<PAGE>

                                      2001
================================================================================

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549

                      ----------------------------------

                                   FORM 10-Q

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

               For the quarterly period ended September 30, 2001

[_] 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                          (I.R.S. Employer
 of incorporation or organization)                      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

Indicate by a 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 ___
                                              ---
The registrant had 3,185,240 shares of its Class A Common Stock and 618,091
shares of its Class B Common Stock outstanding as of November 6, 2001.

================================================================================
<PAGE>

                 AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

                                     INDEX

<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                   ----
<S>                                                                                                <C>
PART I.  FINANCIAL INFORMATION

    Item 1.  Financial Statements

    Condensed Consolidated Statements of Operations for the Three and Nine
    Months Ended September 30, 2001 and 2000 (Unaudited)........................................     3

    Condensed Consolidated Balance Sheets at September 30, 2001 (Unaudited)
    and December 31, 2000.......................................................................     4

    Condensed Consolidated Statements of Cash Flows for the Nine
    Months Ended September 30, 2001 and 2000 (Unaudited)........................................     5

    Notes to Condensed Consolidated Financial Statements (Unaudited)............................     6

    Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations................................................    11


PART II.  OTHER INFORMATION

    Item 1.     Legal Proceedings...............................................................     18

    Item 2.     Changes in Securities and Use of Proceeds.......................................     18

    Item 3.     Defaults upon Senior Securities ................................................     18

    Item 4.     Submission of Matters to a Vote of Security Holders ............................     18

    Item 5.     Other Information ..............................................................     18

    Item 6.     Exhibits and Reports on Form 8-K ...............................................     18


SIGNATURE.......................................................................................     19
</TABLE>

                                       2
<PAGE>

                         PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands except for per share amounts)


<TABLE>
<CAPTION>
                                                             Three Months Ended                 Nine Months Ended
                                                                September 30,                     September 30,
                                                        ------------------------------     -----------------------------
                                                            2001             2000             2001             2000
                                                        -------------     ------------     ------------    -------------
<S>                                                     <C>               <C>              <C>             <C>
Net operating revenues...............................   $   22,270        $  21,968        $   56,466      $   64,683


Cost and expenses:

Cost of operations...................................       19,773           19,766            50,612          58,317

Write-down of costs in excess of fair market
   value of net assets of acquired businesses........           --               --               486              --

Selling, general and administrative expense..........        2,740            2,714             8,003           8,024
                                                        ----------        ---------        ----------      ----------

Loss from operations.................................         (243)           ( 512)           (2,635)         (1,658)

Other income:

Interest income......................................          126              220               454             700

Other income, net....................................          136              217               246             233
                                                        ----------        ---------        ----------      ----------

Income (loss) before income taxes....................           19              (75)           (1,935)           (725)
Income tax expense (benefit) ........................         (145)              93              (653)           (232)
                                                        ----------        ---------        ----------      ----------
Net income (loss)....................................   $      164        $    (168)       $   (1,282)     $     (493)
                                                        ==========        =========        ==========      ==========

Basic net income (loss) per share ...................   $      .04        $    (.04)       $     (.34)     $     (.13)
                                                        ==========        =========        ==========      ==========
Weighted average shares outstanding (Note 2).........        3,803            3,803             3,803           3,803
                                                        ==========        =========        ==========      ==========
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                     September 30,       December 31,
                                                                                         2001               2000
                                                                                     ------------      --------------
Assets                                                                                (Unaudited)
------
<S>                                                                                  <C>               <C>
Current assets:
   Cash and cash equivalents....................................................     $    14,044       $     11,022
   Short-term investments.......................................................               6                759
   Accounts receivable, net.....................................................          15,269             16,156
   Refundable income taxes......................................................              --                327
   Deferred income taxes........................................................             564                564
   Prepaid expenses and other current assets....................................           2,704              2,124
                                                                                     -----------       ------------
     Total current assets.......................................................          32,587             30,952

Properties and equipment, less accumulated depreciation
   and amortization of $17,346 in 2001 and $16,670 in 2000......................          28,644             30,099
Costs in excess of fair market value of net assets of acquired
   businesses, net..............................................................             548              1,082
Other assets, net...............................................................             143                177
                                                                                     -----------       ------------
     Total assets...............................................................     $    61,922       $     62,310
                                                                                     ===========       ============

Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
   Accounts payable.............................................................     $     6,794       $      5,242
   Accrued payroll and other compensation.......................................           1,599              1,249
   Accrued income taxes.........................................................             470                596
   Other accrued taxes..........................................................             300                305
   Other liabilities and accrued expenses.......................................           1,457              1,831
                                                                                     -----------       ------------
     Total current liabilities..................................................          10,620              9,223

Deferred income taxes...........................................................             736              1,239
Other noncurrent liabilities ...................................................             120                120

