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Note 7 - Leases

3 Months Ended

Mar. 31, 2023

Lessee, Operating and Financing Leases [Text Block]

Note 7. Leases

Operating Leases

Avalon leases golf carts and associated GPS equipment, furniture and fixtures for The Grand Resort and office copiers under operating leases. Our operating leases have remaining lease terms ranging from less than 1 year to 5.0 years. The weighted average remaining lease term on operating leases was approximately 3.7 years at March 31, 2023.

During the first three months of 2023 and 2022, the Company entered into new operating lease agreements for golf cart GPS equipment. During the first three months of 2023 and 2022, the Company recorded operating lease right-of-use assets and corresponding obligations under the operating leases of approximately $35,000 and $31,000, respectively.

Leased property and associated obligations under operating leases at March 31, 2023 and December 31, 2022 consists of the following (in thousands):

	March 31,		December 31,
	2023		2022
Operating lease right-of-use assets	$	1,406	$	1,386

Current portion of obligations under operating leases	$	432	$	424
Long-term portion of obligations under operating leases		974		962
Total obligations under operating leases	$	1,406	$	1,386

The weighted average discount rate on operating leases was 5.0% at both March 31, 2023 and December 31, 2022

Finance Leases

In November 2003, Avalon entered into a long-term agreement with Squaw Creek Country Club to lease and operate its golf course and related facilities. The lease has an initial term of ten (10) years with four (4) consecutive ten (10) year renewal term options unilaterally exercisable by Avalon. Under the lease, Avalon is obligated to pay $15,000 in annual rent and make leasehold improvements of $150,000 per year. Amounts expended by Avalon for leasehold improvements during a given year in excess of $150,000 will be carried forward and applied to future leasehold improvement obligations. Based upon the amount of leasehold improvements already made, Avalon expects to exercise all its remaining renewal options. At March 31, 2023 there were approximately 30.6 years remaining on the golf course and related facilities finance lease.

In addition, the Company also entered into lease agreements for a vehicle, golf course maintenance and restaurant equipment which were determined to be finance leases. At March 31, 2023, the vehicle, golf course maintenance and restaurant equipment have remaining lease terms ranging from less than 1 year to 4.6 years. The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.3 years at March 31, 2023.

Leased property and associated obligations under finance leases at March 31, 2023 and December 31, 2022 consists of the following (in thousands):

	March 31,			December 31,
	2023			2022
Leased property under finance leases	$	12,280		$	12,004
Less accumulated amortization		(7,124	)		(7,003	)
Leased property under finace leases, net	$	5,156		$	5,001

Current portion of obligations under finance leases	$	139		$	115
Long-term portion of obligations under finance leases		509			381
Total obligations under finance leases	$	648		$	496

The weighted average discount rate on finance leases was 6.5% at March 31, 2023 and 5.2 % at December 31, 2022.

For the three months ended March 31, 2023 and 2022, components of lease expense were as follows (in thousands):

	Three Months Ended
	March 31,
	2023		2022
Operating lease cost:
Rental expense	$	74	$	110

Finance lease cost:
Depreciation expense	$	121	$	127
Interest expense		7		9
Total finance lease cost	$	128	$	136

For the twelve months ending March 31, future commitments under long-term, operating and finance leases are as follows (in thousands):

	Finance		Operating		Total
2024	$	172	$	494	$	666
2025		163		409		572
2026		101		360		461
2027		75		188		263
2028		52		95		147
Thereafter		375		-		375
Total lease payments		938		1,546		2,484
Less: imputed interest		290		140		430
Total		648		1,406		2,054
Less: current portion of obligations under leases		139		432		571
Long-term portion of obligations under leases	$	509	$	974	$	1,483