Annual Report (10-k)

2014

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________

FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2014

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from to

Commission File Number 1-14105

AVALON HOLDINGS CORPORATION

(Exact name of registrant as specified in its charter)

Ohio		34-1863889
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One American Way, Warren, Ohio 44484-5555

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (330) 856-8800

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Class A Common Stock, $.01 par value		NYSE Amex

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No X

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No X

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer, “accelerated filer and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ___	Accelerated filer ___	Non-accelerated filer	Smaller reporting company X
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes___ No X

The aggregate market value of Class A Common Stock held by non-affiliates of the registrant on March 6, 2015 was $9.4 million. Assuming that the market value of Avalon Holdings Corporation’s Class B Common Stock was the same as its Class A Common Stock by reason of its one-to-one conversion rights, the market value of Class B Common Stock held by non-affiliates of the registrant on March 6, 2015 was approximately $3,400. The registrant had 3,191,100 shares of its Class A Common Stock and 612,231 shares of its Class B Common Stock outstanding as of March 6, 2015.

Documents Incorporated by Reference

1.	Portions of the Avalon Holdings Corporation Annual Report to Shareholders for the year ended December 31, 2014 (Parts I and II of Form 10-K).
2.	Portions of the Avalon Holdings Corporation Proxy Statement for the 2015 Annual Meeting of Shareholders are incorporated by reference herein into Part III.

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

_________________________________

As used in this report, the terms “Avalon,” “Company,” and “Registrant” mean Avalon Holdings Corporation and its wholly owned subsidiaries, taken as a whole, unless the context indicates otherwise.

_________________________________

TABLE OF CONTENTS

			Page
Part I

	Item 1.	Business	1
	Item 1A.	Risk Factors	5
	Item 1B.	Unresolved Staff Comments	9
	Item 2.	Properties	9
	Item 3.	Legal Proceedings	9
	Item 4.	Mine Safety Disclosures	9

Part II

	Item 5.	Market for the Registrant’s Common Equity and Related Stockholder Matters	10
	Item 6.	Selected Financial Data	10
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	10
	Item 8.	Financial Statements and Supplementary Data	10
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	11
	Item 9A.	Controls and Procedures	11
	Item 9B.	Other Information	11

Part III

	Item 10.	Directors and Executive Officers of the Registrant	12
	Item 11.	Executive Compensation	13
	Item 12.	Security Ownership of Certain Beneficial Owners and Management	13
	Item 13.	Certain Relationships and Related Transactions	13
	Item 14.	Principal Accountant Fees and Services	13

Part IV

	Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K	14

Signatures			16

Note on Incorporation by Reference

Throughout this report various information and data are incorporated by reference from Avalon’s 2014 Annual Report to Shareholders (hereinafter referred to as the “Annual Report to Shareholders”). Any reference in this report to disclosures in the Annual Report to Shareholders shall constitute incorporation by reference of that specific material into this Form 10-K.

PART 1

ITEM 1.

BUSINESS

General

Avalon Holdings Corporation (“Avalon”) was formed on April 30, 1998 as a subsidiary of American Waste Services, Inc. (“AWS”). On June 17, 1998, AWS distributed, as a special dividend, all of the outstanding shares of capital stock of Avalon to the holders of AWS common stock on a pro rata and corresponding basis (the “Spin-off”). The history and organization of the remaining operations, some of which were contributed to Avalon as a result of the Spin-off, are described below.

In June 1990, AWS purchased approximately 5.6 acres of real estate located in Warren, Ohio on which it constructed Avalon’s corporate headquarters. In connection with the acquisition of such property, Avalon Lakes Golf, Inc. (“ALGI”), a former subsidiary of AWS and now a subsidiary of Avalon, acquired the real and personal property associated with the Avalon Lakes Golf Course, an 18-hole golf course adjacent to the office property. The corporate headquarters and ALGI were contributed to Avalon by AWS. The Avalon corporate headquarters building includes a clubhouse, restaurant, golf simulators and a pro shop for the Avalon Golf and Country Club at Avalon Lakes Golf Course.

In 1995, American Waste Management Services, Inc. (“AWMS”) commenced its waste disposal brokerage and management operations and in 1997, American Landfill Management, Inc. (“ALMI”) started its captive landfill management operations. Both companies were contributed to Avalon by AWS and now are subsidiaries of Avalon.

In November 2003, TBG, Inc. (“TBG”), a subsidiary of ALGI, entered into a long-term lease agreement with Squaw Creek Country Club to lease and operate its golf course and related facilities. As a result of the transaction, Avalon created a newly organized subsidiary, Avalon Golf and Country Club, Inc. (“AGCC”) which manages all the golf courses and related operations.

In October 2006, Avalon, through a newly created subsidiary, Avalon Country Club at Sharon, Inc. (“Sharon”), completed the acquisition of the Sharon Country Club assets. The primary assets of the Sharon club include the golf course and clubhouse. Avalon renovated the clubhouse and constructed additional recreational facilities and operates the Sharon facilities as part of its Avalon Golf and Country Club.

In June 2011, American Water Management Services, LLC was formed to acquire options on properties for the purpose of operating salt water injection wells. American Water Management Services, LLC, a wholly owned subsidiary of Avalon, manages all the salt water injection well operations, including the marketing and sales function and all decisions regarding the well operations for a percentage of the gross revenues.

In August 2013, AWMS Holdings, LLC formed its first wholly owned subsidiary, AWMS Rt. 169, LLC, to own and operate two salt water injection wells. AWMS Rt. 169, LLC leases 5.2 acres on which the salt water injection wells are located. Construction of the wells began in the fourth quarter of 2013, and in April 2014, the wells commenced operations accepting brine water for disposal.

Business Segments Information

Avalon’s business segments are waste management services and golf and related operations. The waste management services segment includes waste disposal brokerage and management services, captive landfill management operations and salt water injection well operations. The golf and related operations segment includes the operation and management of golf courses and related clubhouses, a hotel, fitness centers, tennis courts, spa services, dining and banquet facilities and a travel agency. In 2014, no customer individually accounted for 10% or more of Avalon’s consolidated net operating revenues. In 2013, one customer of the waste management services segment, Shell Western Exploration and Production, Inc., accounted for 17% of the waste management services segment’s net operating revenues to external customers and 13% of the consolidated net operating revenues.

Waste Management Services

Avalon’s waste management subsidiaries provide hazardous and nonhazardous waste disposal brokerage and management services, captive landfill management services and salt water injection well operations. Waste management services are provided to industrial, commercial, municipal and governmental customers primarily in selected northeastern and midwestern United States markets. For the years 2014 and 2013, the net operating revenues of the waste management services segment represented approximately 75% and 79%, respectively, of Avalon’s total segments’ net operating revenues.

American Waste Management Services, Inc. (“AWMS”) assists customers with managing and disposing of wastes at approved treatment and disposal sites based upon a customer’s needs.

Because waste generators remain liable for their waste, both before and after disposal, they require assurance that their waste will be safely and properly transported, treated and disposed of. To give customers this confidence, as well as to limit its own potential liability, AWMS has instituted procedures designed to minimize the risks of improper handling or disposal of waste.

Before AWMS will provide waste brokerage or management services, a potential customer must complete a detailed waste profile setting forth the amount, chemical composition and any unique characteristics for each type of waste to be handled. Representative samples of the waste are analyzed by a state or federally certified laboratory. In addition, an AWMS representative generally inspects the process generating the waste, the location where the waste may be temporarily stored or the site of the remediation project producing the waste, and interviews representatives of the generator familiar with the waste. This inspection, along with the laboratory results, allows AWMS to determine whether the waste is within acceptable parameters for disposal and, if so, what special handling and treatment procedures must be instituted. If the waste is continuously generated, new representative samples are tested on a periodic basis.

These procedures are important to both AWMS and its customers because the key to proper handling of waste is accurate identification. Hazardous waste which is not identified as such, and thus, improperly disposed of can result in substantial liability to the waste generator, the disposal facility, AWMS and potentially to all other waste generators that have used the disposal site. Conversely, waste that could safely and legally be disposed of in a solid waste landfill, but is instead sent to a hazardous waste facility for treatment and disposal, will result in substantial and unnecessary expense to the generator.

American Landfill Management, Inc. (“ALMI”) is a landfill management company that provides technical and operational services to customers owning captive disposal facilities. A captive disposal facility only disposes of waste generated by the owner of such facility. ALMI provides turnkey services, including daily operations, facilities management and management reporting for its customers. Currently, ALMI manages one captive disposal facility located in Ohio. In addition, American Construction Supply, Inc., a wholly owned subsidiary of ALMI, sells construction mats.

AWMS Holdings, LLC, is a holding company that was created to form and own a series of wholly owned subsidiaries that own and operate salt water injection wells and facilities. AWMS Holdings, LLC, offers investment opportunities to accredited investors by selling membership units of AWMS Holdings, LLC through private placement offerings. The monies received from these offerings, along with internally contributed capital, are used to construct the facilities necessary for the operation of salt water injection wells. American Water Management Services, LLC, a wholly owned subsidiary of Avalon, manages the operations, including the marketing and sales function and all the decisions regarding the well operations for a percentage of the gross revenues. As a result of the private placement offering, Avalon is not the majority owner of AWMS Holdings, LLC; however, due to the managerial control of American Water Management Services, LLC, the financial statements of AWMS Holdings, LLC and subsidiaries are included in Avalon’s consolidated financial statements. AWMS Holdings, LLC formed its first wholly owned subsidiary, AWMS Rt. 169, LLC, to own and operate two salt water injection wells. AWMS Rt. 169, LLC leases 5.2 acres on which the salt water injection wells are located. Construction of the wells began in the fourth quarter of 2013, and in April 2014, the wells commenced operations accepting brine water for disposal.

Golf and Related Operations

Avalon’s golf and related operations segment operates golf courses and related facilities, a hotel and travel agency. For the years 2014 and 2013, the net operating revenues of the golf and related operations segment represented approximately 25% and 21%, respectively, of Avalon’s total segments’ net operating revenues.

Avalon Lakes Golf, Inc. (“ALGI”) owns and operates a Pete Dye designed championship golf course located in Warren, Ohio. ALGI generates revenue from membership dues, greens fees, cart rentals, merchandise, and food and beverage sales. TBG, a subsidiary of ALGI, entered into a long-term agreement with Squaw Creek Country Club to lease and operate its golf course and related facilities. The lease, which commenced on November 1, 2003, has an initial term of ten (10) years with four (4) consecutive ten (10) year renewal term options unilaterally exercisable by TBG. In addition to a championship golf course, the Squaw Creek facilities include a swimming pool, tennis courts and a clubhouse that includes a fitness center, dining and banquet facilities. TBG generates its revenue in the same manner as ALGI, but also generates revenues from tennis and swimming. Avalon Travel, Inc., a subsidiary of ALGI, owns and operates a travel agency which generates its revenue from booking travel reservations.

In October 2006, Avalon, through its subsidiary, Avalon Country Club of Sharon, Inc., completed the acquisition of the Sharon Country Club assets. The primary assets of Sharon include the golf course and clubhouse which includes, dining and banquet facilities, a swimming pool, spa services and a fitness center. Sharon generates its revenue in the same manner as ALGI and TBG, but also generates revenues from its fitness center and spa services.

In August 2014, Avalon, through a newly created subsidiary, The Avalon Resort and Spa LLC, completed the acquisition of The Magnuson Grand Hotel (formerly The Avalon Inn) in Howland, Ohio. Subsequent to the acquisition, The Magnuson Grand Hotel was renamed The Avalon Resort and Spa. The primary assets of The Avalon Resort and Spa include the 144 room hotel, indoor swimming pool and adjoining tennis center. The Avalon Resort and Spa is located adjacent to Avalon’s corporate headquarters and Avalon Lakes Golf Course. The Avalon Resort and Spa will provide our 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 allow its guests to utilize the facilities at each of the clubhouses. The Avalon Resort and Spa is currently being renovated. The renovations include a complete renovation of the existing facility and indoor junior Olympic sized swimming pool. The Avalon Resort and Spa will also be expanded to include a 12,000 square foot addition which will provide for new restaurants, bars, a full service spa and salon, extensive conference facilities, complete fitness center and a resort style pool. The Avalon Resort and Spa earns revenues through room rentals and from tennis activities. Upon completion of the expansion and renovation, other revenue-generating resort amenities will include restaurants, bars, a full service spa and salon and extensive banquet and conference facilities. The Avalon Resort and Spa operates in conjunction with its Avalon Golf and Country Club.

In November 2003, Avalon formed the Avalon Golf and Country Club to manage its golf courses and the related operations. Members of the Avalon Golf and Country Club are entitled to privileges at all the facilities. Membership requires payment of annual dues. Members receive several benefits including reduced greens fees, preferential tee times and discounts on merchandise. In addition, members of the Avalon Golf and Country Club will also have access to all of the amenities offered by The Avalon Resort and Spa. 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 three facilities and the addition of The Avalon Resort and Spa 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 December 31, 2014, Avalon has not attained its membership goals. There can be no assurance as to when such goals will be attained and when the golf and related operations will ultimately become profitable. 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.

The golf courses are significantly dependent upon weather conditions during the golf season as a result of being located in northeast Ohio and western Pennsylvania. Avalon’s financial performance is adversely affected by adverse weather conditions.

Governmental Regulations

The federal government and numerous state and local governmental bodies are continuing to consider legislation or regulations to either restrict or impede the disposal and/or transportation of waste. 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. Avalon’s waste brokerage and management services may also be affected by the trend toward laws requiring the development of waste reduction and recycling or other programs.

All three of Avalon’s golf course operations and The Avalon Resort and Spa 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.

