<PAGE>

                                                                    Exhibit 13.1
================================================================================


                              Financial Highlights


  (in thousands, except for per share amounts)

For the year                                                2000      1999
----------------------------------------------------------------------------
Net operating revenues.....................               $ 84,290   $80,860
Income (loss) from operations..............                 (4,593)      992
Net income (loss)..........................                 (2,433)    1,223
Net income (loss) per share................                   (.64)      .32
Net cash provided by operating activities..                    740     2,046
Net cash used in investing activities......                 (8,444)   (5,594)

At year-end                                                   2000      1999
----------------------------------------------------------------------------
Working capital............................               $ 21,729   $26,969
Total assets...............................                 62,310    66,404
Shareholders' equity.......................                 51,728    54,161


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


                                  The Company

Avalon Holdings Corporation provides transportation services, waste disposal
brokerage and management services, and technical environmental services
including environmental engineering, site assessment, analytical laboratory,
remediation and landfill management services to industrial, commercial,
municipal and governmental customers. Avalon Holdings Corporation also owns and
operates a public golf course.


                                    Contents

<TABLE>
<S>                                                                       <C>
Financial Highlights...................................................    1

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

Consolidated Balance Sheets............................................    9

Consolidated Statements of Operations..................................   10

Consolidated Statements of Cash  Flows.................................   11

Consolidated Statements of Shareholders' Equity........................   12

Notes to Consolidated Financial
   Statements..........................................................   13

Independent Auditors' Report...........................................   21

Digest of Financial Data...............................................   23

Company Location Directory.............................................   24

Directors and Officers.................................................   25

Shareholder Information................................................   26
</TABLE>

                                                                               1
<PAGE>

Avalon Holdings Corporation and Subsidiaries
--------------------------------------------------------------------------------


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 (collectively the
"Company" or "Avalon").  This discussion should be read in conjunction with the
consolidated financial statements and accompanying notes.

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.

Spin-off

Pursuant to the terms of a Contribution and Distribution Agreement dated as of
May 7, 1998 between Avalon and American Waste Services, Inc. ("AWS"), AWS
contributed to Avalon its transportation operations, technical environmental
services operations, waste disposal brokerage and management operations, and
golf course and related operations together with certain other assets including
the headquarters of AWS and certain accounts receivable. In connection with the
contribution, Avalon assumed certain liabilities of AWS including, without
limitation, liabilities relating to the termination of employment of certain
employees of AWS and costs and potential liabilities relating to a certain legal
proceeding. On June 17, 1998 AWS distributed, as a special dividend, all of the
outstanding shares of capital stock of Avalon to the holders of AWS common stock
on a pro rata and corresponding basis (the "Spin-off").

Liquidity and Capital Resources

For the year 2000, Avalon utilized existing cash and cash provided by operations
to fund capital expenditures and meet operating needs.

During 2000, capital expenditures for Avalon totaled $8.1 million which was
principally related to the capital improvements to Avalon's golf course and the
purchase of equipment for Avalon's transportation operations. Avalon's aggregate
capital expenditures in 2001 are expected to be in the range of $2 million to $3
million, which will relate principally to acquiring additional transportation
equipment and capital improvements to the golf course.

On August 2, 1999, Avalon closed the golf course to begin a significant capital
improvement program.  In addition to the capital improvements to the golf
course, Avalon initiated capital expenditures for improvements to golf course
related facilities.  During 1999 and 2000, expenditures for the golf course
capital improvement program amounted to approximately $5.7 million and
expenditures for golf course related facilities amounted to approximately $1
million.  The golf course resumed operations on a limited basis during the third
quarter of 2000.

Working capital decreased to $21.7 million at December 31, 2000 compared with
$27 million at December 31, 1999.  The decrease is primarily the result of
utilizing existing cash for capital expenditures.

The decrease in Accrued payroll and other compensation at December 31, 2000
compared with December 31, 1999 is primarily the result of a decrease in accrued
performance-based compensation during 2000.

2
<PAGE>

The decrease in Other accrued taxes at December 31, 2000 compared with December
31, 1999 is primarily the result of a successful appeal of assessed highway fuel
taxes, which resulted in a reduction in the amount of highway fuel taxes to be
paid.

In December 2000, Avalon authorized the repurchase of up to 1,000,000 shares of
its Class A Common Stock for an aggregate amount not to exceed $2,500,000.
Using available cash, Avalon plans to make purchases from time to time in the
open market and in privately negotiated transactions.  The amount and timing of
any share purchases will be based upon management's ongoing assessment of
Avalon's capital structure, liquidity, general market conditions and other
corporate considerations.

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, fund capital
expenditure programs and fund purchases under Avalon's stock repurchase program.
Avalon does not currently have a credit facility.

Currently, 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 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

Avalon's primary business segment provides transportation services which include
transportation of hazardous and nonhazardous waste and transportation of general
and bulk commodities.  The technical environmental services segment provides
environmental engineering, site assessment, analytical laboratory, remediation
and captive landfill management services.  The waste disposal brokerage and
management services segment provides hazardous and nonhazardous disposal
brokerage and management services.  The golf and related operations segment
includes the operation of a public golf course and travel agency.

Performance in 2000 compared with 1999

Overall Performance. Net operating revenues increased to $84.3 million in 2000
from $80.9 million in 1999.  The increase is primarily the result of a 15 %
increase in net operating revenues of the transportation services segment and a
8.8% increase in the net operating revenues of the waste disposal brokerage and
management services segment partially offset by a decline in the net operating
revenues of the technical environmental services segment and golf and related
operations segment.  Cost of operations as a percentage of net operating
revenues increased to 90% in 2000 from 85.8% in 1999.  The increase is primarily
the result of higher costs of operations as a percentage of net operating
revenues of the technical environmental services segment, the transportation
services segment and the golf and related operations segment.  In 2000, the
engineering and consulting business of the technical environmental services
segment experienced a significant loss before taxes due to increased
competition, increased operating costs and a decline in net operating revenues
compared with the prior year.  As a result, Avalon closed its engineering and
consulting offices in Akron, Ohio and reduced its workforce by approximately 30%
in January 2001.  In accordance with Avalon's asset impairment policy, Avalon
recorded charges of approximately $1.1 million for the write-down of costs in
excess of fair market value of net assets of acquired businesses ("goodwill")
and $.7 million for the write-down of other non-current assets.  Selling and
general administrative expenses increased to $11.1 million in 2000 compared with
$10.5 million in 1999 primarily as a result of an increase in the provision for
losses on accounts receivable as a result of significant write-offs of accounts
receivable of customers in the steel business which have recently filed
bankruptcy.  Other income increased to $.5 million in 2000 compared with $.1
million in 1999 primarily as a result of the settlement of Avalon's claim for
attorney's fees in connection with a certain legal proceeding.  Avalon incurred
a net loss of $2.4 million in 2000 compared with net income of $1.2 million in
1999.

                                                                               3
<PAGE>

Segment performance.  Segment performance should be read in conjunction with
Note 11 to the Consolidated Financial Statements.

Net operating revenues of the transportation services segment increased to $46.3
million in 2000 from $40.1 million in 1999.  The increase is primarily
attributable to an increase in the net operating revenues of the transportation
brokerage operations and an increase in the transportation of municipal solid
waste partially offset by decreased transportation of hazardous waste.  Income
before taxes of the transportation services segment decreased to $1.1 million in
2000 compared with $2.3 million in 1999.  The decrease is primarily the result
of increased costs of operations resulting from higher fuel prices and increased
rental, depreciation and employee related expenses, partially offset by improved
operating results of the transportation brokerage operations and a decrease in
accrued highway fuel tax expense as a result of a successful audit appeal.
Also, in 1999, costs of operations were reduced by approximately $.6 million
resulting from Avalon reducing its accrued liability associated with anticipated
remediation costs of a hazardous waste facility.

