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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.

From time to time, Avalon entered into contracts which required surety bonds or other financial instruments to assure performance under the terms thereof. Although Avalon has obtained such bonds or other financial instruments in the past, substantial changes in the bond market have limited Avalon’s ability to obtain surety bonds in the future. No assurance can be given that such bonds will be available in the future or, if available, that the premiums and/or collateral requirements for such bonds will be reasonable. The inability of Avalon to obtain surety bonds may adversely impact its future financial performance.

Employees

As of December 31, 2004, Avalon had 120 employees, 24 of whom were employed by the waste management services segment, 75 of whom were employed by the golf course and related operations and 21 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 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 golf course. The corporate and administrative offices of ALMI, ALGI, TBG, AGCC and AWMS are each located at the headquarters building of Avalon in Warren, Ohio. Avalon’s corporate headquarters building also includes a clubhouse, restaurant and pro shop for the Avalon Golf and Country Club at Avalon Lakes Golf Course.

The captive landfill management operations use approximately six pieces of equipment (such as a bulldozer, excavator and backhoe) all of which are owned or leased by ALMI.

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. ALGI currently leases the restaurant building and banquet facility to a third party operator. All the 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, a swimming pool, four tennis courts and a 67,000 square foot clubhouse that includes a pro shop, restaurant and banquet facilities. The clubhouse was renovated and expanded in 2004.

Avalon owns a 48,000 square foot office building in Export, Pennsylvania. Avalon currently leases approximately 12,000 square feet of this building to a third party. The building is currently held for sale.

Dart Realty, Inc., a subsidiary of Avalon, owns a 18,800 square foot facility in Canfield, Ohio. This facility was used in the transportation operations, which were sold in July 2004. This building is currently held for sale.

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

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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 it. See Item 1. “Business—Insurance.”

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Fourth

Quarter

Net operating revenues

Operating income (loss) from continuing operations

Income (loss) from continuing operations

Income (loss) from discontinued operations

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PART II

Information with respect to the following items can be found on the indicated pages of Exhibit 13.1, the 2004 Annual Report to Shareholders if not otherwise included herein.

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

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ITEM 9A. CONTROLS AND PROCEDURES

Avalon’s management, including the Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this annual report has been made known to them in a timely fashion. There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Chief Financial Officer completed their evaluation.

ITEM 9B. OTHER INFORMATION

None

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following information is included pursuant to Item 401, 405 and 406 of Regulation S-K:

The above-listed executive officers 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. The above listed directors have been elected to hold office as directors until the next annual shareholder’s meeting and until their respective successors are duly elected and qualified.

Ronald E. Klingle has been a director and Chairman of the Board of Avalon since June 1998. He was Chief Executive Officer from June 1998 until December 2002 and reassumed the position in March 2004. He had been Chairman, Chief Executive Officer and a director of American Waste Services, Inc. since December 1988. 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 Avalon.

Frank Lamanna has been Treasurer and Chief Financial Officer of Avalon since August 2004. He was Controller from April 2002 until August 2004. Mr. Lamanna had previously been Vice President of Corporate Financial Services from 1999 to April 2002. Mr. Lamanna received a Bachelor of Science in Business Administration in Accounting degree from Youngstown State University. He is also a Certified Public Accountant in the State of Ohio.

Frances R. Klingle has been Chief Administrative Officer of Avalon since June 1998. She was also Controller of Avalon from June 1998 to April 2002. She had been Controller of American Waste Services, Inc. since June 1986. 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, Chief Executive Officer 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. since September 1996. Mr. McMahon received a Bachelor of Business Administration degree in finance and his Master of Business Administration degree from Youngstown State University.

Thomas C. Kniss has been a director of Avalon since November 2003. Mr. Kniss has been a certified public accountant since 1979 and was a founder of the certified public accounting firm of Kniss Kletzli & Associates, P.C. in 1992. Mr. Kniss received his Bachelor of Science degree in Accounting from Saint Vincent College in 1977.

