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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 June 30, 2003                                            
|  |  |                                                                                         
|o |  | 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

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AVALON HOLDINGS CORPORATION(Exact name of registrant as specified in its
charter)

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

|                                         |  |           
|---------------------------------------- |  | ----------
|One American Way, Warren, Ohio           |  | 44484-5555
|(Address of principal executive offices) |  | (Zip Code)

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

---

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.

Yesx Noo

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 August 7, 2003.

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AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

INDEX

|                                                                                                                      |                                                                                       | Page
|--------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----
|PART I.FINANCIAL INFORMATION                                                                                          |                                                                                      
|                                                                                                                      |                                                                                       |     
|Item 1.                                                                                                               | Financial Statements                                                                  |     
|                                                                                                                      |                                                                                       |     
|Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2003 and 2002 (Unaudited) | 3                                                                                    
|                                                                                                                      |                                                                                       |     
|Condensed Consolidated Balance Sheets at June 30, 2003 (Unaudited)and December 31, 2002                               | 4                                                                                    
|                                                                                                                      |                                                                                       |     
|Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 (Unaudited)           | 5                                                                                    
|                                                                                                                      |                                                                                       |     
|Notes to Condensed Consolidated Financial Statements (Unaudited)                                                      | 6                                                                                    
|                                                                                                                      |                                                                                       |     
|Item 2.                                                                                                               | Managements Discussion and Analysis of Financial Condition and Results of Operations | 12  
|                                                                                                                      |                                                                                       |     
|Item 4.                                                                                                               | Controls and Procedures                                                               | 19  

|                          |                                                     |   
|------------------------- | --------------------------------------------------- | --
|PART II.OTHER INFORMATION |                                                    
|                          |                                                     |   
|Item 1.                   | Legal Proceedings                                   | 20
|                          |                                                     |   
|Item 2.                   | Changes in Securities and Use of Proceeds           | 20
|                          |                                                     |   
|Item 3.                   | Defaults upon Senior Securities                     | 20
|                          |                                                     |   
|Item 4.                   | Submission of Matters to a Vote of Security Holders | 20
|                          |                                                     |   
|Item 5.                   | Other Information                                   | 20
|                          |                                                     |   
|Item 6.                   | Exhibits and Reports on Form 8-K                    | 20
|                          |                                                     |   
|SIGNATURE                 | 21                                                 

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PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

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

|                                                      |                             |  |                          |        |      |   |        |   |   |        |   |   |        |  
|----------------------------------------------------- | --------------------------- |  | ------------------------ | ------ | ---- | - | ------ | - | - | ------ | - | - | ------ | -
|                                                      | Three Months Ended June 30, |  | Six Months EndedJune 30, |       
|                                                      | 2003                        |  | 2002                     |        | 2003 |   | 2002   |  
|Net operating revenues                                |                             |  | $                        | 16,320 |      | $ | 16,248 |   | $ | 30,328 |   | $ | 31,969 |  
|Costs and expenses:                                   |                             |  |                          |        |      |   |        |   |   |        |   |   |        |  
|Costs of operations                                   |                             |  |                          | 14,318 |      |   | 14,781 |   |   | 27,175 |   |   | 29,646 |  
|Selling, general and administrative expenses          |                             |  |                          | 2,510  |      |   | 2,208  |   |   | 4,796  |   |   | 4,477  |  
|                                                      |                             |  |                          |        |      |   |        |  
|Operating loss from continuing operations             |                             |  |                          | (508   | )    |   | (741   | ) |   | (1,643 | ) |   | (2,154 | )
|Other income:                                         |                             |  |                          |        |      |   |        |   |   |        |   |   |        |  
|Interest income                                       |                             |  |                          | 63     |      |   | 67     |   |   | 115    |   |   | 144    |  
|Other income, net                                     |                             |  |                          | 58     |      |   | 209    |   |   | 162    |   |   | 241    |  
|                                                      |                             |  |                          |        |      |   |        |  
|Loss from continuing operations before income taxes   |                             |  |                          | (387   | )    |   | (465   | ) |   | (1,366 | ) |   | (1,769 | )
|Provision (benefit) for income taxes                  |                             |  |                          |       |      |   |       |   |   |       |   |   |       |  
|                                                      |                             |  |                          |        |      |   |        |  
|Loss from continuing operations                       |                             |  |                          | (387   | )    |   | (465   | ) |   | (1,366 | ) |   | (1,769 | )
|Discontinued operations:                              |                             |  |                          |        |      |   |        |   |   |        |   |   |        |  
|Loss from discontinued operations before income taxes |                             |  |                          |       |      |   | (370   | ) |   |       |   |   | (697   | )
|Provision (benefit) for income taxes                  |                             |  |                          |       |      |   |       |   |   |       |   |   |       |  
|                                                      |                             |  |                          |        |      |   |        |  
|Loss from discontinued operations                     |                             |  |                          |       |      |   | (370   | ) |   |       |   |   | (697   | )
|Net loss                                              |                             |  | $                        | (387   | )    | $ | (835   | ) | $ | (1,366 | ) | $ | (2,466 | )
|                                                      |                             |  |                          |        |      |   |        |  
|Net loss per share from continuing operations         |                             |  | $                        | (.10   | )    | $ | (.12   | ) | $ | (.36   | ) | $ | (.47   | )
|                                                      |                             |  |                          |        |      |   |        |  
|Net loss per share from discontinued operations       |                             |  | $                        |       |      | $ | (.10   | ) | $ |       |   | $ | (.18   | )
|                                                      |                             |  |                          |        |      |   |        |  
|Net loss per share (Note 2)                           |                             |  | $                        | (.10   | )    | $ | (.22   | ) | $ | (.36   | ) | $ | (.65   | )
|                                                      |                             |  |                          |        |      |   |        |  
|Weighted average shares outstanding (Note 2)          |                             |  |                          | 3,803  |      |   | 3,803  |   |   | 3,803  |   |   | 3,803  |  
|                                                      |                             |  |                          |        |      |   |        |  

See accompanying notes to condensed consolidated financial statements.

