AVALON COMMUNITY SERVICES INC, S-2, 1996-09-30

AVALON COMMUNITY SERVICES INC
S-2, 1996-09-30
FACILITIES SUPPORT MANAGEMENT SERVICES

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<PAGE> 1
REGISTRATION NO. 33-____________
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

--------------------

FORM S-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

--------------------

AVALON COMMUNITY SERVICES, INC.
(Exact Name of Registrant as Specified in its Charter)

--------------------

NEVADA 8999 13-3592263
(State of Incorporation (Primary Standard Industrial (I.R.S. Employer
or Organization) Classification Code No.) Identification No.)

13401 RAILWAY DRIVE
OKLAHOMA CITY, OKLAHOMA 73114
(405) 752-8802
(Address, including zip code and telephone number,
including area code, of Registrant's principal executive office)

DONALD E. SMITH WITH COPIES TO:
Chief Executive Officer MARK A. ROBERTSON, ESQ.
AVALON COMMUNITY SERVICES, INC. ROBERTSON & WILLIAMS
13401 RAILWAY DRIVE 3033 N.W. 63RD STREET, SUITE 160
OKLAHOMA CITY, OKLAHOMA 73114 OKLAHOMA CITY, OK 73116
(405) 752-8802 (405) 848-1944
(Name, address, including zip code
and telephone number, including
area code, of agent for service)

--------------------

Approximate date of commencement of proposed sale to the public: As soon as
possible after the Effective Date of the Registration Statement.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the follow box. [x]

If the registrant elects to deliver its last annual report to security holders,
or a complete and legible facsimile thereof, pursuant to Item 11(a)(1) of this
Form, check the following box. [ ]

If this Form is filed to registered additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, Check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 75,000 $5.12 $384,000 132.41
- ------------------------------------------------------------------------------------------------------------
Common Stock Purchase Warrants Series C 165,000 $0.01 $1,650 0.57
- ------------------------------------------------------------------------------------------------------------
Common Stock on Exercise of Warrants 165,000 $3.50 $577,500 199.14
- ------------------------------------------------------------------------------------------------------------
Common Stock Purchase Warrants Series D 275,000 $0.01 $2,750 0.95
- ------------------------------------------------------------------------------------------------------------
Common Stock on Exercise of Warrants 275,000 $5.12 $1,408,000 485.52
- ------------------------------------------------------------------------------------------------------------
Registration Fee . . . . . . . . . . . $818.59
============================================================================================================
</TABLE>

================================================================================
<PAGE> 2
AVALON COMMUNITY SERVICES, INC.

CROSS REFERENCE SHEET
SHOWING LOCATION IN PROSPECTUS,
FILED AS PART OF REGISTRATION STATEMENT, OF
INFORMATION REQUIRED BY FORM S-2

<TABLE>
<CAPTION>
ITEM NUMBER
IN FORM S-2 ITEM CAPTION IN FORM S-2 LOCATION IN PROSPECTUS
- ----------- ------------------------ ----------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus . . . . . . . . . . . Front Cover Page

2. Inside Front and Outside Back
Cover Pages of Prospectus . . . . . . . . . . . . . . Back Cover Page

3. Summary Information, Risk Factors
and Ratio of Earnings to Fixed Charges . . . . . . . Summary of Prospectus; Risk
Factors

4. Use of Proceeds . . . . . . . . . . . . . . . . . . . . Use of Proceeds

5. Determination of Offering Price . . . . . . . . . . . . Front Cover Page

6. Dilution . . . . . . . . . . . . . . . . . . . . . . . Not Applicable

7. Selling Security Holders . . . . . . . . . . . . . . . Selling Security Holders

8. Plan of Distribution . . . . . . . . . . . . . . . . . Front Cover Page; Plan of
Distribution

9. Description of the Securities to be Registered . . . . Summary of Prospectus;
Description of Securities

10. Interest of Named Experts and Counsel . . . . . . . . . Not Applicable

11. Information with Respect to the Registrant . . . . . . Incorporation of Certain Documents by
Reference

12. Incorporation of Certain Information
by Reference . . . . . . . . . . . . . . . . . . . . Incorporation of Certain Documents by
Reference

13. Disclosure of Commission Position on Indemni-
fication for Securities Act Liabilities . . . . . . . Part II of Registration Statement

14. Other Expenses of Issuance and
Distribution . . . . . . . . . . . . . . . . . . . . Part II of Registration Statement

15. Indemnification of Directors and Officers . . . . . . . Part II of Registration Statement

16. Exhibits . . . . . . . . . . . . . . . . . . . . . . . Exhibits to Registration Statement

17. Undertakings . . . . . . . . . . . . . . . . . . . . . Part II of Registration Statement

18. Financial Statements and Schedules . . . . . . . . . . Incorporation of Certain Documents by
Reference
</TABLE>
<PAGE> 3
PROSPECTUS

AVALON COMMUNITY SERVICES, INC.
515,000 SHARES OF COMMON STOCK
440,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS

All of the 440,000 Redeemable Common Stock Purchase Warrants (the
"Warrants") of Avalon Community Services, Inc. (the "Company") offered hereby
and 75,000 shares of Common Stock (the "Common Stock") are being sold by
certain security holders of the Company. 440,000 shares of Common Stock
offered hereby are issuable by the Company upon the exercise of the Warrants.
Unless the context otherwise requires, the holders of the Warrants who are
selling securities hereunder are hereinafter collectively referred to as the
"Selling Shareholders." The Company will not receive any proceeds from the
sale of the Common Stock or the Warrants by the Selling Shareholders. See
"Selling Shareholders," "Plan of Distribution" and "Use of Proceeds."

The Company's Common Stock is listed on the NASDAQ SmallCap Market
System under the symbol "CITY." The average of the bid and asked price for the
Common Stock, as reported on the NASDAQ SmallCap Market System, was $4.50 per
share on September 27, 1996. There is no established trading market for the
Warrants.

INVESTMENT IN THE SECURITIES IS SPECULATIVE AND INVOLVES A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" FOR INFORMATION THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
============================================================================================================
Underwriting Proceeds to
Price to Discounts and Selling Proceeds to
Public Commissions Shareholders Company(1)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Offering by Selling Shareholders(2)
Per Share . . . . . . . . . . . . . . . See Text See Text See Text See Text
Per Warrant . . . . . . . . . . . . . . Note (2) Note (2) Note (2) Note (2)
- ------------------------------------------------------------------------------------------------------------
Offering by Company:
Offering Price per Share of
Common Stock Underlying 3.50 3.50
Warrants(3) . . . . . . . . . . . . . . 5.12 $-0- $-0- 5.12
---------------------------------------------------------------
Total . . . . . . . . . . . . . . . . $1,985,500 $-0- $-0- $1,985,500
============================================================================================================
</TABLE>

(1) Assuming exercise of Warrants and before deducting expenses payable by
the Company and Selling Shareholders, which are estimated at $10,000.
(2) The Selling Shareholders have advised the Company that they propose to
offer for sale and to sell the Common Stock and Warrants from time to
time during the next 12 months through brokers in the over-the-counter
market, in private transactions, or otherwise, at market prices then
prevailing or obtainable. Accordingly, sales prices and proceeds to
the Selling Shareholders will depend upon price fluctuations and the
manner of sale. If the Common Stock or Warrants are sold through
brokers, the Selling Shareholders will pay brokerage commissions and
other charges (which compensation as to a particular broker-dealer
might be in excess of customary commissions). Except for the payment
of such brokerage commissions and charges, their share of the offering
expenses and the legal fees, if any, of the Selling Shareholders, the
Company will bear the balance of all expenses in connection with
registering the securities offered hereby. Such expenses are
estimated to total approximately $10,000. See "Plan of Distribution."
(3) C Warrants are exercisable at $3.50 per share and D Warrants at $5.12
per share.