Stephen L. Gordon has been a director of Avalon since June 1998. He has been a partner in the law firm of Beveridge & Diamond, P.C. since 1982. Mr. Gordon received his Bachelor of Arts degree from Rutgers University and his Doctor of Jurisprudence degree from the University of Pennsylvania.

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Ted Wesolowski, has been a director of Avalon since April 2002. Mr. Wesolowski was Chief Executive Officer and President of Avalon from January 2003 until March 15, 2004. Mr. Wesolowski resigned as Chief Executive Officer and President on March 15, 2004. Mr. Wesolowski continued as a director. Prior to serving as Chief Executive Officer and President of Avalon, Mr. Wesolowski was a co-founder of Babst, Calland, Clements & Zomnir, P.C., and had been with the Pittsburgh, Pennsylvania-based law firm since its inception in 1986. Mr. Wesolowski returned to his position with the law firm after his resignation. He received his Bachelor of Science degree from The Pennsylvania State University and his Doctor of Jurisprudence degree from The University of Pittsburgh. He was also the Chairman of the Business Law Section of the Allegheny County Bar Association and was a faculty member of the Pennsylvania Business Law Institute.

Robert M. Arnoni has been a director of Avalon since June 1998. He is currently President of the Arnoni Development Company, Inc. From 1985 to August 1996, Mr. Arnoni was President and Chief Executive Officer of The Arnoni Group, a management company for various solid waste collection, transportation and disposal operations. Mr. Arnoni has over 20 years experience in the solid waste industry.

Audit Committee Financial Expert

The Audit Committee is responsible for recommending the firm of independent accountants to be engaged to audit Avalon’s financial statements, reviewing the scope and results of the audit with the independent accountants, reviewing with management and the independent accountants Avalon’s interim and year-end operating results, considering the adequacy of the internal accounting controls and procedures of Avalon and reviewing the non-audit services to be performed by the independent accountants. The Audit Committee consists of three members, as follows: Messrs. Kniss (Chairman), Arnoni and Gordon. The Board of Directors has determined that each member of the Audit Committee is independent as defined by the Securities and Exchange Commission and American Stock Exchange. The Board of Directnet income (loss) per share from discontinued operations

Basic net loss per share

First

Quarter

Second

Quarter

Third

Quarter

Fourth

Quarter

Net operating revenues

Operating loss from continuing operations

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 requires Avalon’s directors, its executive officers and persons holding more than 10 percent of a class of Avalon’s equity securities to file with the Commission, the American Stock Exchange and Avalon, initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of Avalon. These officers, directors and greater than 10 percent shareholders are required by the Commission’s regulations to furnish Avalon with copies of all Section 16(a) forms they file.

To Avalon’s knowledge, based solely on review of the copies of such reports furnished to Avalon, all such Section 16(a) reports were filed.

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.

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.

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ITEM 11. EXECUTIVE COMPENSATION

Compensation of Executive Officers

The following information required by Item 11 is included pursuant to Item 402 of Regulation S-K and the table below sets forth the compensation of Avalon’s Chief Executive Officer, Avalon’s four most highly compensated executive officers other than the Chief Executive Officer who were serving as executive officers as of December 31, 2004 and those individuals who served as executive officers of Avalon during some part of the fiscal year ended December 31, 2004.

SUMMARY COMPENSATION TABLE (1)

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Avalon Holdings Corporation and Subsidiaries

Report of Independent Registered Public Accounting Firm

The Shareholders and Board of Directors of Avalon Holdings Corporation

We have audited the accompanying consolidated balance sheets of Avalon Holdings Corporation and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of operations, shareholders’ equity, comprehensive income, and cash flows for each of the three years in the period ended December 31, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit 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 consolidated financial position of Avalon Holdings Corporation and subsidiaries as of December 31, 2004 and 2003, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

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Avalon Holdings Corporation and Subsidiaries

Digest of Financial Data

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Option Grants in Last Fiscal Year

The Option Plan Committee determines grants of options to purchase shares under Avalon’s 1998 Long-Term Incentive Plan based upon recommendations made by Avalon’s Compensation Committee. The Option Plan Committee consists of three members, as follows: Messrs. Kniss (Chairman), Arnoni and Gordon.