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

|                                                                                                                |               |  |                   |         |   |   |         |  
|--------------------------------------------------------------------------------------------------------------- | ------------- |  | ----------------- | ------- | - | - | ------- | -
|                                                                                                                | June 30, 2003 |  | December 31, 2002 |        
|                                                                                                                | (Unaudited)   |  |                  
|Assets                                                                                                          |               |  |                   |         |   |   |         |  
|Current assets:                                                                                                 |               |  |                   |         |   |   |         |  
|Cash and cash equivalents                                                                                       |               |  | $                 | 3,303   |   | $ | 2,595   |  
|Short-term investments                                                                                          |               |  |                   | 3,951   |   |   | 5,965   |  
|Accounts receivable, net                                                                                        |               |  |                   | 11,210  |   |   | 11,776  |  
|Prepaid expenses                                                                                                |               |  |                   | 1,132   |   |   | 1,781   |  
|Other current assets                                                                                            |               |  |                   | 601     |   |   | 549     |  
|                                                                                                                |               |  |                   |        
|Total current assets                                                                                            |               |  |                   | 20,197  |   |   | 22,666  |  
|Noncurrent investments                                                                                          |               |  |                   | 2,014   |   |   |        |  
|Properties and equipment, less accumulated depreciation and amortization of $18,047 in 2003 and $17,050 in 2002 |               |  |                   | 27,241  |   |   | 28,303  |  
|Costs in excess of fair market value of net assets of acquired businesses, net                                  |               |  |                   | 538     |   |   | 538     |  
|Other assets, net                                                                                               |               |  |                   | 138     |   |   | 139     |  
|                                                                                                                |               |  |                   |        
|Total assets                                                                                                    |               |  | $                 | 50,128  |   | $ | 51,646  |  
|                                                                                                                |               |  |                   |        
|Liabilities and Shareholders Equity                                                                            |               |  |                   |         |   |   |         |  
|Current liabilities:                                                                                            |               |  |                   |         |   |   |         |  
|Accounts payable                                                                                                |               |  | $                 | 5,272   |   | $ | 5,852   |  
|Accrued payroll and other compensation                                                                          |               |  |                   | 876     |   |   | 827     |  
|Accrued income taxes                                                                                            |               |  |                   | 288     |   |   | 236     |  
|Other accrued taxes                                                                                             |               |  |                   | 482     |   |   | 541     |  
|Other liabilities and accrued expenses                                                                          |               |  |                   | 1,976   |   |   | 1,425   |  
|                                                                                                                |               |  |                   |        
|Total current liabilities                                                                                       |               |  |                   | 8,894   |   |   | 8,881   |  
|Other noncurrent liabilities                                                                                    |               |  |                   | 11      |   |   | 131     |  
|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                                                                                             |               |  |                   | (16,940 | ) |   | (15,574 | )
|Accumulated other comprehensive income                                                                          |               |  |                   | 29      |   |   | 74      |  
|                                                                                                                |               |  |                   |        
|Total shareholders equity                                                                                      |               |  |                   | 41,223  |   |   | 42,634  |  
|                                                                                                                |               |  |                   |        
|Total liabilities and shareholders equity                                                                      |               |  | $                 | 50,128  |   | $ | 51,646  |  
|                                                                                                                |               |  |                   |        

See accompanying notes to condensed consolidated financial statements.

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

|                                                                                            |                           |  |      |        |   |   |        |  
|------------------------------------------------------------------------------------------- | ------------------------- |  | ---- | ------ | - | - | ------ | -
|                                                                                            | Six Months Ended June 30, |  |     
|                                                                                            | 2003                      |  | 2002 |       
|Operating activities:                                                                       |                           |  |      |        |   |   |        |  
|Loss from continuing operations                                                             |                           |  | $    | (1,366 | ) | $ | (1,769 | )
|Reconciliation of loss from continuing operations to cash provided by operating
activities: |                           |  |      |        |   |   |        |  
|Depreciation and amortization                                                               |                           |  |      | 1,210  |   |   | 1,213  |  
|Amortization of investments                                                                 |                           |  |      | 34     |   |   | 62     |  
|Provision for losses on accounts receivable                                                 |                           |  |      | 358    |   |   | 235    |  
|Gain from disposal of property and equipment                                                |                           |  |      | (39    | ) |   | (35    | )
|Change in operating assets and liabilities:                                                 |                           |  |      |        |   |   |        |  
|Accounts receivable                                                                         |                           |  |      | 208    |   |   | 160    |  
|Prepaid expenses                                                                            |                           |  |      | 649    |   |   | 533    |  
|Other current assets                                                                        |                           |  |      | (52    | ) |   | (59    | )
|Other assets                                                                                |                           |  |      | 1      |   |   | 2      |  
|Accounts payable                                                                            |                           |  |      | (580   | ) |   | (1,740 | )
|Accrued payroll and other compensation                                                      |                           |  |      | 49     |   |   | (108   | )
|Accrued income taxes                                                                        |                           |  |      | 52     |   |   | (18    | )
|Other accrued taxes                                                                         |                           |  |      | (59    | ) |   | (138   | )
|Other liabilities and accrued expenses                                                      |                           |  |      | 551    |   |   | 251    |  
|Other noncurrent liabilities                                                                |                           |  |      | (120   | ) |   | 11     |  
|                                                                                            |                           |  |      |       
|Net cash provided by (used in)
operating activities from continuing operations              |                           |  |      | 896    |   |   | (1,400 | )
|Net cash used in operating activities from
discontinued operations                          |                           |  |      |       |   |   | (297   | )
|                                                                                            |                           |  |      |       
|Net cash provided by (used in) operating activities                                         |                           |  |      | 896    |   |   | (1,697 | )
|                                                                                            |                           |  |      |       
|Investing activities:                                                                       |                           |  |      |        |   |   |        |  
|Purchase of available-for-sale investments                                                  |                           |  |      | (2,014 | ) |   |       |  
|Maturities of available-for-sale investments                                                |                           |  |      | 1,935  |   |   |       |  
|Sales of held-to-maturity investments                                                       |                           |  |      |       |   |   | 712    |  
|Capital expenditures                                                                        |                           |  |      | (154   | ) |   | (2,076 | )
|Proceeds from disposal of property and equipment                                            |                           |  |      | 45     |   |   | 42     |  
|                                                                                            |                           |  |      |       
|Net cash used in investing
activities from continuing operations                            |                           |  |      | (188   | ) |   | (1,322 | )
|Net cash provided by investing activities from
discontinued operations                      |                           |  |      |       |   |   | 378    |  
|                                                                                            |                           |  |      |       
|Net cash used in investing activities                                                       |                           |  |      | (188   | ) |   | (944   | )
|                                                                                            |                           |  |      |       
|Increase (decrease) in cash and cash equivalents                                            |                           |  |      | 708    |   |   | (2,641 | )
|Cash and cash equivalents at beginning of year                                              |                           |  |      | 2,595  |   |   | 4,807  |  
|                                                                                            |                           |  |      |       
|Cash and cash equivalents at end of period                                                  |                           |  | $    | 3,303  |   | $ | 2,166  |  
|                                                                                            |                           |  |      |       

