Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information which management believes is relevant to an assessment and understanding of the operations and financial condition of Avalon Holdings Corporation and its subsidiaries. As used in this report, the term "Avalon" or the "Company" means Avalon Holdings Corporation, its wholly owned subsidiaries and variable interest entities when it has been determined that Avalon is the primary beneficiary of those company's operations, taken as a whole, unless the context indicates otherwise.

Statements included in Management's Discussion and Analysis of Financial Condition and Results of Operations which are not historical in nature are intended to be, and are hereby identified as, "forward looking statements". Avalon cautions readers that forward looking statements, including, without limitation, those relating to Avalon's future business prospects, revenues, working capital, liquidity, capital needs, interest costs, and income, are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated in the forward looking statements, due to risks and factors identified herein and from time to time in Avalon's reports filed with the Securities and Exchange Commission.

Liquidity and Capital Resources

For the nine months ended September 30, 2025, Avalon utilized existing cash and cash provided by operations to meet operating needs, fund capital expenditures and make required monthly payments on our term loan facility. Cash in our project fund was also utilized to fund capital expenditures.

2022 Term Loan Agreement

On August 5, 2022, Avalon and certain direct and indirect wholly owned subsidiaries entered into a loan and security agreement (the "2022 Term Loan Agreement") with Laurel Capital Corporation which provided for a $31.0 million term loan. At closing, $20.2 million of the proceeds were used to pay off and refinance amounts outstanding and associated interest under our 2019 Term Loan Agreement with Laurel Capital Corporation and $0.4 million of the proceeds were utilized to pay transaction costs. The remaining proceeds of approximately $10.4 million were deposited into a project fund account for which those proceeds are to fund future costs of renovating and expanding both The Grand Resort and Avalon Field Club at New Castle. The balance of "Restricted Cash" is $8.7 million and $9.0 million at September 30, 2025 and December 31, 2024, respectively, and presented in the Consolidated Balance Sheets. The monies are earning nominal interest. .

The 2022 Term Loan Agreement is payable in 119 equal monthly installments of principal and interest, based on a twenty-five (25) year maturity schedule which commenced September 5, 2022 followed by one final balloon payment of all remaining principal, interest and fees due on the maturity date of August 5, 2032. Upon request by Avalon, project fund proceeds can be utilized to pay debt service. Borrowings under the 2022 Term Loan Agreement bear interest at a fixed rate of 6.00% until the seventh anniversary date of the closing at which time the interest rate will be reset to a fixed rate equal to the greater of (a) 6.00% per annum or (b) the sum of the three year treasury rate on the date two (2) business days prior to the reset date plus 3.40%, provided that the applicable rate shall in no event exceed 8.50% per annum.

Avalon has the right to prepay the amount outstanding under the 2022 Term Loan Agreement, in whole or in part, at any time upon payment of the principal amount of the loan to be prepaid plus accrued unpaid interest thereon to the prepayment date, plus an applicable prepayment penalty. The prepayment penalty, expressed as a percentage of the principal of the loan being prepaid, is six percent (6%) on any prepayment in the first five years; four percent (4%) on any prepayment in the sixth and seventh year; three percent (3%) on any prepayment in the eighth and ninth year; and two percent (2%) on any prepayment in the tenth year.

Borrowings under the 2022 Term Loan Agreement are secured by certain real property and related business assets as defined in the agreement. The 2022 Term Loan Agreement contains a Fixed Charge Coverage Ratio requirement of at least 1.20 tested on an annual basis on December 31 of each year. The 2022 Term Loan also contains other nonfinancial covenants, customary representations, warranties and events of default. Avalon was in compliance with the 2022 Term Loan Agreement covenants at September 30, 2025 and December 31, 2024.

The Company capitalized approximately $0.6 million of debt issuance costs in connection with the 2022 Term Loan Agreement in accordance with ASC Subtopic 470-50, Debt-Modifications and Extinguishments. The Company is amortizing these costs over the life of the 2022 Term Loan Agreement. In accordance with ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, these costs are presented in the Condensed Consolidated Balance Sheets as a direct reduction from the carrying amount of the term loan liability

Line of Credit Agreement

On May 31, 2018, Avalon entered into a business loan agreement with Wesbanco Bank (formerly Premier Bank), (the "Line of Credit Agreement") which provides for a line of credit of up to $5.0 million. On September 24, 2025, the Company amended the Line of Credit Agreement to extend the maturity date to July 31, 2027. Under the Line of Credit Agreement, borrowings in excess of $1.0 million are subject to a borrowing base which is calculated based off a specific level of eligible accounts receivable of the waste management business as defined in the agreement.

At September 30, 2025 and December 31, 2024, approximately $3.2 million was outstanding under the Line of Credit Agreement. At September 30, 2025 and December 31, 2024, approximately $1.8 million was available under the Line of Credit Agreement. Outstanding borrowings under the Line of Credit Agreement bear interest at Prime Rate plus .25%. At September 30, 2025, the interest rate on the Line of Credit Agreement was 7.50%.

Borrowings under the Line of Credit Agreement are secured by certain business assets of the Company including accounts receivable, inventory and equipment. The Line of Credit Agreement contains a Fixed Charge Coverage Ratio requirement of at least 1.20 tested on an annual basis on December 31 of each year. The Line of Credit Agreement also contains other nonfinancial covenants, customary representations, warranties and events of default. Avalon was in compliance with the Line of Credit Agreements covenants at September 30, 2025 and December 31, 2024.

During the nine months ended September 30, 2025 and 2024, the weighted average interest rate on outstanding borrowings was 6.17% and 6.26%, respectively.

Squaw Creek Country Club Lease Agreement

In November 2003, Avalon entered into a long-term agreement with Squaw Creek Country Club to lease and operate its golf course and related facilities. The lease has an initial term of ten (10) years with four (4) consecutive ten (10) year renewal term options unilaterally exercisable by Avalon. Under the lease, Avalon is obligated to pay $15,000 in annual rent and make leasehold improvements of $150,000 per year. Amounts expended by Avalon for leasehold improvements during a given year in excess of $150,000 will be carried forward and applied to future leasehold improvement obligations. Based upon the amount of leasehold improvements already made, Avalon expects to exercise all of its remaining renewal options.