Net operating revenues of the technical environmental services segment decreased
to $27.3 million in 2000 compared with $29 million in 1999.  The decrease is
primarily attributable to a decrease in net operating revenues of engineering
and consulting services.  The technical environmental services segment incurred
a loss before taxes of $1.7 million in 2000 compared with income before taxes of
$2 million in 1999.  The engineering and consulting business of Avalon's
technical environmental services operations experienced a significant loss
before taxes in 2000 due to increased competition, increased operating costs and
a decline in net operating revenues compared with the prior year.  As a result,
Avalon closed its engineering and consulting office in Akron, Ohio and reduced
its workforce by approximately 30% in January 2001.  In accordance with Avalon's
asset impairment policy, Avalon performed an evaluation of the non-current
assets of the engineering and consulting business including goodwill to
determine if the carrying value of such assets was recoverable. In accordance
with Avalon's asset impairment policy, to ascertain whether an impairment
existed, Avalon estimated the undiscounted sum of the expected future cash flows
of the engineering and consulting business to determine if such sum was less
than the carrying value of the non-current assets.  The evaluation indicated the
existence of an impairment and Avalon determined the fair value of the non-
current assets (and measured the extent of the impairment) by discounting the
expected future cash flows at the rate of 6%.  As a result, in the fourth
quarter of 2000, Avalon recorded a write-down of goodwill in the amount of $1.1
million and a write-down of other non-current assets of $.7 million.   The
laboratory operations also incurred a loss before taxes in 2000 compared with
income before taxes in 1999, which was primarily attributable to increased
operating and depreciation expenses and an increase in the provision for losses
on accounts receivable as a result of a significant write-off of an account
receivable of a customer in the steel industry which filed bankruptcy in the
fourth quarter of 2000.   Although net operating revenues of the remediation
business increased in 2000 compared with 1999, a significant portion of the net
operating revenues of the remediation services business is related to work
performed by subcontractors, for which Avalon invoices its customers with little
or no markup.  Income before taxes of the remediation services business
decreased as a result of lower net operating revenues relating to work not
performed by subcontractors.  Income before taxes of Avalon's captive landfill
management business was relatively unchanged in 2000 from 1999.

Net operating revenues of the waste disposal brokerage and management services
segment increased to $22 million in 2000 compared with $18.5 million in 1999.
The increase in net operating revenues is primarily the result of an increase in
the level of disposal brokerage and management services provided.  Income before
taxes was $1.1 million in 2000 compared with $1.4 million in 1999.  Despite the
increase in net operating revenues, income before taxes did not increase because
of higher selling and administrative expenses, including an increase in the
provision for losses on accounts receivable as a result of a significant write-
off of an account receivable of a customer in the steel industry which recently
filed bankruptcy.

Avalon's golf and related operations segment consists of the operation of a
public golf course and travel agency.  During the third quarter of 1999, Avalon
closed the golf course to make significant capital improvements to the course
and related facilities.  The golf course resumed operations on a limited basis
during the third quarter of 2000.  Net operating revenues for the golf and
related operations segment decreased to $.7 million in 2000 compared with $1.4
million in 1999 primarily as a result of decreased golf revenues.  The golf and
related operations segment incurred a loss before taxes of $1.1 million in 2000
compared with a loss before taxes of $.2 million in 1999

4
<PAGE>

primarily as a result of decreased net operating revenues and increased expenses
associated with the newly renovated golf course. Net operating revenues and
results of operations of the travel agency were relatively unchanged in 2000
from 1999.

Interest Income

Interest income decreased to $.9 million in 2000 compared with $1.1million in
1999, primarily due to a decline in the average amount of cash and cash
equivalents during 2000 compared with 1999 partially offset by an increase in
investment rates.

General Corporate Expenses

General corporate expenses decreased to $3.4 million in 2000 compared with $4.1
million in 1999.  Such decrease is primarily the result of lower performance
based compensation expense.

Net Income (Loss)

Avalon incurred a net loss of $2.4 million in 2000 compared with net income of
$1.2 million in 1999 primarily as a result of the foregoing.  Avalon's overall
effective tax rate, including the effect of state income tax provisions, was
23.4% in 2000.  The effective tax rate in 2000 was significantly impacted by the
nondeductibility for tax purposes of the amortization and write-down of goodwill
and other nondeductible expenses.  The effective tax rate of 44.4% for 1999 is
higher than the federal statutory rate primarily due to state income taxes, the
nondeductibility for tax purposes of the amortization of goodwill and other
nondeductible expenses.

Performance in 1999 compared with 1998

Overall performance.  Net operating revenues increased 8.5% to $80.9 million in
1999 from $74.5 million in 1998.  The increase is primarily the result of a 4.5%
increase in the net operating revenues of the transportation services segment, a
14.6% increase in the net operating revenues of the technical environmental
services segment and a 18.6% increase in the net operating revenues of the waste
disposal brokerage and management services segment partially offset by a
decrease in the net operating revenues of the golf and related operations
segment. The golf course was closed August 2, 1999 to begin capital
improvements. Cost of operations as a percentage of net operating revenues
decreased to 85.8% in 1999 compared with 87.4% in 1998. The decrease is
primarily the result of lower cost of operations as a percentage of net
operating revenues of the technical environmental services segment. Selling,
general and administrative expenses increased to $10.5 million in 1999 compared
with $10 million in 1998. Such increase was primarily attributable to additional
expenses resulting from operating as an independent company subsequent to the
Spin-off for the entire year of 1999. Interest income increased to $1.1 million
in 1999 compared with $.7 million in 1998 primarily as a result of higher
average cash and cash equivalent balances for the entire year of 1999. Avalon
recorded net income of $1.2 million in 1999 compared with a net loss of $.6
million in 1998.

Segment performance.  Segment performance should be read in conjunction with
Note 11 to the Consolidated Financial Statements.

Net operating revenues of the transportation services segment increased to $40.1
million in 1999 from $37.3 million in 1998.  The increase in net operating
revenues is primarily attributable to an increase in the transportation of
municipal solid waste and hazardous waste, partially offset by a decrease in the
transportation of general commodities.  Income before taxes of the
transportation services segment increased to $2.3 million in 1999 compared with
$1.6 million in 1998.  Such increase is primarily attributable to increased net
operating revenues and a reduction in operating costs of approximately $.6
million resulting from Avalon reducing its accrued liability associated with
anticipated remediation costs of a hazardous waste facility partially offset by
higher fuel costs and increased rental expense of transportation equipment.
Income before taxes for 1998 included a write-down of

                                                                               5
<PAGE>

certain assets to be disposed of in the amount of approximately $.5 million
partially offset by a one-time rebate of workers compensation premiums of $.4
million from the State of Ohio.

Net operating revenues of the technical environmental services segment increased
to $29 million in 1999 from $25.3 million in 1998.  The increase in net
operating revenues is primarily the result of increased net operating revenues
of remediation services and to a lesser extent increased net operating revenues
of engineering and consulting services, laboratory services, and captive
landfill management operations.  Income before taxes increased to $2 million in
1999 compared with a loss before taxes of $.1 million in 1998.  The increase in
income before taxes is primarily the result of improved operating results of the
remediation, engineering and consulting and captive landfill management
operations.  The loss before taxes for the technical environmental services
segment in 1998 included a write-down of certain assets to be disposed of in the
amount of $.1 million and a write-down of goodwill of $.4 million.

Net operating revenues of the waste disposal brokerage and management services
segment increased to $18.5 million in 1999 from $14.4 million in 1998.  The
increase in net operating revenues is primarily the result of an increase in the
level of disposal brokerage and management services provided during the first
six months of 1999 as compared with the first six months of 1998 which preceded
the Spin-off.  Many customers, which had previously utilized the nonhazardous
waste disposal facilities owned by American Waste Services, Inc., elected to do
business with Avalon's waste disposal brokerage and management operations after
the Spin-off to ensure a continuation of the high level of management services
to which these customers had become accustomed.  The waste disposal brokerage
and management services segment recorded income before taxes of $1.4 million in
1999 compared with $1.3 million in 1998.  The increase is primarily the result
of a reduction in operating costs of approximately $.3 million arising from
Avalon reaching a favorable agreement with a third party vendor during the third
quarter of 1999 concerning amounts previously accrued by Avalon for disposal and
transportation services.  Excluding this reduction in operating costs, income
before taxes decreased primarily as a result of significantly higher selling and
administrative expenses.

Avalon's golf and related operations segment consist primarily of the operation
of a public golf course and travel agency.  During the third quarter of 1999,
Avalon closed the golf course to make significant capital improvements to the
course and related facilities.  As a result, net operating revenues for the golf
and related operations segment decreased to $1.4 million in 1999 compared with
$2.1 million in 1998 and the golf and related operations segment incurred a loss
before taxes of $.2 million in 1999 compared with income before taxes of $.4
million in 1998.

Interest Income

Interest income increased to $1.1 million in 1999 compared with $.7 million in
1998, primarily because the cash resulting from the Spin-off was invested for
the full year of 1999 as compared with only six and a half months in the prior
year.

General Corporate Expenses

General corporate expenses were $4.1 million in 1999 compared with $4.2 million
in 1998.  General corporate expenses for 1999 were the actual expenses incurred
by Avalon for such period, which includes all of the costs associated with the
corporate headquarters contributed to Avalon by AWS and additional expenses
resulting from operating as an independent company subsequent to the Spin-off.
General corporate expenses for 1998 included approximately $.9 million of
corporate expenses which were allocated to Avalon by AWS prior to the Spin-off
and a one-time charge of $1.4 million for additional compensation and severance
which was paid in the second quarter of 1998.