Shareholders' equity:
   Class A Common Stock, $.01 par value.........................................              32                 32
   Class B Common Stock, $.01 par value.........................................               6                  6
   Paid-in capital..............................................................          58,096             58,096
   Accumulated deficit..........................................................          (7,688)            (6,406)
                                                                                     -----------       ------------
     Total shareholders' equity.................................................          50,446             51,728
                                                                                     -----------       ------------
     Total liabilities and shareholders' equity.................................     $    61,922       $     62,310
                                                                                     ===========       ============
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements
of Cash Flows (Unaudited) (in thousands)

<TABLE>
<CAPTION>
                                                                                               Nine Months Ended
                                                                                                 September 30,
                                                                                              2001         2000
                                                                                           ----------   -----------
<S>                                                                                        <C>          <C>
Operating activities:
   Net loss ............................................................................   $  (1,282)   $     (493)
   Reconciliation of net loss  to cash from operating activities:
       Depreciation and amortization....................................................       2,373         2,407
       Write-down in costs in excess of fair market value of net assets of
         acquired businesses............................................................         486            --
       Provision for deferred income tax benefit........................................        (503)          (20)
       Provision for losses on accounts receivable......................................         102           130
       Gain on sales and disposal of property and equipment.............................        (150)         (106)
       Changes in assets and liabilities
           Accounts receivable..........................................................         785        (1,512)
           Refundable income taxes......................................................         327            --
           Prepaid expenses and other current assets....................................        (580)         (639)
           Other assets.................................................................          31            (4)
           Accounts payable.............................................................       1,552           936
           Accrued payroll and other compensation.......................................         350          (549)
           Accrued income taxes.........................................................        (126)         (305)
           Other accrued taxes..........................................................          (5)         (401)
           Other liabilities and accrued expenses.......................................        (374)           56
                                                                                           ----------   ----------
                Net cash provided by (used in) operating activities.....................       2,986          (500)
                                                                                           -----------  ----------

Investing activities:
   Purchases and sales of short-term investments, net...................................         753        (1,483)
   Capital expenditures.................................................................      (1,048)       (6,391)
   Proceeds from sales of property and equipment........................................         331           278
                                                                                           ---------    ----------
                Net cash provided by (used in) investing activities.....................          36        (7,596)
                                                                                           ---------    ----------


Increase (decrease) in cash and cash equivalents........................................       3,022        (8,096)
Cash and cash equivalents at beginning of year..........................................      11,022        18,726
                                                                                           ---------    ----------
Cash and cash equivalents at end of period..............................................   $  14,044    $   10,630
                                                                                           =========    ==========
</TABLE>

Noncash investing activities:
  Capital expenditures of $884 are included in Accounts Payable at September 30,
2000.

See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>

                 AVALON HOLDINGS CORPORATION AND SUBSIDIARIES
             Notes to Condensed Consolidated Financial Statements
                                  (Unaudited)
                              September 30, 2001


Note 1.  Basis of Presentation

The unaudited condensed consolidated financial statements of Avalon Holdings
Corporation and subsidiaries (collectively "Avalon") and related notes included
herein have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
consistent with such rules and regulations. The accompanying unaudited condensed
consolidated financial statements and related notes should be read in
conjunction with the consolidated financial statements and related notes
included in Avalon's 2000 Annual Report to Shareholders.

In the opinion of management, these unaudited condensed consolidated financial
statements include all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of the financial position of Avalon as of
September 30, 2001, and the results of operations and cash flows for the interim
periods presented.

The operating results for the interim periods are not necessarily indicative of
the results to be expected for the full year.

Note 2.  Basic Net Income (Loss) Per Share

Basic net income (loss) per share has been computed using the weighted average
number of common shares outstanding during each period, which was 3,803,331.
There were no common equivalent shares outstanding and therefore diluted per
share amounts are equal to basic per share amounts for the three and nine months
ended September 30, 2001 and 2000.

Note 3.  Short-Term Investments

Avalon's securities investments that are principally held with the intent of
selling them in the near term are classified as trading securities. Trading
securities are recorded at fair value on the balance sheet, with the change in
fair value during the period included in earnings. Trading securities are
included in the Condensed Consolidated Balance Sheet under the caption
"Short-term investments".

Note 4.  Comprehensive Income

Avalon has no item that qualifies as a component of other comprehensive income
as defined in Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income and, therefore, comprehensive income equals net income for
all periods presented.

