Note 7 - Leases

6 Months Ended

Jun. 30, 2024

Notes to Financial Statements

Lessee, Operating and Financing Leases [Text Block]

Note 7. Leases

Operating Leases

Avalon leases golf carts, machinery and equipment for the landfill operations, 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 2.6 years and 3.4 years at June 30, 2024 and December 31, 2023, respectively.

During the first six months of 2024 the Company did not record any new operating lease right-of-use assets or corresponding obligations under operating leases. During the first six months of 2023, the Company recorded operating lease right-of-use assets and corresponding obligations under the operating leases of approximately $47,000.

Leased property and associated obligations under operating leases at June 30, 2024 and December 31, 2023 consists of the following (in thousands):

	June 30,		December 31,
	2024		2023
Operating lease right-of-use assets	$	1,096	$	1,270
Current portion of obligations under operating leases	$	387	$	432
Long-term portion of obligations under operating leases		709		838
Total obligations under operating leases	$	1,096	$	1,270

The weighted average discount rate on operating leases was 5.9% at both June 30, 2024 and December 31, 2023.

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 June 30, 2024 there were approximately 29.3 years remaining on the golf course and related facilities finance lease. At December 31, 2023 there were approximately 29.8 years remaining on the golf course and related facilities finance lease. The net asset value of finance leases, excluding leasehold improvements was $0.7 million and $0.8 million at June 30, 2024 and December 31, 2023, respectively.

In addition, the Company also entered into lease agreements for a vehicle, golf course maintenance and the captive landfill operations entered into lease agreements for equipment which were determined to be finance leases. At June 30, 2024, the vehicles, golf course maintenance and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from less than 1 year to 4.5 years. The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.5 and 3.4 years at June 30, 2024 and December 31, 2023.

Leased property and associated obligations under finance leases at June 30, 2024 and December 31, 2023 consists of the following (in thousands):

	June 30,			December 31,
	2024			2023
Leased property under finance leases	$	13,147		$	13,131
Less accumulated amortization		(7,660	)		(7,420	)
Leased property under finace leases, net	$	5,487		$	5,711
Current portion of obligations under finance leases	$	216		$	198
Long-term portion of obligations under finance leases		610			598
Total obligations under finance leases	$	826		$	796

The weighted average discount rate on finance leases was 6.5% at June 30, 2024 and 6.3% at December 31, 2023.

For the three and six months ended June 30, 2024 and 2023, components of lease expense were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Operating lease cost:
Rental expense	$	155	$	220	$	223	$	294
Finance lease cost:
Depreciation expense	$	133	$	122	$	270	$	250
Interest expense		9		8		29		15
Total finance lease cost	$	142	$	130	$	299	$	265

For the twelve months ending June 30, future commitments under long-term, operating and finance leases are as follows (in thousands):

	Finance		Operating			Total
2025	$	267	$	446		$	713
2026		183		376			559
2027		162		230			392
2028		121		128			249
2029		56		37			93
Thereafter		361		-			361
Total lease payments		1,150		1,217			2,367
Less: imputed interest		324		121			445
Total		826		1,096	#		1,922
Less: current portion of obligations under leases		216		387			603
Long-term portion of obligations under leases	$	610	$	709	#	$	1,319