This Prospectus also relates to such additional securities as may be
issued to the Selling Shareholders because of future stock dividends, stock
distributions, stock splits or similar capital readjustments.

The date of this Prospectus is September ___, 1996.
<PAGE> 4
AVAILABLE INFORMATION

The Company is subject to certain informational requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and, in accordance therewith,
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Such reports and other information can be inspected and
copies at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's
regional offices at 7 World Trade Center, 13th Floor, New York, New York 10048
and 500 West Madison Street, Chicago, Illinois 60661. Copies of such material
can also be obtained at prescribed rates by writing to the Securities and
Exchange Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549.

The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-2 under the Securities Act of 1933, as amended
with respect to the securities offered hereby. This Prospectus, filed as a
part of the Registration Statement, does not contain information set forth in
or annexed as exhibits to the Registration Statement, and reference is made to
such exhibits to the Registration Statement for the complete text thereof. For
further information with respect to the Company and the securities offered
hereby, reference is made to the Registration Statement and to the exhibits
filed as part thereof, which may be inspected at the office of the Commission
without charge, or copies thereof may be obtained therefrom upon payment of a
fee prescribed by the Commission.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission are
incorporated in this Prospectus by reference:

(A) Annual Report filed on Form 10-KSBA for the fiscal year ended
December 31, 1995 (File No. 0-20307);

(B) Quarterly Reports on Form 10-QSB for the fiscal quarters ended
March 31, 1996 and June 30, 1996; and

All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering of the Warrants and shares of Common Stock
hereunder shall be deemed incorporated by reference in this Prospectus and
shall be deemed to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed incorporated
herein by reference shall be deemed to be modified or superseded for all
purposes to the extent that a statement contained in this Prospectus or in any
other subsequently filed document which also is, or is deemed to be,
incorporated by reference in this Prospectus modifies or supersedes such
statement.

This Prospectus is accompanied by a copy of the Company's last Form
10-KSB. The Company undertakes to provide without charge to each person to
whom a Prospectus is delivered, upon written or oral request of such person, a
copy of any and all of the information which have been or may be incorporated
in this Prospectus by reference but not delivered herewith, except for certain
exhibits to such documents. Requests for such information should be directed
to Treasurer, Avalon Community Services, Inc. 13401 Railway Drive, Oklahoma
City, Oklahoma 73114, telephone number (405) 752-8802.

2
<PAGE> 5
PROSPECTUS SUMMARY

The following is a summary of certain information contained in this
Prospectus and is qualified in its entirety by the detailed information and
Consolidated Financial Statements (including the Notes thereto) appearing
elsewhere in this Prospectus or incorporated by reference. Each prospective
investor is urged to read this Prospectus in its entirety.

THE COMPANY

Avalon Community Services, Inc. (the "Company") operates (through its
wholly owned subsidiaries) private correction services, substance abuse
treatment services, residential care services, outpatient mental health
services, and assisted living centers. These services include the following:
(a) private correctional services through the operation of a 250-bed minimum
security facility in Oklahoma City, Oklahoma, a 255-bed minimum security
facility in Tulsa, Oklahoma and a 144-bed medium security facility in El Paso,
Texas; (b) substance abuse treatment services for inmates in Nebraska; (c)
residential care services through three facilities in Oklahoma; (d) the
management of four outpatient mental health clinics in Oklahoma; and (e) the
operations of two assisted living centers, one in Oklahoma City, Oklahoma and
one in Fort Collins, Colorado. See "THE COMPANY."

THE OFFERING

Securities Offered by
Company . . . . . . . . . . . . Up to 440,000 shares of Common Stock
upon the exercise of all the Warrants
being registered hereby.

Securities Offered by Selling
Securities Holders . . . . . . 75,000 shares of Common Stock and
165,000 Class C Warrants and 275,000
Class D Warrants, plus any shares of
Common Stock issued pursuant to the
exercise of the Warrants by any persons
who acquired the Warrants in the
original issuance of such Warrants.

Terms of Warrants . . . . . . . . Each Class C Warrant will entitle the
holder to purchase one share of Common
Stock at a price of $3.50 per share,
subject to certain adjustments. Each
Class D Warrant will entitle the holder
to purchase one share of Common Stock at
a price of $5.12 per share, subject to
certain adjustments. The C Warrants are
exercisable at any time until their
expiration in December, 1999 and the D
Warrants until their expiration in
August, 2001. The Warrants are subject
to redemption by the Company at a price
of $0.01 per Warrant upon the
satisfaction of certain conditions. See
"DESCRIPTION OF SECURITIES -- Warrants."

Common Stock Outstanding
prior to this Offering . . . . 2,952,135 Shares

Common Stock Outstanding
after this Offering . . . . . . 4,390,235 Shares if all outstanding
warrants are exercised.

Use of Proceeds . . . . . . . . The proceeds of this offering may be
used by the Company to fund new projects,
expand existing operations, retire
existing indebtedness, for working
capital and general corporate purposes.
See "USE OF PROCEEDS."

3
<PAGE> 6
Risk Factors . . . . . . . . . . An investment in the Company involves
certain risks, including operational
risks associated with the various
businesses owned by the Company,
dependence on key individuals,
competition, the risk of illiquidity and
other risks as more fully set forth under
"RISK FACTORS."

NASDAQ Symbol . . . . . . . . . . "CITY" on the NASDAQ SmallCap Market
System.

SUMMARY FINANCIAL DATA

<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
------------------------------------ -------------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:

Revenues From Continuing
Operations . . . . . . . . . . . $2,254,490 $2,536,136 $3,056,032 $1,410,224 $1,629,137
Income (Loss) From
Continuing Operations . . . . . . 60,905 66,893 (31,942) 51,498 (114,336)
Income (Loss) From Continuing
Operations Per Common Share . . . 0.04 0.03 (0.01) 0.02 (0.04)
Income (Loss) From
Discontinued Operations . . . . . - (59,539) (52,898) (57,598) -
Income (Loss) From Discontinued
Operations Per Common Share . . . - (0.03) (0.02) (0.02) -
</TABLE>

Total Assets . . . . . . . . . . . $3,222,581 $4,725,616 $6,450,199 $6,093,337 $7,698,428
Long-Term Debt,
less Current Maturities . . . . . 1,085,907 1,512,797 3,449,275 3,071,878 2,759,659
Stockholder's Equity . . . . . . . 1,086,604 2,425,666 2,340,826 2,419,220 3,405,927
</TABLE>

4
<PAGE> 7
RISK FACTORS

An investment in the Company is speculative and involves a high degree
of risk. Prior to making an investment, prospective investors should carefully
consider the following risk factors inherent in and affecting the business of
the Company and this offering.