Note 5.  Long-lived Asset Impairment

The analytical laboratory business of Avalon's technical environmental services
operations has experienced operating losses due to increased competition and
operational inefficiencies. As a result, during the second quarter of 2001, the
analytical laboratory operations implemented a reduction and reorganization of
its workforce. Although Avalon believes the operational inefficiencies have been
appropriately addressed, the analytical laboratory business has not been able to
increase its net operating

                                       6
<PAGE>

revenues to a level necessary to cover the continuing costs associated with the
laboratory operations, many of which are fixed. Therefore, in accordance with
Avalon's asset impairment policy, Avalon performed an evaluation of the long-
lived assets of the Export, Pennsylvania analytical laboratory operations
including the costs in excess of fair market value of net assets of acquired
businesses ("goodwill") to determine if the carrying value of such assets was
recoverable. To ascertain whether an impairment existed, Avalon estimated the
undiscounted sum of the expected future cash flows of the Export, Pennsylvania
analytical laboratory operations to determine if such sum was less than the
carrying value of the long-lived assets. The evaluation indicated the existence
of an impairment and Avalon measured the extent of the impairment by determining
the fair market value of the long-lived assets based upon quoted market prices
and comparing such fair market values to Avalon's carrying value. As a result,
the Company recorded a write-down of goodwill in the amount of $.5 million in
the second quarter of 2001.

Note 6. Legal Matters

In September 1995, certain subsidiaries of Avalon were informed that they had
been identified as potentially responsible parties by the Indiana Department of
Environmental Management with respect to a Fulton County, Indiana hazardous
waste disposal facility which facility is subject to remedial action under
Indiana Environmental Laws. Such identification was based upon the subsidiaries
having been involved in the transportation of hazardous substances to the
facility. A large number of waste generators and other waste transportation and
disposal companies were also identified as responsible or potentially
responsible parties with respect to this facility. During the fourth quarter of
1999, Avalon became a party to an Agreed Order and a Participation Agreement
regarding the remediation of a portion of this site. The Participation Agreement
provides for, among other things, the allocation of all site remediation costs
except for approximately $3 million. Avalon's total liability for the allocated
costs under the Participation Agreement was approximately $71,000, which Avalon
has paid.

The additional unallocated site remediation costs are currently estimated to be
approximately $3 million and Avalon's total accrued liability relating to the
remediation of this portion of the site on an undiscounted basis is $120,000
which amount is included in the Condensed Consolidated Balance Sheets under the
caption "Other noncurrent liabilities." The extent of any ultimate liability of
any of Avalon's subsidiaries with respect to these additional costs is unknown.
The measurement of environmental liabilities is inherently difficult and the
possibility remains that technological, regulatory or enforcement developments,
the results of environmental studies or other factors could materially alter
Avalon's expectations at any time. Currently, however, because of the expected
sharing among responsible and potentially responsible parties, the availability
of legal defenses, and typical settlement results, Avalon currently estimates
that the ultimate liability of this matter will be consistent with the amounts
recorded on Avalon's financial statements.

In the ordinary course of conducting its business, Avalon also 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.

Note 7.  Business Segment Information.

For business segment information, Avalon considered its operating and management
structure and the types of information subject to regular review by its "chief
operating decision maker." On this basis, Avalon's reportable segments include
transportation services, technical environmental services, waste disposal
brokerage and management services and golf and related operations. Avalon
accounts for

                                       7
<PAGE>

intersegment net operating revenue as if the transactions were to third parties.
The segment disclosures are presented on this basis for all periods presented.

Avalon's primary business segment provides transportation services that include
transportation of hazardous and nonhazardous waste as well as general and bulk
commodities. The technical environmental services segment provides environmental
consulting, engineering, site assessments, analytical laboratory, remediation
services and operates and manages a captive landfill for an industrial customer.
The waste disposal brokerage and management services segment provides disposal
brokerage and management services for both hazardous and nonhazardous waste. The
golf and related operations segment includes the operation of a public golf
course and travel agency. Avalon does not have significant operations located
outside the United States and, accordingly, geographical segment information is
not presented.

The accounting policies of the segments are consistent with those described for
the consolidated financial statements in the summary of significant accounting
policies. Avalon measures segment profit for internal reporting purposes as
income (loss) before taxes. Business segment information including the
reconciliation of segment income (loss) before taxes to consolidated income
(loss) before taxes is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                 Three Months Ended            Nine Months Ended
                                                                    September 30,                September 30,
                                                               -----------------------     ------------------------
                                                                  2001          2000          2001          2000
                                                               -----------    --------     ----------     ---------
<S>                                                            <C>            <C>          <C>            <C>
Net operating revenues from:
Transportation services:
  External customers revenues.............................     $     8,106    $ 10,603     $   23,323     $  31,512
  Intersegment revenues...................................           1,461       1,614          3,772         4,779
                                                               -----------    --------     ----------     ---------
  Total transportation services...........................           9,567      12,217         27,095        36,291
                                                               -----------    --------     ----------     ---------

Technical environmental services:
  External customers revenues.............................           6,058       7,324         15,970        20,783
  Intersegment revenues...................................               6          15             16            60
                                                               -----------    --------     ----------     ---------
  Total technical environmental services..................           6,064       7,339         15,986        20,843
                                                               -----------    --------     ----------     ---------