Capital Expenditures

During the nine months ended September 30, 2025, Avalon incurred capital expenditures of $1.4 million of which $1.3 million of such expenditures was paid to vendors during the period. During the nine months ended September 30, 2024, Avalon incurred and paid to vendors capital expenditures in the amount of $1.7 million. For the nine months ended September 30, 2024 expenditures primarily related to the continued remodeling of The Grand Resort. For the nine months ended September 30, 2024 expenditures primarily related to The Grand Resort and Avalon Dermatology, LLC.

In 2025, all hotel rooms at The Grant Resort and other areas of the facility were in the process of being remodeled. Avalon's aggregate capital expenditures in 2025 are expected to be in the range of $1.5 million to $2.5 million. Capital expenditures primarily relate to hotel room remodeling at The Grand Resort, parking lot paving and resealing along with other building improvements and equipment purchases. Such capital expenditures are expected to be funded with cash from our project fund account and cash generated from operations.

Working Capital

At September 30, 2025 working capital was approximately $0.3 million. At December 31, 2024, there was a working capital deficit of approximately $0.9 million. Working capital was positively impacted by an increase in cash and cash equivalents along with an increase in accounts receivable. The positive impact was partially offset by increases in accounts payable, deferred membership dues and accrued payroll and other compensation.

Accounts receivable increased to $12.5 million at September 30, 2025 compared with $8.6 million at December 31, 2024. Accounts receivable related to the golf and related operations segment increased approximately $0.8 million at September 30, 2025 compared to December 31, 2024 due to the associated timing of annual membership renewals. Additionally, accounts receivable related to our waste management services segment increased by approximately $3.1 million at September 30, 2025 compared with December 31, 2024 as a result of an increase in net operating revenues in the third quarter of 2025 compared to the fourth quarter of 2024.

Unbilled membership dues receivable was approximately $0.8 million at September 30, 2025 compared to $0.6 million at December 31, 2024. The increase was primarily due to the timing of annual membership renewals related to the Avalon Golf and Country Club and associated monthly billing over the course of the annual agreement.

Inventory was approximately $1.7 million at September 30, 2025 compared to $1.6 million at December 31, 2024. The increase is related to merchandise, food and beverage inventory as a result of the increase in business operations for our golf and related operations segment.

Accounts payable was approximately $9.6 million at September 30, 2025 compared to $7.1 million at December 31, 2024. Approximately $2.0 million of the increase in accounts payable between periods was due to the waste management segment. Accounts payable related to our waste management segment increased as a result of the associated timing of vendor payments in the ordinary course of business. Accounts payable related to our golf and related operations increased $0.5 million at September 30, 2025 compared to December 31, 2024, due to associated timing of vendor payments in the ordinary course of business.

Deferred revenue relating to membership dues was approximately $4.6 million at September 30, 2025 compared to $3.5 million at December 31, 2024. The increase in deferred revenues was primarily due to the associated timing of annual membership renewals.

Accrued payroll and other compensation was approximately $1.7 million at September 30, 2025 compared to $1.1 million at December 31, 2024. The increase is primarily due to the associated timing of employee payroll payments in the ordinary course of business related to our waste management services segment.

Management believes that anticipated cash provided from future operations will be sufficient to meet operating requirements and make required monthly payments under our term loan facility. If business conditions warrant additional monies needed, Avalon will take all available actions to fund operating requirements including borrowing from our existing line of credit.

Growth Strategy

Waste Management Services Segment

Our growth strategy for the waste management services segment focuses on increasing revenue, gaining market share and enhancing shareholder value through internal growth. Although we are a waste management services company, we do not own any landfills or provide waste collection services. However, because of our many relationships with various disposal facilities and transporters, we are able to be more flexible and provide alternative solutions to a customer's waste disposal or recycling needs. We intend to capitalize on our management and sales staff which has extensive experience in all aspects of the waste business. As such, we intend to manage our internal growth as follows:

• Sales and Marketing Activities. We will focus on retaining existing customers and obtaining new business through our well-managed sales and marketing activities. We seek to manage our sales and marketing activities to enable us to capitalize on our position in many of the markets in which we operate. We provide a tailored program to all of our customers in response to their particular needs. We accomplish this by centralizing services to effectively manage their needs, such as minimizing their procurement costs.

We currently have a number of professional sales and marketing employees in the field who are compensated using a commission structure that is focused on generating high levels of quality revenue. For the most part, these employees directly solicit business from existing and prospective customers. We emphasize our rate and cost structures when we train new and existing sales personnel. We intend to hire additional qualified professional sales personnel to expand into different geographical areas.

• Development Activities. We will seek to identify opportunities to further position us as an integrated service provider in markets where we provide services. In addition, we will continue to utilize the extensive experience of our management and sales staff to bid on significant one-time projects and those that require special expertise. Where appropriate, we may seek to obtain permits that would provide vertically integrated waste services or expand the service offerings or leverage our existing volumes with current vendors to provide for long term, cost competitive strategic positioning within our existing markets.

Golf and Related Operations Segment

In August 2014, the Company acquired The Grand Resort which was integrated into the golf and related operations segment. The acquisition is consistent with the Company's business strategy in that The Grand Resort provides guests with a self-contained vacation experience, offering hotel guests golf packages to all of the golf courses of the Avalon Golf and Country Club and allows its guests to utilize the facilities at each of the clubhouses. Members of the Avalon Golf and Country Club also have access to all of the amenities offered by The Grand Resort. The Grand Resort is open year-round and provides a consistent, comfortable environment where our guests can enjoy our various amenities and activities. Avalon believes that the combination of its four golf facilities and The Grand Resort will result in additional memberships in the Avalon Golf and Country Club.

