UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2013 or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_________________________to____________________________

Commission File Number:	000-54065

AVALON HOLDING GROUP, INC
(Exact name of registrant as specified in it’s charter)

Nevada	26-3608086
(State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification No.)

6536 102nd Place NE, Kirkland, WA 98033 USA
(Address of principal executive offices)(Zip Code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

(X)

yes

(_)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

(_)

yes

(_)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	(_)	Accelerated filer	(_)

Non-accelerated filer	(_)	Smaller reporting company	(X)

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

(_)

yes

(X)

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court

(_)

yes

(_)

APPLICABLE ONLY TO CORPORATE ISSUERS: Number of shares outstanding of the registrant’s class of common stock as of September 20, 2013: 121,320,000.

TABLE OF CONTENTS

		Page
	PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5

Item 4.	Controls and Procedures	5

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	6

Item 1A.	Risk Factors	6

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6

Item 3.	Defaults Upon Senior Securities	6

Item 4.	Mine Safety Disclosures	6

Item 5.	Other Information	6

	Entry into a Material Definitive Agreement

Item 6.	Exhibits	7

	SIGNATURES	8

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

AVALON HOLDING GROUP, INC. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2013

	Page
Balance Sheets	F-1
Statement of Operations	F-2
Statements of Cash Flows	F-3
Notes to Financial Statements	F-4 to F-7

AVALON HOLDING GROUP, INC. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

	July 31, 2013			January 31, 2013
	(Unaudited)			(Audited)
ASSETS
CURRENT
Cash	$	15,424		$	147,153
Prepaid royalty fees		-			50,000
Prepaid expenses		-			29,600
Deposit		10,000			10,000
Inventory		117,268			118,350

Total Current Assets		142,692			355,103

TOTAL ASSETS	$	142,692		$	355,103
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	168,291		$	23,351
Promissory note		551,925			551,925
Advances from a director		25,100			25,100

TOTAL CURRENT LIABILITIES		745,316			600,376
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ DEFICIT
Common stock
500,000,000 shares authorized, at $0.001 par value,
121,320,000 shares issued and outstanding (January 31, 2013 –121,320,000)		121,320			121,320
Additional paid-in capital		(36,712	)		(36,712	)
Deficit accumulated during the development stage		(687,232	)		(329,881	)

TOTAL STOCKHOLDERS’ DEFICIT		(602,624	)		(245,273	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	142,692		$	355,103

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-1

AVALON HOLDING GROUP INC. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

	Three Months Ended						Six Months Ended						Inception (July 28, 2008) to
	July 31,						July 31,						July 31,
	2013			2012			2013			2012			2013
REVENUE
Revenue	$	3,097		$	-		$	25,497		$	-		$	25,943
Cost of Goods Sold		(1,717	)		-			(4,082	)		-			(4,082	)

GROSS PROFIT		1,380			-			21,415			-			21,861

EXPENSES
General and administrative expenses		160,446			18,881			211,418			23,754			369,286
Advertising and marketing expenses		18,363			-			115,979			-			266,667
Management Fees		16,000			-			24,000			-			47,000
Depreciation		-			-			-			-			965

TOTAL EXPENSES		194,809			18,881			351,397			23,754			683,918

LOSS FROM OPERATIONS		(193,429	)		(18,881	)		(329,982	)		(23,754	)		(662,057	)

OTHER INCOME (EXPENSE)
Gain on forgiveness of debt		-			9,000			-			9,000			21,514
Interest expense		(13,912	)		-			(27,369	)		-			(37,754	)
Loss on disposal of equipment		-			-						-			(8,935	)

TOTAL OTHER INCOME (EXPENSE)		(13,912	)		9,000			(27,369	)		9,000			(25,175	)

NET INCOME (LOSS)	$	(207,341	)	$	(9,881	)	$	(357,351	)	$	(14,754	)	$	(687,232	)

BASIC AND DILUTED LOSS PER COMMON SHARE	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED		121,320,000			121,320,000			121,320,000			121,320,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-2

AVALON HOLDING GROUP, INC. AND SUBSIDIARY

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Six months ended July 31, 2013			Six months ended July 31, 2012			July 28, 2008 (inception) to July 31, 2013

OPERATING ACTIVITIES
Net loss for the period	$	(357,351	)	$	(14,754	)	$	(687,232	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		-			-			965
Loss on disposal of equipment		-			-			8,935
Gain on debt forgiveness		-			(9,000	)		(21,514	)
Expenses paid by third party on behalf of the Company		-			-			51,925
Expenses paid by related party on behalf of the Company		-			-			11,505
Changes in operating assets and liabilities:
Inventory		1,082			-			(117,268	)
Prepaid royalty fees		50,000			-			-
Prepaid expenses		29,600			-			-
Deposit		-			-			(10,000	)
Accounts payable and accrued expenses		144,940			12,544			180,805
NET CASH USED IN OPERATING ACTIVITIES		(131,729	)		(11,210	)		(581,879	)