Waste disposal brokerage and management:
  External customers revenues.............................           7,629       3,833         16,303        11,889
  Intersegment revenues...................................             225       1,687            491         4,189
                                                               -----------    --------     ----------     ---------
  Total waste disposal brokerage and management
    services..............................................           7,854       5,520         16,794        16,078
                                                               -----------    --------     ----------     ---------

Golf and related operations:
  External customers revenues                                          477         203            870           416
  Intersegment revenues...................................              29          49            120           185
                                                               -----------    --------     ----------     ---------
  Total golf and related operations.......................             506         252            990           601
                                                               -----------    --------     ----------     ---------

Other businesses:
  External customers revenues.............................              --           5             --            83
  Intersegment revenues...................................              --          --             --            --
                                                               -----------    --------     ----------     ---------
  Total other businesses..................................              --           5             --            83
                                                               -----------    --------     ----------     ---------

  Segment operating revenues..............................          23,991      25,333         60,865        73,896
  Intersegment eliminations...............................          (1,721)     (3,365)        (4,399)       (9,213)
                                                               -----------    --------     ----------     ---------
  Total net operating revenues............................     $    22,270    $ 21,968     $   56,466     $  64,683
                                                               -----------    --------     ----------     ---------
</TABLE>

                                       8
<PAGE>

Business Segment Information (continued)

<TABLE>
<CAPTION>
                                                               Three Months Ended             Nine Months Ended
                                                                  September 30,                  September 30,
                                                            -----------------------        ------------------------
                                                               2001        2000               2001          2000
                                                            -----------  ----------        ----------     ---------
<S>                                                         <C>          <C>               <C>            <C>
Income (loss) before taxes:
  Transportation services.................................  $    160     $     627         $     22       $     845
  Technical environmental services........................       339            92               36             388
  Waste disposal brokerage and management
    services..............................................       446           439              838           1,054
  Golf and related operations.............................      (119)         (378)            (633)           (759)
  Other businesses........................................         7           (84)               4            (190)
                                                            --------     ---------         --------       ---------
  Segment income before taxes.............................       833           696              267           1,338

  Corporate interest income...............................        94           180              335             608
  Corporate other income, net.............................        (5)           18                6              30
  General corporate expenses..............................      (903)         (969)          (2,543)         (2,701)
                                                            --------     ---------         --------       ---------
  Income (loss) before taxes..............................  $     19     $     (75)        $ (1,935)      $    (725)
                                                            --------     ---------         --------       ---------

Other significant noncash items
  Write-down of costs in excess of fair market value
    of net assets of acquired businesses:
    Technical environmental services......................  $     --     $      --         $    486       $      --
                                                            --------     ---------         --------       ---------
       Total..............................................  $     --     $      --         $    486       $      --
                                                            --------     ---------         --------       ---------

Interest income:

  Transportation services.................................. $     14     $      19         $     51       $      42
  Technical environmental services........................         7            10               29              22
  Waste disposal brokerage and management
    services..............................................         9             9               34              24
  Golf and related operations.............................         2             2                5               4
  Corporate...............................................        94           180              335             608
                                                            --------     ---------         --------       ---------
       Total..............................................  $    126     $     220         $    454       $     700
                                                            --------     ---------         --------       ---------
</TABLE>

<TABLE>
<CAPTION>
                                                                    September 30,    December 31,
                                                                        2001            2000
                                                                    -------------   -------------
<S>                                                                 <C>              <C>
Identifiable assets:
  Transportation services.................................          $    13,939      $   14,365
  Technical environmental services........................               12,618          14,253
  Waste disposal brokerage and management
    services..............................................                4,482           4,027
  Golf and related operations.............................               12,361          12,238
  Other businesses........................................                   65              67
  Corporate...............................................               31,539          31,246
                                                                    -----------      ----------
       Sub Total..........................................               75,004          76,196
  Elimination of Intersegment Receivables.................              (13,082)        (13,886)
                                                                    -----------      ----------
       Total..............................................          $    61,922      $   62,310
                                                                    ===========      ==========
</TABLE>


                                       9
<PAGE>

Note 8.  Accounting Pronouncements

On July 20, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) 141, Business Combinations,
and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all
business combinations completed after June 30, 2001. SFAS 142 is effective for
fiscal years beginning after December 15, 2001; however, certain provisions of
this Statement apply to goodwill and other intangible assets acquired between
July 1, 2001 and the effective date of SFAS 142. Major provisions of these
Statements and their effective dates for Avalon are as follows:

 .   All business combinations initiated after June 30, 2001 must use the
    purchase method of accounting. The pooling of interest method of accounting
    is prohibited except for transactions initiated before July 1, 2001.
 .   Intangible assets acquired in a business combination must be recorded
    separately from goodwill if they arise from contractual or other legal
    rights or are separable from the acquired entity and can be sold,
    transferred, licensed, rented or exchanged, either individually or as part
    of a related contract, asset or liability.
 .   Goodwill, as well as intangible assets with indefinite lives, acquired after
    June 30, 2001, will not be amortized. Effective January 1, 2002, all
    previously recognized goodwill and intangible assets with indefinite lives
    will no longer be subject to amortization.
 .   Effective January 1, 2002, goodwill and intangible assets with indefinite
    lives will be tested for impairment annually and whenever there is an
    impairment indicator.
 .   All acquired goodwill must be assigned to reporting units for purposes of
    impairment testing and segment reporting.

