Credit Facility:

On March 21, 2008, Avalon entered into a $3.5 million unsecured line of credit agreement with The Huntington National Bank. Interest on borrowings accrues at LIBOR plus 1.75%. The agreement was amended in April 2009 to provide for a minimum interest rate of 3.25%. The line of credit contains certain financial and other covenants, customary representations, warranties and events of defaults. At March 31, 2009, there were no borrowings under the line of credit.

Income Taxes:

Avalon recorded a net loss of $.4 million in the first quarter of 2009 compared with a net loss of $60,000 in the first quarter of 2008. Excluding the minor effect of the state income tax provisions, Avalon’s overall effective tax rate was 0% in the first quarter of 2009 and 2008. The overall effective tax rate is different than statutory rates primarily due to a change in the valuation allowance. Avalon’s income tax benefit on the loss before taxes was offset by a increase in the valuation allowance. A valuation allowance is provided when it is more likely than not that deferred tax assets relating to certain federal and state loss carryforwards will not be realized. Avalon continues to maintain a valuation allowance against the majority of its deferred tax amounts until it is evident that the deferred tax asset will be utilized in the future.

Liquidity and Capital Resources:

For the first three months of 2009, Avalon utilized existing cash and cash provided from operations to fund capital expenditures and meet operating needs.

Avalon’s aggregate capital expenditures in 2009 are expected to be in the range of $.2 million to $.5 million. Such expenditures will principally relate to equipment purchases and building improvements for the golf and related operations. During the first three months of 2009, capital expenditures for Avalon totaled about $17,000 which was principally related to such building improvements.

Avalon 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 November 1, 2003, 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. Avalon has made about $7.3 million of leasehold improvements as of March 31, 2009. Based upon the amount of leasehold improvements already made and leasehold improvements anticipated to be made in the future, Avalon expects to exercise all of its renewal options.

Working capital was $5.0 million at both March 31, 2009 and December 31, 2008.

The decrease in accounts receivable at March 31, 2009 compared with December 31, 2008 is primarily due to lower net operating revenues of the waste management services segment in the first quarter of 2009 compared with the fourth quarter of 2008, partially offset by a small increase in accounts receivable of the golf and related operations segment. The waste management services segment recorded net operating revenues of $7.2 million in the first quarter of 2009 compared with $10.6 million in the fourth quarter of 2008.

The decrease in accounts payable at March 31, 2009 compared with December 31, 2008 is primarily a result of decreased payables due disposal facilities and transporters used by the waste brokerage and management services business as a result of lower net operating revenues in the first quarter of 2009 compared with the fourth quarter of 2008 and the timing of payments to such vendors in the ordinary course of business.

The decrease in accrued payroll and other compensation is primarily due to the payment of bonus incentives of the waste brokerage and management services business which were accrued at December 31, 2008.

The increase in other liabilities and accrued expenses at March 31, 2009 compared with December 31, 2008 is primarily due to an increase in deferred revenues relating to membership dues of the golf and related operations segment. Such deferred revenues increased to $2.2 million at March 31, 2009 compared with $2.0 million at December 31, 2008.

Comparing March 31, 2008 with December 31, 2007, the increase in other current assets is primarily due to an increase in inventories of the golf and related operations due to the opening of the restaurants and banquet facilities at the Sharon facility in the first quarter of 2008. The decrease of $.7 million in accounts payable and $.5 million in accounts receivable is primarily due to the timing of payments to vendors and the collections of receivables from customers of the waste management services segment in the ordinary course of business. The increase in other current liabilities and accrued expenses is primarily due to an increase in deferred revenues relating to membership dues of the golf and related operations segment.

Management believes that anticipated cash provided from future operations, existing working capital, as well as Avalon’s ability to incur indebtedness, will be, for the foreseeable future, sufficient to meet operating requirements and fund capital expenditure programs.

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 and is giving consideration to the possibility of acquiring one or more additional golf courses. Avalon will continue to consider acquisitions that make economic sense. Such potential acquisitions could be financed by existing working capital, secured or unsecured debt, issuance of common stock, or issuance of a security with characteristics of both debt and equity, any of which could impact liquidity in the future.

Results of Operations:

Overall performance:

The decrease is primarily the result of lower net operating revenues of the waste management services segment, partially offset by an increase in the net operating revenues of the golf and related operations segment. Costs of operations decreased to $7.3 million in the first quarter of 2009 compared with $8.5 million in the prior year’s first quarter. The decrease is primarily due to the lower net operating revenues of the waste management services segment, which resulted in lower transportation and disposal costs, as these costs vary directly with the associated net operating revenues. Fixed costs relating to depreciation and amortization expense increased to $.4 million in the first quarter of 2009 from $.3 million in the prior year’s first quarter. Due to such increased costs, the gross profit percentage declined to 13% in the first quarter of 2009 compared with 14.6% in the prior year quarter. Consolidated selling, general and administrative expenses decreased to $1.6 million in the first quarter of 2009 compared with $1.7 million in the first quarter of 2008 primarily due to slightly lower payroll and employee costs. Avalon recorded a net loss of $.4 million or $.11 per share, in the first quarter of 2009 compared with a net loss of $60,000 or $.02 per share, in the first quarter of 2008.

Performance in the First Quarter of 2009 compared with the First Quarter of 2008:

Interest income:

Interest income was $3,000 in the first quarter of 2009 compared with $29,000 in the first quarter of 2008. The decrease is primarily the result of lower average cash and cash equivalents invested during the first quarter of 2009 compared with the first quarter of the prior year.