Sales and Marketing

Avalon’s sales and marketing approach is decentralized, with each business segment being responsible for its own sales and marketing efforts. Each business segment employs its own sales force which concentrates on expanding its business.

Competition

The hazardous and nonhazardous waste disposal brokerage and management business is highly competitive and fragmented. Avalon’s waste disposal brokerage and management business competes with other brokerage companies, as well as, with companies which own treatment and disposal facilities. In addition to price, knowledge and service are key factors when competing for waste disposal brokerage and management business. Avalon’s waste disposal brokerage and management operations obtain and retain 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 a reduction in the number of disposal options available to waste generators and may cause disposal pricing to increase. Avalon may need to absorb all or a portion of these cost increases depending upon competitive conditions at the time.

Avalon’s golf courses are located in Warren, Ohio, Vienna, Ohio and Sharon, Pennsylvania and compete with many public courses and country clubs in the area.

The Avalon Resort and Spa’s principal competitors are operators of full service, select service and extended stay properties, including major hospitality chains with well-established and recognized brands. We also compete against small chains and independent and local owners and operators. We compete for guests based primarily on the resort complex and country club experience created through the combination of the resort/spa and country club operations.

Insurance

Avalon carries $11,000,000 of liability insurance coverage. This insurance includes coverage for comprehensive general liability, automobile liability and other customary coverage. Avalon also carries $5,000,000 of liability insurance for the golf courses and related operations which maintain separate insurance coverage. Avalon carries comprehensive property damage coverage and, also, professional liability insurance for its fitness, swimming and spa activities. No assurance can be given that such insurance will be available in the future or, if available, that the premiums for such insurance will be reasonable.

If Avalon were to incur a substantial liability for damages not covered by insurance or in excess of its policy limits or at a time when Avalon no longer is able to obtain appropriate liability insurance, its financial condition could be materially adversely affected.

Employees

As of December 31, 2014, Avalon had 379 employees, 35 of whom were employed by the waste management services segment, 316 of whom were employed by the golf and related operations and 28 of whom were employed in financial and administrative activities. Avalon believes that it has a good relationship with its employees.

Other Business Factors

None of Avalon’s business segments is materially dependent on patents, trademarks, licenses, franchises or concessions, other than permits, licenses and approvals issued by regulatory agencies. Avalon does not sponsor significant research and development activities.

ITEM 1A.

RISK FACTORS

The following factors, as well as, factors described elsewhere in the Form 10-K, or in other filings by Avalon with the Securities and Exchange Commission, could adversely affect Avalon’s consolidated financial position, results of operations or cash flows. Other factors not presently known to us or that we presently believe are not material could also affect our business operations and financial results.

Voting Control by Management

Avalon has two classes of common stock, Class A and Class B. Each share of Class A Common Stock is entitled to one vote and each share of Class B Common Stock is entitled to ten votes on all matters submitted to a vote of the shareholders. Except for the election of Avalon’s Board of Directors, the Class A Common Stock and the Class B Common Stock vote together as a single class on all matters presented for a vote to the shareholders. The holders of the Avalon Class B Common Stock, which consists principally of the management of Avalon, have approximately 66 percent of the aggregate voting power of the outstanding Avalon Common Stock. Thus, the holders of the Avalon Class A Common Stock will not, either alone or acting collectively, be able to elect a majority of the members of Avalon’s Board of Directors (the “Avalon Board”) or control many corporate actions. However, the holders of the Avalon Class A Common Stock, voting as a separate class, have the right to elect the number of directors equal to at least 25 percent of the total Board of Directors of Avalon until the outstanding Avalon Class B Common Stock constitutes less than 50 percent of the total voting power of the outstanding Avalon Common Stock, after which time the holders of the Avalon Class A and Class B Common Stock will vote as a single class for the election of directors and all matters presented for a vote to the shareholders. The holders of a majority of all outstanding shares of Class A Common Stock or Class B Common Stock, voting as separate classes, must also approve amendments to the Articles of Incorporation that adversely affect the shares of their class.

Each share of Class B Common Stock is convertible, at any time, at the option of the shareholder, into one share of Class A Common Stock. Shares of Class B Common Stock are also automatically converted into shares of Class A Common Stock on the transfer of such shares to any person other than Avalon, another holder of Class B Common Stock or a Permitted Transferee, as defined in Avalon’s Articles of Incorporation.

Certain Anti-Takeover Provisions of Articles of Incorporation, Code of Regulations and Ohio Law

The Articles of Incorporation and Code of Regulations of Avalon, as well as, Ohio statutory law, contain provisions that may have the effect of discouraging an acquisition of control of Avalon not approved by the Avalon Board. Such provisions may also have the effect of discouraging third parties from making proposals involving an acquisition or change of control of Avalon, even though such proposals, if made, might be considered desirable by a majority of the Avalon stockholders. Such provisions could also have the effect of making it more difficult for third parties to cause the replacement of the current management of Avalon without the concurrence of the Avalon Board. These provisions have been designed to enable Avalon to develop its business and foster its long-term growth without disruptions caused by the threat of a takeover not deemed by the Avalon Board to be in the best interest of Avalon and its stockholders.

Dividend Policy

The dividend policy of Avalon is determined by the Avalon Board. Avalon presently intends to retain earnings for use in the operation and expansion of its business and, therefore, does not anticipate paying cash dividends in the foreseeable future.

Avalon’s market for shares may be subject to greater volatility and limited daily activity

Market fluctuations, as well as economic conditions, may adversely affect the market price of the Avalon Class A Common Stock. Given the relatively small market capitalization of Avalon, the market for its Class A Common Stock may be subject to greater volatility than would be the case for a large company. In addition, the selling and buying of shares on a daily basis may be limited because of the relatively small capitalization of Avalon.

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 and is 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.

The golf operations primary source of 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 operations are primarily dependent on the sale and renewal of memberships in the Avalon Golf and Country Club, on a year to year basis.

Long-lived asset impairment

Certain events or changes in circumstances may indicate that the recoverability of the carrying value of long-lived assets should be assessed. Such events or changes may include a significant decrease in market value, a significant change in the business climate in a particular market, or a current-period operating or cash flow loss combined with historical losses or projected future losses. If an event occurs or changes in circumstances are present, Avalon estimates the future cash flows expected to result from the use of the applicable groups of long-lived assets and their eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying value, Avalon would recognize an impairment loss to the extent the carrying value of the groups of long-lived assets exceeds their fair value. Avalon would determine the fair value by using quoted market prices, if available, for such assets; or if quoted market prices are not available, Avalon would discount the expected estimated future cash flows.

The ability to accurately predict future cash flows may impact the determination of fair value. Avalon’s assessments of cash flows represent management’s best estimate at the time of the impairment review. Avalon estimates the future cash flows expected to result from the use and, if applicable, the eventual disposition of the assets. The key variables that management must estimate include, among other factors, sales, costs, inflation and capital spending. Significant management judgment is involved in estimating these variables, and they include inherent uncertainties. If different cash flows had been estimated in the current period, the value of the long-lived assets could have been materially impacted. Furthermore, Avalon’s accounting estimates may change from period to period as conditions in markets change, and this could materially impact financial results in future periods.

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 could be adversely affected by adverse weather conditions.

Saltwater Disposal Wells

The saltwater disposal business is a startup business for Avalon. Avalon has no history of operating saltwater disposal wells, although Avalon has successfully operated waste disposal facilities and waste brokering businesses for over 20 years. To be successful, Avalon must, among other things, acquire and/or develop and construct disposal wells; attract and maintain customers; provide disposal services at attractive prices; and respond to competitive developments. The failure to do so could have a material adverse effect on the business and financial results of Avalon.

The recent increase in the use of hydrofracturing in both Pennsylvania and Ohio has substantially increased the need for saltwater disposal wells and it is likely that the number of saltwater disposal wells being permitted and constructed will increase. As such, the price charged to customers to dispose of the saltwater brine may fluctuate with the increase in competition. In addition, alternative methods for the disposal of saltwater brine may be developed. Both a price decline and/or alternative methods for the disposal of saltwater brine could adversely impact the financial results of Avalon.

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.

There is a continuing risk during the saltwater disposal well’s 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 both of Avalon’s saltwater injection wells. The Orders were based on the findings that the two saltwater injection wells are located in close proximity to the area of known seismic activity and also that the saltwater injection wells pose a risk of increasing or creating seismic activity. The two saltwater injection wells are located approximately 112 feet apart. Based on these findings, the Chief ordered the immediate suspension of all operations of the two saltwater injection wells, until the Division can further evaluate the wells.

On September 5, 2014, Avalon submitted the information required by the Chief’s Order in regards to its AWMS #1 injection well. The Division reviewed all the information submitted by Avalon and additional data. Based upon this review, the Division concluded that with reasonable scientific certainty, the injection operations of AWMS #1 were not related to the deep seismic event that occurred on August 31, 2014. As a result, the Order suspending all operations of AWMS #1 was terminated effective September 18, 2014. As such, Avalon resumed injection operations of AWMS #1 consistent with all terms and conditions of the permit issued on July 18, 2013.

On September 19, 2014, Avalon submitted the information required by the Chief’s Order in regards to its AWMS #2 injection well. On October 3, 2014, Avalon filed an appeal to the Orders of the Chief disputing the basis for suspending operations of AWMS #2 and also the authority of the Chief to immediately suspend such operations. Currently, the operations of Avalon’s second injection well are still suspended. Avalon is seeking relief in the form of an order from the Commission that vacates the Orders. An appeal hearing is tentatively scheduled to occur in March of 2015.

Environmental Liabilities

Avalon may be subject to liability for environmental contamination caused by pollutants, the transportation, treatment or disposal of which was arranged for by Avalon or one of its predecessors.

Although Avalon has compliance guidelines for its waste brokerage and management services business, Avalon could still incur a substantial liability for environmental damage not covered by or in excess of its insurance policy limits and, as such, its financial condition could be adversely affected.

Competitive pressures

The hazardous and nonhazardous waste disposal brokerage and management business is highly competitive and fragmented. Avalon’s waste disposal brokerage and management business competes with other brokerage companies, as well as, with companies which own treatment and disposal facilities. In addition to price, knowledge and service are key factors when competing for waste disposal brokerage and management business. Avalon’s waste disposal brokerage and management 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 companies offering disposal options available to waste generators and may cause disposal pricing to increase. Avalon may need to absorb all or a portion of these cost increases depending upon competitive conditions at the time.

Golf Memberships and Liquor Licenses

The Avalon Golf and Country Club operates golf courses and related clubhouses at each of its three facilities. The Avalon Golf and Country Club facilities also offer swimming pools, fitness centers, tennis courts, dining and banquet facilities and spa services. In addition, The Avalon Resort and Spa will provide 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 allow its guests to utilize the facilities at each of the clubhouses. Members of the Avalon Golf and Country Club will also have access to all of the amenities offered by The Avalon Resort and Spa. 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 three facilities and the addition of The Avalon Resort and Spa 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 December 31, 2014, Avalon has not attained its membership goals. There can be no assurance as to when such goals will be attained and when the golf and related operations will ultimately become profitable. 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.

Government regulations

The federal government and numerous state and local governmental bodies are continuing to consider legislation or regulations to either restrict or impede the disposal and/or transportation of waste. A portion of Avalon’s waste management services revenues is derived from the brokerage of 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. Avalon’s waste brokerage and management services may also be affected by the trend toward laws requiring the development of waste reduction and recycling or other programs.

Changes in laws, regulations and accounting standards

Our implementation of new accounting rules and interpretations or compliance with changes in existing accounting rules could adversely affect our balance sheet or results of operations or cause unanticipated fluctuations in our results of operations in future periods.

Accounting estimates and judgments

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and subsequent adjustments could have a material adverse effect on operating results for the period or periods in which the change is identified.

Inflation

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. In general, management believes that rising costs resulting from price 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.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

There were no unresolved comments from the Staff of the U. S. Securities and Exchange Commission at December 31, 2014.

ITEM 2.

PROPERTIES

Avalon owns a 37,000 square foot headquarters building located on approximately 5.6 acres of property in Warren, Ohio adjacent to the Avalon Lakes Golf Course. The corporate and administrative offices of ALMI, AWMS and all the golf operations are located at the headquarters building of Avalon in Warren, Ohio. Avalon’s corporate headquarters building also includes a clubhouse, restaurant, golf simulators and a pro shop for the Avalon Golf and Country Club at Avalon Lakes Golf Course.

ALGI owns an 18-hole golf course and practice facility on approximately 200 acres, a maintenance and storage building of approximately 12,000 square feet, a restaurant building of approximately 10,400 square feet, and a banquet facility of approximately 7,000 square feet. All of ALGI’s facilities are located in Warren, Ohio.

TBG, Inc. leases and operates the Avalon Golf and Country Club at Squaw Creek in Vienna, Ohio, which includes an 18-hole golf course and practice facility on approximately 224 acres, an outdoor swimming pool, 4 outdoor tennis courts, 4 indoor tennis courts and a 67,000 square foot clubhouse that includes a pro shop, fitness center, restaurants and banquet facilities.

Avalon Country Club at Sharon, Inc. owns an 18-hole golf course on approximately 130 acres. The clubhouse and recreational facilities are approximately 80,000 square feet and include a pro shop, dining and banquet facilities, an outdoor swimming pool, a spa and fitness center.

The Avalon Resort and Spa owns an 89,000 square foot 144 room hotel, fitness center and 3 indoor tennis courts of approximately 4,500 square feet located on approximately 8.2 acres in Warren, Ohio adjacent to the Avalon Lakes Golf Course. The Avalon Resort and Spa is currently being renovated. The renovations include a complete renovation of the existing facility and indoor junior Olympic sized swimming pool. The Avalon Resort and Spa will also be expanded to include a 12,000 square foot addition which will provide for new restaurants, bars, a full service spa and salon, extensive conference facilities, complete fitness center and a resort style pool.