See accompanying notes to condensed consolidated financial statements.

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AVALON HOLDINGS CORPORATION AND SUBSIDIARIES  Notes to Condensed Consolidated Financial Statements  (Unaudited)  June 30, 2003

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 2002 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 June 30, 2003, and the results of its 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 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 six months ended June 30, 2003 and 2002.

Note 3.   Investment Securities

Avalon held
available-for-sale securities of $5,965,000 at both June 30, 2003 and December 31, 2002, which are included in the Condensed Consolidated Balance Sheets under the captions Short-term investments and Noncurrent investments. As
a result of the classification of these securities as available-for-sale, Avalon has recognized unrealized losses, net of applicable income taxes, of $25,000 during the three month period ended June 30, 2003 and of $45,000 during the six month
period ended June 30, 2003 as a component of other comprehensive income. Accumulated other comprehensive income was $29,000 at June 30, 2003.

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Information regarding investment securities consists of the following (in thousands):

|                    |                |  |                        |       |                      |   |                |  |                        |       |                      |   |       |  |   |    |  |   |      
|------------------- | -------------- |  | ---------------------- | ----- | -------------------- | - | -------------- |  | ---------------------- | ----- | -------------------- | - | ----- |  | - | -- |  | - | -----
|                    | June 30, 2003  |  | December 31, 2002     
|                    | Amortized Cost |  | Gross Unrealized Gains |       | Estimated Fair Value |   | Amortized Cost |  | Gross Unrealized Gains |       | Estimated Fair Value
|Available-for-Sale: |                |  |                        |       |                      |   |                |  |                        |       |                      |   |       |  |   |    |  |   |      
|U.S. Treasury Notes |                |  | $                      | 5,936 |                      | $ | 29             |  | $                      | 5,965 |                      | $ | 5,891 |  | $ | 74 |  | $ | 5,965

The amortized cost and estimated fair value of available-for-sale investments at June 30, 2003, by contractual maturity, consist of the
following (in thousands):

|                                      |                    |                      |   |       |  |   |      
|------------------------------------- | ------------------ | -------------------- | - | ----- |  | - | -----
|                                      | Available-for-Sale
|                                      | Amortized Cost     | Estimated Fair Value
|Due in one year or less               |                    |                      | $ | 3,922 |  | $ | 3,951
|Due after one year through five years |                    |                      |   | 2,014 |  |   | 2,014
|                                      |                    |                     
|Total                                 |                    |                      | $ | 5,936 |  | $ | 5,965
|                                      |                    |                     

Note 4.    Comprehensive Income (Loss)

Comprehensive income (loss) is comprised of two components: net income (loss) and other comprehensive income (loss). Comprehensive income (loss) is the change in equity during a period from transactions and other events and
circumstances from non-owner sources. The unrealized gains and losses, net of applicable taxes, related to available-for-sale securities is the only component of Accumulated other comprehensive income in the Condensed Consolidated
Balance Sheets for Avalon. Comprehensive income (loss), net of related tax effects, is as follows (in thousands):

|                                                        |                             |  |                           |      |      |   |      |   |   |        |   |   |        |  
|------------------------------------------------------- | --------------------------- |  | ------------------------- | ---- | ---- | - | ---- | - | - | ------ | - | - | ------ | -
|                                                        | Three Months Ended June 30, |  | Six Months Ended June 30, |     
|                                                        | 2003                        |  | 2002                      |      | 2003 |   | 2002 |  
|Net loss                                                |                             |  | $                         | (387 | )    | $ | (835 | ) | $ | (1,366 | ) | $ | (2,466 | )
|Unrealized gain (loss) on available-for-sale securities |                             |  |                           | (25  | )    |   | 52   |   |   | (45    | ) |   | 52     |  
|                                                        |                             |  |                           |      |      |   |      |   |   |       
|Total comprehensive loss                                |                             |  | $                         | (412 | )    | $ | (783 | ) | $ | (1,411 | ) | $ | (2,414 | )
|                                                        |                             |  |                           |      |      |   |      |   |   |       

Note 5.    Discontinued Operations

Recognizing that the continuing losses incurred by the
analytical laboratory business would adversely impact its future financial performance, in the second quarter of 2002, management determined that it was in Avalons best interest to discontinue operating the analytical laboratory business.
Accordingly, on May 1, 2002, Avalon sold all of the operating assets of its Export, Pennsylvania analytical laboratory business and on September 1, 2002, Avalon sold all of the operating assets of its radio-chemistry laboratory business. The results
of operations of the analytical laboratory business for the three and six months ended June 30, 2002 have been included in discontinued operations.