6
<PAGE>

Net Income (Loss)

Avalon recorded net income of $1.2 million in 1999 compared with a net loss of
$.6 million in 1998 primarily as a result of the foregoing.  Avalon's overall
effective tax rate, including the effect of state income tax provisions, was 44%
in 1999.  In 1998, Avalon recorded a provision for income taxes instead of an
income tax benefit even though Avalon incurred a loss before income taxes,
primarily because of the nondeductibility for tax purposes of the amortization
and write-down of goodwill and other nondeductible items.  The effective tax
rate for both 1999 and 1998 is higher than statutory rates primarily due to
state income taxes, the nondeductibility for tax purposes of the amortization of
goodwill, 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 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.  During 2000, and continuing into the first quarter of
2001, Avalon's transportation operations experienced significant increases in
fuel prices, some of which Avalon has not and will not be able to pass on to its
customers.

Competitive pressures within the environmental industry 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 for its services could
adversely impact the future financial performance of Avalon.

The engineering and consulting business of Avalon's technical environmental
services operations experienced a significant loss before taxes in 2000 due to
increased competition, increased operating costs and a decline in net operating
revenues.  As a result, Avalon closed its engineering and consulting office in
Akron, Ohio and reduced its workforce by approximately 30% in January 2001.

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.  Continued 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.

                                                                               7
<PAGE>

As a result of the significant capital improvements to the golf course, the
green 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 green fees and will result in increased
net operating revenues and increased income before taxes, 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.

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 could be
adversely affected by winter weather conditions.

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 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.

Inflation Impact

Avalon has not entered into any long-term fixed price contracts that could have
a material adverse impact upon its financial performance in periods of
inflation.    In general, management believes that rising costs resulting from
price inflation could be passed on to customers; however, Avalon may need to
absorb all or a portion of these cost increases depending upon competitive
conditions at the time.  As is the case with any transportation company, an
increase in fuel prices may subject the transportation operations to increased
operating expenses, which Avalon, in light of competitive market conditions, may
not be able to pass on to its customers.  During 2000 and continuing into the
first quarter of 2001, Avalon's transportation operations experienced
significant increases in fuel prices, some of which Avalon has not and will not
be able to pass on to its customers.

8
<PAGE>

Avalon Holdings Corporation and subsidiaries
--------------------------------------------------------------------------------

Consolidated Balance Sheets

 (in thousands, except for share data)

<TABLE>
<CAPTION>
                                                                                                    December 31,
                                                                                                 -----------------
                                                                                                   2000      1999
                                                                                                 -----------------
<S>                                                                                              <C>        <C>
Assets
Current Assets:
  Cash and cash equivalents.....................................................                 $11,022   $18,726
  Short-term investments........................................................                     759        --
  Accounts receivable, less allowance for
   doubtful accounts of $446 in 2000 and $790 in 1999...........................                  16,156    16,628
  Refundable income taxes (Note 5)..............................................                     327        --
  Deferred income taxes (Note 5)................................................                     564       403
  Prepaid expenses..............................................................                   1,560     1,567
  Other current assets..........................................................                     564       414
                                                                                                 -----------------

    Total current assets........................................................                  30,952    37,738

Property and equipment, net (Notes 3 and 4).....................................                  30,099    26,165
Costs in excess of fair market value of net assets of acquired businesses, net
  (Note 3)......................................................................                   1,082     2,324
Other assets, net...............................................................                     177       177
                                                                                                 -----------------

     Total assets...............................................................                 $62,310   $66,404
                                                                                                 =================
Liabilities and Shareholders' Equity
Current Liabilities:
  Accounts payable..............................................................                 $ 5,242   $ 6,001
  Accrued payroll and other compensation........................................                   1,249     1,833
  Accrued income taxes..........................................................                     596       618
  Other accrued taxes...........................................................                     305       720
  Other liabilities and accrued expenses (Note 6)...............................                   1,831     1,597
                                                                                                 -------   -------

    Total current liabilities...................................................                   9,223    10,769

Deferred income taxes (Note 5)..................................................                   1,239     1,354
Other noncurrent liabilities (Note 9)...........................................                     120       120

Contingencies and commitments (Notes 9 and 10)..................................                      --        --

Shareholders' Equity (Note 8):
  Class A Common Stock, $.01 par value, one vote per share; authorized
   10,500,000 shares, issued 3,185,240 shares at December 31, 2000 and
   December 31, 1999............................................................                      32        32
  Class B Common Stock, $.01 par value, ten votes per share; authorized
   1,000,000 shares; issued 618,091 shares at December 31, 2000 and
   December 31, 1999............................................................                       6         6
  Paid-in capital...............................................................                  58,096    58,096
  Accumulated deficit...........................................................                  (6,406)   (3,973)
                                                                                                 -----------------

     Total shareholders' equity.................................................                  51,728    54,161
                                                                                                 -----------------

     Total liabilities and shareholders' equity.................................                 $62,310   $66,404
                                                                                                 =================
</TABLE>

  See accompanying notes to consolidated financial statements.

                                                                               9
<PAGE>

Avalon Holdings Corporation and Subsidiaries
--------------------------------------------------------------------------------


Consolidated Statements of Operations

     (in thousands, except for per share amounts)

<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,
                                                                         ----------------------------------------------
                                                                               2000             1999              1998
                                                                         ----------------------------------------------
<S>                                                                      <C>              <C>               <C>
Net operating revenues.................................................  $    84,290      $    80,860       $    74,495

Cost and expenses:
     Costs of operations...............................................       75,862           69,349            65,119
     Write-down of assets (Note 3).....................................          796               --               599
     Write-down of costs in excess of fair market value of net assets
        of acquired businesses (Note 3)................................        1,093               --               377
     Selling, general and administrative expenses......................       11,132           10,519             9,951
                                                                         ----------------------------------------------
Income (loss) from operations..........................................       (4,593)             992            (1,551)

Other income (expense):
     Interest expense..................................................           --               (2)              (45)
     Interest income...................................................          879            1,073               667
     Other income, net.................................................          538              138               465
                                                                         ----------------------------------------------
Income (loss) before income taxes......................................       (3,176)           2,201              (464)

Provision (benefit) for income taxes (Note 5):
     Current...........................................................         (467)             920               745
     Deferred..........................................................         (276)              58              (562)
                                                                         -----------------------------------------------
                                                                                (743)             978               183
                                                                         ----------------------------------------------

Net income (loss)......................................................  $    (2,433)     $     1,223       $      (647)
                                                                         ===============================================

Net income (loss) and pro forma net loss per share (*) (Note 2)........  $      (.64)     $       .32       $      (.17)
                                                                         ===============================================

Weighted average shares outstanding (*)................................        3,803            3,803             3,803
                                                                         ===============================================
</TABLE>

(*)  In accordance with Securities and Exchange Commission regulations, pro
     forma per share data has been presented for 1998, the year in which the
     Spin-off occurred. For purposes of determining the pro forma per share
     data, all of Avalon's common stock issued as a result of the Spin-off is
     deemed to have been outstanding for 1998.


  See accompanying notes to consolidated financial statements.

10
<PAGE>

Avalon Holdings Corporation and Subsidiaries
--------------------------------------------------------------------------------

Consolidated Statements of Cash Flows
(in thousands)

<TABLE>
<CAPTION>
                                                                                     Year Ended December 31,
                                                                         -----------------------------------------------
                                                                                2000             1999              1998
                                                                         -----------------------------------------------
<S>                                                                      <C>              <C>               <C>
Operating activities:
     Net income (loss).................................................  $    (2,433)     $     1,223       $      (647)
     Reconciliation of net income (loss) to cash provided by
       operating activities:
         Depreciation..................................................        3,112            2,739             2,401
         Amortization..................................................          153              223               221
         Write-down of assets..........................................          796               --               599
         Write-down of costs in excess of fair market value of net
            assets of acquired businesses..............................        1,093               --               377
         Provision (benefit) for deferred income taxes.................         (276)              58              (562)
         Provision for losses on accounts receivable...................          905              231               326
         (Gain) loss from disposal of property and equipment...........         (146)             (10)               11
         Unrealized gain on short-term investments.....................          (11)              --                --
         Change in operating assets and liabilities:
              Accounts receivable......................................         (433)            (687)           (3,083)
              Refundable income taxes..................................         (327)              --               105
              Prepaid expenses.........................................            7              (99)             (785)
              Other current assets.....................................         (150)              22               133
              Other assets.............................................           (4)              (5)              (47)
              Accounts payable.........................................         (759)            (278)            1,196
              Accrued payroll and other compensation...................         (584)             591               336
              Accrued income taxes.....................................          (22)            (460)              358
              Other accrued taxes......................................         (415)            (202)               75
              Other liabilities and accrued expenses...................          234             (575)              555
              Other noncurrent liabilities.............................           --             (725)              (11)
                                                                         -----------------------------------------------