The captive landfill management operations use approximately four pieces of equipment (such as bulldozers, excavators and backhoes) and two pieces of rolling stock, all of which are owned or leased by ALMI.

AWMS Rt. 169, LLC leases 5.2 acres on which the salt water injection wells and related facilities are located.

Generally, Avalon’s fixed assets are in good condition and are satisfactory for the purposes for which they are intended.

ITEM 3.

LEGAL PROCEEDINGS

In the ordinary course of conducting its business, Avalon becomes involved in lawsuits, administrative proceedings and governmental investigations, including those related 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, Avalon does not believe that any uninsured ultimate liabilities, fines or penalties resulting from such pending proceedings, individually or in the aggregate, would have a material adverse effect on its liquidity, financial position or results of operations. See Item 1. “Business—Insurance.”

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

PART II

Information with respect to the following items can be found on the indicated pages of Exhibit 13.1, the 2014 Annual Report to Shareholders, if not otherwise included herein.

ITEM 5.

MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

	Page(s)
Common stock information	34
Dividend policy	34

ITEM 6.

SELECTED FINANCIAL DATA

Not required for Smaller Reporting Company

ITEM 7.

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations

3-12

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for Smaller Reporting Company.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Independent Registered Public Accounting Firm		30

Financial Statements:
	Consolidated Balance Sheets as of December 31, 2014 and 2013	13
	Consolidated Statements of Operations for the years ended December 31, 2014 and 2013	14
	Consolidated Statements of Cash Flows for the years ended December 31, 2014 and 2013	15
	Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2014 and 2013	16

	Notes to Consolidated Financial Statements	17-29

Information regarding financial statement schedules is contained in Item 15(a) of Part IV of this report.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON accounting and FINANCIAL DISCLOSURE

None

item 9A.

controls and procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “Exchange Act”), Avalon’s management conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by the Annual Report. For purposes of the foregoing, the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s (“SEC”) rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Avalon’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as outlined above. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that they believe that, as of December 31, 2014, our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

In August 2014, we acquired The Avalon Resort and Spa. The Avalon Resort and Spa operated under its own set of systems and internal controls. We are currently incorporating their processes into our own systems and control environment. We expect to complete the incorporation of The Avalon Resort and Spa’s operations into our systems and control environment in 2015.

The Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) released the updated Internal Control–Integrated Framework (“2013 Framework”) in May 2013 which superseded the original 1992 Framework. During 2014, we transitioned to the criteria set forth by COSO in the 2013 Framework from the original 1992 Framework. This transition did not materially affect, and is not reasonably likely to materially affect, our internal control over financial reporting.

There have been no other changes in our internal control over financial reporting during the fourth fiscal quarter ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B.

Other INFORMATION

None

PART III

ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by Item 10 regarding Directors is contained under the caption “Election of Directors” in the Registrant’s definitive Proxy Statement for its 2015 Annual Meeting of Shareholders (the “Proxy Statement”) which will be filed with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after the end of the fiscal year, which information under such caption is incorporated herein by reference. The following information with respect to the Executive Officers of Avalon is included pursuant to Instruction 3 of Item 401(b) of Regulation S-K:

Name	Age	Position
Ronald E. Klingle	67	Chairman of the Board, Chief Executive Officer and a Director
Bryan P. Saksa	38	Chief Financial Officer and Treasurer
Frances R. Klingle	68	Chief Administrative Officer
Kenneth J. McMahon	62	Chief Executive Officer and President of American Waste Management Services, Inc.
Timothy C. Coxson	64	Secretary, Director of Corporate Financial Services and a Director

The above-listed individuals have been elected to the offices set opposite their names to hold office at the discretion of the Board of Directors of Avalon or its subsidiaries, as the case may be.

Ronald E. Klingle has been a director and Chairman of the Board of the Company since June 1998. He was Chief Executive Officer from June 1998 until December 2002. He reassumed and held the position of Chief Executive Officer from March 15, 2004 until February 28, 2010. On February 16, 2011 he again assumed the position of Chief Executive Officer. Mr. Klingle has over 30 years of environmental experience and received his Bachelor of Engineering degree in Chemical Engineering from Youngstown State University. Mr. Klingle is the spouse of Frances R. Klingle who is the Chief Administrative Officer of the Company.

Bryan P. Saksa was appointed Chief Financial Officer and Treasurer of the Company in December 2014. Mr. Saksa has been a Certified Public Accountant since 2001 and previously worked for a national public accounting firm and publicly owned companies in financial accounting and reporting roles. He received a Bachelor of Business Administration degree in Accounting from Cleveland State University.

Frances R. Klingle has been Chief Administrative Officer since June 1998. She was Controller of Avalon from June 1998 to April 2002. Ms. Klingle received a Bachelor of Arts degree in French from Kent State University and has completed postgraduate work in accounting at Youngstown State University. Ms. Klingle is the spouse of Ronald E. Klingle who is Chairman of the Board and a director of Avalon.

Kenneth J. McMahon has been Chief Executive Officer and President of American Waste Management Services, Inc. since June 1998. Mr. McMahon had previously been Executive Vice President, Sales and a director of American Waste Services, Inc. from September 1996 to June 1998. Mr. McMahon received a Bachelor of Business Administration degree in finance and his Master of Business Administration degree from Youngstown State University.

Timothy C. Coxson has been the Director of Corporate Financial Services since December 2014 and a director and Secretary of the Company since April 2007. He was previously Chief Financial Officer and Treasurer from March 2006 to December 2014. Mr. Coxson had been Chief Financial Officer and Treasurer of Avalon from June 1998 until August 2004. From September 2004 to March 2006, Mr. Coxson was Director of Corporate Services of Avalon. He has over 25 years of experience working for publicly owned companies in accounting and external reporting. He received a Bachelor of Business Administration degree in Accounting from The Ohio State University.

CODE OF ETHICS

Avalon has adopted a Code of Ethics in the form of Standards of Business Ethics and Conduct. Such code applies to all employees of Avalon including its principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions. The Code of Ethics is posted on our website at http://www.avalonholdings.com.

Copies of Avalon’s Code of Ethics may be obtained without charge by any shareholder. Written requests for copies should be directed to the Secretary of Avalon Holdings Corporation, One American Way, Warren, Ohio 44484.

ITEM 11.

EXECUTIVE COMPENSATION

The information required by Item 11 is contained under the captions “Executive Compensation,” and “Compensation of Directors and Executive Officers” in the Proxy Statement. The information under such captions is incorporated herein by reference.

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by Item 12 is contained under the captions “Voting Securities and Principal Holders Thereof” and “Stock Ownership of Management” in the Proxy Statement which information under such captions is incorporated herein by reference.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Item 13 is contained under the captions “Certain Relationships and Related Transactions” in the Proxy Statement which information under such captions is incorporated herein by reference.

item 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14 is contained under the caption “Independent Public Accountants” in the Proxy Statement which information under such captions is incorporated herein by reference.

PART IV

ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:

Financial Statements and Independent Auditors’ Report (See Part II, Item 8 of this report regarding incorporation by reference from the 2014 Annual Report to Shareholders).

Financial Statement Schedules required to be filed by Item 8 and Paragraph (d) of this Item 15.

The following financial statement schedule, which is applicable for years ended December 31, 2014 and 2013, should be read in conjunction with the previously referenced financial statements.

Independent Auditors’ Report on Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts

Such independent auditors’ report and financial statement schedule are at pages 17 and 18 of this report. The other schedules are omitted because of the absence of conditions under which they are required or because the information required is shown in the consolidated financial statements or the notes thereto.

Exhibits.

Registrant will furnish to any shareholder, upon written request, any of the following exhibits upon payment by such shareholder of the Registrant’s reasonable expenses in furnishing any such exhibit.

Exhibit No.

2.1

Agreement and Plan of Merger, dated as of February 6, 1998, entered into by and among USA Waste Services, Inc. (“USA”), C&S Ohio Corp. and American Waste Services, Inc. (“AWS”), incorporated herein by reference to Avalon Holdings Corporation Registration Statement on Form 10, Exhibit 2.1.

2.2

Form of Contribution and Distribution Agreement, dated as of May 7, 1998, by and between AWS and Avalon Holdings Corporation (“Avalon”), incorporated herein by reference to Avalon Holdings Corporation Registration Statement on Form 10, Exhibit 2.2.

3.1

Articles of Incorporation of Avalon incorporated herein by reference to Avalon Holdings Corporation Registration Statement on Form 10, Exhibit 3.1.

3.2

Code of Regulations of Avalon incorporated herein by reference to Avalon Holdings Corporation Registration Statement on Form 10, Exhibit 3.2.

4.1

Form of certificate evidencing shares of Class A common stock, par value $.01, of Avalon Holdings Corporation incorporated herein by reference to Avalon Holdings Corporation Registration Statement on Form 10, Exhibit 4.1.

4.2

Avalon Holdings Corporation Long-Term Incentive Plan incorporated herein by reference as Exhibit 4.2 on registrant’s Form S-8.

10.1

Form of Tax Allocation Agreement, dated as of May 7, 1998, by and among AWS, Avalon and USA incorporated herein by reference to Avalon Holdings Corporation Registration Statement on Form 10, Exhibit 10.1.

10.2

Lease Agreement with Squaw Creek Country Club, as referenced as Exhibit 10.3 to the registrant’s Form 10-Q for the period ended September 30, 2003.

10.3

Stock Purchase Agreement dated as of June 30, 2004 between Avalon Holdings Corporation and BMC International, Inc. for the purchase of DartAmericA, Inc., as referenced as Exhibit 10.4 to the registrant’s Form 10-Q for the period ended June 30, 2004.

11.1

Omitted—inapplicable. See “Basic and dilutive net income (loss) per share” on page 20 of the 2014 Annual Report to Shareholders.

13.1

Avalon Holdings Corporation 2014 Annual Report to Shareholders (except pages and information therein expressly incorporated by reference in this Form 10-K, the Annual Report to Shareholders, is provided for the information of the Commission and is not to be deemed “filed” as part of the Form 10-K).

14.1

Code of Ethics, incorporated herein by reference to Exhibit 14.1 to the registrant’s Form 10-K for the period ended December 31, 2010.

21.1

Subsidiaries of Avalon Holdings Corporation.

23.1

Consent of Independent Registered Public Accounting Firm

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)	Reports on Form 8-K

On December 2, 2014, announced the appointment of Bryan P. Saksa as Chief Financial Officer and Treasurer effective December 1, 2014.

(c)	Reference is made to Item 15 (a)(3) above for the index of Exhibits.

(d)	Reference is made to Item 15 (a)(2) above for the index to the financial statements and financial statement schedules.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on the 12^th day of March, 2015.

	AVALON HOLDINGS CORPORATION
	(Registrant)


		/s/ Bryan P. Saksa
		Bryan P. Saksa - Chief Financial Officer and Treasurer

__________________________

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, on the 12^th day of March, 2015.

Signatures		Title

/s/ Ronald E. Klingle		Chairman of the Board, Chief Executive Officer and Director
Ronald E. Klingle

/s/ Bryan P. Saksa		Chief Financial Officer and Treasurer
Bryan P. Saksa

/s/ Timothy C. Coxson		Secretary, Director of Corporate Financial Services and Director
Timothy C. Coxson

/s/ Kurtis D. Gramley		Director
Kurtis D. Gramley

/s/ Stephen L. Gordon		Director
Stephen L. Gordon

/s/ David G. Bozanich		Director
David G. Bozanich

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and

Shareholders of Avalon Holdings Corporation

We have audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) the consolidated financial statements of Avalon Holdings Corporation and subsidiaries referred to in our report dated March 12, 2015, which is included in the 2014 Annual Report to Shareholders and incorporated by reference in Part II of this form. Our audits of the basic consolidated financial statements included the financial statement schedule listed in the index appearing under Item 15(a) (2), which is the responsibility of the Company’s management. In our opinion, this financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ GRANT THORNTON LLP

Cleveland, Ohio

March 12, 2015

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 2014 AND 2013

(in thousands)


			Additions
DESCRIPTION	Balance at Beginning of Year		Charged to Costs and Expenses		Charged to Other Accounts		Deductions / (Recoveries) ¹		Balance at End of Year

Allowance for Doubtful Accounts:

Year ended December 31,
2014	$	168	$	56	$	—	$	56	$	168
2013	$	166	$	18	$	—	$	16	$	168

¹Accounts receivable written-off as uncollectible, net of recoveries.

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

EXHIBIT INDEX

__________________________

Exhibit

13.1

2014 Annual Report to Shareholders

21.1

Subsidiaries of Avalon Holdings Corporation

23.1

Consent of Independent Registered Public Accounting Firm

31.1

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101.INS^*

XBRL Instance

Exhibit 101.SCH^*

XBRL Taxonomy Extension Schema

Exhibit 101.CAL^*

XBRL Taxonomy Extension Calculation

Exhibit 101.DEF^*

XBRL Taxonomy Extension Definition

Exhibit 101.LAB^*

XBRL Taxonomy Extension Labels

Exhibit 101.PRE^*

XBRL Taxonomy Extension Presentation

* XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

Exhibit 13.1

Financial Highlights

(in thousands, except for per share amounts)

For the year	2014			2013

Net operating revenues	$	51,472		$	59,470
Income (loss) before income taxes		(1,185	)		535
Net income (loss) of Avalon Holdings Corporation common shareholders		(1,080	)		438
Net income (loss) per share attributable to Avalon Holdings Corporation common shareholders		(0.28	)		0.12

At year-end	2014		2013

Working capital	$	4,002	$	9,537
Total assets		57,844		55,579
Avalon Holdings Corporation Shareholders' Equity		39,437		40,420

The Company

Avalon Holdings Corporation provides waste management services to industrial, commercial, municipal and governmental customers in selected northeastern and midwestern U.S. markets, captive landfill management services and salt water injection well operations. Avalon Holdings Corporation also owns the Avalon Golf and Country Club, which includes the operation of golf courses, country clubs and related facilities and The Avalon Resort and Spa which operates a hotel and tennis facility.