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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. 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. In April 2003, Avalon executed an Agreed Order that
provides for, among other things, the allocation of remaining site remediation costs. Avalons total liability for such remaining costs was approximately $9,000. As a result, Avalon reduced its recorded liability by $111,000 to reflect the
final resolution of this matter. Such adjustment is included under the caption Costs of operations in the Condensed Consolidated Statements of Operations for the six months ended June 30, 2003.

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.

In applying Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures About Segments of an Enterprise
and Related 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 intersegment net operating revenues as if the transactions were with 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, transportation of general and bulk commodities, and transportation brokerage and management services. The technical environmental services segment provides environmental consulting, engineering, site assessments, remediation
services and operates and manages a captive landfill for an industrial customer. The waste disposal brokerage and management services segment provides hazardous and nonhazardous waste disposal brokerage and management services. The golf and related
operations segment includes the operations of a golf course and travel agency. Avalon does not have significant operations located outside the United States and, accordingly, geographical segment information is not presented.

For the six months ended June 30, 2003, one customer and its affiliates accounted for approximately 24% of the transportation services segments net operating revenues to external customers and approximately 11% of
Avalons consolidated net operating revenues. For the six months ended June 30, 2002, two customers accounted for approximately 23% and 20%, respectively, of the transportation services segments net operating revenues to external
customers and approximately 12% and 11%, respectively, of Avalons consolidated net operating revenues.

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

|                                                       |                             |  |                           |        |      |   |        |   |   |        |   |   |        |  
|------------------------------------------------------ | --------------------------- |  | ------------------------- | ------ | ---- | - | ------ | - | - | ------ | - | - | ------ | -
|                                                       | Three Months Ended June 30, |  | Six Months Ended June 30, |       
|                                                       | 2003                        |  | 2002                      |        | 2003 |   | 2002   |  
|Net operating revenues from:                           |                             |  |                           |        |      |   |        |   |   |        |   |   |        |  
|Transportation services:                               |                             |  |                           |        |      |   |        |   |   |        |   |   |        |  
|External customers revenues                            |                             |  | $                         | 7,333  |      | $ | 8,396  |   | $ | 13,815 |   | $ | 17,086 |  
|Intersegment revenues                                  |                             |  |                           | 808    |      |   | 887    |   |   | 1,693  |   |   | 1,877  |  
|                                                       |                             |  |                           |        |      |   |        |   |   |       
|Total transportation services                          |                             |  |                           | 8,141  |      |   | 9,283  |   |   | 15,508 |   |   | 18,963 |  
|                                                       |                             |  |                           |        |      |   |        |   |   |       
|Technical environmental services:                      |                             |  |                           |        |      |   |        |   |   |        |   |   |        |  
|External customers revenues                            |                             |  |                           | 2,228  |      |   | 2,691  |   |   | 5,217  |   |   | 5,677  |  
|Intersegment revenues                                  |                             |  |                           |       |      |   |       |   |   |       |   |   |       |  
|                                                       |                             |  |                           |        |      |   |        |   |   |       
|Total technical environmental services                 |                             |  |                           | 2,228  |      |   | 2,691  |   |   | 5,217  |   |   | 5,677  |  
|                                                       |                             |  |                           |        |      |   |        |   |   |       
|Waste disposal brokerage and management services:      |                             |  |                           |        |      |   |        |   |   |        |   |   |        |  
|External customers revenues                            |                             |  |                           | 5,875  |      |   | 4,702  |   |   | 10,299 |   |   | 8,659  |  
|Intersegment revenues                                  |                             |  |                           | 20     |      |   | 65     |   |   | 70     |   |   | 110    |  
|                                                       |                             |  |                           |        |      |   |        |   |   |       
|Total waste disposal brokerage and management services |                             |  |                           | 5,895  |      |   | 4,767  |   |   | 10,369 |   |   | 8,769  |  
|                                                       |                             |  |                           |        |      |   |        |   |   |       
|Golf and related operations:                           |                             |  |                           |        |      |   |        |   |   |        |   |   |        |  
|External customers revenues                            |                             |  |                           | 884    |      |   | 459    |   |   | 997    |   |   | 547    |  
|Intersegment revenues                                  |                             |  |                           | 23     |      |   | 20     |   |   | 38     |   |   | 34     |  
|                                                       |                             |  |                           |        |      |   |        |   |   |       
|Total golf and related operations                      |                             |  |                           | 907    |      |   | 479    |   |   | 1,035  |   |   | 581    |  
|                                                       |                             |  |                           |        |      |   |        |   |   |       
|Segment operating revenues                             |                             |  |                           | 17,171 |      |   | 17,220 |   |   | 32,129 |   |   | 33,990 |  
|Intersegment eliminations                              |                             |  |                           | (851   | )    |   | (972   | ) |   | (1,801 | ) |   | (2,021 | )
|                                                       |                             |  |                           |        |      |   |        |   |   |       
|Total net operating revenues                           |                             |  | $                         | 16,320 |      | $ | 16,248 |   | $ | 30,328 |   | $ | 31,969 |  
|                                                       |                             |  |                           |        |      |   |        |   |   |       
|Income (loss) from continuing operations before taxes: |                             |  |                           |        |      |   |        |   |   |        |   |   |        |  
|Transportation services                                |                             |  | $                         | 100    |      | $ | 233    |   | $ | (160   | ) | $ | (131   | )
|Technical environmental services                       |                             |  |                           | (20    | )    |   | (72    | ) |   | 145    |   |   | (133   | )
|Waste disposal brokerage and management services       |                             |  |                           | 176    |      |   | 164    |   |   | 387    |   |   | 269    |  
|Golf and related operations                            |                             |  |                           | 165    |      |   | (94    | ) |   | (117   | ) |   | (332   | )
|Other businesses                                       |                             |  |                           | (1     | )    |   |       |   |   | (1     | ) |   | (1     | )
|                                                       |                             |  |                           |        |      |   |        |   |   |       
|Segment income (loss) before taxes                     |                             |  |                           | 420    |      |   | 231    |   |   | 254    |   |   | (328   | )
|Corporate interest income                              |                             |  |                           | 44     |      |   | 56     |   |   | 89     |   |   | 116    |  
|Corporate other income, net                            |                             |  |                           | 41     |      |   | 37     |   |   | 79     |   |   | 38     |  
|General corporate expenses                             |                             |  |                           | (892   | )    |   | (789   | ) |   | (1,788 | ) |   | (1,595 | )
|                                                       |                             |  |                           |        |      |   |        |   |   |       
|Loss from continuing operations before taxes           |                             |  | $                         | (387   | )    | $ | (465   | ) | $ | (1,366 | ) | $ | (1,769 | )
|                                                       |                             |  |                           |        |      |   |        |   |   |       