LIMITED CUSTOMER BASE; NO COMMITMENT FOR MINIMUM NUMBER OF INMATE
REFERRALS; UNCERTAINTY OF FUTURE CONTRACTS. Approximately 68% percent of the
Company's business is derived from contracts with the Oklahoma Department of
Corrections ("ODOC") relating to the Company's private correctional facilities
in Oklahoma City ("Carver Center") and Tulsa ("Avalon Correctional Center").
The Company's contracts with the ODOC do not specify a commitment by ODOC to
send a minimum number of inmates to the Company's private correctional
facilities. There is no guarantee that government funds will continue to be
available for the housing of inmates in halfway houses such as Carver Center
and Avalon Correctional Center, or that the State of Oklahoma will not find an
alternate means of alleviating prison overcrowding without the use of outside
contractors such as the Company. Further, there is a financial risk to the
Company that the expansion of the Carver Center and Avalon Correctional Center
will not generate additional numbers of inmates and revenues to justify such
expansion. The Company's private correctional operations are dependent upon
the continuation of its existing contractual relationships with the State of
Oklahoma, as to which no guarantees can be given. The Company's contracts have
typically been one year renewable contracts. Further, there is no guarantee
that the ODOC will contract for any particular number of beds during the term
of any contract. The Company would have no recourse in the event that funding
for the types of services rendered to inmates at Carver Center and Avalon
Correctional Center were to be decreased or even discontinued by the State of
Oklahoma, which would result in termination of the Company's existing
contracts.

SIGNIFICANT GOVERNMENT REGULATION: OVERSIGHT, AUDITS AND
INVESTIGATIONS. The Company's business is highly regulated by a variety of
governmental authorities such as the ODOC, the Oklahoma Department of Mental
Health and Substance Abuse Services, the Oklahoma Health Department, West Texas
Community Supervision and Corrections Department and various municipal zoning
authorities, with oversight occurring continuously. Failure by the Company to
comply with contract terms or applicable regulations could expose it to
substantial penalties. In addition, changes in existing regulations could
require the Company to modify substantially the manner in which it conducts
business and, therefore, could have a material adverse effect on the Company.

Additionally, the Company's contracts give the contracting agency the
right to conduct audits of the facilities and operations managed by the Company
for the agency, and such audits occur routinely. An audit involves a
governmental agency's review of the Company's compliance with the prescribed
policies and procedures established with respect to the facility. Further, the
Company may be subject to investigations as a result of an audit, an inmate's
complaint or other causes.

LACK OF ACCEPTANCE OF PRIVATIZED CORRECTIONAL AND DETENTION
FACILITIES. Management of correctional and detention facilities by private
entities has not achieved complete acceptance by either governments or the
public. Some sectors of the Federal government and some state governments are
legally unable to delegate their traditional management responsibilities for
correctional and detention facilities to private companies. The operation of
correctional and detention facilities by private entities is a relatively new
concept and is not widely understood by the public and has encountered
resistance from certain groups, such as labor unions, local sheriffs
departments, and groups that believe that correctional and detention facility
operations should only be conducted by governmental agencies. Moreover,
changes in dominant political parties in any of the markets in which the
Company operates could result in significant changes to previously established
views of privatization in such market.

REQUIREMENTS OF ACCREDITATION; INSPECTION AND RISK OF LOSS OF
ACCREDITATION. In order to maintain its existing contracts with agencies of
the State of Oklahoma, the Company must remain accredited by the American
Correctional Association (the "ACA"), a not-for-profit organization which has
developed uniformity and industry standards for inmate care and operations of
correctional facilities and agencies. Accreditation involves a very

5
<PAGE> 8
extensive audit and compliance procedure, and is generally granted for a
three-year period. Carver Center has been accredited since 1990 and the
current three-year accreditation expires in 1999. Avalon Correction Center
received its accreditation in 1996. Management is not aware of any facts or
circumstances which might impair or jeopardize accreditation or reaccreditation.
In addition to the ACA accreditation, the Company must undergo periodic
inspections of its premises by agencies of the State of Oklahoma, as well as
annual inspections by the City and State Fire Marshal's Office.

WORKING CAPITAL REQUIREMENTS; NEED FOR ADDITIONAL FINANCING. The
Company may require additional capital to finance its operations and continued
growth. There can be no assurance that the Company will be able to obtain such
working capital or financing if and when needed, or that if obtained, it will
be sufficient or on terms and conditions acceptable to the Company.

BROAD DISCRETION AS TO USE OF PROCEEDS. Due to the contingent nature
of the exercise of the Warrants, it is impossible to determine at this time
what specific projects or uses would be made of the funds. The net proceeds
may be used to fund new projects, expand existing operations, retire
indebtedness or for working capital and other general corporate purposes.
Management will have broad discretion with respect to the expenditure of such
funds. See "USE OF PROCEEDS."

POTENTIAL LEGAL LIABILITY. The Company's management of correctional
and residential care facilities exposes it to potential third-party claims or
litigation by prisoners, residents or other persons for personal injury or
other damage resulting from contact with Company-managed facilities, programs,
personnel or prisoners, including damages arising from a prisoner's escape or
from a disturbance or riot at a Company-managed facility. The Company
participates in an insurance program that provides coverage for certain
liability risks faced by the Company, including accident and personal injury
and bodily injury or property damage to a third party where the Company is
found to be negligent. There can be no assurance, however, that the Company's
insurance will be adequate to cover all potential third-party claims.

ADVERSE PUBLICITY. Both the Company's correctional business and its
residential care business are subject to public scrutiny. Any disturbances at
a Company-managed facility or another privately-managed facility may result in
publicity adverse to the Company and the industry in which it operates, which
could materially adversely affect the Company's business.

NON-ARM'S LENGTH TRANSACTIONS. The Company and its subsidiaries have
engaged in transactions with its Chief Executive Officer and principal
stockholder which may be considered as not having occurred at arm's length.
The terms of such transactions may not have been as favorable as the Company
might have received from unrelated third parties on an arms-length basis. No
guarantee can be given, however, that the Company will not engage in any
non-arm's length transactions with its officers and directors in the future.

CONFLICTS OF INTEREST. The Company's Chief Executive Officer and
principal stockholder is involved in other ventures and activities and he will
spend a portion of his time performing services for such activities. Conflicts
of interest may arise in the allocation of resources and time between the
Company and such activities and ventures.