Avalon will continue to amortize goodwill recognized prior to July 1, 2001,
under its current method until January 1, 2002 at which time annual and
quarterly goodwill amortization of $41,300 and $10,325, respectively, will no
longer be recognized. By December 31, 2002 Avalon will have completed a
transitional fair value based impairment test of goodwill as of January 1, 2002.
Impairment losses, if any, resulting from the transitional testing will be
recognized in the quarter ended March 31, 2002 as a cumulative effect of a
change in accounting principle.

On August 16, 2001 the Financial Accounting Standards Board (FASB) issued
Statement of Accounting Standards (SFAS) 143, Accounting for Asset Retirement
Obligations. SFAS 143 is effective for financial statements issued for years
beginning after June 15, 2002. Although management is still reviewing the
provisions of this Statement, its preliminary assessment is that this Statement
will not have a material impact on Avalon's financial position or results of
operations.

On October 3, 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Accounting Standards (SFAS) 144, Accounting for the Impairment or
Disposal of long-lived assets. SFAS 144 is effective for financial statements
issued for fiscal years beginning after December 15, 2001, and interim periods
within those fiscal years. Although management is still reviewing the provisions
of this Statement, its preliminary assessment is that this Statement will not
have a material impact on Avalon's financial position or results of operations.

                                       10
<PAGE>

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information which management believes is
relevant to an assessment and understanding of the operations and financial
condition of Avalon Holdings Corporation and its subsidiaries. As used in this
report, the term "Avalon" means Avalon Holdings Corporation and its wholly owned
subsidiaries, taken as a whole, unless the context indicates otherwise.

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


Liquidity and Capital Resources

For the first nine months of 2001, Avalon utilized cash provided by operations
to fund capital expenditures and meet operating needs.

During the first nine months of 2001, capital spending for Avalon totaled
approximately $1 million which was principally related to capital improvements
to the golf course and to a lesser extent the purchase of equipment for Avalon's
transportation and technical environmental services operations. Avalon's capital
spending in 2001, is expected to be in the range of $1.5 million to $2.0 million
which will be principally for capital improvements to the golf course, golf
course related facilities and additional transportation equipment.

Working capital was $22 million at both September 30, 2001 and December 31,
2000.

The decrease in Accounts Receivable at September 30, 2001 compared with December
31, 2000 is primarily due to a decrease in the average days outstanding of the
accounts receivable at September 30, 2001 when compared to December 31, 2000.

The increase in Prepaid Expenses and other current assets is primarily due to
the renewal of the Company's insurance program in September 2001.

The increase in Accounts Payable at September 30, 2001 compared with December
31, 2000 is primarily the result of higher insurance premiums payable at
September 30, 2001 because of the timing of the annual renewal of the Company's
insurance program and increased accounts payable relating to remediation
projects and projects of the waste disposal brokerage operations.

Management believes that cash provided from operations, the availability of
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. Avalon does not currently have a credit facility.

Avalon is not aggressively pursuing potential acquisition candidates but will
continue to consider acquisitions that make economic sense. While Avalon has not
entered into any pending agreements for acquisitions, it may do so at any time.
Such potential acquisitions could be financed by existing working

                                       11
<PAGE>

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

Net operating revenues in the third quarter of 2001 increased to $22.3 million
compared with $22.0 million in the prior year's third quarter. Cost of
operations were $19.8 million in both the third quarter of 2001 and 2000. Avalon
recorded net income of $.2 million or $.04 per share for the third quarter of
2001 compared with a net loss of $.2 million or a loss of $.04 per share for the
third quarter of 2000. For the first nine months of 2001, net operating revenues
decreased to $56.5 million compared with $64.7 million for the first nine months
of 2000. Cost of operations were $50.6 million for the first nine months of 2001
compared with $58.3 million for the first nine months of the prior year. During
the first nine months of 2001, Avalon recorded a net loss of $1.3 million or a
loss of $.34 per share compared with a net loss of $.5 million or a loss of $.13
per share for the first nine months of 2000.

Performance in the Third Quarter of 2001 compared with the Third Quarter of 2000

Segment performance

Segment performance should be read in conjunction with Note 7 to the Condensed
Consolidated Financial Statements.