                 Net cash provided by operating activities.............          740            2,046             1,558
                                                                         ----------------------------------------------

Investing activities:
     Purchases of short-term investments...............................      (12,426)              --                --
     Sales of short-term investments...................................       11,678               --                --
     Capital expenditures..............................................       (8,144)          (5,898)           (2,269)
     Proceeds from disposal of property and equipment..................          448              304                83
                                                                         ----------------------------------------------

                 Net cash used in investing activities.................       (8,444)          (5,594)           (2,186)
                                                                         -----------------------------------------------

Financing activities:
     Capital contribution from AWS.....................................           --               --            22,475
     Repayments of long-term debt......................................           --               --            (1,236)
     Dividends paid to AWS.............................................           --               --              (100)
                                                                         -----------------------------------------------

                 Net cash provided by financing activities.............           --               --            21,139
                                                                         ----------------------------------------------

Increase (decrease) in cash and cash equivalents.......................       (7,704)          (3,548)           20,511
Cash and cash equivalents at beginning of year.........................       18,726           22,274             1,763
                                                                         ----------------------------------------------

Cash and cash equivalents at end of year...............................  $    11,022      $    18,726       $    22,274
                                                                         ==============================================
</TABLE>

See accompanying notes to consolidated financial statements

                                                                              11
<PAGE>

Avalon Holdings Corporation and Subsidiaries
--------------------------------------------------------------------------------

Consolidated Statements of Shareholders' Equity

   (in thousands)

<TABLE>
<CAPTION>
                                                            For The Three Years Ended December 31, 2000
                                        -------------------------------------------------------------------------------
                                             Shares           Common Stock        Combined
                                        ------------------  -----------------     Capital      Paid-in      Accumulated
                                        Class A   Class B   Class A   Class B     Accounts     Capital        Deficit
                                        ------------------  -----------------     --------     -------     ------------
<S>                                     <C>         <C>     <C>       <C>         <C>          <C>         <C>

Balance at January 1, 1998..........         --      --     $  --     $  --       $ 37,496     $    --       $  (4,549)

Dividends from subsidiaries to
   American Waste Services, Inc.
   prior to the Spin-off............         --      --        --        --           (259)         --              --

Issuance of the Avalon Holdings
   Corporation common stock
   and Spin-off of the Avalon
   Business from AWS................      3,176     627        32         6        (37,237)     37,199              --

Capital contribution from
   American Waste Services, Inc.
   (Note 1).........................         --      --        --        --             --      20,897              --
Net loss............................         --      --        --        --             --          --            (647)
                                       -------------------------------------------------------------------------------

Balance at December 31, 1998........      3,176     627        32         6             --      58,096          (5,196)

Conversion of shares by
   shareholders.....................          9      (9)       --        --             --          --              --

Net income..........................         --      --        --        --             --          --           1,223
                                       -------------------------------------------------------------------------------

Balance at December 31, 1999........      3,185     618        32         6             --      58,096          (3,973)


Net Loss............................         --      --        --        --             --          --          (2,433)
                                       -------------------------------------------------------------------------------

Balance at December 31, 2000........      3,185     618    $   32     $   6       $     --     $58,096       $  (6,406)
                                       ===============================================================================
</TABLE>


See accompanying notes to consolidated financial statements.

12
<PAGE>

Avalon Holdings Corporation and Subsidiaries
--------------------------------------------------------------------------------

Notes to Consolidated Financial Statements


Note 1.  Description of the Business

Avalon Holdings Corporation ("Avalon" or "Company") was formed on April 30, 1998
as a subsidiary of American Waste Services, Inc. ("AWS").  Pursuant to the terms
of a Contribution and Distribution Agreement dated as of May 7, 1998 between
Avalon and AWS, AWS contributed to Avalon its transportation operations,
technical environmental services operations, waste disposal brokerage and
management operations, and golf course and related operations together with
certain other assets including the headquarters of AWS and certain accounts
receivable.  In connection with the contribution, Avalon assumed certain
liabilities of AWS including, without limitation, liabilities relating to the
termination of certain employees of AWS and costs and potential liabilities
relating to a certain legal proceeding.  On June 17, 1998 AWS distributed, as a
special dividend, all of the outstanding shares of capital stock of Avalon to
the holders of AWS common stock on a pro rata and corresponding basis (the
"Spin-off").

Avalon Holdings Corporation provides transportation services, technical
environmental services, and waste disposal brokerage and management services to
industrial, commercial, municipal and governmental customers primarily in
selected northeastern and midwestern U.S. markets.  Avalon Holdings Corporation
also owns and operates a public golf course and travel agency.

Note 2.  Summary of Significant Accounting Policies

The significant accounting policies of Avalon which are summarized below are
consistent with generally accepted accounting principles and reflect practices
appropriate to the businesses in which they operate.  The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period.  Actual results could differ
from those estimates. Certain prior year amounts have been reclassified to be
consistent with the 2000 presentations.

Principles of consolidation

The consolidated financial statements include the accounts of Avalon including
all wholly owned subsidiaries.  All significant intercompany accounts and
transactions have been eliminated in consolidation.  The financial information
of Avalon for all periods presented prior to June 18, 1998 reflect the combined
operations of the businesses of Avalon while operating as subsidiaries of
American Waste Services, Inc.

Cash and cash equivalents

Cash and cash equivalents include money market instruments and other highly
liquid investments that are stated at cost which approximates market value.
Such investments, which mature in three months or less from date of purchase,
are considered to be cash equivalents for purposes of the Consolidated
Statements of Cash Flows and Consolidated Balance Sheets. The balance of such
short-term investments was $10,223,000 and $18,166,000 at December 31, 2000 and
1999, respectively. Such investments were not insured by the Federal Deposit
Insurance Corporation.

Avalon maintains its cash balances in several financial institutions.  These
balances may, at times, exceed federal insured limits.  Avalon has not
experienced any losses in such accounts and believes it is not exposed to any
significant credit risk relating to cash and cash equivalents.

Short-term investments

Avalon's securities investments that are bought and held principally for the
purpose 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 invested primarily in debt securities and are included in the Consolidated
Balance Sheets under the caption "Short-term investments".  The balance of
Avalon's trading securities at December 31, 2000 was approximately $734,000.  As
of December 31, 2000 the unrealized gain on trading securities was approximately
$11,000.

Also at December 31, 2000, Avalon held "available-for-sale" securities which
were primarily invested in debt securities.  The approximate fair value of these
available-for-sale securities at December 31, 2000 was $25,000, and

                                                                              13
<PAGE>

such balance was included in the Consolidated Balance Sheet under the caption
"Short-term investments". At December 31, 2000, the cost of available-for-sale
securities approximated their fair value and therefore Avalon had no unrealized
gains or losses on these securities.

Financial instruments

The fair value of financial instruments consisting of cash, cash equivalents,
receivables, and accounts payable at December 31, 2000 and 1999, approximates
carrying value due to the relative short maturity of these financial
instruments.

Property and equipment

Property and equipment, is stated at cost and depreciated using the straight-
line method over the estimated useful life of the asset which varies from 10 to
30 years for land improvements; 5 to 50 years in the case of buildings and
improvements; and from 3 to 10 years for machinery and equipment, transportation
equipment and vehicles, and office furniture and equipment (See Note 3).

Major additions and improvements are charged to the property and equipment
accounts while replacements, maintenance and repairs which do not improve or
extend the life of the respective asset are expensed currently.  The cost of
assets retired or otherwise disposed of and the related accumulated depreciation
is eliminated from the accounts in the year of disposal.  Gains or losses
resulting from disposals of property and equipment are credited or charged to
operations currently.  Interest costs, if any, are capitalized on significant
construction projects.

Costs in excess of fair market value of net assets
of acquired businesses ("Goodwill")

Goodwill is amortized on a straight-line basis over 25 years.  Amortization of
these costs was $149,000 in 2000 and 1999 and $172,000 in 1998.  Accumulated
amortization at December 31, 2000 and 1999 was $1,115,000 and $1,720,000,
respectively.  During the fourth quarter of 2000 and the fourth quarter of 1998,
in accordance with Avalon's asset impairment policy, a portion of the goodwill
was written off (see Note 3).

Income taxes

Income taxes are accounted for under the asset and liability method.  Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards.  Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.  The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

Prior to the Spin-off, Avalon's operations were included in the consolidated
federal and state income tax returns of AWS.  For all periods presented, the
income tax provisions and tax liabilities of Avalon have been recorded as if
Avalon had been a stand-alone entity filing separate tax returns.