In addition, several private country clubs in the northeast Ohio area are experiencing economic difficulties. Avalon believes some of these clubs may represent an attractive investment opportunity. While Avalon has not entered into any pending agreements for acquisitions, it may do so at any time and will continue to consider acquisitions that make economic sense.

Results of Operations

Avalon's primary business segment, the waste management services segment, provides hazardous and nonhazardous waste brokerage and management services, captive landfill management services and salt water injection well operations. The golf and related operations segment includes the operation and management of four golf courses and related country clubs and facilities, a hotel and its associated resort amenities and a multipurpose recreation center.

Performance in the third quarter of 2025 compared with the third quarter of 2024

Overall Performance

Net operating revenues increased to $25.7 million in the third quarter of 2025 compared with $24.2 million in the third quarter of 2024. Net operating revenues of the waste management services segment were approximately $12.9 million in the third quarter of 2025 compared to $11.5 million in the third quarter of 2024. The increase in net operating revenues of the waste management services segment was mainly attributed to an increase in event work projects during the third quarter of 2025 compared to the third quarter of 2024. Net operating revenues of the golf and related operations segment were approximately $12.8 million in both the third quarter of 2025 and 2024.

Total cost of operations related to the waste management services segment increased to $10.3 million in the third quarter of 2025 compared with $8.9 million in the third quarter of 2024. The increase in the cost of operations between periods for the waste management services segment is primarily due to an increase in net operating revenues as these costs vary directly with the associated revenues.

Total cost of operations related to the golf and related operations segment increased to $9.4 million in the third quarter of 2025 compared to $9.3 million in the third quarter of 2024. The increase in costs is primarily a result of an increase in employee related and utility costs compared to the prior period.

Depreciation and amortization expense was approximately $0.9 million in the third quarter of 2025 compared to $1.0 million in the third quarter of 2024. The slight decrease is due to a lower depreciable basis compared to the prior period.

Consolidated selling, general and administrative expenses were approximately $2.8 million in the third quarter of 2025 compared to $2.7 million in the third quarter of 2024. The slight increase was primarily a result of increases in certain earned employee incentives relating to our waste management services segment

Interest expense was approximately $0.5 million in both the third quarter of 2025 and 2024, respectively. During the three months ended September 30, 2025 and 2024, the weighted average interest rate on outstanding borrowings was 6.17% and 6.23%, respectively.

Net income attributable to Avalon Holdings Corporation common shareholders was $1.9 million, or $0.49 per share, in the third quarter of 2025 compared with net income attributable to Avalon Holdings Corporation common shareholders of $1.8 million, or $0.47 per share, in the third quarter of 2024. Avalon recorded a state income tax provision in both the third quarters of 2025 and 2024, which was related entirely to the waste management and brokerage operations. Due to the recording of a full valuation allowance against the Company's federal net deferred tax assets, the overall effective tax rate in both periods reflect taxes owed in certain U.S state jurisdictions. Avalon's income tax provision on the income before taxes was offset by a change in the valuation allowance. A valuation allowance is provided when it is more likely than not that deferred tax assets relating to certain federal and state loss carryforwards will not be realized. Avalon continues to maintain a valuation allowance against the majority of its deferred tax amounts until it is evident that the deferred tax asset will be utilized in the future.

Segment Performance

Segment performance should be read in conjunction with Note 13 to the Condensed Consolidated Financial Statements.

Waste Management Services Segment

The net operating revenues of the waste management services were approximately $12.9 million in the third quarter of 2025 compared with $11.5 million in the third quarter of 2024. The waste management services segment includes waste disposal brokerage and management services, captive landfill management operations and salt water injection well operations.

The net operating revenues of the waste disposal brokerage and management services business were approximately $12.2 million in the third quarter of 2025 compared to $10.8 million in the third quarter of 2024. Continuous work in the waste disposal brokerage business decreased by approximately $0.2 million between periods. Net operating revenues related to continuous work were approximately $6.9 million in the third quarter of 2025 compared with $7.1 million in the third quarter of 2024. Event work net operating revenues related to multiple projects increased by approximately $1.6 million during third quarter of 2025 when compared to third quarter of 2024. Event work is defined as bid projects under contract that occurs on a one-time basis over a short period of time. Such work can fluctuate significantly from period to period. Event work net operating revenues were approximately $5.3 million in the third quarter of 2025 compared with $3.7 million in the third quarter of 2024.

The net operating revenues of the captive landfill management operations were approximately $0.7 million in the third quarter of both 2025 and 2024. The net operating revenues of the captive landfill operations are almost entirely dependent upon the volume of waste generated by the owner of the landfill for whom Avalon manages the facility.

Costs of operations related to the waste management services segment were approximately $10.3 million in the third quarter of 2025 compared with $8.9 million in the third quarter of 2024. The increase in the cost of operations between periods for the waste management segment is primarily due to an increase in net operating revenues as these costs vary directly with the associated revenues. The overall gross margin percentage of the waste brokerage and management services business was approximately 20% in the third quarter of 2025 compared to 22% in the third quarter of 2024. The decrease in the overall gross margin percentage was primarily attributable to a lower gross profit generated from event work projects during third quarter of 2025.

Income before income taxes for the waste management services segment was approximately $1.3 million in the third quarter of 2025 compared to $1.2 million in the third quarter of 2024. Income before income taxes of the waste brokerage and management services business was approximately $1.3 million in the third quarter of 2025 compared to approximately $1.2 million in the third quarter of 2024. Income before income taxes of the captive landfill operations were approximately $0.1 million in both the third quarter of 2025 and 2024. During both the third quarter of 2025 and 2024, the salt water injection wells incurred a loss before income taxes of less than $0.1 million primarily due to legal and professional costs incurred relating to Avalon's appeal and mandamus processes.

Golf and Related Operations Segment

Net operating revenues of the golf and related operations segment were approximately $12.8 million in both the third quarter of 2025 and 2024, respectively. Avalon's golf and related operations segment consists of the operation and management of four golf courses and related country clubs which provide dining and banquet facilities, a hotel, The Grand Resort, which provides lodging, dining, banquet and conference facilities and other resort related amenities along with a multipurpose recreation center.