Net operating revenues of the transportation services segment decreased to $9.6
million in the third quarter of 2001 compared with $12.2 million in the third
quarter of the prior year. The decrease in net operating revenues is primarily
attributable to a significant decrease in the level of business of the
transportation brokerage operations and a decrease in the transportation of
industrial and hazardous waste. The transportation services segment recorded
income before taxes of $.2 million for the third quarter of 2001 compared with
income before taxes of $.6 million for the third quarter of 2000. The decrease
is primarily the result of a decline in the level of business of both the
transportation brokerage operations and the transportation of industrial and
hazardous waste.

Net operating revenues of the technical environmental services segment decreased
to $6.1 million in the third quarter of 2001 compared with $7.3 million in the
third quarter of the prior year. The decrease in net operating revenues was
primarily the result of a decrease in the net operating revenues of the
engineering and consulting business and to a lesser extent the analytical
laboratory business and remediation services business. The decrease in net
operating revenues of the engineering and consulting business and the laboratory
business is primarily as a result of a decline in the level of business.
Although the total net operating revenues of the remediation business declined,
the net operating revenues relating to services performed by employees of the
remediation business increased, while the net operating revenues relating to
services performed by subcontractors, at little or no mark up, declined. The
increase in the net operating revenues for the services performed by employees
of the remediation business is primarily related to a single significant
project. The technical environmental services segment recorded income before
taxes of $.3 million in the third quarter of 2001 compared with income before
taxes of $.1 million in the third quarter of 2000. The increase in income before
taxes is primarily the result of improved operating margins of both the
remediation and engineering and consulting businesses partially offset by the
increased loss before taxes of the analytical laboratory business.

                                       12
<PAGE>

Net operating revenues of the waste disposal brokerage and management services
segment increased to $7.9 million in the third quarter of 2001 compared with
$5.5 million in the third quarter of the prior year. The increase in net
operating revenues is primarily related to the net operating revenues associated
with a significant project during the third quarter of 2001. Income before taxes
was $.4 million in both the third quarter of 2001 and the third quarter of 2000.
Despite the increase in net operating revenues, income before taxes remained
approximately the same primarily due to increased selling and administrative
expenses.

Avalon's golf and related operations segment consists primarily of the operation
of a golf course and travel agency. Net operating revenues for the golf and
related operations segment increased to $.5 million in the third quarter of 2001
compared with $.2 million in the third quarter of 2000. During most of the third
quarter of 2000, the golf course was closed while significant capital
improvements were being made to the course. The golf and related operations
segment incurred a loss before taxes of $.1 million in the third quarter of 2001
compared with a loss before taxes of $.4 million in the prior year quarter. The
improved results are primarily as a result of the additional golf revenues in
the third quarter of 2001 compared with the prior year quarter partially off set
by increased expenses of the golf course operations.

Interest income

Interest income decreased to $.1 million in the third quarter of 2001 compared
with $.2 million in the third quarter of 2000 primarily due to a decrease in
investment rates during the third quarter of 2001 compared with the prior year
quarter partially offset by a slight increase in the average amount of cash and
cash equivalents during the third quarter of 2001 compared with the prior year
quarter.

General corporate expenses

General corporate expenses were $.9 million in the third quarter of 2001
compared with $1 million in the third quarter of the prior year. Such decrease
is primarily the result of a decrease in various administrative expenses.

Net income

Avalon recorded net income of $.2 million in the third quarter of 2001 compared
with a net loss of $.2 million in the third quarter of the prior year. Avalon's
overall effective tax rate, including the effect of state income tax provisions,
was adjusted during the third quarter of 2001 to reflect changes in projected
results for 2001. The overall effective rate is different than statutory rates
primarily due to state income taxes, the nondeductibility for tax purposes of
the amortization and write-down of costs in excess of fair market value of net
assets of acquired businesses and other nondeductible expenses.

Performance in the First Nine Months of 2001 compared with the First Nine Months
of 2000

Segment performance

Net operating revenues of the transportation services segment decreased to $27.1
million in the first nine months of 2001 compared with $36.3 million in the
first nine months of the prior year. The decrease is primarily attributable to a
significant decrease in the net operating revenues of the transportation
brokerage operations and a decrease in the transportation of hazardous waste.
The decrease in net operating revenues of the transportation brokerage
operations is primarily because the net operating revenues in the first nine
months of 2000 included significant revenues related to a one-time project in
the

                                       13
<PAGE>

New England states. The decreased net operating revenues for the transportation
of hazardous waste is primarily as a result of a decline in the volume of
hazardous waste transportation for certain customers. The transportation
services segment recorded income before taxes of $22,000 in the first nine
months of 2001 compared with income before taxes of $.8 million in the first
nine months of the prior year. The decrease is primarily the result of the
significant decrease in the level of business of both the transportation
brokerage operations and the transportation of hazardous waste.