INVESTING ACTIVITIES:
Purchase of vending equipment		-			-			(9,900	)
NET CASH USED IN INVESTING ACTIVITIES		-			-			(9,900	)

FINANCING ACTIVITIES
Advances payable		-			-			9,000
Proceeds from promissory note		-			-			500,000
Advances from director		-			11,210			69,998
Payments to director		-			-			(295	)
Proceeds from issuance of common stock		-			-			28,500
NET CASH PROVIDED BY FINANCING ACTIVITIES		-			11,210			607,203

NET INCREASE (DECREASE) IN CASH		(131,729	)		-			15,424

CASH, BEGINNING		147,153			-			-

CASH, ENDING	$	15,424		$	-		$	15,424

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Advances contributed to capital by director

56,108

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-3

AVALON HOLDING GROUP, INC. AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

July 31, 2013

1. ORGANIZATION AND BUSINESS OPERATIONS

a)	Organization

AVALON HOLDING GROUP, INC (“the Company”) was incorporated under the laws of the State of Nevada, U.S. on July 28, 2008.

On September 28, 2012, the Company incorporated a new fully owned company (“subsidiary”) under the laws of the State of Nevada, U.S. The new subsidiary is called PAINMASTER PRODUCT, INC.

b)	Development Stage Activities

The Company is in the development stage as defined under ASC 915. Avalon Holding Group, Inc., under its new fully owned subsidiary, Painmaster Products, Inc., ceased operations in the entertainment and amusement gaming machines business within Russia. The Company now intends through its wholly owned subsidiary Painmaster Products, Inc. to license, manufacture, market and distribute, within the United States and Canada, a Micro Current Therapy patch that is drug free, non-invasive and proven to control pain and promote healing.

Based upon our business plan, we are a development stage enterprise, and we present our financial statements in conformity with the accounting principles generally accepted in the United States of America. As a development stage enterprise, we disclose the deficit accumulated during the development stage and the cumulative consolidated statements of operations and consolidated cash flows from our inception to the current consolidated balance sheet date.

c)	Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for financial information and with the instructions to Form 10-Q. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended January 31, 2013 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. The unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the six months ended July 31, 2013 are not necessarily indicative of the results that may be expected for the year ending January 31, 2014.

2. GOING CONCERN

Our accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), which contemplates our continuation as a going concern. However, we have minimal business operations to date. In addition, from inception on July 28, 2008 through July 31, 2013, we have incurred losses of $687,232, and have a working capital deficit of $602,624. These matters raise substantial doubt about our ability to continue as a going concern. There is no assurance that future capital raising plans will be successful in obtaining sufficient funds to assure our eventual profitability. While management believes that actions planned and presently being taken to revise our operating and financial requirements provide the opportunity for us to continue as a going concern, there is no assurance the actions will be successful. In addition, recent events in worldwide capital markets may make it more difficult for us to raise additional equity or debt capital.

Our consolidated financial statements do not include any adjustments that might result from these uncertainties.

3. SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented to assist in understanding our financial statements. Our financial statements and notes are representations of our management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles in the United States of America (“GAAP”) and have been consistently applied in the preparation of the financial statements. The financial statements are stated in United States of America dollars.

F-4

AVALON HOLDING GROUP, INC. AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

July 31, 2013

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

a)	Income Taxes

We have adopted the ASC subtopic 740-10. ASC 740-10 requires the use of the asset and liability method of accounting of income taxes. Under the asset and liability method of ASC 740-10, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. 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 date of enactment or substantive enactment. The estimated net operating loss carry-forward to date is $687,232. The approximate deferred tax asset of $234,000 has been fully offset by a valuation allowance.