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Business Segment Information (continued)

|                                                 |                             |  |                           |    |      |   |      |  |   |     |  |   |    
|------------------------------------------------ | --------------------------- |  | ------------------------- | -- | ---- | - | ---- |  | - | --- |  | - | ---
|                                                 | Three Months Ended June 30, |  | Six Months Ended June 30,
|                                                 | 2003                        |  | 2002                      |    | 2003 |   | 2002
|Interest income:                                 |                             |  |                           |    |      |   |      |  |   |     |  |   |    
|Transportation services                          |                             |  | $                         | 14 |      | $ | 4    |  | $ | 17  |  | $ | 11 
|Technical environmental services                 |                             |  |                           | 1  |      |   | 3    |  |   | 3   |  |   | 8  
|Waste disposal brokerage and management services |                             |  |                           | 3  |      |   | 3    |  |   | 5   |  |   | 8  
|Golf and related operations                      |                             |  |                           | 1  |      |   | 1    |  |   | 1   |  |   | 1  
|Corporate                                        |                             |  |                           | 44 |      |   | 56   |  |   | 89  |  |   | 116
|                                                 |                             |  |                           |    |      |   |      |  |  
|Total                                            |                             |  | $                         | 63 |      | $ | 67   |  | $ | 115 |  | $ | 144
|                                                 |                             |  |                           |    |      |   |      |  |  

|                                                 |               |  |                   |         |   |   |         |  
|------------------------------------------------ | ------------- |  | ----------------- | ------- | - | - | ------- | -
|                                                 | June 30, 2003 |  | December 31, 2002 |        
|Identifiable assets:                             |               |  |                   |         |   |   |         |  
|Transportation services                          |               |  | $                 | 10,336  |   | $ | 10,735  |  
|Technical environmental services                 |               |  |                   | 8,401   |   |   | 8,969   |  
|Waste disposal brokerage and management services |               |  |                   | 5,470   |   |   | 4,462   |  
|Golf and related operations                      |               |  |                   | 14,411  |   |   | 14,376  |  
|Other businesses                                 |               |  |                   | 72      |   |   | 72      |  
|Corporate                                        |               |  |                   | 26,751  |   |   | 28,239  |  
|                                                 |               |  |                   |         |   |  
|Sub Total                                        |               |  |                   | 65,441  |   |   | 66,853  |  
|Elimination of intersegment receivables          |               |  |                   | (15,313 | ) |   | (15,207 | )
|                                                 |               |  |                   |         |   |  
|Total                                            |               |  | $                 | 50,128  |   | $ | 51,646  |  
|                                                 |               |  |                   |         |   |  

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Note 8. Recently Issued Financial Accounting Standards

In January 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities (FIN 46) to provide guidance on when an investor should consolidate another entity from which they receive benefits or are exposed to risks when those other entities are not controlled based on
traditional voting interests or they are thinly capitalized. The provisions of FIN 46 are effective beginning July 1, 2003. Management has reviewed the provisions of FIN 46 and its assessment is that this interpretation will not have a material
impact on Avalons financial position or results of operations.

In April 2003, SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, was issued. SFAS
149 amends and clarifies financial accounting and reporting for derivatives and hedging activities under SFAS 133 Accounting for Derivative Instruments and Hedging Activities. This statement is effective for contracts entered into or
modified after June 30, 2003. Management has reviewed the provisions of SFAS 149 and its assessment is that this amendment will not have a material impact on Avalons financial position or results of operations.

In May 2003, SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, which establishes standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity, was issued. SFAS 150 requires that an issuer classify a financial instrument within its scope as a liability (or an asset in some circumstances) because that financial instrument
embodies an obligation of the issuer. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. Although
management is still reviewing the provisions of SFAS 150, Avalon has not entered into or modified any financial instruments after May 31, 2003 and its preliminary assessment is that this financial accounting standard will not have a material impact
on Avalons financial position or results of operations.