There were no options granted during 2004.

Compensation of Directors

Each of Avalon’s directors who is not an officer or employee of Avalon is entitled to receive a retainer fee of $20,000 per year for Board of Directors membership and a fee of $1,000 for attendance at each Board of Directors meeting (or committee meeting held on a separate day). Officers and employees who serve as directors are not compensated for their services as directors. In accordance with the Avalon Holdings Corporation 1998 Long-Term Incentive Plan, non-employee directors are entitled to receive grants of options to purchase shares of Class A Common Stock as determined by the Board of Directors. All directors are reimbursed for expenses incurred in attending Board of Directors meetings and committee meetings. During 2004, Avalon made a payment of $50,000 to Ted Wesolowski for services performed subsequent to his resignation as Chief Executive Officer and President.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee is responsible for reviewing and establishing the compensation arrangements for employees of Avalon, including the salaries and bonuses of top management. The Compensation Committee consists of three members, as follows: Messrs. Klingle (Chairman), Wesolowski and Arnoni.

Ronald E. Klingle served as Chairman of the Compensation Committee and was an executive officer of Avalon during 2004. Furthermore, during 2004, Mr. Klingle was an executive officer and/or director of various directly or indirectly wholly owned subsidiaries of Avalon.

No member of the Compensation Committee serve on a Compensation Committee performing equivalent functions for any other entity other than a directly or indirectly wholly owned subsidiary of Avalon.

Avalon is a controlled company as defined by the American Stock Exchange company guide because over 50% of the voting power of Avalon is held by Mr. Klingle. As such, Avalon does not have a Nominating Committee and the members of Avalon’s Compensation Committee are not all independent.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by Item 12 is included pursuant to Item 403 of Regulation S-K and the following table sets forth information with respect to beneficial ownership of thetom">)

Interest expense

Loss from continuing operations

Loss from discontinued operations

Net loss

Net loss per share from continuing operations

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Ted Wesolowski is a director of Avalon and was Chief Executive Officer and President of Avalon from January 1, 2003 until March 15, 2004. Previously, Mr. Wesolowski was a shareholder of the Pittsburgh, Pennsylvania law firm of Babst, Calland, Clements & Zomnir, P.C. which rendered legal services to Avalon during 2004. Mr. Wesolowski returned to his position with the law firm after resigning as Chief Executive Officer and President of Avalon on March 15, 2004.

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PART IV

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by Item 14 is included pursuant to Item 9(e) of Schedule 14A.

Independent Public Accountants

The appointment of an independent public accountant is approved annually by the Board of Directors based on the recommendation of the Audit Committee. Grant Thornton LLP has served as independent public accountant of Avalon since 1999.

The aggregate fees billed to Avalon for the years ended December 31, 2004 and 2003 by Grant Thornton LLP are as follows:

The amount shown for “Audit fees” also includes fees relating to quarterly reviews of unaudited financial statements, and the amount shown for “All other fees” relates primarily to the audit of Avalon’s 401(k) profit sharing plan and providing Sarbanes-Oxley information.

Pre-Approval Policy Regarding Independent Auditors

It is the Audit Committee’s policy to pre-approve all audit and non-audit services performed by Avalon’s independent auditors, Grant Thornton LLP. The Audit Committee pre-approved all services provided by Grant Thornton LLP in 2004.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

The following financial statement schedule, which is applicable for years ended December 31, 2004, 2003 and 2002, 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 12 and 13 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.

Registrant will furnish to any shareholder, upon written request, any of the following exhibits upon payment by such shareholder of the Registrant’s reas

Low

Year-end

Number of employees at year-end

Signatures

Title