We provide deferred taxes for the estimated future tax effects attributable to temporary differences and carry forwards when realization is more likely than not.

b)	Property and Equipment

Property and equipment is stated at cost, and is depreciated over estimated useful lives using primarily the straight line method for financial reporting purposes. Useful lives range from 3 to 5 years. We evaluate property and equipment at least annually for impairment. Since inception, all of the equipment has been sold for a net loss of $8,935. The Company has no property and equipment of value as of July 31, 2013.

c)	Principles of Consolidation

The Company consolidates its 100% owned subsidiary pursuant to Accounting Standards Codification (“ASC”) No. 810, “Consolidation”. All intercompany transactions and balances have been eliminated.

d)	Basic and Diluted Loss Per Share

In accordance with ASC 260-10, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. At July 31, 2013, we had no common stock equivalents.

e)	Fair Value of Financial Instruments

The carrying value of our financial instruments, consisting of accounts payable, approximates their fair value due to the short-term maturity of such instruments. Unless otherwise noted, it is management’s opinion that we are not exposed to significant interest, currency or credit risks arising from these financial statements.

f)	Revenue Recognition

It is our policy that revenues are recognized in accordance with ASC 605-10. Under ASC 605-10, product revenues (or service revenues) are recognized when persuasive evidence of an arrangement exists, delivery has occurred (or service has been performed), the sales price is fixed and determinable and collectability is reasonably assured.

g)	Use of Estimates

The preparation of financial statements in conformity with GAAP 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

F-5

AVALON HOLDING GROUP, INC. AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

July 31, 2013

3. SIGNIFICANT ACCOUNTING POLICIES (continued)

h)	Cash and Cash Equivalents

Cash is comprised of cash on hand and demand deposits. Cash equivalents include short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

Inventory

We value our inventories at the lower of cost, determined on a first-in, first-out method, or market value. Our inventory consists solely of finished goods. We review inventories on hand at least quarterly and record provisions for estimated excess, slow moving and obsolete inventory, as well as inventory with a carrying value in excess of net realizable value. The regular and systematic inventory valuation reviews include a current assessment of future product demand, historical experience and obsolete finished product.

j)	Advertising Costs

The Company accounts for advertising costs in accordance with provisions in ASC 720-35-25 which states that advertising costs can be expensed as incurred or the first time the advertising takes place.

4. RECENT ACCOUNTING PRONOUNCEMENTS

The Company does not expect the adoption of any recent accounting pronouncements to have a material impact on its consolidated financial statements.

5. MARKETING AGREEMENT

On September 26, 2012 Painmaster Products Inc. (“Painmaster’) entered into a Marketing Agreement (“Agreement”) with Newmark, Inc. (“Newmark”). This Agreement grants to Painmaster the exclusive license to all intellectual property owned by or licensed to Newmark or its affiliates associated with the product to use in the field of alleviating pain (the “Field”), including, without limitations, all patents, technology, inventions, know-how, processes and trademarks for the term of ten (10) years with an automatic renewal of another ten (10) years. Painmaster has the right to terminate the Agreement at the end of any one year period at its own discretion. The Territory this Agreement covers is the United States and Canada including each of their respective, territories and possessions.

The Marketing Agreement between Painmaster and Newmark has expired. Painmaster is still selling product pending a new agreement or the selection of a new vendor, in which case Painmaster will sell any remaining inventory to the new vendor. It is expected negotiations will be completed by October 1, 2013.

Compensation

Within five (5) days of signing the Agreement Painmaster shall pay to Newmark fifty thousand dollars ($50,000 - the amount has been paid). Further Painmaster shall pay to Newmark the sum of seven hundred thousand dollars ($700,000), of which seventy thousand dollars ($70,000) shall be paid monthly commencing on July 15, 2013 and continuing on the 15th of each of the nine succeeding months. The total of seven hundred and fifty thousand dollars ($750,000) shall be considered an advance on Royalty payments. Total Royalty advances as of July 31, 2013 were seventy thousand dollars ($70,000) and have been expensed. These sums shall be non-refundable even if Royalties do not exceed the total amount advanced.

Royalty Payments

Newmark shall receive from Painmaster an amount equal to three percent (3%) of all Net sale of the DRTV marketing campaign. Newmark also shall receive from Painmaster ten per cent (10%) of all retail and wholesale revenue of any kind (the “Retail Sales Royalties”), less the $750,000 previously advanced to Newmark. The Retail Sales Royalty rate shall be reduced to 7.5% once aggregate Royalties/Advances (irrespective of Retail, wholesale or DRTV marketing) has totalled two million dollars ($2,000,000). The Retail Sales Royalty rate shall be further reduced to 5% once aggregate Royalties/Advances (irrespective of Retail, wholesale or DRTV marketing) has totalled five million dollars ($5,000,000).

F-6

AVALON HOLDING GROUP, INC. AND SUBSIDIARY

(A Development Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

July 31, 2013

6. COMMON STOCK

The authorized capital of the Company is 500,000,000 common shares with a par value of $ 0.001 per share.

On November 3, 2008, the Company issued 72,000,000 shares of common stock at a price of $0.00004 per share for total cash proceeds of $3,000.