Note 9. Subsequent Event

Avalon has reached an agreement in principle with Squaw Creek
Country Club to enter into a long-term lease of its golf course and related facilities located in Vienna, Ohio. Although there can be no assurances, it is anticipated that a definitive agreement will be finalized during the third quarter of 2003.
Under the lease, Avalon would be obligated to pay $150,000 in annual rent, payable in the form of capital improvements to the Squaw Creek golf course and related facilities. Avalon would agree to complete $1 million in capital improvements within
the first two years of the lease term, with the full amount of such expenditures being credited against future rent payments. The lease, including options unilaterally exercisable by Avalon, would have a term of 50 years.

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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 six months of 2003, Avalon utilized cash provided by operations to fund capital expenditures and meet operating needs.

Avalons aggregate capital expenditures in
2003, excluding capital expenditures relating to Squaw Creek Country Club as described below, are expected to be in the range of $.3 million to $.7 million, which relate principally to the purchase of transportation equipment, vehicles for the
technical environmental services operations, and upgrading computer equipment. During the first six months of 2003, capital expenditures for Avalon totaled $.2 million which was principally related to the purchase of transportation equipment for the
transportation services operations.

Working capital was $11.3 million at June 30, 2003 compared with $13.8 million at December 31, 2002. The decrease is primarily the result of a reclassification of
short-term investments to noncurrent investments as a result of a change in maturity dates of certain investments.

The decrease in accounts payable at June 30, 2003 compared with December 31, 2002 is
primarily due to the payment of insurance premiums for Avalons insurance program.

The increase in other liabilities and accrued expenses is primarily the result of an increase in membership dues of
the Avalon Lakes Golf Club. Although membership dues are collected throughout the calendar year, they are recognized as net operating revenues during the months of May through October, which generally represents the golf season.

From time to time Avalon enters into contracts which require 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 significantly limited Avalons ability to obtain surety bonds. No assurance can be given that such bonds will be available in the future or, if available, that the premiums and/or any
collateral requirements for such bonds will be reasonable. The inability of Avalon to obtain surety bonds may adversely impact its future financial performance and any significant collateral requirements may impact Avalons
liquidity.

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Several private golf clubs in the Warren, Ohio vicinity 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. While Avalon has not entered into any pending agreements for acquisitions, it has reached an agreement in principle with Squaw Creek Country Club to
enter into a long-term lease of its golf course and related facilities located in Vienna, Ohio. Although there can be no assurances, it is anticipated that a definitive agreement will be finalized during the third quarter of 2003. Under the lease,
Avalon would be obligated to pay $150,000 in annual rent, payable in the form of capital improvements to the Squaw Creek golf course and related facilities. Avalon would agree to complete $1 million in capital improvements within the first two years
of the lease term, with the full amount of such expenditures being credited against future rent payments. The lease, including options unilaterally exercisable by Avalon, would have a term of 50 years.

Avalon will continue to consider additional acquisitions that make economic sense, including acquisitions of other golf related operations. 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.

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. Avalon does not
currently have a credit facility.

Results of Operations

Overall performance

Net
operating revenues in the second quarter of 2003 increased to $16.3 million compared with $16.2 million in the prior years second quarter. Costs of operations decreased to $14.3 million in the second quarter of 2003 compared with $14.8 million
in the prior year quarter. Avalon incurred a loss from continuing operations of $.4 million or a loss of $.10 per share for the second quarter of 2003 compared with a loss from continuing operations of $.5 million or a loss of $.12 per share for the
second quarter of 2002. For the first six months of 2003, net operating revenues decreased to $30.3 million compared with $32 million for the first six months of 2002. Cost of operations were $27.2 million for the first six months of 2003 compared
with $29.6 for the first six months of the prior year. Avalon incurred a loss from continuing operations of $1.4 million or a loss of $.36 per share for the first six months of 2003 compared with a loss from continuing operations of $1.8 million or
a loss of $.47 per share for the first six months of 2002.

Performance in the Second Quarter of 2003 compared with the Second Quarter of 2002

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 $8.1 million in the second quarter of 2003 compared with $9.3 million in the second 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

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transportation brokerage operations and a decrease in the transportation of municipal solid waste, partially offset by an increase in the transportation of hazardous waste and general
commodities. The decrease in net operating revenues of the transportation brokerage operations was due to the second quarter of 2002 including a significant amount of transportation brokerage services provided for a single customer on a one-time
basis. The increase in net operating revenues relating to the transportation of hazardous waste in the second quarter of 2003 was primarily the result of an increase in the volume of hazardous waste transported for a single customer. The
transportation services segment recorded income before taxes of $.1 million for the second quarter of 2003 compared with income before taxes of $.2 million for the second quarter of 2002. The decrease is primarily the result of a significant decline
in income before taxes of the transportation brokerage operations.

Net operating revenues of the technical environmental services segment were $2.2 million in the second quarter of 2003 compared with $2.7
million in the second quarter of 2002. The technical environmental services segment incurred a loss before taxes of $20,000 in the second quarter of 2003 compared with a loss before taxes of $.1 million in the second quarter of 2002. The improvement
in income before taxes is primarily related to improved operating margins of the engineering and consulting business and a reduced loss before taxes of the remediation business. Income before taxes of the captive landfill management business was
relatively unchanged from the prior year quarter.

Net operating revenues of the waste disposal brokerage and management services segment increased to $5.9 million in the second quarter of 2003 compared with
$4.8 million in the second quarter of the prior year. The increase in net operating revenues is primarily the result of an increase in the level of brokerage and management services provided. Income before taxes for the waste disposal brokerage and
management services segment was $.2 million in the second quarter of 2003 which was relatively unchanged from the second quarter of 2002. The income before taxes in the second quarter of 2003 included a charge of $.3 million to the provision for
losses on accounts receivable due to a customer filing bankruptcy.