Food, beverage and merchandise sales were approximately $4.6 million in both the third quarter of 2025 and in the third quarter of 2024.

Other golf and related operation revenues were approximately $8.2 million in both the third quarter of 2025 and 2024, respectively. Membership dues revenue was approximately $1.8 million in both the third quarter of 2025 and 2024. Net operating revenues related to room rental was approximately $2.9 million in the third quarter of 2025 compared to $2.8 million in the third quarter of 2024. The increase in room revenue was a result of a slight increase in average room rates when compared to the prior period. Greens fees and associated cart rentals were approximately $1.9 million the third quarter of 2025 compared to $1.8 million in the third quarter of 2024. Other revenues consisting of athletic, fitness, salon and spa related activities were approximately $1.6 million in the third quarter of 2025 compared to $1.8 million in the third quarter of 2024. The decrease between periods was primarily due to a decrease in salon and spa revenue.

Total cost of operations for the golf and related operations segment were $9.4 million in the third quarter of 2025 compared with $9.3 million in the third quarter of 2024. Cost of food, beverage and merchandise was approximately $2.0 million in both the third quarter of 2025 and 2024. The cost of food, beverage and merchandise sales was approximately 43% of associated revenue in the third quarter of 2025 compared to 44% in the third quarter of 2024. Golf and related operations operating costs increased to approximately $7.4 million in the third quarter of 2025 compared with $7.3 million in the third quarter of 2024. The slight increase in operating costs between periods is primarily related to an increase in employee related costs in the third quarter of 2025 compared to the third quarter of 2024.

The golf and related operations recorded income before income taxes of $1.9 million in both the third quarter of 2025 and 2024, respectively.

General Corporate Expenses

General corporate expenses were $0.9 million in both the third quarter of 2025 and 2024, respectively.

Interest Expense

Interest expense was approximately $0.5 million in both third quarter of 2025 and third quarter of 2024. During the three months ended September 30, 2025 and 2024, the weighted average interest rate on outstanding borrowings was 6.17% and 6.23%, respectively.

Net Income

Net income attributable to Avalon Holdings Corporation common shareholders was $1.9 million in the third quarter of 2025 compared to net income attributable to Avalon Holdings Corporation common shareholders of $1.8 million in the third quarter of 2024. Avalon recorded a state income tax provision in both the third quarter of 2025 and 2024, which was related entirely to the waste management and brokerage operations. Due to the recording of a full valuation allowance against the Company's federal net deferred tax assets, the overall effective tax rate in both periods reflect taxes owed in certain U.S state jurisdictions. Avalon's income tax on the income before taxes was offset by a change in the valuation allowance. A valuation allowance is provided when it is more likely than not that deferred tax assets relating to certain federal and state loss carryforwards will not be realized. Avalon continues to maintain a valuation allowance against the majority of its deferred tax amounts until it is evident that the deferred tax asset will be utilized in the future.

Performance in the first nine months of 2025 compared with the first nine months of 2024

Overall Performance

Net operating revenues decreased to $62.1 million in the first nine months of 2025 compared with $66.2 million in the first nine months of 2024. Net operating revenues of the waste management services segment were approximately $32.3 million in the first nine months of 2025 compared to $36.2 million in the first nine months of 2024. The decrease in net operating revenues of the waste management services segment was a result of decreases in both event work projects and continuous work during the first nine months of 2025 compared to the first nine months of 2024. Net operating revenues of the golf and related operations segment were approximately $29.7 million in the first nine months of 2025 compared to $30.0 million in the first nine months of 2024. The decrease in net operating revenues of the golf and related operations was a result of a decrease in membership dues revenue coupled with a decrease in business activity at the country clubs.

Total cost of operations related to the waste management services segment decreased to $25.3 million in the first nine months of 2025 compared with $28.4 million in the first nine months of 2024. The decrease in the cost of operations between periods for the waste management services segment is primarily due to a decrease in net operating revenues as these costs vary directly with the associated revenues.

Total cost of operations related to the golf and related operations segment increased to $24.1 million in the first nine months of 2025 compared to $23.6 million in the first nine months of 2024. The increase in operating costs between periods is primarily related to an increase in utility and operating costs in the first nine months of 2025 compared to the first nine months of 2024.

Depreciation and amortization expense was approximately $2.9 million in the first nine months of 2025 compared to $3.0 million in the first nine months of 2024. The decrease is due to a lower depreciable asset base compared to the prior period.

Consolidated selling, general and administrative expenses were approximately $7.8 million in the first nine months of 2025 compared to $8.0 million in the first nine months of 2024. The decrease is mainly attributed to a decrease in incentive compensation for salesman of waste management services segment.

Interest expense was approximately $1.5 million in both the first nine months of 2025 and the first nine months of 2024. During the nine months ended September 30, 2025 and 2024, the weighted average interest rate on outstanding borrowings was 6.17% and 6.26%, respectively.

Net income attributable to Avalon Holdings Corporation common shareholders was $0.7 million, or $0.17 per share, in the first nine months of 2025 compared with a net income attributable to Avalon Holdings Corporation common shareholders of $1.8 million, or $0.47 per share, in the first nine months of 2024.

Segment Performance

Segment performance should be read in conjunction with Note 13 to the Condensed Consolidated Financial Statements.

Waste Management Services Segment

The net operating revenues of the waste management services segment decreased to $32.3 million in the first nine months of 2025 compared with $36.2 million in the first nine months of 2024.

The net operating revenues of the waste disposal brokerage and management services business were approximately $29.8 million in the first nine months of 2025 compared to $34.0 million in the first nine months of 2024. Continuous work of the waste disposal brokerage business decreased by approximately $0.6 million between periods. Net operating revenues related to continuous work were approximately $19.3 million in the first nine months of 2025 compared with $19.9 million in the first nine months of 2024. Event work net operating revenues decreased by approximately $3.6 million during first nine months of 2025 when compared to first nine months of 2024. Event work is defined as bid projects under contract that occurs on a one-time basis over a short period of time. Such work can fluctuate significantly from year to year. Event work net operating revenues were approximately $10.5 million in the first nine months of 2025 compared with $14.1 million in the first nine months of 2024.