Contents

Financial Highlights	1

Management’s Discussion and Analysis of Financial Condition and Results of Operations	3

Consolidated Balance Sheets	13

Consolidated Statements of Operations	14

Consolidated Statements of Cash Flows	15

Consolidated Statements of Shareholders’ Equity	16

Notes to Consolidated Financial Statements	17

Report of Independent Registered Public Accounting Firm	30

Management’s Annual Report on Internal Controls over Financial Reporting	31

Company Location Directory	32

Directors and Officers	33

Shareholder Information	34

Avalon Holdings Corporation and Subsidiaries

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 (collectively “Avalon” or the “Company”). This discussion should be read in conjunction with the consolidated financial statements and accompanying notes.

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 year ended December 31, 2014, Avalon utilized existing cash, cash provided by operations and borrowings under the line of credit facility to meet operating needs, fund capital expenditures and to fund the acquisition and associated renovations of The Avalon Resort and Spa described below. In addition, during 2014, Avalon received $0.7 million through the private placement offering, described below, to finalize the drilling and construction of the salt water injection wells and related facilities.

In October 2013, AWMS Holdings, LLC, which was formed to act as a holding company to own a series of wholly owned subsidiaries to own and operate salt water injection wells and related facilities, began accepting subscriptions, through a private placement offering to accredited investors, for the purchase of membership units in AWMS Holdings, LLC. As of December 31, 2014, AWMS Holdings, LLC had received $3.75 million from the sale of membership units to accredited investors. The monies raised through the private placement offering plus cash contributed by Avalon were used to construct the facilities necessary for the operation of two salt water injection wells. As a result of the private placement offering, Avalon is not the majority owner of AWMS Holdings, LLC; however, due to the managerial control of Avalon, the financial statements of AWMS Holdings, LLC and subsidiaries are included in the Avalon consolidated financial statements. At December 31, 2014, Avalon owned approximately 47% of AWMS Holdings, LLC. During the year ended December 31, 2014, AWMS Holdings, LLC incurred $3.1 million in capital expenditures relating to the drilling and construction of the two salt water injection wells and related facilities. The wells commenced operations by accepting brine water for disposal in April 2014.

In August 2014, Avalon, through a newly created subsidiary, The Avalon Resort and Spa LLC, completed the acquisition of The Magnuson Grand Hotel (formerly The Avalon Inn) in Howland, Ohio for approximately $3.1 million in cash and the assumption of certain operating leases and some rental payment relief. The acquisition was primarily funded from borrowings under our line of credit facility of $2.9 million and cash on hand of approximately $0.2 million. Subsequent to the acquisition, The Magnuson Grand Hotel was renamed The Avalon Resort and Spa. The primary assets include the 144 room hotel, indoor swimming pool and adjoining tennis center. The Avalon Resort and Spa is located adjacent to Avalon’s corporate headquarters and the Avalon Lakes Golf Course.

The Avalon Resort and Spa is currently in operation and is being renovated. The renovations include a complete renovation of the existing facility and indoor junior Olympic sized swimming pool. The Avalon Resort and Spa will also be expanded to include a 12,000 square foot addition which will provide for new restaurants, bars, a full service spa and salon, extensive conference facilities, complete fitness center and a resort style pool.

Avalon Holdings Corporation and Subsidiaries

The Company accounted for the acquisition of The Avalon Resort and Spa using the acquisition method of accounting, which requires among other things, the recognition of the assets acquired and the liabilities assumed at their respective fair values as of the acquisition date. As of December 31, 2014, the entire purchase price allocation is preliminary. The Company has received a preliminary third-party valuation of the acquired property, buildings, furniture and fixtures and any intangible assets of The Avalon Resort and Spa and, therefore, the values attributed to those acquired assets in the consolidated financial statements are subject to adjustment. As the Company finalizes the fair value of assets acquired and liabilities assumed, additional adjustments will be recorded during the measurement period.

In 2014 Avalon incurred capital expenditures of $7.7 million and paid vendors $6.8 million for such expenditures. Such expenditures related principally to the renovation of The Avalon Resort and Spa, drilling of two salt water injection wells and the construction of related facilities, building improvements and equipment for the golf and related operations segment. Avalon’s aggregate capital expenditures in 2015 are expected to be in the range of $6 million to $10 million, which will principally relate to the renovation and expansion of The Avalon Resort and Spa, building improvements and equipment purchases.

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 renewal options.

Working capital was $4.0 million at December 31, 2014 compared with $9.5 million at December 31, 2013. The decrease in working capital is primarily due to a decrease in cash and cash equivalents and accounts receivable partially offset by a decrease in accounts payable described below. Cash and cash equivalents decreased primarily as a result of the utilization of funds associated with the renovation of The Avalon Resort and Spa and the drilling and construction of the two salt water injection wells and related facilities.

Accounts receivable decreased to $8.8 million at December 31, 2014 compared with $10.2 million at December 31, 2013 primarily as the result of a reduction in the number of days outstanding of receivables from some of the larger customers of the waste brokerage and management services business partially offset by an increase in net operating revenues of the waste management segment in the fourth quarter of 2014 compared to the same period in the prior year.

Accounts payable decreased to $6.4 million at December 31, 2014 compared with $8.1 million at December 31, 2013 primarily as the result of a decrease in amounts due to disposal facilities and transportation carriers of the waste brokerage and management services as a result of timing of payments to vendors in the ordinary course of business and payments made to vendors during 2014 for the construction and drilling of the two salt water injection well facilities accrued at December 31, 2013. The decrease in accounts payable was partially offset by an increase in amounts owed to vendors for the renovation of The Avalon Resort and Spa.

During July 2014, Avalon increased its unsecured line of credit agreement with The Huntington National Bank from $1 million to $5 million. Interest on borrowings accrues at LIBOR plus 2.70% and has a .25% nonuse fee. In March 2015 the maturity date on the line of credit agreement was extended to April 30, 2016. The line of credit agreement contains certain financial and other covenants, customary representations, warranties and events of defaults. Avalon was in compliance with the debt covenants at December 31, 2014. At December 31, 2014, the outstanding borrowings under the line of credit agreement were approximately $3.8 million. Amounts borrowed under the line of credit agreement were utilized to fund the acquisition of The Avalon Resort and Spa and related renovations. As of December 31, 2014, the Company had $1.2 million available under the line of credit agreement. At December 31, 2013, there were no borrowings under the line of credit agreement. The weighted average interest rate on outstanding borrowings under the line of credit agreement was 2.86% during 2014. At December 31, 2014, the interest rate was 2.85%.

Avalon Holdings Corporation and Subsidiaries

Management believes that anticipated cash provided from future operations, will be, for the foreseeable future, sufficient to meet operating requirements. If business conditions warrant additional monies needed to fund capital expenditure programs, Avalon will take actions such as refinancing or restructuring our current debt agreement, incurring additional indebtedness, issuance of common stock or issuance of a security with characteristics of both debt and equity.

Growth Strategy

Waste Management 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. In addition, Avalon has purchased options on a number of properties for the purpose of drilling salt water injections wells for the disposal of the brine waters from oil and gas drilling. As previously mentioned Avalon has commenced the operation of salt water injection wells on one of these properties. It is the intent of Avalon to acquire or construct additional salt water injection wells, if business conditions warrant such opportunities. 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 also intend to utilize our sales and marketing capabilities to secure customers for the salt water injection well business who will utilize our wells to dispose of brine water from oil and gas drilling.

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.

• Long-Term Agreements. We seek to obtain long-term agreements with our customers when possible. By obtaining such long-term agreements, we will have the opportunity to grow our revenue base at the same rate as the underlying revenue growth of these customers. We believe this positions us to minimize revenue deterioration and experience internal growth rates that are generally higher than our industry’s overall growth rate. Additionally, we believe that by securing a base of long-term recurring revenue, we are better able to protect our market position from competition and our business may be less susceptible to downturns in economic conditions.

• 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.

Avalon Holdings Corporation and Subsidiaries

Golf and Related Operations Segment

For the golf and related operations segment, as previously mentioned, in August 2014, the Company acquired The Avalon Resort and Spa. The acquisition is consistent with the Company's business strategy in that The Avalon Resort and Spa will provide 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 allow its guests to utilize the facilities at each of the clubhouses. Members of the Avalon Golf and Country Club will also have access to all of the amenities offered by The Avalon Resort and Spa. The Avalon Resort and Spa earns revenues through room rentals and from tennis activities. Upon completion of the expansion and renovation, other revenue-generating resort amenities including restaurants, bars, a full service spa and salon, tennis courts and extensive banquet and conference facilities. Our resort is open year-round and provides a consistent, comfortable environment where our guests can enjoy our various amenities and activities.

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 of golf courses, country clubs and related facilities, a hotel and a travel agency.

Performance in 2014 compared with 2013

Overall Performance

Net operating revenues decreased 13% to $51.5 million in 2014 compared with $59.5 million in 2013. The decrease is primarily the result of a decrease in net operating revenues of the waste management services segment. Costs of operations decreased to $42.7 million in 2014 compared with $49.6 million in 2013. Such decrease is primarily due to the lower net operating revenues of the waste management services segment, which resulted in less transportation and disposal costs, as these costs vary directly with the associated net operating revenues. Fixed costs relating to depreciation and amortization expense were $2.2 million in 2014 and $1.6 million in 2013. The increase is primarily the result of depreciation expense associated with the salt water injection wells which commenced operations by accepting brine water for disposal in April 2014. Consolidated selling, general and administrative expenses were $8.0 million in both 2014 and 2013. Avalon recorded a net loss of $1.1 million, or $.28 per share in 2014 compared with net income of $0.4 million or $.12 per share in 2013.

Segment Performance

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

Net operating revenues of the waste management services segment decreased approximately 18% to $38.6 million in 2014 compared with $47.2 million in 2013. 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 brokerage and management services business decreased to $35.7 million in 2014 from $44.9 million in 2013. This decrease was primarily due to a 30% decrease in net operating revenues associated with event work and a 56% decrease in the net operating revenues relating to managerial, consulting and clerical services that are provided for a single customer. Such services are entirely dependent on that customer’s needs and declined by $4.2 million in 2014. 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. The net operating revenues from event work declined by $5.2 million in 2014 due to four large event work projects that accounted for approximately $5.0 million in net operating revenues in 2013. The net operating revenues of the captive landfill management operations decreased slightly to $2.2 million in 2014 from $2.3 million in 2013 primarily due to a decrease in the volume of waste required to be disposed of, partially offset by construction mat sales. 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. The net operating revenues of the salt water injection wells, which began operating in the second quarter of 2014, were $0.7 million.

Avalon Holdings Corporation and Subsidiaries

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 both of Avalon’s saltwater injection wells. The Orders were based on the findings that the two saltwater injection wells were located in close proximity to the area of known seismic activity and also that the saltwater injection wells pose a risk of increasing or creating seismic activity. The two saltwater injection wells are located approximately 112 feet apart. Based on these findings, the Chief ordered the immediate suspension of all operations of the two saltwater injection wells, until the Division could further evaluate the wells.

On October 3, 2014, Avalon filed an appeal to the Orders of the Chief disputing the basis for suspending operations and also the authority of the Chief to immediately suspend such operations. Currently, the operations of Avalon’s second injection well are still suspended. As a result the net operating revenues and results of the saltwater injection wells have been adversely affected. Avalon is currently seeking relief in the form of an order from the Commission that vacates the Orders. An appeal hearing is tentatively scheduled to occur in March of 2015.

Income before income taxes for the waste management services segment decreased to $2.9 million in 2014 compared with $3.8 million in the prior year. The decrease is primarily due to decreased net operating revenues of the waste brokerage and management services business partially offset by improved gross margins. Income before income taxes of the waste brokerage and management services business was approximately $2.9 million in 2014 compared with $3.4 million in 2013 primarily as a result of the aforementioned items. The overall average gross margins of the waste brokerage and management services business increased to approximately 20% in 2014 compared with 17% in the prior year. The improvement is primarily the result of less net operating revenues from managerial, consulting and clerical services, which have a lower gross margin than our traditional waste brokerage and management services’ margins. Income before income taxes of the captive landfill operations was $0.4 million in both 2014 and 2013. During 2014, the salt water injection wells, which began operating in the second quarter, incurred a loss before income taxes of $0.4 million due to the limited amount water accepted for disposal as a result of a seismic event described above.

Net operating revenues of the golf and related operations segment were $13.0 million in 2014 compared with $12.3 million in 2013. 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 2014 and 2013. Net operating revenues increased primarily as a result of the inclusion of $0.6 million of net operating revenues of the hotel operations. In addition, net operating revenues from membership dues and food and beverage sales increased but such increase was partially offset by a decrease in the net operating revenues from greens fees, cart rentals and merchandise sales. The average number of members during 2014 was 3,749 compared with 3,613 in the prior year. Although the net operating revenues from membership dues increased in 2014 compared with 2013, the average net operating revenues per member from membership dues decreased slightly due to a change in the mix between social and golf members and from promotional membership programs.