Revenue recognition

Avalon recognizes revenue for transportation services on the date of delivery.
Revenue for waste disposal brokerage and management services and technical
environmental services, excluding laboratory services, is recognized as services
are performed, while revenue for laboratory services is recognized when the
service is completed.  On contracts where the percentage-of-completion method is
used, revenue is recognized for a portion of the total contract revenue, in the
proportion that costs incurred bear to management's estimate of total contract
costs to be incurred, commencing when progress reaches a point where experience
is sufficient to estimate final results with reasonable accuracy. Earnings and
costs on contracts are subject to revision throughout the term of the contract,
and any required revisions are made in the periods in which the revisions become
known.  Provision is made for the full amount of anticipated losses in the
period in which they are determinable.

Costs and estimated earnings in excess of billings on uncompleted contracts
represent revenues recognized on contracts for which billings will be presented
in accordance with contract provisions.  Such revenues are generally expected to
be billed and collected within one year.

Asset impairments

Avalon periodically reviews the carrying value of certain of its assets in
relation to historical results, current business conditions and trends to
identify potential situations in which the carrying value of assets may not be
recoverable.  If such reviews indicate that the carrying value of such assets
may not be recoverable, Avalon would estimate the undiscounted sum of the
expected future cash flows of

14
<PAGE>

such assets to determine if such sum is less than the carrying value of such
assets to ascertain if an impairment exists. If an impairment exists, Avalon
would determine the fair value by using quoted market prices, if available, for
such assets; or if quoted market prices are not available, Avalon would discount
the expected future cash flows of such assets.

Environmental liabilities

When Avalon concludes that it is probable that a liability has been incurred
with respect to a site, a provision is made in Avalon's financial statements for
Avalon's best estimate of the liability based on management's judgment and
experience, information available from regulatory agencies, and the number,
financial resources and relative degree of responsibility of other potentially
responsible parties who are jointly and severally liable for remediation of that
site as well as the typical allocation of costs among such parties.  If a range
of possible outcomes is estimated and no amount within the range appears to be a
better estimate than any other, then Avalon provides for the minimum amount
within the range, in accordance with generally accepted accounting principles.
The liability is recognized on an undiscounted basis.  Avalon's estimates are
revised, as deemed necessary, as additional information becomes known.

Basic net income (loss) per share and pro forma net income (loss) per share

For the years ended December 31, 2000 and 1999 basic net income (loss) per share
has been computed using the weighted average number of common shares outstanding
which was 3,803,331.  For purposes of determining the pro forma net loss per
share data for the year ended December 31, 1998 all of Avalon's common stock
issued as a result of the Spin-off is deemed to have been outstanding for 1998.
As such, the weighted average number of shares outstanding for 1998 is
3,803,331.  There were no common equivalent shares outstanding and therefore
diluted per share amounts are equal to basic per share amounts for 2000, 1999
and 1998.

Comprehensive income

Comprehensive income equals net income for all years presented.

Selling, general and administrative expense

Certain selling, general and administrative expenses were allocated to Avalon
from AWS prior to the Spin-off.  The amount allocated to Avalon from AWS from
January 1, 1998 to June 17, 1998 amounted to $867,000. These costs represent
costs of AWS allocated to Avalon and are not necessarily representative of what
these costs would have been if Avalon had been operating as an independent
basis.

Note 3.  Long-lived Asset Impairments

The engineering and consulting business of Avalon's technical environmental
services operations experienced a significant loss before taxes in 2000 due to
increased competition, increased operating costs and a decline in net operating
revenues compared with the prior year.  As a result, Avalon closed its
engineering and consulting office in Akron, Ohio and reduced its workforce by
approximately 30% in January 2001.  In accordance with Avalon's asset impairment
policy, Avalon performed an evaluation of the non-current assets of the
engineering and consulting business 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.

In accordance with Avalon's asset impairment policy, to ascertain whether an
impairment existed, Avalon estimated the undiscounted sum of the expected future
cash flows of the engineering and consulting business to determine if such sum
was less than the carrying value of the non-current assets.  The evaluation
indicated the existence of an impairment and Avalon determined the fair value of
the non-current assets (and measured the extent of the impairment) by
discounting the expected future cash flows at the rate of 6%.  As a result, in
the fourth quarter of 2000, Avalon recorded a write-down of goodwill in the
amount of $1,093,000 and a write-down of other non-current assets of $747,000.
These amounts are included in the Consolidated Statements of Operations under
the captions "Write-down of costs in excess of fair market value of net assets
of acquired businesses" and "Write-down of assets", respectively.

During the fourth quarter of 1998, the remediation business of Avalon's
technical environmental services operations continued to experience operating
losses.  As a result, Avalon changed the focus of its remediation business from
larger projects to smaller projects and to providing support to Avalon's other
environmental services.  In accordance with Avalon's asset impairment policy,
Avalon performed an evaluation of the goodwill of the remediation business to
determine if the carrying value of such asset was recoverable.

                                                                              15
<PAGE>

In accordance with Avalon's asset impairment policy, to ascertain whether an
impairment existed, Avalon estimated the undiscounted sum of the expected future
after-tax cash flows of the remediation business, excluding amortization of
goodwill, to determine if such sum was less than the carrying value of the
goodwill, which had a remaining life of 17 years.  The evaluation indicated the
existence of an impairment.

As a result of the existence of an impairment, in determining the fair value of
the goodwill, Avalon concluded that the remediation business could not be sold
for more than the carrying value of its property and equipment.  Therefore,
Avalon recorded a write-down of the goodwill in the amount of $377,000 in the
fourth quarter of 1998.  The write-down is included in the Consolidated
Statements of Operations under the caption "Write-down of costs in excess of
fair market value of net assets of acquired businesses."

In addition, as a result of the change in focus to smaller remediation projects,
the management of the remediation business decided during the fourth quarter of
1998 to sell a piece of equipment which had been utilized solely on large
remediation projects.  In accordance with Avalon's asset impairment policy,
Avalon recorded a write-down of $100,000 in the fourth quarter of 1998 to
reflect the fair value of this asset.  This write-down is included in the
Consolidated Statements of Operations under the caption "Write-down of assets."

During the fourth quarter of 1998, Avalon also committed to a plan to dispose of
certain assets of the transportation operations which resulted in the write-down
of such assets in accordance with Avalon's asset impairment policy.  Prior to
the Spin-off, Avalon used special containers designed primarily for hauling
waste over long distances to an affiliated disposal facility which owned special
equipment necessary to unload these specialized containers.  As a result of the
transportation operation's decreased utilization of these containers subsequent
to the Spin-off and the fact that the disposal facility which owns the unloading
equipment is no longer affiliated with Avalon, management of the transportation
operations decided during the fourth quarter of 1998 to discontinue utilizing
these special containers and to sell or dispose of them.  In accordance with
Avalon's asset impairment policy, Avalon, therefore, recorded a write-down of
$499,000 in the fourth quarter of 1998 to reflect the fair value of these
assets.  The write-down is included in the Consolidated Statements of Operations
for the year ended December 31, 1998 under the caption "Write-down of assets."


Note 4.  Property and Equipment

Property and equipment at December 31, 2000 and 1999 consists of the following
(in thousands):

                                       2000       1999
                                     --------   --------
Land and land improvements.........  $  9,798   $  3,885
Buildings and improvements.........    11,814     13,610
Machinery and equipment............     6,019      5,118
Transportation equipment and
         vehicles..................    13,692     12,992
Office furniture and equipment.....     4,952      4,777
Construction in progress...........       494      2,427
                                     -------------------
                                       46,769     42,809
Less accumulated depreciation and
      amortization.................   (16,670)   (16,644)
                                     -------------------
Property and equipment, net........  $ 30,099   $ 26,165
                                     ===================

Included in construction in progress at December 31, 1999 was $2,420,000 of
capital improvements relating to the golf course.

Note 5.  Income Taxes

Prior to the Spin-off, Avalon's operations were included in the consolidated
federal and state income tax returns of AWS.  For all periods presented, the
income tax provisions and tax liabilities of Avalon have been recorded as if
Avalon had been a stand-alone entity filing separate tax returns.

Income (loss) before income taxes for each of the three years ended December 31,
2000 was subject to taxation under United States jurisdictions only.