DEPENDENCE ON KEY PERSONNEL; NO KEY MAN INSURANCE. The Company is
heavily dependent upon its officers and directors for its continued operation,
and in particular on its Chief Executive Officer, Donald E. Smith. The loss of
Mr. Smith's services could have a serious impact on the operation of the
Company's business. While the Company currently pays the premiums on a policy
of life insurance pertaining to Mr. Smith, the beneficiary of the policy is a
banking institution which is a lender to the Company. The Company has no
present intention to purchase a policy of key- man life insurance pertaining to
Mr. Smith.

EMPLOYMENT CONTRACTS. The Company has entered into a written
employment agreement with only one of its executive officers, its Chief
Executive Officer, Donald E. Smith. Mr. Smith's contract is for a five-year
term and commenced in June, 1992, providing for first-year salary of $60,000
and subsequent-year salaries to be determined by the Board of Directors of the
Company. The agreement also contains provisions for severance pay

6
<PAGE> 9
and disability payments, as well as a non-compete agreement preventing him from
engaging in a business deemed similar to that of the Company for a period of
one year from the cessation of his employment. The Company's other officers
and directors are employed by the Company pursuant to verbal agreements.

COMPETITION. A number of other corporations operate both private
correctional facilities and residential care facilities in the same geographic
region as the Company, and still others compete directly with the Company for
contracts with state agencies. While the Company believes that it has certain
advantages in competing for State contracts, some of the companies eligible to
compete may have longer operating histories and greater financial resources
available to them. Since the award of State contracts is pursuant to
competitive bidding, it is possible that the greater financial resources of the
companies eligible to compete might enable them to underbid the Company for
such contracts.

LOSS OF RESIDENTIAL CARE CONTRACTS. Effective July 1, 1995 certain
Oklahoma state contracts for the Company to provide residential care services
in its residential care facilities were not renewed. While Management of the
Company believes the contracts will be reinstated, the loss of these contracts
has a negative impact on the Company's revenues and cash flow. The loss of
revenues from these contracts would not be significant, amounting to
approximately 3% of the Company's revenues for 1995. See "SELECTED FINANCIAL
DATA," "MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION."

CONTINUED CONTROL BY DONALD E. SMITH. The Company's Chief Executive
Officer, Donald E. Smith, controls the Company through his ownership of
1,053,500 shares of Common Stock which is approximately 42% of all Common Stock
presently outstanding. As a result of his ownership of Class B Common Stock as
discussed under "DESCRIPTION OF SECURITIES -- Class B Common Stock," Mr. Smith
will be able to vote an additional 1,210,000 shares which increases his current
voting percentage to approximately 61% before any Warrants are exercised, and
approximately 42% of the voting rights after the exercise of all Warrants.
Additional shares of Class B common stock may be issued to Mr. Smith upon his
guarantee of Company obligations which would further increase his voting
percentage. As of the date of this Prospectus, Mr. Smith is entitled to an
additional 2,220,000 shares of Class B Common Stock which can be issued
immediately for guaranteed debt. See "DESCRIPTION OF SECURITIES -- Warrants."

CORPORATE ACTION POSSIBLE WITHOUT STOCKHOLDER VOTE. Pursuant to
Nevada corporate statutes, the holders of a majority of the Company's Common
Stock may authorize or take corporate action without notice to or the consent
of the stockholders. The Company's stockholders may not have the opportunity
to approve or consent to the Company's involvement in an acquisition or other
transaction, or to the terms of such transaction. A shareholder vote may not
be made available, and in any event, such a shareholder vote would be
controlled by Management.

LARGE AMOUNT OF AUTHORIZED BUT UNISSUED SHARES. It is also possible
that the Company could issue additional shares of its common stock in the
future to finance the acquisition of businesses or properties. The Company's
Articles of Incorporation authorize the issuance of 24,000,000 shares of common
stock (both Common Stock and Class B Common Stock) and 1,000,000 of preferred
stock, of which 2,952,135 were issued and outstanding on the date of the
Prospectus (excluding Class B Common Stock). Additional shares might be issued
without shareholder approval which could have a dilutive effect on the current
shareholders. On the date of the Prospectus there were no commitments or
understandings of any kind pertaining to the Company's acquisition of
businesses or properties, or the issuance of additional shares other than as
disclosed in the Prospectus. See "DESCRIPTION OF SECURITIES."

NO DIVIDENDS. The Company has never paid cash dividends on its
Common Stock and has no plans to pay cash dividends in the foreseeable future.
The policy of the Company's Board of Directors is to retain all available
earnings for use in the operation and expansion of the Company's business.
Therefore, this investment is not appropriate for investors seeking income.
See "DIVIDEND POLICY."

NON-REGISTRATION IN CERTAIN JURISDICTIONS OF SHARES UNDERLYING THE
WARRANTS. The Warrants registered in this Offering are not exercisable
unless, at the time of exercise, the Company has a current prospectus covering

7
<PAGE> 10
the shares of Common Stock issuable upon exercise of the Warrants and such
shares have been registered, qualified or deemed to be exempt under the
securities laws of the state of residence of the exercising holder of the
Warrants. Although the Company will use its best efforts to have all the
shares of Common Stock issuable upon the exercise of the Warrants registered or
qualified on or before the exercise date and to maintain a current prospectus
relating thereto until the expiration of the Warrants, there is no assurance
that it will be able to do so. In this event, the Company would be unable to
issue shares to those persons desiring to exercise their Warrants unless and
until the shares and Warrants could be qualified for sale in jurisdictions in
which such purchasers reside, or an exemption from such qualification exists in
such jurisdictions, and Warrant holders would have no choice but to attempt to
sell the Warrants in a jurisdiction where such sale is permissible or allow
them to expire unexercised. See "DESCRIPTION OF SECURITIES -- Warrants."

SHARES ELIGIBLE FOR FUTURE SALE. A substantial portion (1,132,830
shares) of the Company's currently issued and outstanding shares of common
stock are "restricted" securities. Restricted securities may be sold only upon
compliance with Rule 144 adopted under the Securities Act of 1933 as amended,
or pursuant to a registration statement filed under the Act. Generally
speaking, Rule 144 provides that a person must hold restricted securities for a
period of two years, and may then sell those securities in unsolicited
brokerage transactions or in transactions with a market maker. The holder may
sell an amount equal to one percent of the Company's outstanding common stock
every three months or the average weekly reported volume of trading during the
four calendar weeks preceding the filing of a Notice of Proposed Sale,
whichever is greater. To comply with Rule 144, an issuer must make available
adequate current public information with respect to the issuer. Under certain
circumstances, the sale of shares by a person who has satisfied a three year
holding period is permitted without any quantity limitation and whether or not
there is adequate public information available. Any such sales will likely
have a depressive effect on the market price of the Company's Common Stock.