Net operating revenues of the golf and related operations segment were $.9 million in the second quarter of 2003 compared with $.5 million
in the second quarter of 2002. The golf and related operations segment recorded income before taxes of $.2 million in the second quarter of 2003 compared with a loss before taxes of $.1 million in the second quarter of 2002. The increase in net
operating revenues and income before taxes is primarily attributed to a significant increase in the average number of members of the Avalon Lakes Golf Club in the second quarter of 2003 compared with the prior year quarter, which in turn has
significantly increased the number of rounds of golf played. The financial performance of the golf and related operations segment was negatively impacted by adverse weather conditions during the second quarter of 2003. Although the golf course will
continue to be available to the general public, the primary source of revenues will be derived from members of the Avalon Lakes Golf Club. Annual membership dues of the Avalon Lakes Golf Club are recognized as net operating revenues during the
months of May through October, which generally represents the golf season.

Interest income

Interest income was $.1 million in both the second
quarter of 2003 and 2002.

General corporate expenses

General corporate expenses were $.9 million in the second quarter of 2003 compared with
$.8 million in the second quarter of 2002.

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Net loss

Avalon recorded a net loss of $.4 million in the second quarter of 2003 compared with a net loss of $.8 million
in the second quarter of the prior year. Avalons overall effective tax rate, including the effect of state income tax provisions, was 0% in the second quarter of 2003 and 2002. The deferred tax benefit arising from the loss before income taxes
was offset by a 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. The overall effective tax rate is
different than statutory rates primarily due to the increase in the valuation allowance.

Performance in the first six months of 2003 compared with the first six months of 2002

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 $15.5 million in the first six months of 2003 compared with $19 million in the first six months 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 municipal solid waste, partially offset by an increase in the transportation of
hazardous waste and general commodities. The decrease in net operating revenues of the transportation brokerage operations was due to the first six months of 2002 including a significant amount of transportation brokerage services provided for a
single customer on a one-time basis. The increase in net operating revenues relating to the transportation of hazardous waste in the first six months of 2003 was primarily the result of an increase in the volume of hazardous waste transported for a
single customer. The transportation services segment incurred a loss before taxes of $.2 million for the six months of 2003 compared with a loss before taxes of $.1 million for the first six months of 2002. The increased loss is primarily the result
of a significant decrease in income before taxes of the transportation brokerage operations, partially offset by numerous cost reductions and a favorable adjustment relating to the settlement of an environmental matter.

Net operating revenues of the technical environmental services segment were $5.2 million in the first six months of 2003 compared with $5.7 million in the first six months of 2002. The technical environmental services segment
recorded income before taxes of $.1 million in the first six months of 2003 compared with a loss before taxes of $.1 million in the first six months of 2002. The increase in income before taxes is primarily related to improved operating margins of
the engineering and consulting business and a reduced loss before taxes of the remediation business. Additionally, during the first six months of 2002, both the engineering and consulting business and the remediation business were adversely impacted
by charges to the provision for losses on accounts receivable of approximately $.2 million as a result of certain customers filing bankruptcy. Income before taxes of the captive landfill management business was relatively unchanged from the prior
year period.

Net operating revenues of the waste disposal brokerage and management services segment increased to $10.4 million in the first six months of 2003 compared with $8.8 million in the first six
months of the prior year. The increase in net operating revenues is primarily the result of an increase in the level of brokerage and management services provided. Income before taxes for the waste disposal brokerage and management services segment
increased to $.4 million in the first six months of 2003 compared with $.3

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million in the first six months of the prior year primarily as a result of an increase in the level of business and improved operating margins. The income before taxes for the first six
months of 2003 included a charge of $.3 million to the provision for losses on accounts receivable due to a customer filing bankruptcy.

Net operating revenues of the golf and related operations segment were
$1 million for the first six months of 2003 compared with $.6 million for the first six months of 2002. The golf course, which is located in Warren, Ohio, was closed during the first three months of 2003 and 2002 due to seasonality. The golf and
related operations segment incurred a loss before taxes of $.1 million in the first six months of 2003 compared with a loss before taxes of $.3 million in the first six months of 2002. The increase in net operating revenues and income before taxes
is primarily attributed to a significant increase in the average number of members of the Avalon Lakes Golf Club in the second quarter of 2003 compared with the prior year quarter, which in turn has significantly increased the number of rounds of
golf played. The financial performance of the golf and related operations segment was negatively impacted by adverse weather conditions during the second quarter of 2003. Although the golf course will continue to be available to the general public,
the primary source of revenues will be derived from members of the Avalon Lakes Golf Club. The net operating revenues associated with the annual membership dues of the Avalon Lakes Golf Club are recognized during the months of May through October,
which generally represents the golf season.

Interest income

Interest income was $.1 million in both the first six months of 2003 and
2002.

General corporate expenses

General corporate expenses were $1.8 million in the first six months of 2003 compared with $1.6 million in the
first six months of 2002.

Net loss

Avalon recorded a net loss of $1.4 million in the first six months of 2003 compared with a net loss of $2.5
million in the first six months of the prior year. Avalons overall effective tax rate, including the effect of state income tax provisions, was 0% in the first six months of 2003 and 2002. The deferred tax benefit arising from the loss before
income taxes was offset by a 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. The overall effective tax
rate is different than statutory rates primarily due to the increase in the valuation allowance.

Trends and Uncertainties

In the ordinary
course of conducting its business, Avalon becomes involved in lawsuits, administrative proceedings and governmental investigations, including those relating to environmental matters. Some of these proceedings may result in fines, penalties or
judgments being assessed against Avalon which, from time to time, may have an impact on its business and financial condition. Although the outcome of such lawsuits or other proceedings cannot be predicted with certainty, management assesses the
probability of loss and accrues a liability as appropriate. Avalon does not believe that any uninsured ultimate liabilities, fines or penalties resulting from such pending proceedings, individually or in the aggregate, will have a material adverse
effect on it.