The provisions (benefits) for income taxes charged to operations consist of the
following (in thousands):

                                              2000    1999   1998
                                             ---------------------
Current:
Federal...................................   $(515)  $ 835  $ 701
State.....................................      48      85     44
                                             --------------------
                                              (467)    920    745
                                             --------------------
Deferred:
Federal...................................     (93)     34   (527)
State.....................................    (183)     24    (35)
                                             --------------------
                                              (276)     58   (562)
                                             --------------------
                                             $(743)  $ 978  $ 183
                                             ====================

16
<PAGE>

The tax effects of temporary differences that give rise to significant portions
of the deferred tax (assets) liabilities at December 31, 2000 and 1999 are as
follows (in thousands):

                                                           2000     1999
                                                         ---------------
Deferred tax assets:
Accounts receivable, principally due
    to allowance for doubtful accounts.................  $ (156)  $ (288)
Reserves not deductible until paid.....................    (205)    (312)
Net operating loss carry-forwards
     Federal...........................................    (245)      --
    State..............................................    (278)     (89)
Other..................................................     (16)     (50)
                                                         ---------------
Gross deferred tax assets..............................    (900)    (739)
Less valuation allowance...............................      35       35
                                                         ---------------
Net deferred tax assets................................  $ (865)  $ (704)
                                                         ---------------


Deferred tax liabilities:
Property and equipment.................................  $1,486   $1,651
Other..................................................      54        4
                                                         ---------------
Gross deferred tax liabilities.........................   1,540    1,655
                                                         ---------------

Net deferred tax liability.............................  $  675   $  951
                                                         ===============

The provision (benefit) for income taxes differs from

the amount of income tax determined by applying the applicable U.S. statutory
federal income tax rate to income (loss) before income taxes as a result of the
following differences (in thousands):


                                                 2000     1999      1998
                                               ---------------------------
Income (loss) before income
 taxes....................................     $(3,176)  $2,201   $  (464)
Federal statutory tax rate................          35%      35%       35%
                                               ---------------------------
                                                (1,112)     770      (162)

State income taxes, net
 of federal income tax
 benefits.................................         (88)      71         6
Nondeductible amortization
 and depreciation.........................         423       51       187
Other nondeductible
 expenses.................................         113      119       132
Other, net................................         (79)     (33)       20
                                               --------------------------
                                               $  (743)  $  978   $   183
                                               ==========================

Avalon had net income tax refunds of $118,000 in 2000 and made net income tax
payments of  $1,376,000 and $109,000 in 1999 and 1998, respectively.  At
December 31, 2000 Avalon has a taxable loss for federal income tax purposes of
$1,683,000, of which $994,000 is being utilized as a carryback to reduce taxable
income of a prior year.  Refundable income taxes of $327,000 have been recorded
as a result of the carryback.  The remaining taxable loss of $689,000 is
available to offset future taxable income through 2020.

In addition, at December 31, 2000 and 1999, certain subsidiaries of Avalon have
net operating loss carryforwards for state purposes aggregating $3,774,000 and
$1,169,000, respectively, which are available to offset future state taxable
income.

Note 6.  Retirement Benefits

Avalon sponsors a defined contribution profit sharing plan that is a qualified
tax deferred benefit plan under Section 401(k) of the Internal Revenue Code (the
"Plan").  Substantially all employees are eligible to participate in the Plan.
The Plan provides for employer discretionary cash contributions determined by
Avalon's Board of Directors.  Discretionary contributions vest on a graduated
basis and become 100% vested after six years of service.  Plan participants may
also contribute a portion of their annual compensation to the Plan, subject to
maximums imposed by the Internal Revenue Code and related regulations.  Costs
charged to operations for Avalon's contributions were $624,000, $588,000 and
$604,000 for the years 2000, 1999 and 1998, respectively.  The liability for
Avalon's contribution is included in the Consolidated Balance Sheets under the
caption "Other liabilities and accrued expenses."

Note 7. Stock Option Plan

Effective July 1, 1998, Avalon adopted the 1998 Long-term Incentive Plan which
provides for the granting of options which are intended to be non-qualified
stock options ("NQSO's") for federal income tax purposes except for those
options designated as incentive stock options ("ISO's") which qualify under
section 422 of the Internal Revenue Code.  Avalon has reserved 1,300,000 shares
of Class A Common Stock for issuance to employees and non-employee directors.
NQSO's may be granted with an exercise price which is not less than 85% of the
fair market value of the Class A Common Stock on the date of grant.  Options
designated as ISO's shall not be less than 110% of fair market value for
employees who are ten percent shareholders and not less than 100% of fair market
value for other employees.  The Board of Directors may, from time to time, in
its discretion grant options to one or more outside directors, subject to such
terms and conditions as the Board of Directors may determine, provided that such
terms and conditions are not inconsistent with other applicable provisions of
the 1998 Long-term Incentive Plan.  Options shall have a term of no longer than
ten years from the date of grant; except that for

                                                                              17
<PAGE>

an option designated as an ISO which is granted to a ten percent shareholder,
the option shall have a term no longer than five years.

No option shall be exercisable prior to one year after its grant, unless
otherwise provided by the Option Committee of the Board of Directors (but in no
event before 6 months after its grant), and thereafter options shall become
exercisable in installments, if any, as provided by the Option Committee.
Options must be exercised for full shares of common stock.  To the extent that
options are not exercised when they become initially exercisable, they shall be
carried forward and be exercisable until the expiration of the term of such
options.

To date, no options have been granted under the 1998 Long-term Incentive Plan.

Note 8. Shareholders' Equity

Each share of Class A Common Stock is entitled to one vote and each share of
Class B Common Stock is entitled to ten votes on all matters submitted to a vote
of the shareholders.  Except for the election of Avalon's Board of Directors,
the Class A Common Stock and the Class B Common Stock vote together as a single
class on all matters presented for a vote of the shareholders.  However, with
regard to the election of directors, for as long as the outstanding Class B
Common Stock has more than 50% of the total outstanding voting power of all
Common Stock, the holders of the Class A Common Stock, voting as a separate
class, will elect the number of directors equal to at least 25% of the total
Board of Directors and the holders of the Class B Common Stock, voting as a
separate class, will elect the remaining directors.  Thereafter, the holders of
the Class A and Class B Common Stock will vote together as a single class for
the election of directors.  The holders of a majority of all outstanding shares
of Class A Common Stock or Class B Common Stock, voting as separate classes,
must also approve amendments to the Articles of Incorporation that adversely
affect the shares of their class.  Shares of Class A Common Stock and Class B
Common Stock do not have cumulative voting rights.

Each share of Class B Common Stock is convertible, at any time, at the option of
the shareholder, into one share of Class A Common Stock.  Shares of Class B
Common Stock are also automatically converted into shares of Class A Common
Stock on the transfer of such shares to any person other than Avalon, another
holder of Class B Common Stock or a Permitted Transferee, as defined in Avalon's
Articles of Incorporation.  The Class A Common Stock is not convertible.

In December 2000, Avalon authorized the repurchase of up to 1,000,000 shares of
its Class A Common Stock for an aggregate amount not to exceed $2,500,000.
Using available cash, Avalon plans to make purchases from time to time in the
open market and in private negotiated transactions.  The amount and timing of
any share purchases will be based upon management's ongoing assessment of
Avalon's capital structure, liquidity, general market conditions and other
corporate considerations.

Note 9.  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 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 is included in the December 31, 2000 and 1999 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

18
<PAGE>

the ultimate liability for 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 relating to the 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 10.  Lease Commitments

Avalon leases certain office facilities, vehicles, machinery and equipment.
Future commitments under long-term, noncancellable operating leases at December
31, 2000 are as follows (in thousands):

Year ending December 31,
------------------------

2001........................................................  $   3,047
2002........................................................      2,702
2003........................................................      2,533
2004........................................................      2,020
2005........................................................      1,805
After 2005..................................................      1,493
                                                              ---------
                                                              $  13,600
                                                              =========

Rental expense included in the Consolidated Statements of Operations amounted to
$4,616,000 in 2000, $3,593,000 in 1999, and $2,800,000 in 1998. Periodically,
Avalon's transportation operations rent additional transportation equipment on a
short-term basis in order to meet its hauling obligations

Note 11.  Business Segment Information

Effective for the year ended December 31, 1998, Avalon adopted Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of an
Enterprise and Related Information," requiring that companies disclose segment
data based on how management makes resource allocation decisions and evaluates
segment operating performance.

In applying the Statement, 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 to
third parties.  The segment disclosures are presented on this basis for all
years presented.

Avalon's primary business segment provides transportation services that include
transportation of hazardous and non-hazardous waste, transportation of general
and bulk commodities and transportation brokerage and management services.  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 hazardous and
nonhazardous disposal brokerage and management services.  The golf and related
operations includes the operations 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.

Prior to the Spin-off, the transportation services segment obtained
approximately $2.4 million of its net operating revenue from AWS's landfill
subsidiaries in 1998.  The other Avalon segments did not have significant
transactions with the AWS landfill subsidiaries in 1998.