Net operating revenues of the technical environmental services segment decreased
to $16 million in the first nine months of 2001 compared with $20.8 million in
the first nine months of 2000 because of decreased net operating revenues of all
operations except for the captive landfill management operations which remained
unchanged. The decrease in net operating revenues of the engineering and
consulting business and the laboratory business is primarily as a result of a
decline in the level of business. Although the total net operating revenues of
the remediation business declined, the net operating revenues relating to
services performed by employees of the remediation business increased, while the
net operating revenues relating to services performed by subcontractors, at
little or no mark up, declined. The increase in the net operating revenues for
services performed by employees of the remediation business is primarily related
to a single significant project. The analytical laboratory business of Avalon's
technical environmental services operations has experienced operating losses due
to increased competition and operational inefficiencies. As a result, during the
second quarter of 2001, the laboratory operations implemented a reduction and
reorganization of its workforce. Although Avalon believes the operational
inefficiencies have been appropriately addressed, the analytical laboratory
business has not been able to increase net operating revenues to a level
necessary to cover the costs associated with the laboratory operations, many of
which are fixed. Therefore, in accordance with Avalon's asset impairment policy,
Avalon performed an evaluation of the long-lived assets of the Export,
Pennsylvania analytical laboratory operations including the costs in excess of
fair market value of net assets of acquired businesses ("goodwill") to determine
if the carrying value of such assets was recoverable. To ascertain whether an
impairment existed, Avalon estimated the undiscounted sum of the expected future
cash flows of the Export, Pennsylvania analytical laboratory operations to
determine if such sum was less than the carrying value of the long-lived assets.
The evaluation indicated the existence of an impairment and Avalon measured the
extent of the impairment by determining the fair market value of the long-lived
assets based upon quoted market prices and comparing such fair market values to
Avalon's carrying value. As a result, the Company recorded a write-down of
goodwill in the amount of $.5 million. Excluding the write-down of goodwill,
income before taxes of the technical environmental services segment in the first
nine months of 2001 increased to $.5 million compared with $.4 million in the
first nine months of the prior year. The increase is primarily the result of
improved operating margins and decreased selling and general administrative
expenses of the engineering and consulting business. The analytical laboratory
operations incurred significantly larger losses before taxes in the first nine
months of 2001 compared with the first nine months of the prior year which
offset the increased income before taxes of the engineering and consulting
business. The engineering and consulting business incurred a loss before taxes
for the first nine months of 2000.

Net operating revenues of the waste disposal brokerage and management services
segment increased to $16.8 million in the first nine months of 2001 compared
with $16.1 million in the first nine months of 2000. The increase in net
operating revenues is primarily related to the net operating revenues associated
with a significant project during the third quarter of 2001. Excluding the net
operating revenues associated with this project, there was a decrease in net
operating revenues as a result of a decline in the level of disposal brokerage
and management services provided. Income before taxes decreased to $.8 million
in the first nine months of 2001 compared with $1.1 million in the first nine
months of the prior year as a result of the increased selling and general
administrative expenses.

                                       14
<PAGE>

Avalon's golf and related operations segment consists primarily of the operation
of a golf course and travel agency. The golf course, which is located in Warren,
Ohio, was closed during the first quarter and part of the second quarter of 2001
due to seasonality. The golf course resumed operations during May 2001. The golf
course was closed during most of the first nine months of 2000 to make
significant capital improvements. Net operating revenues for the golf and
related operations segment increased to $1 million in the first nine months of
2001 compared with $.6 million in the first nine months of 2000. The net
operating revenues for the first nine months of 2000 are primarily related to
the travel agency. Net operating revenues of the travel agency declined slightly
during the first nine months of 2001 compared with the first nine months of
2000. The golf and related operations segment incurred a loss before taxes of
$.6 million in the first nine months of 2001 compared with a loss before taxes
of $.8 million in the first nine months of the prior year. The improved results
are primarily as a result of additional golf revenues in the third quarter of
2001 partially offset by increased expenses of the golf course operations.

Interest Income

Interest income decreased to $.5 million in the first nine months of 2001
compared with $.7 million in the first nine months of the prior year, primarily
due to a decrease in investment rates during the first nine months of 2001
compared with the first nine months of the prior year.

General Corporate Expenses

General corporate expenses decreased to $2.5 million in the first nine months of
2001 compared with $2.7 million in the first nine months of the prior year. The
decrease is primarily the result of a decrease in various administrative
expenses.

Net Income

Avalon recorded a net loss of $1.3 million in the first nine months of 2001
compared with a net loss of $.5 million in the first nine months of the prior
year. Avalon's overall effective tax rate, including the effect of state income
tax provisions, was 33.7% in the first nine months of 2001 compared with 32% in
the first nine months of the prior year. The effective tax rate for the current
and prior year period is different than the federal statutory rates due to state
income taxes, the nondeductibility for tax purposes of the amortization and
write-down of costs in excess of fair market value of net assets of acquired
businesses and other nondeductible expenses.