Avalon Holdings Corporation and Subsidiaries

The golf and related operations segment incurred a loss before income taxes of $1.2 million in 2014 compared with a loss before taxes of $0.3 million in 2013. The increased loss was primarily due to significantly higher employee costs, higher food costs as a percentage of food revenue, substantially higher utility costs as a result of the inclement weather and higher costs for operating supplies. In addition, The Avalon Resort and Spa recorded a loss before income taxes of approximately $0.1 million in 2014. 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 $2.9 million in 2014 compared with $3.0 million in 2013. The decrease is primarily due to the accumulated net decrease in various corporate administrative expenses.

Net Income (loss)

Avalon recorded a net loss of $1.1 million in 2014 compared with net income of $0.4 million in 2013. Excluding the effect of state income tax provisions and some minor tax credits, Avalon’s overall effective tax rate was 0% for both 2014 and 2013. The overall effective tax rate is different than statutory rates primarily due to a change in the valuation allowance. As such, Avalon’s income tax benefit in 2014 and income tax provision in 2013 were offset by a change in the valuation allowance. A valuation allowance has been provided when it is more likely than not that the 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

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.

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.

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 Holdings Corporation and Subsidiaries

If Avalon is unable to obtain a favorable decision and resume operations of AWMS #2, the Company will assess the recoverability of the carrying value of the wells and recognize an impairment loss to the extent the carrying value exceeds the fair value.

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.

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 Impact

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. 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.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make judgments, assumptions, and estimates that affect reported amounts. Significant accounting policies used in the preparation of Avalon’s Consolidated Financial Statements are described in Note 2 to the consolidated financial statements. Estimates are used when accounting for, among other things, the allowance for doubtful accounts, asset impairments, compensation costs relating to stock options granted, contingencies and administrative proceedings, environmental matters and taxes.

The majority of Avalon’s accounts receivable is due from industrial and commercial customers. Credit is extended based on an evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Avalon determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, Avalon’s previous accounts receivable loss history, the customer’s current ability to pay its obligation to Avalon and the condition of the general economy and the industry as a whole. Bankruptcy or economic challenges of a particular customer represent uncertainties that are not controllable by management. If management’s assessments change due to different assumptions or if actual collections differ from management’s estimates, future operating results could be impacted. Avalon writes off accounts receivable when they become uncollectible. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts, or to income, as appropriate under the circumstances.

Avalon Holdings Corporation and Subsidiaries

Avalon recognizes share-based compensation expense related to stock options issued to employees and directors. Avalon estimates the fair value of the stock options granted using a Monte Carlo simulation. The Monte Carlo simulation was selected to determine the fair value because it incorporates six minimum considerations; 1) the exercise price of the option, 2) the expected term of the option, taking into account both the contractual term of the option, the effects of employees’ expected exercise and post-vesting employment termination behavior, as well as the possibility of change in control events during the contractual term of the option agreements, 3) the current fair value of the underlying equity, 4) the expected volatility of the value of the underlying share for the expected term of the option, 5) the expected dividends on the underlying share for the expected term of the option and 6) the risk-free interest rate(s) for the expected term of the option.

Avalon amortizes the fair value of the stock options over the expected term or requisite service period. If accelerated vesting occurs based on the market performance of Avalon’s common stock, the compensation costs related to the vested stock options that have not previously been amortized are recognized upon vesting.

The ability to accurately predict future cash flows may impact the determination of fair value. Avalon’s assessments of cash flows represent management’s best estimate at the time of the impairment review. Avalon estimates the future cash flows expected to result from the use and, if applicable, the eventual disposition of the assets. The key variables that management must estimate include, among other factors, sales, costs, inflation and capital spending. Significant management judgment is involved in estimating these variables and they include inherent uncertainties. If different cash flows had been estimated in the current period, the value of the long-lived assets could have been materially impacted. Furthermore, Avalon’s accounting estimates may change from period to period as conditions in markets change, and this could materially impact financial results in future periods.

When Avalon concludes that it is probable that an environmental liability has been incurred, a provision is made in Avalon’s financial statements for Avalon’s best estimate of the liability based on management’s judgment and experience, information available from regulatory agencies, and the number, financial resources and relative degree of responsibility of other potentially responsible parties who are jointly and severally liable for remediation of that site, as well as, the typical allocation of costs among such parties. If a range of possible outcomes is estimated and no amount within the range appears to be a better estimate than any other, then Avalon provides for the minimum amount within the range, in accordance with generally accepted accounting principles. The liability is recognized on an undiscounted basis. Avalon’s estimates are revised, as deemed necessary, as additional information becomes known. Such revisions may impact future operating results. Although Avalon is not currently aware of any environmental liability, there can be no assurance that in the future an environmental liability will not occur.

Avalon Holdings Corporation and Subsidiaries

Avalon recognizes deferred tax assets and liabilities based on differences between financial statement carrying amounts and the tax bases of assets and liabilities. Avalon also records tax benefits when it believes that it is more likely than not that the benefit will be sustained by the tax authority. Avalon regularly reviews its deferred tax assets for recoverability and establishes a valuation allowance based upon historical taxable income, projected future taxable income and the expected timing of the reversals of existing temporary differences to reduce its deferred assets to the amount that it believes is more likely than not to be realized. Avalon has considered future taxable income in assessing the need for the valuation allowance. The $2,245,000 of deferred tax liabilities will reverse in the same period and jurisdiction and is of the same character as the temporary differences giving rise to the $2,253,000 of deferred tax assets. Avalon has not provided a valuation allowance on the amount of deferred tax assets that it estimates will be utilized as a result of these reviews. The net deferred tax asset of $8,000 as of December 31, 2014 is likely to be utilized upon the filing of certain state tax returns. If future taxable income is less than the amount that has been assumed in assessing the recoverability of the deferred tax assets, then an increase in the valuation allowance will be required, with a corresponding increase to income tax expense. Likewise, should Avalon ascertain in the future that it is more likely than not that deferred tax assets will be realized in excess of the net deferred tax assets, all or a portion of the $1,418,000 valuation allowance as of December 31, 2014, would be reversed as a benefit to the provision for income taxes in the period such determination was made.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, to clarify the principles used to recognize revenue for all entities. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidance, effective for Avalon on January 1, 2017, establishes a five-step approach for the recognition of revenue. Avalon is currently evaluating the impact the adoption of this guidance will have on its financial position, results of operations, cash flows and related disclosures and does not anticipate that the new guidance will fundamentally change our revenue recognition policies, practices or systems.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties About an Entity’s Ability to Continue as a Going Concern. The new standard provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. Under ASU 2014-15, management will be required to perform interim and annual assessments of the Company’s ability to continue as a going concern within one year of the date the financial statements are issued. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The adoption of this standard is not expected to have an impact on Avalon’s financial statement disclosures.

Avalon Holdings Corporation and Subsidiaries

Consolidated Balance Sheets

(in thousands, except for share data)

	December 31,
	2014			2013
Assets
Current Assets:
Cash and cash equivalents	$	4,329		$	9,798
Accounts receivable, less allowance for doubtful accounts of $168 at December 31, 2014 and 2013		8,750			10,201
Inventories		947			815
Prepaid expenses		474			349
Refundable income taxes		8			3
Other current assets		45			15
Total current assets		14,553			21,181

Property and equipment, net		35,954			27,563
Leased property under capital leases, net		6,418			6,719
Noncurrent deferred tax asset		8			8
Other assets, net		911			108
Total assets	$	57,844		$	55,579

Liabilities and Equity
Current liabilities:
Current portion of obligations under capital leases	$	58		$	56
Accounts payable		6,429			8,101
Accrued payroll and other compensation		714			549
Accrued income taxes		8			1
Other accrued taxes		379			307
Deferred revenues		2,256			2,265
Other liabilities and accrued expenses		707			365
Total current liabilities		10,551			11,644

Revolving line of credit		3,800			-
Obligations under capital leases		333			390
Asset retirement obligation		100			75
Deferred rental income		138			-
Contingencies and commitments		-			-

Equity:
Avalon Holdings Corporation Shareholders' Equity:
Class A Common Stock, $.01 par value, one vote per share: authorized 10,500,000 shares; issued and outstanding 3,191,100 shares at December 31, 2014 and 2013		32			32
Class B Common Stock, $.01 par value, ten votes per share: authorized 1,000,000 shares; issued and outstanding 612,231 shares at December 31, 2014 and 2013		6			6
Paid-in capital		58,868			58,771
Accumulated deficit		(19,469	)		(18,389	)
Total Avalon Holdings Corporation Shareholders' Equity		39,437			40,420
Non-controlling interest in subsidiary		3,485			3,050
Total equity		42,922			43,470
Total liabilities and equity	$	57,844		$	55,579

See accompanying notes to consolidated financial statements.

Avalon Holdings Corporation and Subsidiaries

Consolidated Statements of Operations

(in thousands, except for per share amounts)

	Year Ended December 31,
	2014			2013
Net operating revenues	$	51,472		$	59,470

Costs and expenses:
Costs of operations		42,687			49,598
Depreciation and amortization expense		2,155			1,636
Selling, general and administrative expenses		8,026			7,965
Operating income (loss)		(1,396	)		271

Other income (expense):
Interest expense		(58	)		(22	)
Interest income		1			1
Other income, net		268			285
Income (loss) before income taxes		(1,185	)		535

Provision for income taxes		73			97
Net income (loss)		(1,258	)		438

Less net loss attributable to non-controlling interest in subsidiary		(178	)		-
Net income (loss) of Avalon Holdings Corporation common shareholders	$	(1,080	)	$	438

Income (loss) per share attributable to Avalon Holdings Corporation common shareholders:
Basic net income (loss) per share	$	(0.28	)	$	0.12
Dilutive net income (loss) per share	$	(0.28	)	$	0.11

Weighted average shares outstanding - basic		3,803			3,803
Weighted average shares outstanding - diluted		3,803			4,090

See accompanying notes to consolidated financial statements.

Avalon Holdings Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

	Year Ended December 31,
	2014			2013

Operating activities:
Net income (loss)	$	(1,258	)	$	438
Reconciliation of net income (loss) to cash provided by (used in) operating activities:
Depreciation and amortization expense		2,155			1,636
Compensation costs - stock options		80			118
Deferred rental income		(38	)		-
Provision for losses on accounts receivable		56			18
Gain from disposal of property and equipment		(2	)		(23	)
Accretion of asset retirement obligation		25			-
Change in operating assets and liabilities, net of effect of acquisition:
Accounts receivable		1,395			(975	)
Inventories		(132	)		(72	)
Prepaid expenses		(125	)		(62	)
Refundable income taxes		(5	)		6
Other current assets		(30	)		-
Other assets, net		12			(4	)
Accounts payable		(2,566	)		86
Accrued payroll and other compensation		165			63
Accrued income taxes		7			(1	)
Other accrued taxes		72			4
Deferred revenues		(9	)		85
Other liabilities and accrued expenses		252			(59	)
Net cash provided by operating activities		54			1,258

Investing activities:
Capital expenditures		(6,790	)		(2,370	)
Acquisition of Avalon Resort and Spa		(3,122	)		-
Proceeds from disposal of property and equipment		14			25
Net cash used in investing activities		(9,898	)		(2,345	)

Financing activities:
Proceeds from subsidiary private placement offering		700			3,050
Borrowings under line of credit facility		3,800			-
Cash distributions to non-controlling interest in subsidiary		(87	)		-
Principal payments on capital lease obligation		(55	)		(60	)
Contribution to paid-in capital		17			7
Net cash provided by financing activities		4,375			2,997

Increase (decrease) in cash and cash equivalents		(5,469	)		1,910
Cash and cash equivalents at beginning of year		9,798			7,888
Cash and cash equivalents at end of year	$	4,329		$	9,798

Supplemental disclosure of cash flow information:

Significant non-cash operating and investing activities:
Capital expenditures included in accounts payable	$	894		$	1,338
Asset retirement obligation	$	-		$	75

Significant non-cash investing and financing activities:
Capital lease obligations incurred	$	-		$	280

Cash paid during the year for interest	$	58		$	22

For supplemental cash flow information regarding income taxes, see Note 7.

See accompanying notes to consolidated financial statements

Avalon Holdings Corporation and Subsidiaries

Consolidated Statements of Shareholders’ Equity

(in thousands)

	For the Years Ended December 31, 2014 and 2013
	Shares				Common Stock				Paid-in		Accumulated			Total Avalon Shareholders'			Non-controlling Interest in
	Class A		Class B		Class A		Class B		Capital		Deficit			Equity			Subsidiary			Total

Balance at January 1, 2013		3,191		612	$	32	$	6	$	58,646	$	(18,827	)	$	39,857		$	-		$	39,857
Stock options - compensation costs		-		-		-		-		118		-			118			-			118
Investment in subsidiary from accredited investors		-		-		-		-		-		-			-			3,050			3,050
Contribution to paid-in capital		-		-		-		-		7		-			7			-			7
Net income		-		-		-		-		-		438			438			-			438
Balance at December 31, 2013		3,191		612		32		6		58,771		(18,389	)		40,420			3,050			43,470
Stock options - compensation costs		-		-		-		-		80		-			80			-			80
Investment in subsidiary from accredited investors		-		-		-		-		-		-			-			700			700
Cash distributions to non-controlling interest in subsidiary		-		-		-		-		-		-			-			(87	)		(87	)
Contribution to paid-in capital		-		-		-		-		17		-			17			-			17
Net loss		-		-		-		-		-		(1,080	)		(1,080	)		(178	)		(1,258	)
Balance at December 31, 2014		3,191		612	$	32	$	6	$	58,868	$	(19,469	)	$	39,437		$	3,485		$	42,922

See accompanying notes to consolidated financial statements.