The accounting policies of the segments are consistent with those described for
the consolidated financial statements in the summary of significant accounting
policies (see Note 2).  Avalon measures segment profit for internal reporting
purposes as income (loss) before taxes.  Business segment information including
the reconciliation of segment income to consolidated income (loss) before taxes
is as follows (in thousands):

                                                                              19
<PAGE>

Avalon Holdings Corporation and Subsidiaries
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                                  2000       1999       1998
                                                                                              ------------------------------
<S>                                                                                           <C>        <C>        <C>
Net operating revenues from:
Transportation services:
  External customers revenues...........................................................      $ 39,809   $ 34,607   $ 33,105
  Intersegment revenues.................................................................         6,519      5,483      4,215
                                                                                              ------------------------------
  Total transportation services.........................................................        46,328     40,090     37,320
                                                                                              ------------------------------

Technical environmental services:
  External customers revenues...........................................................        27,232     28,871     25,192
  Intersegment revenues.................................................................            73        124        134
                                                                                              ------------------------------
  Total technical environmental services................................................        27,305     28,995     25,326
                                                                                              ------------------------------

Waste disposal brokerage and management services:
  External customers revenues...........................................................        16,650     15,302     12,900
  Intersegment revenues.................................................................         5,331      3,231      1,534
                                                                                              ------------------------------
  Total waste disposal brokerage and management services................................        21,981     18,533     14,434
                                                                                              ------------------------------

Golf and related operations:
  External customer revenues............................................................           516      1,115      1,857
  Intersegment revenues.................................................................           228        278        286
                                                                                              ------------------------------
  Total golf and related operations.....................................................           744      1,393      2,143
                                                                                              ------------------------------

Other businesses:
  External customers revenues...........................................................            83        965      1,441
  Intersegment revenues.................................................................            --         15         --
                                                                                              ------------------------------
  Total other businesses................................................................            83        980      1,441
                                                                                              ------------------------------
  Segment operating revenues............................................................        96,441     89,991     80,664
  Intersegment eliminations.............................................................       (12,151)    (9,131)    (6,169)
                                                                                              ------------------------------
  Total net operating revenues..........................................................      $ 84,290   $ 80,860   $ 74,495
                                                                                              ------------------------------

Income (loss) before taxes:
  Transportation services...............................................................      $  1,057   $  2,334   $  1,575
  Technical environmental services......................................................        (1,703)     1,991       (115)
  Waste disposal brokerage and management services......................................         1,104      1,369      1,282
  Golf and related operations...........................................................        (1,062)      (187)       399
  Other businesses......................................................................          (192)      (170)       (38)
                                                                                              ------------------------------
  Segment income (loss) before taxes....................................................          (796)     5,337      3,103
  Corporate interest income.............................................................           755        944        557
  Corporate other income, net...........................................................           298          2         35
  General corporate expenses............................................................        (3,433)    (4,082)    (4,159)
                                                                                              ------------------------------
  Income (loss) before taxes............................................................      $ (3,176)  $  2,201   $   (464)
                                                                                              ------------------------------

Depreciation and amortization:
  Transportation services...............................................................      $  1,622   $  1,459   $  1,294
  Technical environmental services......................................................         1,141      1,076        961
  Waste disposal brokerage and management services......................................             9         --         --
  Golf and related operations...........................................................           253        171        197
  Other businesses......................................................................            32         60         76
  Corporate.............................................................................           208        196         94
                                                                                              ------------------------------
      Total.............................................................................      $  3,265   $  2,962   $  2,622
                                                                                              ------------------------------

Interest income:
  Transportation services...............................................................      $     58   $     38   $     35
  Technical environmental services......................................................            27         41         40
  Waste disposal brokerage and management services......................................            33         40         18
  Golf and related operations...........................................................             6         --         --
  Other businesses......................................................................            --         10         17
  Corporate.............................................................................           755        944        557
                                                                                              ------------------------------
      Total.............................................................................      $    879   $  1,073   $    667
                                                                                              ------------------------------

Other significant noncash items:
  Write-down of assets:
    Transportation services.............................................................      $     --   $     --   $    499
    Technical environmental services....................................................           747         --        100
    Other businesses....................................................................            49         --         --
                                                                                              ------------------------------
      Total.............................................................................      $    796   $     --   $    599
                                                                                              ------------------------------

  Write-down of costs in excess of
   fair market value of net assets of
   acquired  businesses:
    Technical environmental services....................................................      $  1,093   $     --   $    377
                                                                                              ------------------------------
      Total.............................................................................      $  1,093   $     --   $    377
                                                                                              ------------------------------

Capital expenditures:
  Transportation services...............................................................      $  2,295   $  2,593   $  1,171
  Technical environmental services......................................................         1,031        655        895
  Waste disposal brokerage and management services......................................           104         --         --
  Golf and related operations...........................................................         4,644      2,598         53
  Other businesses......................................................................            --         --          5
  Corporate.............................................................................            70         52        145
                                                                                              ------------------------------
      Total.............................................................................      $  8,144   $  5,898   $  2,269
                                                                                              ------------------------------

Identifiable assets at December 31:
  Transportation services...............................................................      $ 14,365   $ 15,653   $ 17,288
  Technical environmental services......................................................        14,253     16,652     17,954
  Waste disposal brokerage and management services......................................         4,027      4,358      3,165
  Golf and related operations...........................................................        12,238      7,812      5,636
  Other businesses......................................................................            67        446        333
  Corporate.............................................................................        31,246     28,793     30,388
                                                                                              ------------------------------
      Sub Total.........................................................................        76,196     73,714     74,764
  Elimination of intersegment receivables...............................................       (13,886)    (7,310)    (8,079)
                                                                                              ------------------------------
      Total.............................................................................      $ 62,310   $ 66,404   $ 66,685
                                                                                              ------------------------------
</TABLE>

20
<PAGE>

Avalon Holdings Corporation and Subsidiaries
--------------------------------------------------------------------------------

Note 12.  Quarterly financial data (Unaudited)

Selected quarterly financial data for each quarter in 2000 and 1999 is as
follows:

<TABLE>
<CAPTION>
                                                              Year Ended December 31, 2000
                                                -------------------------------------------------------
                                                  First      Second      Third       Fourth
                                                 Quarter    Quarter     Quarter      Quarter     Total
                                                -------------------------------------------------------
<S>                                             <C>         <C>         <C>         <C>         <C>
Net operating revenues....................      $21,252     $21,463     $21,968     $19,607     $84,290
Income (loss) from operations.............         (550)       (596)       (512)     (2,935)     (4,593)
Net loss..................................         (137)       (188)       (168)     (1,940)     (2,433)
Net loss per share........................      $  (.04)    $  (.05)    $  (.04)    $  (.51)    $  (.64)
                                                -------------------------------------------------------

                                                            Year Ended December   31, 1999
                                                -------------------------------------------------------
                                                 First       Second      Third       Fourth
                                                Quarter      Quarter    Quarter      Quarter     Total
                                                -------------------------------------------------------
Net operating revenues....................      $19,494     $19,542     $21,513     $20,311     $80,860
Income (loss) from operations.............         (169)        349         872         (60)        992
Net income................................           66         365         612         180       1,223
Net income per share......................      $   .02     $   .10     $   .16     $   .05     $   .32
                                                -------------------------------------------------------
</TABLE>

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

Independent Auditors' Report

The Shareholders and Board of Directors of Avalon Holdings Corporation

We have audited the accompanying consolidated balance sheets of Avalon Holdings
Corporation and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years then ended.  These consolidated financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Avalon
Holdings Corporation and subsidiaries as of December 31, 2000 and 1999, and the
consolidated results of their operations and their cash flows for the years then
ended, in conformity with accounting principles generally accepted in the United
States of America.

Grant Thornton LLP


Cleveland, Ohio
March 2, 2001

                                                                              21
<PAGE>

Avalon Holdings Corporation and Subsidiaries
--------------------------------------------------------------------------------

Independent Auditors' Report

The Shareholders and Board of Directors of Avalon Holdings Corporation

We have audited the accompanying consolidated statements of operations,
shareholders' equity, and cash flows of Avalon Holdings Corporation and
subsidiaries (formerly the Avalon Business of American Waste Services, Inc.) for
the year ended December 31, 1998.  These consolidated financial statements are
the responsibility of the Company's management.  Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and the cash flows
of Avalon Holdings Corporation and subsidiaries (formerly the Avalon Business of
American Waste Services, Inc.) for the year ended December 31, 1998 in
conformity with accounting principles generally accepted in the United States of
America.