In November 20, 2008, the Company issued 28,800,000 shares of common stock at a price of $0.0002 per share for total cash proceeds of $6,000.

In January 2009, the Company issued 18,600,000 shares of common stock at a price of $0.00083 per share for total cash proceeds of $15,500.

In January 2009, the Company also issued 1,920,000 shares of common stock at a price of $0.002 per share for total cash proceeds of $4,000.

On September 29, 2010, a forward split 24:1 was approved and enacted. All equity transactions have been retroactively restated.

7. PROMISSORY NOTE

On October 1, 2012 Painmaster signed a Promissory Note for five hundred and fifty-two thousand dollars ($552,000) with an annual interest rate of 10%, and a default annual interest rate of the lower of 18%, or the maximum rate permitted by law. The Promissory Note is fully secured with a general assignment of all the assets of Painmaster. The maturity date of the Promissory Note is September 30, 2013. All interest and principal payments are due on the maturity date of the Promissory Note. Painmaster may draw on the Promissory Note as funds are required. As of July 31, 2013, the amount owing on the Promissory Note was $551,925, with accrued interest of $37,753.

8. GAIN ON FORGIVENESS OF DEBT

On July 1, 2012, the Company entered into a written forgiveness of debt agreement to forgive a total of $9,000 that was previously advanced. In November 2012, the Company recorded a gain on forgiveness of debt of $10,000 related to an amount owed to the former CEO. In addition, on January 31, 2013 a vendor forgave a total of $2,514 that was previously charged to the Company. As a result of these transactions, the Company recorded a gain on forgiveness of debt of $21,514 for the year ended January 31, 2013.

9. RELATED PARTY TRANSACTIONS

The Company entered into the following transactions with a related party:

On July 1, 2012, the Company’s former CEO contributed advances totalling $56,108 to capital.

During the year ended January 31, 2013, the previous CEO advanced $25,100 to the Company and paid expenses on behalf of the Company of $11,505. The CEO was also paid back $295. The advances are non-interest bearing and payable on demand.

During the six month period ending July 31, 2013, the Company accrued $24,000 in management fees an officer of Painmaster Product Inc., of which $8,000 has been paid as of July 31, 2013.

F-7

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

GENERAL

During our first year of operations, we intended to commence operations in the entertainment and amusement industry. We purchased coin operated amusement machines for the purpose of placing and operating them in public venues with high traffic flow in Russia. We were initially focused on four amusement games, "Arm Wrestling Game”, "Hammer Game”, "Kicking Game” and “Punching Game” and place them in places such as nightclubs, bars, pubs, cinemas and amusement complexes. Strength testing amusement games have been around for many years and prior management believed that if placed in high traffic location can be high revenue producers.

Since our inception, we have purchased six such machines from our supplier, “Punchline Europe”. Our business strategy was to continue acquiring and placing additional amusement machines in as many places in different cities of Russia as possible.

We do not believe that we will be able to generate significant revenues from sales during the next twelve months in the area of coin operated amusement machines. On September 28, 2012 the director of the Company resolved to incorporate a new fully owned company (“subsidiary”) under the laws of the State of Nevada, U.S. The new subsidiary is called Painmaster Products, Inc.

Avalon Holding Group, Inc. ceased operations in the entertainment and amusement gaming machines business within Russia. The Company now intends through its wholly owned subsidiary Painmaster Products, Inc. to license, manufacture, market and distribute, within the United States and Canada, a Micro Current Therapy patch that is drug free, non-invasive and proven to control pain and promote healing.

RESULTS OF OPERATIONS

Our financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be unable to continue in operation.

We expect we will require additional capital to meet our long term operating requirements. We expect to raise additional capital through, among other things, the sale of equity or debt securities.

Comparison of the Three and Six Month Periods ended July 31, 2013 and 2012

Our net loss for the three month period ended July 31, 2013 was $207,341 compared to a net loss of $9,881 during the same period from the prior fiscal year. During the three month period ended July 31, 2013, we generated $3,097 in revenue and incurred General and administrative expense of $160,446, Advertising & Marketing expense of $18,363 and Management fees of $16,000, as compared to General and administrative expense of $18,881, Advertising & Marketing expense of nil and Management fees of nil for the same period in 2012. The increase in our General and administrative expenses for the three month period ended July 31, 2013, compared to the same period from the prior fiscal year was due to increased audit, accounting, legal, filing expenses and majority of the increase was due to royalty payments. The increase in in our Advertising and Marketing expense and our Management fees was due to operation of our wholly owned subsidiary.