The net operating revenues of the captive landfill management operations were approximately $2.5 million in the first nine months of 2025 compared to $2.2 million in the first nine months of 2024. The net operating revenues of the captive landfill operations are almost entirely dependent upon the volume of waste generated by the owner of the landfill for whom Avalon manages the facility.

Costs of operations related to the waste management services segment decreased to $25.3 million in the first nine months of 2025 compared with $28.4 million in the first nine months of 2024. The decrease in the cost of operations between periods for the waste management segment is primarily due to a decrease in net operating revenues as these costs vary directly with the associated revenues. The overall gross margin percentage of the waste brokerage and management services business was approximately 21% in both the first nine months of 2025 and 2024, respectively.

Income before income taxes for the waste management services segment were approximately $3.2 million in the first nine months of 2025 compared to $3.8 million in the first nine months of 2024. Income before income taxes of the waste brokerage and management services business was approximately $3.2 million in the first nine months of 2025 compared to $3.7 million in the first nine months of 2024. The decrease in income before income taxes was primarily attributable to decreases in both continuous and event work projects during the first nine months of 2025 compared to the first nine months of 2024. Income before income taxes of the captive landfill operations were approximately $0.2 million for the first nine months of both 2025 and 2024, respectively. During the first nine months of 2025 the salt water injection wells incurred a loss before income taxes of approximately $0.2 million compared with a loss before income taxes of approximately $0.1 million during the first nine months of 2024. The increase is primarily due to legal and professional costs incurred relating to Avalon's mandamus processes.

Golf and Related Operations Segment

Net operating revenues of the golf and related operations segment were approximately $29.7 million in the first nine months of 2025 compared to $30.0 million in the first nine months of 2024.

Food, beverage and merchandise sales were approximately $10.3 in the first nine months of 2025 compared to $10.6 million in the first nine months of 2024, respectively. Food, beverages and merchandise sales decreased between periods as a result of a decrease in business activity at the country clubs.

Other net operating revenues related to the golf and related operations were approximately $19.4 million in both the first nine months of 2025 and 2024, respectively. Membership dues revenue was approximately $5.4 million in the first nine months of 2025 compared to $5.6 million in the first nine months of 2024. The decrease in membership dues revenue was attributable to a decrease in the ability to attract and retain members. Net operating revenues related to room rental was approximately $6.0 million in the first nine months of 2025 compared to $5.9 million in the first nine months of 2024. The increase in room revenue was a result of higher occupancy when compared to the prior period. Other revenues consisting of athletic, fitness, salon and spa related activities were approximately $5.0 million in the first nine months of 2025 compared to $4.9 million in the first nine months of 2024. The increase between periods was primarily due to an increase in salon and spa revenue associated with The Grand Resort. Greens fees and associated cart rentals were approximately $3.0 million in both the first nine months of 2025 and the first nine months of 2024, respectively. Due to adverse weather conditions, net operating revenues relating to the golf courses, which are located in northeast Ohio and western Pennsylvania, were minimal during the first three months of 2025 and 2024.

Total cost of operations for the golf and related operations segment were $24.1 million in the first nine months of 2025 compared with $23.6 million in the first nine months of 2024. Cost of food, beverage and merchandise was approximately $4.7 million in both the first nine months of 2025 and 2024, respectively. The cost of food, beverage and merchandise sales was approximately 45% of associated revenue in the first nine months of 2025 compared to 44% in the first nine months of 2024. Golf and related operations operating costs increased to approximately $19.4 million in the first nine months of 2025 compared with $18.9 million in the first nine months of 2024. The increase in costs is primarily a result of an increase in utility costs and overall operating expenditures compared to the prior period.

The golf and related operations recorded income before income taxes of $1.4 million in the first nine months of 2025 compared with a net income before income taxes of $2.1 million in the first nine months of 2024. The change between periods was primarily a result of a decrease in membership dues revenue, food beverage and merchandise revenue, coupled with an increase in utility and overall operating costs.

The ability to attract new members and retain members is very important to the success of the golf and related operations segment. Avalon is continually using different marketing strategies to attract and retain members, such as local television advertising and/or various membership promotions. A significant decline in members could adversely impact the financial results of the golf and related operations segment.

General Corporate Expenses

General corporate expenses were $2.7 million in both the first nine months of 2025 and 2024, respectively.

Interest Expense

Interest expense was approximately $1.5 million for both the first nine months in 2025 the first nine months of 2024. During the nine months ended September 30, 2025 and 2024, the weighted average interest rate on outstanding borrowings was 6.17% and 6.26%, respectively.

Net Income

Net income attributable to Avalon Holdings Corporation common shareholders was $0.7 million in the first nine months of 2025 compared to a net income attributable to Avalon Holdings Corporation common shareholders of $1.8 million in the first nine months of 2024. Avalon recorded a state income tax provision in both the first nine months of 2025 and 2024, which was related entirely to the waste management and brokerage operations. Due to the recording of a full valuation allowance against the Company's federal net deferred tax assets, the overall effective tax rate in both periods reflect taxes owed in certain U.S state jurisdictions. Avalon's income tax on the income before taxes was offset by a change in the valuation allowance. A valuation allowance is provided when it is more likely than not that deferred tax assets relating to certain federal and state loss carryforwards will not be realized. Avalon continues to maintain a valuation allowance against the majority of its deferred tax amounts until it is evident that the deferred tax asset will be utilized in the future.

Trends and Uncertainties

Government regulations

A portion of Avalon's waste brokerage and management services revenues is derived from the disposal and/or transportation of out-of-state waste. Any law or regulation restricting or impeding the transportation of waste or the acceptance of out-of-state waste for disposal could have a negative effect on Avalon.