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, 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.

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 significant portion of Avalon's
transportation and disposal brokerage and management revenues is derived from
the disposal or transportation of out-of-state waste. Any law or regulation
restricting or impeding

                                       15
<PAGE>

the transportation of waste or the acceptance of out-of-state waste for disposal
could have a significant negative effect on Avalon.

As is the case with any transportation company, an increase in fuel prices will
subject Avalon's transportation operations to increased operating expenses,
which, in light of competitive market conditions, Avalon may not be able to pass
on to its customers.

Avalon's transportation operations utilize power units which are subject to
long-term leases. A decrease in the level of transportation services provided
has resulted in the under utilization of many of these power units. Continuing
under utilization of these power units will adversely impact the future
financial performance of the transportation operations.

Competitive pressures continue to impact the financial performance of Avalon's
transportation services, technical environmental services and waste disposal
brokerage and management services. A decline in the rates which customers are
willing to pay could adversely impact the future financial performance of
Avalon.

The analytical laboratory business of the technical environmental services
operations has experienced significant losses before taxes as a result of a
decline in net operating revenues and operational inefficiencies. As a result,
during the second quarter of 2001, the laboratory operations implemented a
reduction and reorganization of its workforce. Avalon believes that the
operational inefficiencies have been appropriately addressed, however, failure
to increase net operating revenues will continue to adversely impact the future
financial performance of the analytical laboratory business because of the fixed
nature of many of the costs associated with the laboratory operations.

Avalon's waste disposal brokerage and management operations obtain and retain
customers by providing service 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 has caused disposal pricing to increase. Avalon does not believe
that pricing changes alone will have a material effect upon its waste disposal
brokerage and management operations. However, consolidation will have the effect
of reducing the number of competitors offering disposal alternatives which may
adversely impact the future financial performance of Avalon's waste disposal
brokerage and management operations.

A significant portion of Avalon's business 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.

As a result of the significant capital improvements to Avalon's golf course, the
greens fees charged customers to play a round of golf have been increased
substantially. Although Avalon believes that the capital improvements made to
the golf course justify the increased greens fees and will result in increased
net operating revenues and increased income before taxes, such increases have
not been realized and there can be no assurance as to when such increases will
be attained.

Avalon's golf course competes with many public and private courses in the area.
Although the course will continue to be available to the general public, in
order to market the redesigned golf course to a broader range of patrons, and in
light of the anticipated national recognition of the course, Avalon has

                                       16
<PAGE>

created the Avalon Lakes Golf Club. Membership requires payment of a one-time
initiation fee as well as annual dues. Members receive several benefits
including reduced greens fees and preferential tee times.

Avalon's golf course is located in Warren, Ohio and is significantly dependent
upon weather conditions during the golf season. Additionally, all of Avalon's
other operations are somewhat seasonal in nature because a significant portion
of the operations are performed primarily in selected northeastern and
midwestern states. As a result, Avalon's financial performance is adversely
affected by winter weather conditions.

Market Risk

Avalon does not have significant exposure to changing interest rates. Currently,
a 10% change in interest rates would have an immaterial effect on Avalon's
pretax earnings for the next fiscal year. Avalon currently has no debt
outstanding and invests primarily in short-term money market funds and other
short-term obligations. Avalon does not undertake any specific actions to cover
its exposure to interest rate risk and Avalon is not a party to any interest
rate risk management transactions.

Avalon does not purchase or hold any derivative financial instruments.


                         ============================

                                       17
<PAGE>

                          PART II. OTHER INFORMATION


Item 1.  Legal Proceedings

         Reference is made to "Item 3. Legal Proceedings" in Avalon's Annual
         Report on Form 10-K for the year ended December 31, 2000 for a
         description of legal proceedings.

Item 2.  Changes in Securities and Use of Proceeds

         None

Item 3.  Defaults upon Senior Securities

         None

Item 4.  Submission of Matters to a Vote of Security Holders

         None


Item 5.  Other Information

         None

Item 6.  Exhibits and Reports on Form 8-K

         (a)   Exhibits
               None

         (b)   Reports on Form 8-K
               None

                                       18
<PAGE>

                                   SIGNATURE

Pursuant to the requirements 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.


                                   AVALON HOLDINGS CORPORATION
                                   (Registrant)



Date: November 12, 2001            By:  /s/ Timothy C. Coxson
      ----------------------       --------------------------------------------
                                   Timothy C. Coxson, Chief Financial Officer
                                   and Treasurer (Principal Financial and
                                   Accounting Officer and Duly Authorized
                                   Officer)

                                       19