DETERMINATION OF EXERCISE PRICE OF WARRANTS. The exercise price of
the Class C Warrants was determined as part of the structuring of the 1994
private placement through negotiations between the Company and its placement
agent, Westminster Securities Corporation ("Westminster"). Accordingly, the
exercise prices do not necessarily bear any relationship to the assets,
operating performance, or other criteria of value applicable to the Company.

REDEMPTION OF WARRANTS. Class C Warrants are subject to redemption
at $0.01 per Warrant on 30 days written notice if a registration statement
covering said Warrants is in effect and if the bid price of the Common Stock,
for a period of 30 consecutive trading days prior to the notice of redemption,
equals or exceeds $5.00 per share, and if a Registration Statement of the
Company covering the Class C Warrants and the shares of Common Stock issuable
upon the exercise of the Warrants is current at all times during the 30-day
notice period and for the 30 days immediately preceding the notice period. In
the event the Company exercises the right to redeem the Class C Warrants, such
Warrants would be exercisable until the close of business on the date fixed for
redemption in such notice. If any Warrant called for redemption is not
exercised by such date, it will cease to be exercisable and the holder will be
entitled only to the redemption price. See "DESCRIPTION OF SECURITIES --
Warrants."

EFFECT OF WARRANTS. The holders of the Company's outstanding
Warrants have the opportunity to profit from a rise in the market value of the
Common Stock of the Company, if any, at the expense of the holders of Common
Stock. A Warrant holder may be expected to exercise Warrants at a time when
the Company, in all likelihood, would be able to obtain equity capital, if it
so desired, by a public sale of new Common Stock on terms more favorable than
those provided in the Warrants. Exercise of the Warrants could dilute the
equity interest of other stockholders in the Company. See "DESCRIPTION OF
SECURITIES -- Warrants."

ILLIQUIDITY. Although the Company's Common Stock is publicly traded,
the trading is very thin and may not be an indication of the value of the
Common Stock. There is presently no established trading market for the
Warrants. While there are several securities broker-dealers making a market in
the Company's Common Stock, there is no assurance that a public market for the
Company's securities will continue to be made.

8
<PAGE> 11
LOSSES. The Company incurred a net loss of $84,800 for the year ended
December 31, 1995 of which $31,900 was from continuing operations and $52,900
from discontinued operations. The new correctional facility in Tulsa, Oklahoma
had a start-up loss in 1995 of $101,000. The Company has also incurred losses
in the first two quarters of 1996. See "MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION -- Results of Operations."

LIMITATION OF LIABILITY OF OFFICERS AND DIRECTORS; INDEMNIFICATION.
The Company's Articles of Incorporation empower the Company to indemnify the
officers and directors against judgments, fines, and other amounts and costs
resulting from actions or proceedings in which they may be involved by reason
of their having held such positions, to the fullest extent permitted pursuant
to the laws of the State of Nevada. The Articles of Incorporation also limit
the personal liability of the Company's directors to the fullest extent
permitted by the Nevada Revised Statutes. The Nevada Revised Statutes contain
provisions entitling directors and officers to indemnification from judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys'
fees, as a result of an action or proceeding in which they may be involved by
reason of being or having been a director or officer of the Company; provided
said officers or directors acted in good faith. The Company's By-Laws state
that such indemnification may not be provided in relation to matters as to
which the person seeking indemnification is adjudged to be liable for
negligence or misconduct in the performance of duty. The Company's policy,
therefore, is that no indemnification will be provided for bad faith actions
and/or breaches of management's fiduciary duties, including in connection with
shareholder derivative suits.

THE COMPANY

Avalon Community Services, Inc. (the "Company") provides various
services that have historically been provided by governmental agencies. Avalon
Enterprises, Inc. ("Avalon") was incorporated in Nevada in September, 1990. On
June 15, 1992, Avalon acquired Southern Correction Systems, Inc. ("SCS"). SCS,
which was incorporated in 1990, was engaged in the business of providing
private correctional services. In June, 1992, Avalon's name was changed to
Avalon Community Services, Inc. The Company acquired two affiliated companies,
Elk City Properties, Inc. ("ECP") and Central Oklahoma Properties Corp.
("COP"), effective December 31, 1993. ECP is engaged in the business of
providing residential care services and COP owns and leases certain related
real estate.

The Company's executive office is located at 13401 Railway Drive,
Oklahoma City, Oklahoma 73114. The Company's telephone number is (405)
752-8802.

USE OF PROCEEDS

Assuming all Warrants are exercised, the Company would receive net
proceeds of approximately $1,985,500 before paying approximately $10,000 in
legal fees, accounting fees, printing and selling expenses and other offering
costs. Receipt of proceeds by the Company is contingent on the exercise of the
Warrants which in turn is contingent on the market price of the Company's
Common Stock. Therefore, it is impossible at this time to determine specific
project's expenditures or use of funds. The net proceeds may be used by the
Company to fund new projects in the correctional, residential care, assisted
living or in other areas of privatization of traditional government services,
expand existing operations, retire existing indebtedness, or for working
capital and general corporate purposes.

9
<PAGE> 12
The Company will not receive any of the proceeds from the sale of the
Common Stock or Warrants by the Selling Shareholders.

DIVIDEND POLICY

The Company has paid no dividends as of the date of this Prospectus
nor does it intend to pay dividends on its Common Stock in the foreseeable
future. See "DESCRIPTION OF SECURITIES." The Company currently intends to
retain future earnings to fund development and growth of its business. In the
future, any payment of dividends on Common Stock will be dependent upon the
financial condition, capital requirements and earnings of the Company and any
other factors the Board of Directors may deem relevant. Therefore, this
investment is not appropriate for investors seeking income.

PRICE RANGE OF COMMON STOCK

The Company's Common Stock is listed for trading on the NASDAQ
SmallCap Market System under the trading symbol "CITY". The following table
reflects the range of high and low bid prices, as reported by the NASDAQ, for
each quarterly period during 1994 and 1995 and the two quarters of 1996. The
prices represent inter-dealer prices, without mark-up, mark-down or commission
and may not represent actual transactions.

<TABLE>
<CAPTION>
Quarterly Period Ended High Low
-------------------------------------------------------
<S> <C> <C>
March 31, 1994 2 1/4 1
June 30, 1994 2 1/8 3/4
September 30, 1994 3 1/8 1 5/8
December 31, 1994 3 1/8 2
March 31, 1995 2 1/8 1
June 30, 1995 2 11/16 1
September 30, 1995 3 1/8 1
December 31, 1995 3 3/8 2 1/4
March 31, 1996 2 1/2 2
June 30, 1996 7 5/8 2 1/2
</TABLE>

The average of the bid and asked prices for the Common Stock, as
reported on the NASDAQ SmallCap Market System was $4.50 per share on September
27, 1996. The Company had approximately 476 holders of its common stock as of
September 27, 1996.

CAPITALIZATION

The following table sets forth the historical capitalization of the
Company as of December 31, 1995 and June 30, 1996, as derived from the
Consolidated Financial Statements of the Company. The information shown below
should be read in conjunction with "MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION" and the Consolidated Financial Statements and Notes and
other financial information included elsewhere herein.

