AVALON HOLDINGS CORP

Finance Leases

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 often (10) years with four (4) consecutiveten (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 its remaining renewal options. At December 31, 2025 there were approximately 27.8 years remaining on the golf course and related facilities finance lease. The net asset value of finance leases, excluding leasehold improvements was $1.6 million and $0.8 million at December 31, 2025 and 2024, respectively.

In addition, the Company also entered into lease agreements for vehicles, golf course maintenance and restaurant equipment which were determined to be finance leases. At December 31, 2025, the vehicles, golf course maintenance and restaurant equipment have remaining lease terms ranging from less thanone year to 5.0 years. The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.8 years at both December 31, 2025 and 2024.

Leased property and associated obligations under finance leases at December 31, 2025 and 2024 consist of the following (in thousands):

The weighted average discount rate on finance leases was 6.7% at December 31, 2025 and 7.8% at December 31, 2024.

For the years ended December 31, 2025 and 2024, components of lease expense were as follows (in thousands):

For the twelve months ending December 31, future commitments under long-term, operating and finance leases are as follows (in thousands):

Note 8. Basic Net Income per Share

Basic net income per share attributable to Avalon Holdings Corporation common shareholders is computed by dividing the net income attributable to Avalon Holdings Corporation common shareholders by the weighted average number of common shares outstanding. For both the years ended December 31, 2025 and 2024, the weighted average number of common shares outstanding was 3,899,431.

Note 9. Term Loans and Line of Credit Agreements