Note 5 - Credit Facility

9 Months Ended

Sep. 30, 2015

Notes to Financial Statements

Debt Disclosure [Text Block]

Note 5. Credit Facility

On May 21, 2015 Avalon and certain wholly owned subsidiaries entered into a line of credit agreement (the “Agreement”) with The Home Savings and Loan Company of Youngstown, Ohio expiring on June 30, 2016. The Agreement provides for a line of credit of up to $9 million. Borrowings under the line of credit agreement are secured by all business assets of the Company including accounts receivable, inventory, equipment and certain real property as defined in the Agreement. Interest on outstanding borrowings accrue at Prime Rate plus .25%. The line of credit agreement contains certain financial and other covenants, customary representations, warranties and events of defaults. Avalon was in compliance with the debt covenants at September 30, 2015.

At September 30, 2015, the outstanding borrowings under the line of credit agreement were $7.6 million. As of September 30, 2015, the Company has $1.4 million available under the line of credit agreement. During the three and nine months ended September 30, 2015, the weighted average interest rate on outstanding borrowings under the line of credit agreement was 3.50% and 3.16%, respectively. At September 30, 2015, the interest rate was 3.50%. Total unamortized debt issuance costs incurred in connection with the Agreement were $17,000 at September 30, 2015.

Initial borrowings of $5.0 million under the Agreement were utilized to repay the total amount outstanding under the previous line of credit agreement with The Huntington National Bank. The line of credit agreement with Huntington National Bank was terminated in conjunction with the repayment. At September 30, 2014, there were $2.9 million of borrowings under the line of credit agreement with Huntington National Bank. Borrowings were utilized to fund the acquisition of The Avalon Inn.

Amounts outstanding under the line of credit agreement with The Home Savings and Loan Company of Youngstown, Ohio are classified as a current liability in the Condensed Consolidated Balance Sheet at September 30, 2015 due to the Agreement expiring on June 30, 2016. The Company is currently discussing various refinancing options with The Home Savings and Loan Company of Youngstown, Ohio. The Company anticipates refinancing the Agreement before the expiration date. Although the Company is in discussions with The Home Savings and Loan Company of Youngstown, Ohio to refinance the line of credit, there can be no assurance that a refinancing would occur. In the event Avalon is unable to refinance with The Home Savings and Loan Company of Youngstown, Ohio, the Company will seek alternative financing options, although the Company cannot guarantee success in doing so.

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 835-20,

Capitalization of Interest

, during the three and nine month periods ended September 30, 2015, Avalon capitalized approximately $20,000 and $97,000, respectively, of interest costs on borrowings incurred related to construction on The Avalon Inn.