Legal matters

In the ordinary course of conducting its business, Avalon becomes involved in lawsuits, administrative proceedings and governmental investigations, including those relating to environmental matters. Some of these proceedings may result in fines, penalties or judgments being assessed against Avalon which, from time to time, may have an impact on its business and financial condition. Although the outcome of such lawsuits or other proceedings cannot be predicted with certainty, management assesses the probability of loss and accrues a liability as appropriate. Avalon does not believe that any uninsured ultimate liabilities, fines or penalties resulting from such pending proceedings, individually or in the aggregate, will have a material adverse effect on its liquidity, financial position or results of operations.

Credit and collections

Economic challenges throughout the industries served by Avalon may result in payment defaults by customers. While Avalon continuously endeavors to limit customer credit risks, customer-specific financial downturns are not controllable by management. Significant customer payment defaults would have a material adverse impact upon Avalon's future financial performance.

Competitive pressures

Avalon's waste brokerage and management services business obtains and retains customers by providing services and identifying cost-efficient disposal options unique to a customer's needs. Consolidation within the solid waste industry has resulted in reducing the number of disposal options available to waste generators and may cause disposal pricing to increase. Avalon's waste brokerage and management services business may not be able to pass these price increases onto some of its customers, which, in turn, may adversely impact Avalon's future financial performance.

Unfavorable general economic conditions could adversely affect our business and financial results

Our operations are substantially affected by economic conditions, including inflationary pressures, which can impact consumer disposable income levels and spending habits. Economic conditions can also be impacted by a variety of factors including epidemics, pandemics and actions taken by governments to manage economic matters, whether through initiatives intended to control wages, increase in the Federal minimum wage, unemployment, inflation, taxation and other economic drivers. Adverse economic conditions could pressure Avalon's business and operating performance and financial results may suffer.

Numerous economic factors, including a recession, other economic downturns, inflation and the potential for a decrease in consumer spending, could adversely affect us

Various adverse economic conditions, including a recession, other economic downturns and inflation could decrease consumer discretionary spending and adversely affect our financial performance. Rising inflation rates have led to increased interest rates. A recession or other economic downturn could have a material adverse effect on our financial results. The products and services that are golf and related operations offer are products or services that consumers may view as discretionary rather than necessities. Our results of operations are sensitive to changes in macroeconomic conditions that impact consumer spending, including discretionary spending. Other factors, including consumer confidence, employment levels, interest rates, fuel and energy costs, tax rates, and consumer debt levels could reduce consumer spending or change consumer purchasing habits. Slowdowns in the U.S. or global economy, or an uncertain economic outlook, could materially adversely affect consumer spending habits and could have a material adverse effect on our business, results of operations and financial condition.

Challenges with respect to labor, including availability and cost, could impact our business and results of operations

Avalon's success depends in part on our ability to recruit, motivate and retain qualified individuals to work in an intensely competitive labor market. We have experienced, and may continue to experience, challenges in adequately staffing, which can negatively impact operations. Our ability to meet labor needs is generally subject to external factors, including the availability of sufficient workforce, unemployment levels and prevailing wages in the markets in which we operate. Increased costs and competition associated with recruiting, motivating and retaining qualified employees could have a negative impact on Avalon's operating margins and profitability.

The waste brokerage and management division employs individuals with unique capabilities and knowledge in the handling, disposal and transportation of both hazardous and non-hazardous waste. In addition, the majority of the senior management and sales representatives have been employed by Avalon for many years and are approaching retirement age. Over the years, the waste brokerage and management division has had difficulty finding qualified individuals with the required expertise in specific geographic areas. Our inability to replace these individuals upon retirement, with the required expertise could have a negative impact on the profitability of the waste brokerage and management division.

Changes in commodity and other operating costs could adversely affect our results of operations

The profitability of our golf and related operations segment depends on our ability to anticipate and react to changes in commodity costs, including food, supplies, fuel, utilities and other operating costs, including labor. We continuously monitor supply and cost trends of these commodities. During the first nine months of 2024 and 2023, we experienced high commodity costs compared to the prior years. These increases are primarily driven by overall market demand and inflationary pressures. Volatility in certain commodity prices and fluctuations in labor costs have adversely affected, and in the future, could adversely affect Avalon's operating results. We anticipate commodity costs to continue to remain elevated throughout 2025 due to inflationary pressures. An increase in commodity costs could have an adverse impact on our profitability.

Effective succession planning is important to our continued success

Effective succession planning is important to our long-term success. Failure to effectively identify, develop and retain key personnel, recruit high-quality candidates and ensure smooth management and personnel transitions could disrupt our business and adversely affect our results.

A majority of Avalon's business is not subject to long-term contracts

A significant portion of Avalon's business is generated from waste brokerage and management services provided to customers that are not subject to long-term contracts. In light of current economic, regulatory and competitive conditions, there can be no assurance that Avalon's current customers will continue to transact business with Avalon at historical levels. Failure by Avalon to retain its current customers or to replace lost business could adversely impact the future financial performance of Avalon.

Avalon's captive landfill management business is dependent upon a single customer as its sole source of revenue. If the captive landfill management business is unable to retain this customer, Avalon's future financial performance could be adversely impacted.

A significant source of the golf and related operations revenues is derived from the members of the Avalon Golf and Country Club. Members are obligated to pay dues for a one year period. As such, the golf and related operations is primarily dependent on the sale and renewal of memberships in the Avalon Golf and Country Club, on a year to year basis.

Avalon's loan and security agreement may obligate it to repay debt before its maturity

The Company's loan and security agreement contains certain covenants and events of default. Should Avalon be unable to meet one or more of these covenants, its lender may require it to repay any outstanding balance prior to the expiration date of the agreement. Our ability to comply with the financial and other covenants in our loan and security agreement may be affected by worsening economic or business conditions, or other events that may be beyond our control. We cannot provide assurance that our business will generate sufficient cash flow from operating activities in amounts sufficient to enable us to service debt and meet these covenants. We may need to refinance all or a portion of our indebtedness, on or before maturity. The Company cannot assure that additional sources of financing would be available to pay off any long-term borrowings under the loan and security agreement, so as to avoid default.