Avalon Holdings Corporation and Subsidiaries

Notes to Consolidated Financial Statements

Note 1. Description of the Business

Avalon Holdings Corporation (“Avalon” or the “Company”) was formed on April 30, 1998 as a subsidiary of American Waste Services, Inc. (“AWS”). On June 17, 1998, AWS distributed, as a special dividend, all of the outstanding shares of capital stock of Avalon to the holders of AWS common stock on a pro rata and corresponding basis.

Avalon provides waste management services to industrial, commercial, municipal and governmental customers in selected northeastern and midwestern U.S. markets, captive landfill management for an industrial customer and salt water injection well operations. In addition, Avalon owns the Avalon Golf and Country Club, which includes the operation and management of three golf courses and associated clubhouses, fitness centers, tennis courts, spa services, dining and banquet facilities and a travel agency. Avalon also owns The Avalon Resort and Spa which operates a hotel and tennis facility.

Note 2. Summary of Significant Accounting Policies

The significant accounting policies of Avalon, which are summarized below, are consistent with accounting principles generally accepted in the United States and reflect practices appropriate to the businesses in which they operate. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Subsequent Events

Avalon evaluated subsequent events for potential recognition and disclosure through the date the financial statements were issued.

Reclassifications

Certain reclassifications of prior year amounts have been made to the Consolidated Balance Sheets and Consolidated Statement of Cash Flows to conform to current year classification.

Principles of consolidation

The consolidated financial statements include the accounts of Avalon, its wholly owned subsidiaries and those companies in which Avalon has managerial control.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Cash and cash equivalents

Cash and cash equivalents include money market instruments that are stated at cost, which approximate fair value. Investments with original maturities of three months or less from date of purchase are considered to be cash equivalents for purposes of the Consolidated Statements of Cash Flows and Consolidated Balance Sheets. Such investments are not insured by the Federal Deposit Insurance Corporation. The balance of cash and cash equivalents was $4.3 million and $9.8 million at December 31, 2014 and 2013, respectively.

Avalon maintains its cash balances in various financial institutions. These balances may, at times, exceed federal insured limits. Avalon has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk relating to its cash and cash equivalents.

Financial instruments

The Company follows the guidance included in the Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, for its financial assets and liabilities. The fair value of financial instruments consisting of cash, cash equivalents, accounts receivable, and accounts payable at December 31, 2014 and 2013 approximates carrying value due to the relative short maturity of these financial instruments.

Avalon Holdings Corporation and Subsidiaries

The fair value of debt under the Company’s credit facility approximates carrying value due to the floating interest rates and relative short maturity of the revolving borrowings under this agreement.

Property and equipment

Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful life of the asset which varies from 0 to 30 years for land improvements; 5 to 50 years in the case of buildings and improvements; and from 3 to 10 years for machinery and equipment, vehicles and office furniture and equipment (See Note 5).

Major additions and improvements are charged to the property and equipment accounts while replacements, maintenance and repairs, which do not improve or extend the life of the respective asset, are expensed currently. The cost of assets retired or otherwise disposed of and the related accumulated depreciation is eliminated from the accounts in the year of disposal. Gains or losses resulting from disposals of property and equipment are credited or charged to operations currently. Interest costs, if any, would be capitalized on significant construction projects.

Income taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and to operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded against net deferred tax assets when management believes it is more likely than not that such deferred tax assets will not be realized. Avalon recognizes any interest and penalty assessed by taxing authorities as a component of interest expense and other expense, respectively.

Revenue recognition

Avalon recognizes revenue for waste management services as services are performed. Revenues for the golf operations are recognized as services are provided with the exception of membership dues which are recognized proportionately over twelve months based upon each member’s anniversary date. The deferred revenue relating to membership dues was approximately $2.3 million at December 31, 2014 and 2013, respectively.

Accounts Receivable

The majority of Avalon’s accounts receivable is due from industrial and commercial customers. Credit is extended based on an evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are stated at amounts due from customers, net of an allowance for doubtful accounts. Customer accounts that are outstanding longer than the contractual payment terms are considered past due. Avalon determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, Avalon’s previous accounts receivable loss history, the customer’s current ability to pay its obligation to Avalon and the condition of the general economy and the industry as a whole. Avalon writes off accounts receivable when they become uncollectible. Payments subsequently received on such receivables are credited to the allowance for doubtful accounts, or to income, as appropriate under the circumstances.

Leases

Avalon applies the accounting rules for leases to categorize leases at their inception as either operating or capital leases depending on certain defined criteria. Leasehold improvements are capitalized at cost and are amortized over the lesser of their expected useful life or the life of the lease (See Notes 6 and 12).

Noncontrolling Interest

Avalon owns approximately 47% of AWMS Holdings, LLC at December 31, 2014. Due to the managerial control of American Water Management Services, LLC, the financial statements of AWMS Holdings, LLC and subsidiaries are included in Avalon’s consolidated financial statements. US GAAP requires noncontrolling interests to be reported as a separate component of equity. The amount of net loss attributable to the noncontrolling interest is recorded in “net loss attributable to noncontrolling interest” in our consolidated statements of operations (See Note 14).

Avalon Holdings Corporation and Subsidiaries

Stock-Based compensation

Avalon recognizes share-based compensation expense related to stock options issued to employees and directors. Avalon estimates the fair value of the stock options granted using a Monte Carlo simulation. The Monte Carlo Simulation was selected to determine the fair value because it incorporates six minimum considerations; 1) the exercise price of the option, 2) the expected term of the option, taking into account both the contractual term of the option, the effects of employees’ expected exercise and post-vesting employment termination behavior, as well as the possibility of change in control events during the contractual term of the option agreements, 3) the current fair value of the underlying equity, 4) the expected volatility of the value of the underlying share for the expected term of the option, 5) the expected dividends on the underlying share for the expected term of the option and 6) the risk-free interest rate(s) for the expected term of the option.

Asset retirement obligation

Avalon recorded an estimated asset retirement obligation of approximately $0.1 million at December 31, 2014 and 2013, respectively, to plug and abandon the two salt water injection wells based upon an estimate from an experienced and qualified third party.

Asset impairments

Avalon reviews the carrying value of its long-lived assets whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. If indicators of impairment exist, Avalon would determine whether the estimated undiscounted sum of the future cash flows of such assets and their eventual disposition is less than its carrying amount. If less, an impairment loss would be recognized if, and to the extent that the carrying amount of such assets exceeds their respective fair value. Avalon would determine the fair value by using quoted market prices, if available, for such assets; or if quoted market prices are not available, Avalon would discount the expected estimated future cash flows.

Avalon does not believe there was a triggering event in 2014 or 2013 relating to the golf operations as future cash flows have not changed significantly and asset values have remained relatively stable. If Avalon is unable to obtain a favorable decision and resume operations of AWMS #2, the Company will assess the recoverability of the carrying value of the wells and recognize an impairment loss to the extent the carrying value exceeds the fair value (See Note 14).

Environmental liabilities

When Avalon concludes that it is probable that a liability has been incurred with respect to a site, a provision is made in Avalon’s financial statements for Avalon’s best estimate of the liability based on management’s judgment and experience, information available from regulatory agencies, and the number, financial resources and relative degree of responsibility of other potentially responsible parties who are jointly and severally liable for remediation of that site, as well as, the typical allocation of costs among such parties. If a range of possible outcomes is estimated and no amount within the range appears to be a better estimate than any other, Avalon provides for the minimum amount within the range, in accordance with generally accepted accounting principles. The liability is recognized on an undiscounted basis. Avalon’s estimates are revised, as deemed necessary, as additional information becomes known. Although Avalon is not currently aware of any environmental liability, there can be no assurance that in the future an environmental liability will not occur.

Avalon Holdings Corporation and Subsidiaries

Basic and dilutive net income (loss) per share

Basic net income (loss) per share for the years ended December 31, 2014 and 2013 is computed by dividing net income (loss) by the weighted average number of common shares outstanding, which were 3,803,331 for each period. Dilutive net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus any weighted common equivalent shares determined to be outstanding during the period using the treasury method. The weighted common equivalent shares included in the calculation are related to stock options granted by Avalon where the weighted average market price of Avalon’s common stock for the period presented is greater than the option exercise price of the stock option. For the year ended December 31, 2014, the diluted per share amounts reported are equal to basic per share amounts because Avalon was in a net loss position and as a result, such dilution would be considered anti-dilutive. Assuming dilution, the weighted average number of common shares outstanding for the year ended December 31, 2014 was 4,091,862. For the year ended December 31, 2013, the dilutive weighted average number of shares outstanding was 4,089,679. The earnings per share calculations for the years ended December 31, 2014 and 2013 are as follows (in thousands, except per share amounts):

	2014			2013
Net income (loss) of Avalon Holdings Corporation common shareholders	$	(1,080	)	$	438

Shares used in computing basic income (loss) per share		3,803			3,803
Potentially dilutive shares from stock options		-			287
Shares used in computing dilutive income (loss) per share		3,803			4,090

Income (loss) per share attributable to Avalon Holdings Corporation common shareholders
Basic net income (loss) per share	$	(0.28	)	$	0.12
Dilutive net income (loss) per share	$	(0.28	)	$	0.11

Recent accounting pronouncements

In May 2014, FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, to clarify the principles used to recognize revenue for all entities. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidance, effective for Avalon on January 1, 2017, establishes a five-step approach for the recognition of revenue. Avalon is currently evaluating the impact the adoption of this guidance will have on its financial position, results of operations, cash flows and related disclosures and does not anticipate that the new guidance will fundamentally change our revenue recognition policies, practices or systems.

Avalon Holdings Corporation and Subsidiaries

Note 3. Acquisition

In August 2014, Avalon, through a newly created subsidiary, The Avalon Resort and Spa LLC, completed the acquisition of The Magnuson Grand Hotel (formerly The Avalon Inn) in Howland, Ohio for approximately $3.1 million in cash and the assumption of certain operating leases and some rental payment relief. The acquisition was primarily funded from borrowings under our line of credit facility of $2.9 million and cash on hand of approximately $0.2 million. Subsequent to the acquisition, The Magnuson Grand Hotel was renamed The Avalon Resort and Spa. The primary assets of The Avalon Resort and Spa include the 144 room hotel, indoor swimming pool and adjoining tennis center. The Avalon Resort and Spa is located adjacent to Avalon’s corporate headquarters and the Avalon Lakes Golf Course.

The acquisition is consistent with the Company's business strategy in that The Avalon Resort and Spa will provide 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 allow its guests to utilize the facilities at each of the clubhouses. Members of the Avalon Golf and Country Club will also have access to all of the amenities offered by The Avalon Resort and Spa. The Avalon Resort and Spa earns revenues through room rentals and from tennis activities. Upon completion of the expansion and renovation, other revenue-generating resort amenities will include restaurants, bars, a full service spa and salon and extensive banquet and conference facilities. The operating results of The Avalon Resort and Spa have been included within the Company’s Consolidated Statement of Operations and within Avalon's golf and related operations segment since the date of acquisition. The Consolidated Statement of Operations for the year ended December 31, 2014 includes net operating revenues of $0.6 million and a loss before income taxes of less than $0.1 million related to The Avalon Resort and Spa. Included in The Avalon’s operating results were approximately $0.1 million in acquisition related costs included in selling, general and administrative expenses in the Consolidated Statement of Operations for the year ended December 31, 2014.

The Avalon Resort and Spa’s assets and liabilities are recorded at fair value as of the date of acquisition. The purchase consideration and related preliminary estimated allocations are as follows (in thousands):

Assets acquired:
Property and equipment	$	2,570
Other intangible assets		818
Assets acquired	$	3,388

Liabilities assumed:
Deferred rental income	$	266
Total liabilities assumed	$	266

Total consideration	$	3,122

Pro forma net operating revenues and results of operations for the acquisition of The Avalon Resort and Spa, had the acquisition occurred at the beginning of the applicable year ended December 31, 2014 or 2013, are not significant and, accordingly, are not provided.

Avalon Holdings Corporation and Subsidiaries

Note 4. Credit Facility

During July 2014, Avalon increased its unsecured line of credit agreement with The Huntington National Bank from $1 million to $5 million. Interest on borrowings accrues at LIBOR plus 2.70% and has a .25% nonuse fee. In March 2015 the maturity date on the line of credit agreement was extended to April 30, 2016. The line of credit agreement contains certain financial and other covenants, customary representations, warranties and events of defaults. Avalon was in compliance with the debt covenants at December 31, 2014. At December 31, 2014, the outstanding borrowings under the line of credit agreement were approximately $3.8 million. Amounts borrowed under the line of credit agreement were utilized to fund the acquisition of The Avalon Resort and Spa and related renovation and expansion. As of December 31, 2014, the Company had $1.2 million available under the line of credit agreement. At December 31, 2013, there were no borrowings under the line of credit agreement. The weighted average interest rate on outstanding borrowings under the line of credit agreement was 2.86% during 2014. At December 31, 2014, the interest rate was 2.85%.

Note 5. Property and Equipment

Property and equipment at December 31, 2014 and 2013 consists of the following (in thousands):

	2014			2013
Land and land improvements	$	12,924		$	11,887
Buildings and improvements		22,054			19,610
Machinery and equipment		8,559			3,088
Vehicles		493			455
Office furniture and fixtures		4,135			3,488
Construction in progress		2,961			2,591
		51,126			41,119
Less accumulated depreciation and amortization		(15,172	)		(13,556	)
Property and equipment, net	$	35,954		$	27,563

Note 6. Capital Leased Assets

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 and leasehold improvements anticipated to be made in the future, Avalon expects to exercise all its renewal options.