10
<PAGE> 13
<TABLE>
<CAPTION>
December 31, 1995 June 30, 1996
----------------- -------------
<S> <C> <C>
Current Maturities
of Long-Term Debt . . . . . . . . . . . . . . . . . . . $ 278,837 $ 924,830
========== ==========
Long-Term Debt, less Current Maturities . . . . . . . . . $3,449,275 $2,759,659
========== ==========
Stockholders' Equity
Common Stock, 24,000,000 shares authorized:
Class A, par value $.001, 2,496,905 and 2,868,905
shares issued and outstanding . . . . . . . . . . . 2,497 2,869
Class B, no par, 1,210,000
shares issued and outstanding . . . . . . . . . . . -- --
Paid-In Capital . . . . . . . . . . . . . . . . . . . . 2,678,214 3,857,275
Accumulated Deficit . . . . . . . . . . . . . . . . . . (339,885) (454,221)
---------- ----------
Total Stockholders' Equity . . . . . . . . . . . . . $2,340,826 $3,405,927
========== ==========
</TABLE>

SELECTED FINANCIAL DATA

The following selected financial data for the years ended December 31,
1994 and 1995, are derived from the audited Consolidated Financial Statements
of the Company and the six months ended June 30, 1996 and 1995 are derived from
the unaudited Consolidated Financial Statements of the Company. The data
should be read in conjunction with the Consolidated Financial Statements,
related notes, and other financial information included herein.

<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
----------------------------------- -------------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:

Revenues From Continuing
Operations . . . . . . . . . . . . $2,254,490 $2,536,136 $3,056,032 $1,410,224 $1,629,137
Income (Loss) From
Continuing Operations . . . . . . . 60,905 66,893 (31,942) 51,498 (114,336)
Income (Loss) From Continuing
Operations Per Common Share . . . . 0.04 0.03 (0.01) 0.02 (0.04)
Income (Loss) From
Discontinued Operations . . . . . . - (59,539) (52,898) (57,598) -
Income (Loss) From Discontinued
Operations Per Common Share . . . . - (0.03) (0.02) (0.02) -
</TABLE>

Total Assets . . . . . . . . . . . . $3,222,581 $4,725,616 $6,450,199 $6,093,337 $7,698,428
Long-Term Debt,
less Current Maturities . . . . . . 1,085,907 1,512,797 3,449,275 3,071,878 2,759,659
Stockholder's Equity . . . . . . . . 1,086,604 2,425,666 2,340,826 2,419,220 3,405,927
</TABLE>

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES -

The Company's cash was increased by $888,000 for the six months ended
June 30, 1996. This was primarily due to Class C stock purchase warrants being
exercised for a net amount of $1,179,000. Approximately $139,000 was used for
capital expenditures. Working capital was positive as of June 30, 1996,
primarily due to the exercise of warrants. Repayment of long term borrowing
was approximately $147,000 with an additional $99,000 long term borrowings
incurred.

The corrections segment of the Company is continuing to expand. In
August, the Company purchased the operations of a medium security level prison
in El Paso, Texas, primarily using the proceeds from the warrant

11
<PAGE> 14
exercise. Revenues from the El Paso prison will begin immediately and be
approximately $110,000 per month before any expansion. Cash flows from the
existing correctional centers will continue to be recognized as the facilities
reach full capacity. In the second quarter 1996, the Avalon Correctional
Center remains at a break-even level before interest and depreciation.
Substance and abuse programs were added in Nebraska.

The Company has plans for the development and management of multiple
assisted living centers in Oklahoma and other states in the Midwest subject to
future funding. The assisted living center in Oklahoma City, Emerald Square, is
under construction and is projected to begin operations in October, 1996. The
Company is operating an assisted living center in Fort Collins, Colorado,
Diamond Crest, which will open in late August, 1996.

The Company believes it has sufficient cash reserves and ample cash
flows from operations to meet its current cash requirements. Additional
sources of funding may be required for future expansion. The Company will
explore other sources of funding such as additional bank borrowing or the sale
of equity securities. Additional funds may also be available through the
exercise of the Company's outstanding stock purchase warrants. Management is
unaware of any other evident trends that are likely to result in material
increases or decreases in the liquidity of the Company.

RESULTS OF OPERATIONS -

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1995 -

Total revenues increased by $219,000 or 16% primarily as a result of
an increase in correctional revenues from Avalon Correctional Center of
$347,000 offset by a decrease in residential care revenue of approximately
$170,000. Net loss for the six months ended June 30, 1996 was $114,000 or $.04
per share as compared to a net loss for the six months ended June 30, 1996 of
$6,000 or $.00 per share. The loss in 1996 was primarily due to a litigation
loss of $70,000.

Revenue from correctional operations increased by $317,000 or 36% from
1995 to 1996 and operating expenses increased by 92%, primarily due to the
addition of the Avalon Correctional Center. The profit margin for Carver
Center is 51% while the profit margin for Avalon Correctional Center is 19%
primarily due to the Avalon Correctional Center. The average number of inmates
or census for the first six months ended 1996 increased 31% over 1995.

Operating revenues for contract services, which are mostly residential
care, decreased by $170,000 or 55%, primarily due to a 16% decrease in
occupancy and a loss of state contract revenues. There was also a decrease of
operating expenses of $115,000 or 38%.

General and administrative expenses increased by $13,000 or 4%.
Depreciation expense increased by $70,000 in 1996 as a result of the
construction of the Carver Center addition and the Avalon Correctional Center
in 1995. Interest expense increased approximately $93,000 primarily due to
interest related to the construction of the new correctional facilities.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE YEAR ENDED DECEMBER 31, 1994 -

The Company had a net loss in 1995 of $84,800 or $.03 per share, as
compared to net income in 1994 of $7,400 or $.00 per share. The majority of
the loss incurred in 1995, $52,900 or $.02 per share, was due to discontinued
park property management operations. The loss from discontinued operations in
1994 was $59,600 or $.03 per share. The new correctional facility, Avalon
Correctional Center, had a start up loss in 1995 of $101,000, and the
residential care facilities had a net operating loss in 1995 of $52,300 as
compared to a net operating gain in 1994 of $140,600.

Total revenues for 1995 increased by 21% from $2,536,000 to
$3,056,000, primarily due to an increase in revenue from corrections, offset by
a decrease in revenue from residential care. Operating expenses increased by
26%, due to the increase in correctional operations and an increase in
residential care expenses.

CORRECTIONS. Operating income for 1995 was $865,700 as compared to
$596,800 in 1994, an increase of approximately 45%. Revenues increased from
$1,364,000 in 1994 to $2,106,000 in 1995 directly as a result of the expansion
of the Carver Center and the opening of Avalon Correctional Center. The average
inmate census increased from 143 in 1994 to 198 in 1995. The average revenue
per inmate day rate increased from approximately $26 in 1994 to approximately
$29 in 1995. Operating expenses increased by 62% also as a result of the
expansion of the facilities. Avalon Correctional Center incurred an operating
start up loss of approximately $101,000 in 1995.