Saltwater disposal wells

Saltwater disposal wells are regulated by the Ohio Department of Natural Resources ("ODNR"), with portions of the disposal facilities regulated by the Ohio EPA. As exploitation of the Marcellus and Utica shale formations by the hydrofracturing process develops, regulatory and public awareness of the environmental risks of saltwater brine and its disposal in saltwater disposal wells is growing and consequently, it is expected that regulation governing the construction and operation of saltwater disposal wells will increase in scope and complexity. Increased regulation may result in increased construction and/or operating costs, which could adversely affect the financial results of Avalon.

The saltwater disposal wells are currently not operational. Assuming operations resume in the future, there is a risk during the operation of an environmental event causing contamination to the water tables in the surrounding area, or seismic events. The occurrence of a spill or contamination at a disposal well site could result in remedial expenses and/or result in the operations at the well site being suspended and/or terminated by the Ohio EPA or the ODNR. Incurring remedial expenses and /or a suspension or termination of Avalon's right to operate one or more saltwater disposal wells at the well site could have an adverse effect on Avalon's financial results.

As a result of a seismic event with a magnitude of 2.1 occurring on August 31, 2014, the Chief of the Division of Oil and Gas Resources Management ("Chief" or "Division") issued Orders on September 3, 2014 to immediately suspend all operations of Avalon's two saltwater injection wells until the Division could further evaluate the wells. The Orders were based on the findings that the two saltwater injection wells were located in close proximity to an area of known seismic activity and that the saltwater injection wells pose a risk of increasing or creating seismic activity.

On September 5, 2014, Avalon submitted the information required by the Chief's Order in regards to its AWMS #1 injection well, and the Chief lifted the suspension for that well on September 18, 2014. On September 19, 2014, Avalon submitted information and a written plan required by the Chief's Order proposing the establishment of certain operations and management controls on injections for the AWMS #2 injection well. To date, the Division has not responded to that plan despite Avalon's requests for feedback.

On October 2, 2014, Avalon filed an appeal with the Ohio Oil and Gas Commission (the "Commission") disputing the basis for suspending operations of AWMS #2 and also the authority of the Chief to immediately suspend such operations. On March 11, 2015, an appeal hearing was held. The Chief stated during the hearing that the suspension order is temporary, and he expects that AWMS #2 will be allowed to resume operations once the state's final policymaking is complete.

On August 12, 2015, the Commission upheld the temporary suspension of injection operations of AWMS #2 stating that the temporary suspension would allow the Chief more time to fully evaluate the facts in anticipation of the Division's implementation of a comprehensive regulatory plan that will specifically address injection-induced seismicity.

Avalon appealed that decision to the Franklin County Court of Common Pleas (the "Court"), and on November 1, 2016 an appeal hearing was held in that Court. On December 23, 2016, the Court issued its Decision and Order in Avalon's favor, and vacated the Commission's decision. The Court found that the Division's suspension and refusal to work with the Company over the 26 month period was arbitrary and not in accordance with reason. Subsequent to the ruling, and in accordance with the Court's Decision and Order, both Avalon and the Division submitted their proposed restart plans to the Court. Avalon's plan sets forth both the initial volumes and pressures and increases in volume and pressure while continuously monitoring seismicity and addressing the concerns of public health and safety.

On February 21, 2017, the Court issued its Final Decision and Order. The Court's Final Decision and Order set forth conditions for restarting the AWMS #2 salt water injection well in accordance with the proposed restart plans filed by Avalon with minor revisions. On February 22, 2017, the Division appealed the Final Decision and Order and filed a Motion to Stay the Court Order. The Motion to Stay was granted by the Ohio 10^th District Court of Appeals on March 21, 2017.

On September 14, 2017, an appeal hearing was held in the Ohio 10^th District Court of Appeals and on July 31, 2018 a decision was issued on the appeal. The decision reinstated the previous Ohio Oil and Gas Commission decision in this matter.

On September 12, 2018, the Company appealed the Ohio 10^th District Court of Appeals decision to the Supreme Court of Ohio. On November 21, 2018, the Company received notice from the Supreme Court of Ohio that the court would not accept for review the Company's appeal of the Ohio 10^th District Court of Appeals decision on the Division of Oil and Gas Resources Management's appeal of the Franklin County Court of Common Pleas February 21, 2017 entry allowing restart of the Company's AWMS Water Solutions, LLC #2 salt water injection well.

On April 5, 2019, Avalon filed with the Oil and Gas Commission a motion to vacate its prior decisions in this matter. The Oil and Gas Commission scheduled a hearing on this motion for August 13, 2019. Before the hearing began, and in response to the Division's motion to dismiss the Company's motion to vacate, the Commission dismissed the matter. The Company appealed that decision to the Franklin County Court of Common Pleas. In April 2020, the Division's motion to dismiss and the Company's opposition were reviewed by the Court. Following the restart orders received on May 24, 2021, and discussed below, the Court dismissed the complaint.

Concurrently with the filing of the appeal with the Franklin County Court of Common Pleas, the Company filed a writ of mandamus in the 10^th District Court of Appeals on August 30, 2019 to compel the chief of the Division to issue restart orders, or alternative orders that would allow the Company to either restart the AWMS #2 well, or appeal said orders to the Oil and Gas Commission in accordance with Ohio Law. On October 6, 2020 and in response to a motion from the Division, the Court dismissed this complaint for writ of mandamus.

In addition, on August 26, 2016, Avalon filed a complaint in the 11^th Appellate District Court in Trumbull County, Ohio for a Peremptory Writ of Mandamus to compel the Director of the Ohio Department of Natural Resources ("ODNR") to initiate appropriations procedures to determine damages from the illegal regulatory taking of the Company's property, or issue an alternative remedy at law. The Company believes that the actions, and lack of responsible actions, by the ODNR is a clear violation of the Company's property rights and a violation of the Fifth and Fourteenth Amendments to the U.S. Constitution; Article I, Section 19 of the Ohio Constitution; and Ohio Revised Code Chapter 163.