KPMG LLP


Cleveland, Ohio
March 10, 1999

22
<PAGE>

Digest of Financial Data

<TABLE>
<CAPTION>
                                                                                (All amounts are in thousands, except per share
                                                                                data, percentages and number of employees)
                                                                                ----------------------------------------------------
                                                                                     2000       1999      1998      1997      1996
                                                                                ----------------------------------------------------
<S>                                                                             <C>          <C>       <C>        <C>       <C>
Selected statement of operations information
Net operating revenues........................................................     $84,290   $ 80,860  $ 74,495   $60,687   $61,361
Income (loss) from operations.................................................      (4,593)       992    (1,551)     (941)    2,109
Interest expense..............................................................          --          2        45       118       141
Net income (loss).............................................................      (2,433)     1,223      (647)     (666)    1,337
Net income (loss) and pro forma net (loss) per share (*)......................        (.64)       .32      (.17)     (.26)        *
Dividends per Class A share...................................................          --         --        --        --        --
Dividends per Class B share...................................................          --         --        --        --        --
Weighted average shares used to calculate net income and
 pro forma net (loss) per share (*)...........................................       3,803      3,803     3,803     3,803         *

Selected cash flow information
Cash provided by
 operating activities.........................................................         740      2,046     1,558     2,749       361
Cash used for capital expenditures............................................       8,144      5,898     2,269     2,881     1,698

Selected year-end balance sheet information
Cash and cash equivalents.....................................................      11,022     18,726    22,274     1,763     1,975
Current assets................................................................      30,952     37,738    40,666    22,078    23,090
Current liabilities...........................................................       9,223     10,769    11,693     8,341     7,780
Working capital...............................................................      21,729     26,969    28,973    13,737    15,310
Properties less accumulated
 depreciation and amortization................................................      30,099     26,165    23,300    19,184    18,680
Total assets..................................................................      62,310     66,404    66,685    44,517    45,099
Current portion of long-term debt.............................................          --         --        --       230       305
Long-term debt................................................................          --         --        --     1,006     1,236
Deferred income taxes (non-current)...........................................       1,239      1,354     1,209     1,367     1,429
Shareholders' equity..........................................................      51,728     54,161    52,938    32,947    33,713

Other information
Working capital ratio.........................................................       3.4:1      3.5:1     3.5:1     2.6:1     3.0:1
Percent of debt-to-total capital employed.....................................          --         --        --         4%        4%
Quoted market price-Class A Shares:
 High.........................................................................       5 3/4      7 1/4     9 1/2       N/A       N/A
 Low..........................................................................      2 5/16    4 13/16   5 11/16       N/A       N/A
 Year-end.....................................................................       2 3/4          5    7 1/16       N/A       N/A
Number of employees at year-end...............................................         450        470       441       373       364
</TABLE>

(*) In accordance with Securities and Exchange Commission regulations, pro forma
    per share data has been presented only for 1998, the year in which the Spin-
    off occurred, and the preceding year. For purposes of determining the pro
    forma per share data, all of Avalon's common stock issued as a result of the
    Spin-off is deemed to have been outstanding since the beginning of 1997.

                                                                              23
<PAGE>

<TABLE>
<S>                            <C>                              <C>
Company Location Directory

Corporate Office               Transportation Offices           Technical
                                                                Environmental
Avalon Holdings Corporation    DartAmericA, Inc.                Services
One American Way               Dart Trucking Company, Inc.
Warren, Ohio 44484-5555        Dart Services, Inc.              Earth Sciences
(330) 856-8800                 TRB National Systems, Inc.       Consultants, Inc.
                               One American Way                 Corporate Headquarters
                               Warren, Ohio 44484-5555          One Triangle Lane
Waste Disposal                 (330) 856-8430                   Export, Pennsylvania 15632
Brokerage and                                                   (724) 733-3000
Management Services
                               Transportation Terminals         Antech Ltd.
American Waste Management                                       One Triangle Lane
Services, Inc.                 Dart Trucking Company, Inc.      Export, Pennsylvania 15632
One American Way               61 Railroad Street               (724) 733-1161
Warren, Ohio 44484-5555        Canfield, Ohio 44406
(330) 856-8800                                                  AWS Remediation, Inc.
                               Dart Trucking Company, Inc.      One Triangle Lane
                               200 Old Webster Road             Export, Pennsylvania 15632
Golf and Related               Oxford, Massachusetts 01540      (724) 733-1009
Operations
                               Dart Trucking Company, Inc.      American Landfill
Avalon Lakes Golf, Inc.        1807A Route 7                    Management, Inc.
One American Way               Kenova, West Virginia 25530      One American Way
Warren, Ohio 44484-5555                                         Warren, Ohio 44484-5555
(330) 856-8898                 Dart Trucking Company, Inc.      (330) 856-8800
                               11861 S. Cottage Grove Ave.
Avalon Travel, Inc.            Chicago, Illinois 60628
One American Way
Warren, Ohio 44484-5555        Dart Trucking Company, Inc.
(330) 856-8400                 5 Crown Point Drive
                               Paulsboro, New Jersey 08066

                               Dart Trucking Company, Inc.
                               11 Riverway Place
                               Building 1
                               Bedford, New Hampshire 03110
</TABLE>

24
<PAGE>

Directors and Officers

Directors                                 Officers

Ronald E. Klingle
/1/(Chairman) /2/(Chairman)               Ronald E. Klingle
Chairman of the Board and                 Chairman of the Board and
Chief Executive Officer                   Chief Executive Officer

Sanford B. Ferguson/1,3,4/ (Chairman)     Timothy C. Coxson
Chairman and Chief Executive Officer of   Treasurer and Chief Financial Officer
Seven Springs Farm, Inc.


Robert M. Arnoni/2,3,4/                   Jeffrey M. Grinstein
President, Arnoni Development             Secretary
Company, Inc.

                                          Frances R. Klingle
Stephen L. Gordon/3/(Chairman),/4/        Chief Administrative Officer
Partner, Beveridge & Diamond (law firm)

                                          Kenneth R. Nichols
                                          Vice President, Taxes
Stephen G. Kilper
Chief  Executive Officer,
American Landfill Management, Inc.        Frank Lamanna
Antech, Ltd.                              Vice President, Corporate Financial
AWS Remediation, Inc.                     Services
Earth Sciences Consultants, Inc.



1  Executive Committee
2  Compensation Committee
3  Audit Committee
4  Option Plan Committee

                                                                              25
<PAGE>

Shareholder Information

Annual meeting of shareholders

The annual meeting of shareholders will be held at the Grand Pavilion, One
American Way, Warren, Ohio, on Monday, April 30, 2001, at 10:00 a.m.

Common stock information

Avalon's Class A Common Stock is listed on the American Stock Exchange (symbol:
AWX). Quarterly stock information for 2000, 1999 and from June 18, 1998 to
December 31, 1998 as reported by The Wall Street Journal is as follows:

 2000:
 Quarter Ended            High        Low        Close
-------------------------------------------------------
 March 31                 5 3/4       4  5/8     4 3/4
 June 30                  4 3/4       3  3/8     3 1/2
 September 30             3 1/2       3          3 1/16
 December 31              3 3/16      2  5/16    2 3/4

 1999:
 Quarter Ended            High        Low        Close
-------------------------------------------------------
 March 31                 7 1/4       5  9/16    6 1/16
 June 30                  7 1/8       5  3/4     6 3/4
 September 30                 7       5  1/2     5 5/8
 December 31              5 7/8       4 13/16    5

 1998:
 Quarter Ended            High        Low        Close
--------------------------------------------------------
 June 30                  8           5 11/16    6 5/8
 September 30             9 1/2       6  3/4     8 1/2
 December 31              8 3/8       7          7 1/16

No dividends were paid during 2000.

There are 687 Class A and 12 Class B Common Stock shareholders of record as of
the close of business March 2, 2001. The number of holders is based upon the
actual holders registered on the records of Avalon's transfer agent and
registrar and does not include holders of shares in "street names" or persons,
partnerships, associations, corporations or other entities identified in
security position listings maintained by depository trust companies.

Dividend policy

Avalon presently intends to retain earnings for use in the operation and
expansion of its business and therefore does not anticipate paying any cash
dividends in the foreseeable future.

Annual report on Form 10-K

Copies of Avalon's annual report on Form 10-K can be obtained free of charge by
writing to Avalon Holdings Corporation, One American Way, Warren, Ohio 44484-
5555, Attention: Shareholder Relations.

Transfer agent and registrar

The transfer agent and registrar for Avalon is American Stock Transfer and Trust
Company. All correspondence concerning stock transfers should be directed to
them at 40 Wall Street, New York, New York 10005.

Investor inquiries

Security analysts, institutional investors, shareholders, news media
representatives and other seeking financial information or general information
about Avalon are invited to direct their inquiries to Timothy C. Coxson,
Treasurer and Chief Financial Officer, telephone (330) 856-8800.

________________________________________________________________________________

Policy statement on equal employment opportunity and affirmative action

Avalon is firmly committed to a policy of equal employment opportunity and
affirmative action. Toward this end, Avalon will continue to recruit, hire,
train and promote persons in all job titles, without regard to race, color,
religion, sex, national origin, age, handicap, ancestry or Vietnam-era or
disabled veteran status. We will base all decisions on merit so as to further
the principle of equal employment opportunity. This policy extends to promotions
and to all actions regarding employment including compensation, benefits,
transfers, layoffs, return from layoffs, company-sponsored training and social
programs.

26