RESIDENTIAL CARE. Operating loss for 1995 was $52,300 as compared to
an operating gain of $140,600 in 1994. Revenues decreased by 11% in 1995 from
$1,007,600 in 1994 to $896,900 in 1995 primarily as a result of a 9% decrease
in census and a loss of state contracts of approximately $60,000. State
contract revenues accounted for approximately 3% of total revenues in 1995.
Operating expenses increased by 9% primarily due to an increase in staffing.
Effective January 1, 1996, the operations were contracted to a tax exempt
organization.

PARK MANAGEMENT. The Company ceased operations and canceled its park
management contract in June, 1995. The loss on the disposal of operations,
net of income tax benefit of $27,400, was $34,100. Loss from operations in
1994 was $59,500 as compared to a loss from operations in 1995 of $18,800.
Management believes that it is in the Company's best interest to devote
available resources to opportunities in other areas of the Company's business.

CORPORATE. General and administrative expenses increased in 1995 by
14% from $529,100 to $603,300. The increase was a result of additional
staffing, increased legal expenses, and an increase in advertising, marketing,
and promotional costs. The increase in 1995 of $110,700 in interest expense
was primarily due to interest on the funds borrowed for the expansion of the
Carver Center ($39,000) and the construction of Avalon Correctional Center
($69,000). Depreciation and amortization expense increased by $91,900
primarily as a result of the expansion of Carver Center and the opening of
Avalon Correctional Center.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO THE YEAR ENDED DECEMBER 31, 1993 -

CORRECTIONS. Revenues increased 7% in 1994 from $1,276,000 to
$1,364,000 as a result of both increases in contract rates and total inmate
days. The rate increases were effective July 1, 1993 and 1994. Operating
expenses increased 5% in 1994 from $665,000 to $696,000 due to additional
personnel, food and other variable costs associated with the increase in total
inmate days. Depreciation increased $10,000 resulting from facility
improvements and additional transportation equipment.

RESIDENTIAL CARE. Revenues increased 13% in 1994 from $894,000 to
$1,008,000 primarily as a result of rate escalations in monthly fees effective
January 1, 1994 and reimbursements of additional expenses incurred for the
benefit of the certain residents. Operating expenses increased 11% in 1994
from $733,000 to $810,000 principally as a result of additional personnel
costs, increased facility rent and additional repairs and maintenance. The
increase of $7,000 in depreciation expense in 1994 was primarily attributable
to the upgrading of furnishings for both facilities during 1994.

PARK MANAGEMENT. The Company's park management operations commenced
in April, 1994 generating revenues of $83,000 and incurring related costs and
expenses, including depreciation, of $171,000.

CORPORATE. General and administrative expenses increased 19% in 1994
from $443,000 to $529,000. The primary factors accounting for this increase
were: a) increases in salaries for officers and administrative personnel; b)
additional staffing of administrative personnel and; c) legal and professional
fees incurred in 1994 in connection with December 31, 1993 acquisitions. These
factors were partially offset by an increase of $30,000 in administrative fees
charged to affiliates. Depreciation expense increased $16,000 due to
improvements made to the Company's administrative offices and additional
transportation equipment. The increase of $19,000 in interest expense was due
to: (a) indebtedness of $280,000 incurred in the second quarter of 1993 and;
(b) short-term indebtedness of $310,000 incurred in late 1993.

SELLING STOCKHOLDERS

The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock and Warrants as of September
27, 1996 by the stockholders of the Company who are offering securities
pursuant to this Prospectus (the "Selling Stockholders"). "Beneficial
Ownership" includes shares for which an individual, directly or indirectly, has
or shares voting or investment power or both. The listing by each of the
Selling Stockholders does not include shares of Common Stock issuable upon
exercise of the Warrants.

12
<PAGE> 15
<TABLE>
<CAPTION>
Before the Offering After the Offering
----------------------- Securities ---------------------
Title Number Percent to Be Number Percent
Name of of Beneficially of Sold In Beneficially Of
Beneficial Owner Class Owned Class Offering Owned Class
- ---------------- ----- ------------ ------- ---------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
Commercial Ventures, Inc. . . . . C Warrant 70,000 7.9 70,000 0 -
Heather Sara Allenstein Trust
Joel Marcus, Trustee . . . . . C Warrant 35,000 3.9 35,000 0 -
Rachel Ruth Allenstein Trust
Joel Marcus, Trustee . . . . . C Warrant 35,000 3.9 35,000 0 -
Myrna Trickey. . . . . . . . . . C Warrant 25,000 2.8 25,000 0 -
RECOR, Inc. . . . . . . . . . . . D Warrant 90,000 32.7 90,000 0 -
Edwin Bruce Lowman II. . . . . . D Warrant 123,750 45.0 123,750 0 -
R.P. Pearce, Jr.. . . . . . . . . D Warrant 27,500 10.0 27,500 0 -
Bruce Williams. . . . . . . . . . D Warrant 33,750 12.3 33,750 0 -
RECOR, Inc. . . . . . . . . . . . Common Stock 22,500 * 22,500 0 -
Edwin Bruce Lowman II. . . . . . Common Stock 33,750 * 33,750 0 -
R.P. Pearce, Jr. . . . . . . . . Common Stock 7,500 * 7,500 0 -
Bruce Williams. . . . . . . . . . Common Stock 11,250 * 11,250 0 -
</TABLE>

- ------------------
*Less than 1% of outstanding shares

DESCRIPTION OF SECURITIES

The Company is authorized to issue 24,000,000 shares of common stock
(both Common Stock, par value $0.001 and Class B Common Stock, no par value)
and 1,000,000 shares of preferred stock, par value $0.001, giving the Board of
Directors the authority to set the rights and preferences of the preferred
stock. On September 27, 1996 there were 2,952,135 shares of Common Stock and
1,210,000 shares of Class B Common Stock issued and outstanding.

COMMON STOCK

The shares of Common Stock are equal in all respects unless otherwise
designated. Each issued and outstanding share of Common Stock entitles to
holder thereof to one vote on all matters submitted to a vote of the
stockholders. The Company's Certificate of Incorporation does not permit
cumulative voting of shares in the election of directors or permit preemptive
rights to stockholders to acquire additional shares, obligations, warrants or
other securities of the Company. The Certificate of Incorporation makes no
provision with respect to subscription or conversion rights, redemption
privileges or sinking funds with respect to shares of the Company's Common
Stock. Subject to the rights of holders of preferred stock (if any), dividends
on Common Stock may be paid if, as and when declared by the Board of Directors
out of funds legally available therefor. The Company has never paid cash
dividends on shares of Common Stock and does not expect to pay such dividends
in the foreseeable future. The Company intends to retain all funds available
to it after payment of its commitments and obligations for the operation and
expansion of its business.