On March 18, 2019, Avalon received notice that the 11^th Appellate District Court in Trumbull County, Ohio issued summary judgment in favor of the Ohio Department of Natural Resources in the writ of mandamus action that resulted from the suspension order of the Company's salt water injection well. The decision was appealed to the Supreme Court of Ohio on April 5, 2019. Oral arguments in the case occurred on April 7, 2020. On September 23, 2020, the Supreme Court of Ohio ruled in favor of the Company. The Supreme Court of Ohio reversed the decision of the 11^th Appellate District Court and remanded the case back to that court for a trial on the merits. The trial occurred in September and October 2021. On December 19, 2022, the 11^th Appellate District Court denied the Company's writ of mandamus action. The Court determined that the Company failed to establish a cognizable property interest that would necessitate a just compensation/takings analysis and accordingly denied the Company's petition for writ of mandamus. The decision was appealed to the Supreme Court of Ohio on January 30, 2023 and on January 24, 2024 the Supreme Court of Ohio ruled in a unanimous decision to overturn the Court of Appeal's decision. The Supreme Court of Ohio remanded to the Court again for a decision on the mandamus complaint as to whether the Company suffered a total or partial taking.

On September 9, 2024 the 11^th Appellate District Court in Trumbull County rendered a non-unanimous decision on remand. The decision denied the Company's categorical regulatory takings claim, but found for the Company on its partial regulatory takings claim. The decision limited damages due to the Company, and the Company subsequently appealed the Appellate Court's decision to the Supreme Court of Ohio based on errors regarding the court's interpretation of Ohio law and abuse of discretion grounds. The Chief of the Division also cross-appealed the Appellate Court's decision to the Supreme Court. Oral arguments were held on August 20, 2025 and the Company is awaiting a decision from the high court.

On May 24, 2021, the Company received Chief's Orders from the Division vacating the September 3, 2014 suspension orders for AWMS #2 and setting conditions for restart of that well. Among these conditions was a limit placed on the seismicity within three miles of the well. Under the Order, if a seismic event with a magnitude 2.1 or above occurs, the well must cease operations for an indefinite period of time until concurrence for subsequent restart is received from the Division. The Company appealed the May 2021 Chief's Order to the Ohio Oil and Gas Commission, seeking reasonable operating conditions that will allow the facility to operate profitably while protecting human health and property. A hearing in this matter occurred in February 2022. On June 30, 2022, the Oil and Gas Commission rendered their decision for the Division in this matter, once again deferring to the Division in their decision. The Company instructed its counsel to appeal the decision to the Franklin County Ohio Court of Common Please no later than August 3, 2022.

The Company's former counsel did not file a copy of notice to appeal to the Franklin County Court within 30-days of the Commission's decision. The Division motioned that court for dismissal of the appeal on August 19, 2022 for not perfecting the appeal. The Franklin County Court of Common Pleas granted that motion on October 31, 2024. On November 26, 2024, the Company appealed that dismissal to the 10^th Appellate District Court in Franklin County. On May 23, 2025, the Appellate Court affirmed the dismissal. On July 2, 2025, the Company appealed the Appellate Court's decision to the Supreme Court of Ohio. The Supreme Court declined to hear the appeal. The Company filed a complaint in the Trumbull County Court of Common Pleas on August 4, 2025 seeking damages from the malpractice of the Company's former legal counsel.

Golf memberships and liquor licenses

The Avalon Golf and Country Club operates four golf courses and related country clubs and a multipurpose recreation center. The Avalon Golf and Country Club facilities also offer swimming pools, fitness centers, tennis courts, dining and banquet facilities, salon and spa services. In addition, The Grand Resort provides guests with a self-contained vacation experience, offering hotel guests golf packages to all of the golf courses of the Avalon Golf and Country Club and allows its guests to utilize the facilities at each of the clubhouses. Members of the Avalon Golf and Country Club also have access to all of the amenities offered by The Grand Resort. The Avalon Golf and Country Club competes with many public courses and country clubs in the area. Although the golf courses continue to be available to the general public, the primary source of revenues is derived from the members of the Avalon Golf and Country Club. Avalon believes that the combination of its golf facilities and The Grand Resort will result in additional memberships in the Avalon Golf and Country Club. The ability to retain current members and attract new members has been an ongoing challenge. Although Avalon was able to increase the number of members of the Avalon Golf and Country Club, as of September 30, 2024, Avalon has not attained its membership goals. There can be no assurance as to when such goals will be attained. Avalon is continually using different marketing strategies to attract new members, such as local television advertising and various membership promotions. A significant decline in members could adversely affect the future financial performance of Avalon.

Avalon's golf course operations, The Grand Resort and multipurpose recreation center currently hold liquor licenses for their respective facilities. If, for some reason, any one of these facilities were to lose their liquor license, the financial performance of the golf and related operations would be adversely affected.

Seasonality

Avalon's operations are somewhat seasonal in nature since a significant portion of those operations are primarily conducted in selected northeastern and midwestern states. Additionally, Avalon's golf courses are located in northeast Ohio and western Pennsylvania and are significantly dependent upon weather conditions during the golf season. As a result, Avalon's financial performance is adversely affected by adverse weather conditions.

Inflation

The Federal Reserve has kept its key interest rates at elevated levels as pricing on consumer goods has remained high. Our operations are substantially affected by economic conditions, including inflation, which can impact consumer disposable income levels and spending habits. Although Avalon has not entered into any long-term fixed price contracts that could have a material adverse impact upon its financial performance in periods of inflation, adverse economic conditions could pressure Avalon's business and operating performance and financial results may suffer. In general, management believes that rising costs resulting from inflation could be passed on to customers; however, Avalon may need to absorb all or a portion of these cost increases depending upon competitive conditions at the time