In addition, the captive landfill operations lease a piece of equipment that was determined to be a capital lease. The amount capitalized in the Consolidated Balance Sheets under the caption “Leased property under capital leases, net” was approximately $0.2 million and $0.3 million at December 31, 2014 and 2013, respectively.

Leased property under capital leases at December 31, 2014 and 2013 consists of the following (in thousands):

	2014			2013
Leased property under capital leases	$	10,285		$	10,116
Less accumulated amortization		(3,867	)		(3,397	)
Leased property under capital leases, net	$	6,418		$	6,719

Avalon Holdings Corporation and Subsidiaries

Note 7. Income Taxes

Income (loss) before income taxes for each of the two years in the period ended December 31, 2014 was subject to taxation under United States jurisdictions only. The provision for income taxes consists of the following (in thousands):

	2014			2013
Current:
Federal	$	(2	)	$	(2	)
State		75			99
		73			97
Deferred:
Federal		-			-
State		-			-
		-			-
	$	73		$	97

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2014 and 2013 are as follows (in thousands):

	2014			2013
Deferred tax assets:
Accounts receivable, allowance for doubtful accounts	$	63		$	63
Reserves not deductible until paid		269			236
Net operating loss carryforwards
Federal		2,252			1,851
State		726			604
Federal tax credit		340			296
Capital loss carryforward		10			10
Other		11			31
Gross deferred tax assets		3,671			3,091
Less valuation allowance		(1,418	)		(942	)
Deferred tax assets net of valuation allowance	$	2,253		$	2,149

Deferred tax liabilities:
Property and equipment	$	(2,188	)	$	(2,141	)
Other		(57	)		-
Gross deferred tax liabilities	$	(2,245	)	$	(2,141	)
Net deferred tax asset	$	8		$	8

The $2,245,000 of deferred tax liabilities will reverse in the same period and jurisdiction and is of the same character as the temporary differences giving rise to the $2,253,000 of deferred tax assets. Avalon has not provided a valuation allowance on the amount of deferred tax assets that it estimates will be utilized as a result of these reviews. If future taxable income is less than the amount that has been assumed in assessing the recoverability of the deferred tax assets, then an increase in the valuation allowance will be required, with a corresponding increase to income tax expense. Likewise, should Avalon ascertain in the future that it is more likely than not that deferred tax assets will be realized in excess of the net deferred tax assets, all or a portion of the $1,418,000 valuation allowance as of December 31, 2014, would be reversed as a benefit to the provision for income taxes in the period such determination was made.

Avalon Holdings Corporation and Subsidiaries

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to income (loss) before income taxes as a result of the following differences (in thousands):

	2014			2013
Income (loss) before income taxes	$	(1,185	)	$	535
Less net loss attributable to non-controlling interest in subsidiary		(178	)		-
Income (loss) before income taxes of Avalon Holdings Corporation common shareholders		(1,007	)		535
Federal statutory rate		35	%		35	%
		(352	)		187
State income taxes, net of federal income tax benefits		49			64
Change in valuation allowance		476			(54	)
Increase in available federal tax credit		(44	)		(47	)
Other nondeductible expenses		49			52
Increase in net operating loss carryforward:
State		(122	)		(77	)
Federal		(9	)		-
Other, net		26			(28	)
	$	73		$	97

Avalon is subject to income taxes in the U.S. federal and various states jurisdictions. With few exceptions, Avalon is no longer subject to U.S. federal, state and local income tax examinations by taxing authorities for the years before 2011. Avalon recognizes any interest and penalty assessed by taxing authorities as a component of interest expense and other expense, respectively. There were no accruals for the payment of interest and penalties for 2014 and 2013.

Avalon made net income tax payments of approximately $68,000 and $100,000 in 2014 and 2013, respectively. At December 31, 2014, Avalon has taxable loss carryforwards for federal income tax purposes aggregating approximately $6,624,000 which are available to offset future federal taxable income. These carryforwards expire in 2021 through 2034. Avalon has a capital loss carryforward for federal tax purposes of approximately $29,000 which is available to offset future federal capital gain income. This carryforward expires in 2016. In addition, at December 31, 2014, certain subsidiaries of Avalon have net operating loss carryforwards for state purposes which are available to offset future state taxable income. These carryforwards expire at various dates through 2035. A valuation allowance has been provided because it is more likely than not that the deferred tax assets relating to certain of the federal and state loss carryforwards will not be realized.

In September 2013 and August 2014 the Internal Revenue Service issued final regulations governing the income tax treatment of acquisitions, dispositions, and repairs of tangible property. Taxpayers are required to follow the new regulations for taxable years beginning on or after January 1, 2014. Management has concluded that the impact of these new regulations did not have a material impact to the financial statements for the year ended December 31, 2014.

Note 8. Retirement Benefits

Avalon sponsors a defined contribution profit sharing plan that is a qualified tax deferred benefit plan under Section 401(k) of the Internal Revenue Code (the “Plan”). Substantially all employees are eligible to participate in the Plan. The Plan provides for employer discretionary cash contributions as determined by Avalon’s Board of Directors. Discretionary contributions vest on a graduated basis and become 100% vested after five years of service. Plan participants may also contribute a portion of their annual compensation to the Plan, subject to maximums imposed by the Internal Revenue Code and related regulations. The Board decided not to make a discretionary employer contribution for 2014 or 2013.

Note 9. Long-term Incentive Plan

On August 12, 2009, the Board of Directors of Avalon approved the renewal of the expired 1998 Long-term Incentive Plan which provides for the granting of options which are intended to be non-qualified stock options (“NQSO’s”) for federal income tax purposes except for those options designated as incentive stock options (“ISO’s”) which qualify under Section 422 of the Internal Revenue Code. The name of the plan was changed to the 2009 Long-term Incentive Plan (“the Option Plan”) to reflect the year of approval. On October 6, 2009, at a Special Meeting of Shareholders, the shareholders approved the Option Plan. Avalon has reserved 1,300,000 shares of Class A Common Stock for issuance to employees and non-employee directors. NQSO’s may be granted with an exercise price which is not less than 100% of the fair market value of the Class A Common Stock on the date of grant. Options designated as ISO’s shall not be less than 110% of fair market value for employees who are ten percent shareholders and not less than 100% of fair market value for other employees. The Board of Directors may, from time to time in its discretion, grant options to one or more outside directors, subject to such terms and conditions as the Board of Directors may determine, provided that such terms and conditions are not inconsistent with other applicable provisions of the Option Plan. Options shall have a term of no longer than ten years from the date of grant; except that for an option designated as an ISO which is granted to a ten percent shareholder, the option shall have a term no longer than five years.

Avalon Holdings Corporation and Subsidiaries

No option shall be exercisable prior to one year after its grant, unless otherwise provided by the Option Committee of the Board of Directors (but in no event before 6 months after its grant), and thereafter options shall become exercisable in installments, if any, as provided by the Option Committee. Options must be exercised for full shares of common stock. To the extent that options are not exercised when they become initially exercisable, they shall be carried forward and be exercisable until the expiration of the term of such options. No option may be exercised by an optionee after his or her termination of employment for any reason with Avalon or an affiliate, except in certain situations provided by the Option Plan.

The purpose of the Avalon Holdings Corporation 2009 Long-term Incentive Plan (the “Plan”) is (a) to improve individual employee performance by providing long-term incentives and rewards to employees of Avalon, (b) to assist Avalon in attracting, retaining and motivating employees and non-employee directors with experience and ability, and (c) to associate the interests of such employees and directors with those of the Avalon shareholders. Under the Plan, 1,300,000 shares have been reserved for the issuance of stock options. There are 760,000 stock options granted under the Plan. The stock options vest ratably over a five year period and have a contractual term of ten years from the date of grant. At the end of each contractual vesting period, the share price of the Avalon common stock, traded on a public stock exchange (NYSE Amex), must reach a predetermined price within three years following such contractual vesting period before the stock options are exercisable (See table below). If the Avalon common stock price does not reach the predetermined price, the stock options will either be cancelled or the period will be extended at the discretion of the Board of Directors.

The Monte Carlo Simulation was selected to determine the fair value because it incorporates six minimum considerations; 1) the exercise price of the option, 2) the expected term of the option, taking into account both the contractual term of the option, the effects of employees’ expected exercise and post-vesting employment termination behavior, as well as the possibility of change in control events during the contractual term of the option agreements, 3) the current fair value of the underlying equity, 4) the expected volatility of the value of the underlying share for the expected term of the option, 5) the expected dividends on the underlying share for the expected term of the option and 6) the risk-free interest rate(s) for the expected term of the option.

The expected term, or time until the option is exercised, is typically based on historical exercising behavior of previous option holders of a company’s stock. Due to the fact that the first options granted were in 2010 and 2011, and at that time, no historical exercising behavior was available, we estimated the expected term of each award to be half the maximum term. Because of the nature of the vesting as described above, the options were separated into five blocks, with each block having its own vesting period and expected term. Assuming the vesting occurs ratably over the vesting period for each option block, the average vesting term (requisite service period) for each option block was calculated to be 2.54, 3.54, 4.54, 5.54 and 6.54 years for option blocks 1 through 5, respectively. As such, the expected terms were calculated to be 6.27, 6.77, 7.27, 7.77 and 8.27 years, for option blocks 1 through 5, respectively.

The current fair value of the underlying equity was determined to be equal to Avalon’s publicly traded stock price as of the grant dates times the sum of the Class A and Class B common shares outstanding.

The expected volatility was based on the observed volatility of Avalon common stock for a five year period prior to the grant dates. The expected volatility that was used ranged from 60.9% to 61.7% with a weighted average expected volatility of 61.2%. There were no expected dividends and the risk-free interest rate(s), which ranged from 2.06% to 2.28%, were based on yield data for U. S. Treasury securities over a period consistent with the expected term.

Avalon Holdings Corporation and Subsidiaries

The following table is a summary of the stock option activity during 2014 and 2013:

	Number of Options Granted		Weighted Average Exercise Price		Weighted Average Fair Value at Grant Date
Outstanding at January 1, 2013		760,000	$	2.63	$	1.09
Options granted		-		-		-
Options exercised		-		-		-
Options cancelled or forfeited		-		-		-
Outstanding at December 31, 2013		760,000		2.63		1.09
Options granted		-		-		-
Options exercised		-		-		-
Options cancelled or forfeited		-		-		-
Outstanding at December 31, 2014		760,000	$	2.63	$	1.09
Options Vested		552,000
Exercisable at December 31, 2014		304,000

The stock options vest and become exercisable based upon achieving two critical metrics as follows:

Contract Vesting Term: The stock options vest ratably over a five year period.

The Avalon common stock price traded on a public stock exchange (NYSE Amex) must reach the predetermined vesting price within three years after the options become vested under the Contract Vesting Term.

The table below represents the period and predetermined stock price needed for vesting.

	Begins Vesting	Ends Vesting	Predetermined Vesting Price
Block 1	12 months after Grant Dates	48 months after Grant Dates	$	3.43
Block 2	24 months after Grant Dates	60 months after Grant Dates	$	4.69
Block 3	36 months after Grant Dates	72 months after Grant Dates	$	6.43
Block 4	48 months after Grant Dates	84 months after Grant Dates	$	8.81
Block 5	60 months after Grant Dates	96 months after Grant Dates	$	12.07

Compensation costs were approximately $0.1 million for both the years ended December 31, 2014 and December 31, 2013, respectively, based upon the estimated fair value calculation. For the year ended December 31, 2013 additional compensation expense was recorded due to the Avalon common stock reaching the predetermined vesting price for Block 2 stock options that had vested, but had not yet become exercisable. The deferred tax benefit recorded was offset by an increase to the valuation allowance. As of December 31, 2014, there was approximately $0.1 million of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 1.26 years.

Note 10. Shareholders’ Equity

Each share of Class A Common Stock is entitled to one vote and each share of Class B Common Stock is entitled to ten votes on all matters submitted to a vote of the shareholders. Except for the election of Avalon’s Board of Directors, the Class A Common Stock and the Class B Common Stock vote together as a single class on all matters presented for a vote to the shareholders. However, with regard to the election of directors, for as long as the outstanding Class B Common Stock has more than 50% of the total outstanding voting power of all common stock, the holders of the Class A Common Stock, voting as a separate class, will elect the number of directors equal to at least 25% of the total Board of Directors and the holders of the Class B Common Stock, voting as a separate class, will elect the remaining directors. Thereafter, the holders of the Class A Common Stock (one vote per share) and Class B Common Stock (ten votes per share) will vote together as a single class for the election of directors. The holders of a majority of all outstanding shares of Class A Common Stock or Class B Common Stock, voting as separate classes, must also approve amendments to the Articles of Incorporation that adversely affect the shares of their class. Shares of Class A Common Stock and Class B Common Stock do not have cumulative voting rights.

Avalon Holdings Corporation and Subsidiaries

Note 11. Legal Matters

Note 12. Lease Commitments

Avalon leases golf carts, machinery and equipment, and copiers under operating leases. Under capital leases, Avalon leases one piece of equipment and land and land improvements. Future commitments under long-term, operating leases and capital leases at December 31, 2014 are as follows (in thousands):

	Capital		Operating		Total
2015	$	76	$	344	$	420
2016		76		344		420
2017		76		307		383
2018		15		228		243
2019		15		71		86
Thereafter		495		-		495
Total minimum lease payments		753	$	1,294	$	2,047
Less: amounts representing interest		362
Present value of minimum lease payments		391
Less: current portion of obligations under capital leases		58
Long-term portion of obligations under capital leases	$	333

Rental expense included in the Consolidated Statements of Operations amounted to $0.4 million in 2014 and $0.3 million in 2013.