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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 waste disposal brokerage and management revenues are derived from the disposal or transportation of out-of-state waste. Any law or regulation restricting or impeding
the transportation of waste or the acceptance of out-of-state waste for disposal could have a 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. The level of transportation services provided has resulted in the under-utilization of many of these power units. Twenty-three
of these power unit leases will expire during the fourth quarter of 2003. Avalon does not intend to renew these leases. The under-utilization of leased power units will continue to adversely impact the future financial performance of the
transportation operations.

As is the case with any transportation company, Avalons transportation operations are significantly dependent upon its ability to attract and retain qualified drivers and
independent contractors. Failure to do so will adversely impact the future financial performance of the transportation operations.

In connection with the transportation of municipal solid waste,
Avalons transportation operations provide loading services at several municipal solid waste transfer stations. Because of the fixed costs associated with loading, the profitability of such operations is dependent upon the volume of waste
delivered to each transfer station. The volume of waste delivered to each transfer station is not within Avalons control and has been less than anticipated.

Insurance costs, particularly within the
transportation industry, have risen dramatically over the past year. The increase in insurance premiums has increased Avalons operating expenses, which, in light of competitive market conditions, Avalon has not been able to fully pass on to
its customers.

From time to time Avalon enters into contracts that require 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 significantly limited Avalons ability to obtain surety bonds. No assurance can be given that such bonds will be available in the future or, if available,
that the premiums and/or any collateral requirements for such bonds will be reasonable. The inability of Avalon to obtain surety bonds may adversely impact its future financial performance.

Competitive and
economic pressures continue to impact the financial performance of Avalons transportation services, technical environmental services and waste disposal brokerage and management services. Some of Avalons competitors periodically reduce
their pricing to gain or retain business, especially during difficult economic times, which may limit Avalons ability to maintain rates. A decline in the rates which customers are willing to pay could adversely impact the future financial
performance of Avalon.

Avalons waste disposal brokerage and management operations obtain and retain customers by providing services and identifying cost-efficient disposal options unique to a
customers needs. Consolidation within the solid waste industry has resulted in reducing the number of disposal options available to waste generators and has caused disposal pricing to increase. Avalon does not believe that industry pricing
changes alone will have a material effect upon its waste disposal brokerage and management operations. However, consolidation has had 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.

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The financial results of the engineering and consulting business have been at a level lower than expected. As a result, during the third quarter of 2003, significant changes in
management of such business have taken place in anticipation of improving the financial performance of the engineering and consulting business.

Avalons environmental remediation operation has
continued to experience operating losses as a result of a decline in business. Avalon is evaluating its ability to sufficiently increase business levels and is currently exploring strategic alternatives to continuing the operation of the remediation
business. Continuing operating losses incurred by the remediation business will adversely impact the future financial performance of Avalon.

Avalons captive landfill management business is dependent
upon a single customer as its sole source of revenue. Negotiations for a three year extension of the management agreement with such customer have been successfully completed and documentation of that agreement is being prepared.

Avalon is currently evaluating the business and prospects of its transportation and technical environmental services business units in light of their financial performance over the past few years. Such evaluation includes an
examination of measures to increase the profitability of these operations, as well as the consideration of other strategic alternatives.

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.

Current economic challenges throughout the industries served by Avalon have resulted in a
reduction of revenues coupled with an increase in payment defaults by customers. While Avalon continuously endeavors to limit customer credit risks, customer specific financial downturns are not controllable by management. Significant customer
payment defaults in the future will continue to have a material adverse impact upon Avalons future financial performance.

Avalons golf course competes with many public courses and country clubs
in the area. Although the golf course will continue to be available to the general public, the primary source of revenues will be derived from members of the Avalon Lakes Golf Club.

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 since a significant portion of those operations are
primarily conducted in selected northeastern and midwestern states. As a result, Avalons financial performance is adversely affected by winter weather conditions.

Avalon believes that the current
depressed state of the golf market may result in attractive golf course properties becoming available under favorable terms. In addition to the Squaw Creek transaction previously described, it is possible that Avalon will further expand its
involvement in the golf business in the future.

Management is currently evaluating Avalons strategic direction for the future. While there are no specific transactions under negotiation or pending at
this time, Avalon does not necessarily intend to limit itself in the future to lines of business which it has historically conducted.

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Market Risk

Avalon does not have significant exposure to changing interest rates. A 10% change in interest rates would
have an immaterial effect on Avalons income before taxes for the next fiscal year. Avalon currently has no debt outstanding and invests primarily in U.S. Treasury notes, 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.

Item 4.
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 quarterly 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.

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##### Table of Contents

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, 2002 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

| | Avalons Annual Meeting of Shareholders was held on April 30, 2003; however, no vote of security holders occurred with respect to any matters reportable under this Item 4.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Item 5.   
Other Information

| | None
| | ----

Item 6.   
Exhibits and Reports on Form 8-K

| |     |         
| | --- | --------
| | (a) | Exhibits

| | Exhibit 31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
| | -------------------------------------------------------------------------------------

| |                                                                                      
| | -------------------------------------------------------------------------------------
| | Exhibit 31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | Exhibit 32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | Exhibit 32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

| |     |                         
| | --- | ------------------------
| | (b) | Reports on Form 8-K None

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##### Table of Contents

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: | August 13, 2003 |  | By:                                                   | /s/ TIMOTHY C. COXSON
|      |                 |  |                                                       |                      
|      |                 |  | Timothy C. Coxson, Chief Financial Officer and       
|      |                 |  | Treasurer (Principal Financial and Accounting Officer
|      |                 |  | and Duly Authorized Officer)                         

21