Our net loss for the six month period ended July 31, 2013 was $357,351 compared to a net loss of $14,754 during the same period from the prior fiscal year. During the six month period ended July 31, 2013, we generated $25,497 in revenue and incurred General and administrative expense of $211,418, Advertising & Marketing expense of $115,979 and Management fees of $24,000, as compared to General and administrative expense of $23,754, Advertising & Marketing expense of nil and Management fees of nil for the same period in 2012. The increase in our General and administrative expenses for the six month period ended July 31, 2013, compared to the same period from the prior fiscal year was due to increased audit, accounting, legal, filing expenses and the majority of the increase was due to royalty payments. The increase in in our Advertising and Marketing expense and our Management fees was due to operation of our wholly owned subsidiary.

The weighted average number of shares outstanding was 121,320,000 for the three and six month period ended July 31, 2013.

LIQUIDITY AND CAPITAL RESOURCES

As of July 31, 2013, we had $142,692 in assets comprised of $15,424 in cash, $10,000 in Deposits and $117,268 in Inventory as compared to $355,103 in assets comprised of $147,153 in cash, $50,000 in Prepaid royalty fees, 29,600 in Prepaid expenses, $10,000 in Deposits and $118,350 in Inventory as of January 31, 2013 As of July 31, 2013, our total liabilities were $745,316 comprised of Accounts payable and accrued expenses of $168,291, Promissory Note of $551,925 and Advances from a director of $25,100 compared to total liabilities of $600,376 as of January 31, 2013 comprised of Accounts payable and accrued expenses of $23,351, Promissory Note of $551,925 and Advances from a director of $25,100.

Stockholders’ deficit increased from $245,273 as of January 31, 2013 to $602,624 as of July 31, 2013, due to the net loss for the period.

PLAN OF OPERATION AND FUNDING

On September 26, 2012 Painmaster Products Inc. (“Painmaster’) entered into a Marketing Agreement (“Agreement”) with Newmark, Inc. “Newmark”). This Agreement grants to Painmaster the exclusive license to all intellectual property owned by or licensed to Newmark or its affiliates associated with the product to use in the field of alleviating pain (the “Field”), including, without limitations, all patents, technology, inventions, know-how, processes and trademarks for the term of ten (10) years with an automatic renewal of another ten (10) years. Painmaster has the right to terminate the Agreement at the end of any one year period at its own discretion. The Territory this Agreement covers is the United States and Canada including each of their respective, territories and possessions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The Company is a smaller reporting Company as defined by Rule 12b-2 of the Securities Act of 1934 and are not required to provide the information under this item.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and chief financial officer of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the current quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 1A. Risk Factors.

The Company is a smaller reporting Company as defined by Rule 12b-2 of the Securities Act of 1934 and are not required to provide the information under this item.

Item 2. Unregistered Sales of Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

None

Item 5. Other Information.

Entry into a Material Definitive Agreement

Compensation

Royalty Payments

Newmark shall receive from Painmaster an amount equal to three percent (3%) of all Net sale of the DRTV marketing campaign. Newmark also shall receive from Painmaster ten per cent (10%) of all retail and wholesale revenue of any kind (the “Retail Sales Royalties”), less the $750,000 previously advanced to Newmark. The Retail Sales Royalty rate shall be reduced to 7.5% once aggregate Royalties/Advances (irrespective of Retail, wholesale or DRTV marketing) has totaled two million dollars ($2,000,000). The Retail Sales Royalty rate shall be further reduced to 5% once aggregate Royalties/Advances (irrespective of Retail, wholesale or DRTV marketing) has totaled five million dollars ($5,000,000).

Item 6. Exhibits.

Exhibit		Description
31.1		Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Executive Officer

31.2		Rule 13(a)-14(a)/15(d)-14(a) Certification of Chief Financial Officer *

32.1		Section 1350 Certification of Chief Executive Officer

32.2		Section 1350 Certification of Chief Financial Officer **

101.CAL		XBRL Taxonomy Extension Calculation Linkbase ***

101.DEF		XBRL Taxonomy Extension Definition Linkbase ***

101.INS		XBRL Instance Document ***

101.LAB		XBRL Taxonomy Extension Label Linkbase ***

101.PRE		XBRL Taxonomy Extension Presentation Linkbase ***

101.SCH		XBRL Taxonomy Extension Schema ***

* Included in Exhibit 31.1

** Included in Exhibit 32.1

*** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Avalon Holding Group, Inc.

Date: September 23, 2013	By:	/s/ Dennis Shafer
	Name:	Dennis Shafer
	Title:	Chief Executive Officer

Avalon Holding Group, Inc. 10-Q