Note 13. Business Segment Information

Avalon’s reportable segments include waste management services and golf and related operations. In determining the segment information, Avalon considered its operating and management structure and the types of information subject to regular review by its “chief operating decision maker.” Using the criteria of ASC 280 Segment Reporting, Avalon’s reportable segments include waste management services and golf and related operations. Avalon accounts for intersegment net operating revenues as if the transactions were to third parties. The segment disclosures are presented on this basis for all years presented.

Avalon’s primary business segment, the waste management services segment, provides hazardous and nonhazardous brokerage and management services to industrial, commercial, municipal and governmental customers, captive landfill management for an industrial customer and salt water injection well operations. The golf and related operations segment includes the operations of golf courses, country clubs and related facilities, a hotel and travel agency. Revenue for the golf and related operations segment consists primarily of membership dues, greens fees, cart rentals, room rentals, merchandise sales, tennis, spa services and food and beverage sales. Avalon does not have significant operations located outside the United States and, accordingly, geographical segment information is not presented. In 2014, no customer individually accounted for 10% or more of Avalon’s consolidated net operating revenues. In 2013, one customer accounted for 17% of the waste management services segment’s net operating revenues to external customers and 13% of the consolidated net operating revenues.

The accounting policies of the segments are consistent with those described for the consolidated financial statements in the summary of significant accounting policies (see Note 2). Avalon measures segment profit for internal reporting purposes as income (loss) before taxes.

Avalon Holdings Corporation and Subsidiaries

Business segment information including the reconciliation of segment income to consolidated income (loss) before taxes is as follows (in thousands):

	2014			2013
Net operating revenues from:
Waste management services:
External customer revenues	$	38,603		$	47,243
Intersegment revenues		-			-
Total waste management services		38,603			47,243

Golf and related operations:
External customer revenues		12,869			12,227
Intersegment revenues		92			89
Total golf and related operations		12,961			12,316

Segment operating revenues		51,564			59,559
Intersegment eliminations		(92	)		(89	)
Total net operating revenues	$	51,472		$	59,470

Income (loss) before income taxes:
Waste management services	$	2,899		$	3,787
Golf and related operations		(1,175	)		(336	)
Segment income before taxes		1,724			3,451
Corporate interest income		1			1
Corporate interest expense		(38	)		-
Corporate other income, net		32			35
General corporate expenses		(2,904	)		(2,952	)
Income (loss) before income taxes	$	(1,185	)	$	535

Depreciation and amortization expense:
Waste management services	$	506		$	99
Golf and related operations		1,475			1,400
Corporate		174			137
Total	$	2,155		$	1,636

Capital expenditures:
Waste management services	$	3,112		$	2,939
Golf and related operations		4,459			797
Corporate		113			327
Total	$	7,684		$	4,063

Avalon Holdings Corporation and Subsidiaries

	December 31,
	2014			2013
Identifiable assets:
Waste management services	$	19,381		$	16,252
Golf and related operations		36,449			29,821
Corporate		44,613			43,997
Subtotal		100,443			90,070
Elimination of intersegment receivables		(42,599	)		(34,491	)
Total	$	57,844		$	55,579

The increase of $3.1 million in identifiable assets of the waste management services segment is primarily due to an increase in properties and equipment as result of the construction and drilling of two salt water injection well facilities. The increase of $6.6 million in identifiable assets of the golf and related operations is primarily due to the acquisition of The Avalon Resort and Spa and associated renovations on the facility.

Note 14. Certain Relationships and Related Transactions

In August 2013, Avalon created a new Ohio limited liability company, AWMS Holdings, LLC, to act as a holding company to form and own a series of wholly owned subsidiaries that will own and operate salt water injection wells and facilities (together the “facilities”). AWMS Holdings, LLC, offers investment opportunities to accredited investors by selling membership units of AWMS Holdings, LLC through private placement offerings. The monies received from these offerings, along with internally contributed capital, are used to construct the facilities necessary for the operation of salt water injection wells. American Water Management Services, LLC, a wholly owned subsidiary of Avalon, manages all the salt water injection well operations, including the marketing and sales function and all decisions regarding the well operations for a percentage of the gross revenues. As a result of the private placement offering, Avalon is not the majority owner of AWMS Holdings, LLC; however, due to the managerial control of American Water Management Services, LLC, the financial statements of AWMS Holdings, LLC and subsidiaries are included in Avalon’s consolidated financial statements. At December 31, 2014, Avalon owned approximately 47% of AWMS Holdings, LLC. At December 31, 2014, AWMS Holdings, LLC received approximately $1.0 million from management and outside directors of Avalon, who qualified as accredited investors.

Avalon Holdings Corporation and Subsidiaries

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders

Avalon Holdings Corporation

We have audited the accompanying consolidated balance sheets of Avalon Holdings Corporation and subsidiaries (the “Company”) as of December 31, 2014 and 2013, and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for each of the two years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Avalon Holdings Corporation and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the two years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/GRANT THORNTON LLP

Cleveland, Ohio

March 12, 2015

Avalon Holdings Corporation and Subsidiaries

Management’s Annual Report on Internal Control over Financial Reporting

The management of Avalon, including the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) of the Securities and Exchange Act of 1934, as amended. Avalon’s internal control system was designed to provide reasonable assurance as to the reliability of the preparation and presentation of the consolidated financial statements for external reporting and the safeguarding of assets from unauthorized use or disposition.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

With our participation, an evaluation of the effectiveness of our internal control over financial reporting was conducted as of December 31, 2014, based upon the framework and criteria established in Internal Control – Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2014.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

/s/ Ronald E. Klingle		/s/ Bryan P. Saksa
Chief Executive Officer		Chief Financial Officer

March 12, 2015

Avalon Holdings Corporation and Subsidiaries

Company Location Directory

Corporate Office	Golf and Related Operations

Avalon Holdings Corporation	Avalon Golf and Country Club
One American Way	One American Way
Warren, Ohio 44484-5555	Warren, Ohio 44484-5555
(330) 856-8800	(330) 856-8898

Waste Management Services	Avalon Lakes Golf Course
	One American Way
American Waste Management Services, Inc.	Warren, Ohio 44484-5555
One American Way	(330) 856-8898
Warren, Ohio 44484-5555
(330) 856-8800	Squaw Creek Golf Course
	761 Youngstown-Kingsville Road
American Landfill Management, Inc.	Vienna, Ohio 44473
One American Way	(330) 539-5103
Warren, Ohio 44484-5555
(330) 856-8800	Avalon Country Club at Sharon, Inc.
	1030 Forker Blvd.
American Construction Supply, Inc.	Hermitage, PA 16148-1566
One American Way	(724) 981-6700
Warren, Ohio 44484-5555
(330) 856-8800	The Avalon Resort and Spa LLC
	9519 East Market Street
American Water Management Services, LLC	Warren, OH 44484-5555
One American Way	(330) 856-1900
Warren, Ohio 44484-5555
(330) 856-8800	Avalon Travel, Inc.
	One American Way
AWMS Holdings, LLC	Warren, Ohio 44484-5555
One American Way	(330) 856-8400
Warren, Ohio 44484-5555
(330) 856-8800

AWMS Rt. 169, LLC
One American Way
Warren, Ohio 44484-5555
(330) 856-8800

Avalon Holdings Corporation and Subsidiaries

Directors and Officers

Directors	Officers

Ronald E. Klingle	Ronald E. Klingle
Chairman of the Board and Chief Executive Officer	Chairman of the Board and Chief Executive Officer
Executive Committee (Chairman)
Compensation Committee	Bryan P. Saksa
	Chief Financial Officer and Treasurer
Kurtis D. Gramley
Chairman and Chief Executive Officer, Edgewood Surgical Hospital	Frances R. Klingle
Audit Committee (Chairman)	Chief Administrative Officer
Executive Committee
Option Plan Committee	Richard R. Fees
	Controller
Stephen L. Gordon
Partner, Beveridge & Diamond, P.C.	Timothy C. Coxson
Compensation Committee	Secretary and Director of Corporate Financial Services
Audit Committee
Option Plan Committee (Chairman)

David G. Bozanich
Director of Finance, City of Youngstown
Audit Committee
Executive Committee
Option Plan Committee

Avalon Holdings Corporation and Subsidiaries

Shareholder Information

Common stock information

Avalon’s Class A Common Stock is listed on the NYSE Amex (symbol: AWX). Quarterly stock information for 2014 and 2013 as reported by The Wall Street Journal is as follows:

2014: Quarter Ended	High		Low		Close
March 31	$	5.93	$	5.01	$	5.22
June 30		5.49		3.81		4.31
September 30		5.11		3.52		3.72
December 31		3.96		2.62		2.62

2013:
Quarter Ended	High		Low		Close
March 31	$	4.22	$	3.73	$	4.12
June 30		4.06		3.29		3.74
September 30		5.91		3.41		5.38
December 31		5.62		4.97		5.20

No dividends were paid during 2014.

There are 338 Class A and 9 Class B Common Stock shareholders of record as of the close of business March 6, 2015. The number of holders is based upon the actual holders registered on the records of Avalon’s transfer agent and registrar and does not include holders of shares in “street names” or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depository trust companies.

Dividend policy

Avalon presently intends to retain earnings for use in the operation and expansion of its business and therefore, does not anticipate paying any cash dividends in the foreseeable future.

Annual report on Form 10-K

Copies of Avalon’s annual report on Form 10-K can be obtained free of charge by writing to Avalon Holdings Corporation, One American Way, Warren, Ohio 44484-5555, Attention: Shareholder Relations or by visiting Avalon’s web-site at

www.avalonholdings.com.

Transfer agent and registrar

The transfer agent and registrar for Avalon is Broadridge Corporate Issuer Solutions, Inc. Regular mail correspondence should be sent to P.O. Box 1342, Brentwood, NY 11717 and overnight correspondence to ATTN: IWS, 1155 Long Island Avenue, Edgewood, NY 11717

Investor inquiries

Security analysts, institutional investors, shareholders, news media representatives and others seeking financial information or general information about Avalon are invited to direct their inquiries to Bryan P. Saksa, Chief Financial Officer and Treasurer, telephone (330) 856-8800.

Policy statement on equal employment opportunity and affirmative action

Avalon is firmly committed to a policy of equal employment opportunity and affirmative action. Toward this end, Avalon will continue to recruit, hire, train and promote persons in all job titles, without regard to race, color, religion, sex, national origin, age, handicap, ancestry or Vietnam-era or disabled veteran status. We will base all decisions on merit so as to further the principle of equal employment opportunity. This policy extends to promotions and to all actions regarding employment including compensation, benefits, transfers, layoffs, returns from layoff, company-sponsored training and social programs.

Exhibit 21.1

The following is a list of Avalon’s subsidiaries except for unnamed subsidiaries which considered in the aggregate as a single subsidiary, would not constitute a significant subsidiary.

Subsidiary Name	State of Incorporation

• American Landfill Management, Inc.	Ohio
•American Construction Supply, Inc.	Ohio
• American Waste Management Services, Inc.	Ohio
• American Waste NJ	New Jersey
• American Water Management Services, LLC	Ohio
• AWMS Holdings, LLC	Ohio
• AWMS Rt. 169, LLC	Ohio
• Avalon Golf and Country Club, Inc.	Ohio
• Avalon Lakes Golf, Inc.	Ohio
• Avalon Travel, Inc.	Ohio
• TBG, Inc.	Ohio
• Avalon Country Club at Sharon, Inc.	Pennsylvania
• Havana Cigar Company	Pennsylvania
• The Avalon Resort and Spa LLC	Ohio

Parent/subsidiary relationships are indicated by indentations. In each case, 100% of the voting securities of each of the subsidiaries are owned by the indicated parent of such subsidiary, except for AWMS Holdings, LLC. At December 31, 2014 American Water Management Services, LLC owned approximately 47% of AWMS Holdings, LLC.

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports dated March 12, 2015, with respect to the consolidated financial statements and schedules included in the Annual Report of Avalon Holdings Corporation on Form 10-K for the year ended December 31, 2014. We hereby consent to the incorporation by reference of said reports in the Registration Statement of Avalon Holdings on Form S-8 (File no. 333-165064, effective February 25, 2010).

/s/ GRANT THORNTON LLP

Cleveland, Ohio

March 12, 2015

Exhibit 31.1

AVALON HOLDINGS CORPORATION

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Ronald E. Klingle, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Avalon Holdings Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15(e) and 15d – 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions) :

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 12, 2015

/s/ Ronald E. Klingle

Ronald E. Klingle, Chief Executive Officer

Exhibit 31.2

AVALON HOLDINGS CORPORATION

CERTIFICATION PURSUANT TO

SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, Bryan P. Saksa, certify that:

1.	I have reviewed this Annual Report on Form 10-K of Avalon Holdings Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 12, 2015

/s/ Bryan P. Saksa

Bryan P. Saksa, Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Avalon Holdings Corporation (the “registrant”) on Form 10-K for the year ending December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “report”), I, Chief Executive Officer of the registrant, certify, pursuant to 18 U.S.C. (a) 1350, as adopted pursuant to (a) 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant.

/s/ Ronald E. Klingle

Ronald E. Klingle

Chief Executive Officer

March 12, 2015

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Avalon Holdings Corporation (the “registrant”) on Form 10-K for the year ending December 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “report”), I, Chief Financial Officer of the registrant, certify, pursuant to 18 U.S.C. (a) 1350, as adopted pursuant to (a) 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the registrant.

/s/ Bryan P. Saksa

Bryan P. Saksa

Chief Financial Officer

March 12, 2015

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