CLASS B COMMON STOCK

The Company created a Class B common stock and issued 1,210,000 shares
to Donald E. Smith in connection with the acquisition of two affiliated
entities. The shares were issued to Mr. Smith in exchange for his personal
guarantee of substantially all of the outstanding debt of the acquired
entities. The Company has also agreed to issue one share of Class B common
stock to Mr. Smith for each dollar of certain Company debt guaranteed by him.
Under the terms of the agreement, 2,220,000 additional shares of Class B Common
Stock can be issued within 60 days. The Class B common stock is entitled to
vote in all actions requiring a vote of the stockholders, but has no
liquidation rights, claim on earnings or the payment of dividends and is
non-transferable.

13
<PAGE> 16
WARRANTS - GENERAL

ADJUSTMENTS AND ANTI-DILUTION PROVISIONS. The exercise price and the
number of shares of Common Stock purchasable upon the exercise of the Warrants
are subject to adjustment upon the occurrence of certain events, including
stock dividends, stock splits, combinations or reclassifications of the Common
Stock, or sale by the Company of shares of its capital stock. Additionally, an
adjustment would be made in the case of a reclassification or exchange of
Common Stock, consolidation or merger of the Company with or into another
corporation or sale of all or substantially all of the assets of the Company
in order to enable Warrant holders to acquire the kind and number of shares of
stock or other securities or property receivable in such event by a holder of
the number of shares of Common Stock that might otherwise have been purchased
upon the exercise of the Warrant. No adjustment to the exercise price of the
shares subject to the Warrants will be made for dividends (other than dividends
in the form of stock), if any, paid on the Common Stock or for: (i) the
issuance of restricted securities in connection with acquisitions by the
Company; (ii) the grant of stock options to persons covered by incentive stock
option plans provided that no more than 250,000 shares of Common Stock be
issued pursuant to such plans from the date of this Prospectus until the
expiration or redemption of the Warrants; (iii) warrants to accommodate lines
of credit or creditors, provided that no registration or registration rights
shall be afforded such warrants or the underlying Common Stock at any time
within one year after effectiveness of the registration of the securities
issued pursuant to this Offering; and (iv) Class B Common Stock voting shares
and up to 750,000 warrants, exercisable for one share of common stock each, at
an exercise price of $1.50 to be issued to Donald E. Smith or his designee
solely upon Mr. Smith's guarantee of corporate obligations.

The Company may authorize one warrant for each one dollar of corporate
obligations guaranteed by Smith up to the maximum amount. For this exception
to the anti-dilution provisions to apply, the corporate debt must first be
approved by the Board of Directors, be bona fide, and the guarantee must be
reasonably required by the creditor. These anti-dilution provisions shall
remain in full force and effect until redemption of all Warrants then
outstanding or expiration of the Warrants. These anti-dilution provisions may
be terminated by the Company provided: (i) that the bid price of the Company's
common stock shall have been $4.00 or more for sixty (60) consecutive trading
days; (ii) the Company presents to Westminster Securities Corporation
("Westminster") as the placement agent for the Warrants a bona fide offer,
agreement, term sheet, or Underwriting Agreement by a duly licensed
broker-dealer proposing to place, on a firm or best efforts basis, securities
of the Company; and (iii) effecting the agreement would trigger application of
the anti-dilution provisions. If these conditions are met, the Company shall
notify Westminster and afford Westminster ten (10) business days in which to
match the terms offered to the Company. At the expiration of the ten (10) day
period, the Company may terminate the anti-dilution provisions by appropriate
corporate action, if Westminster has not matched the offering. The Placement
Agent, on behalf of the purchasers in this Offering, shall be empowered to
release or waive these adjustment and anti-dilution provisions in whole or in
part.

TRANSFER, EXCHANGE AND EXERCISE. The Warrants are in registered form
and may be presented to the Transfer and Warrant Agent for transfer, exchange
or exercise at any time on or prior to their expiration date, at which time the
Warrants become wholly void and of no value. If a market for the Warrants
develops, the holder may sell the Warrants instead of exercising them. There
can be no assurance, however, that a market for the Warrants will develop or
continue. If the Company is unable to qualify the Common Stock underlying the
Warrants for sale in particular states, holders of the Warrants residing in
such states and desiring to exercise the Warrants will have no choice but to
sell such Warrants or allow them to expire. See "DESCRIPTION OF SECURITIES --
Transfer and Warrant Agent." Furthermore, if a Warrant is exercised prior to
the underlying Common Stock being registered, the Common Stock will be a
restricted security and subject to a holding period. See "RISK FACTORS --
Shares Eligible for Future Sale."

RIGHTS OF WARRANTHOLDERS. Holders of the Warrants have no voting
rights and are not entitled to dividends. In the event of liquidation,
dissolution, or winding up of the affairs of the Company, holders of the
Warrants will not be entitled to participate in any liquidation distribution.

14
<PAGE> 17
CLASS A AND CLASS B WARRANTS

Stock purchase warrants were issued in April, 1991 in connection with
an initial public offering of Avalon Common Stock. The warrants were issued as
part of units of the Company's securities which contained one share of Common
Stock, 16 Class A warrants and 16 Class B warrants per Unit offered. This
initial public offering was underwritten by Westminster Securities Corporation.
The following is a brief summary of certain provisions of the Warrants, but
such summary does not purport to be complete and is qualified in all respects
by reference to the actual text of the Warrant Agreements between the Company
and American Securities Transfer, Inc. (the "Transfer and Warrant Agent").
Copies of the Warrant Agreements may be obtained from the Company upon the
written request of a Warrant holder.

The Class A Warrants expired on March 26, 1996 without being
exercised. Each Class B warrant may be exercised by its registered holder to
purchase one share of Common Stock at an exercise price of $6.00 until March
26, 1999. The Class B warrants may be redeemed by the Company prior to
exercise upon 30 days written notice to the registered holders for $0.01 per
warrant. The holders of the Class B warrants have no voting rights and are not
entitled to dividends. In the event of liquidation, dissolution or winding up
of the affairs of the Company, holders of these warrants will not be entitled
to participate in any liquidation distribution.

The Company issued 145,595 shares of Common Stock during 1993 in
connection with the exercise of certain underwriter warrants, 99,095 Class A
warrants and 44,900 Class B warrants, resulting in gross proceeds to the
Company of approximately $825,000. As of the date of this Prospectus, there
are 275,100 Class B warrants still outstanding.

CLASS C WARRANTS

The Company has issued Class C Warrants to purchase 1,000,000 shares
of Common Stock in connection with a private placement and Class C Warrants to
purchase 165,000 shares of Common Stock in settlement of a pending lawsuit and
as a part of an asset purchase agreement. In 1996, 377,000 Class C Warrants
were exercised resulting in gross proceeds to the Company of approximately
$1,319,000. The following is a brief summary of certain provisions of the
Warrants, but such summary does not purport to be complete and is qualified in
all respects by reference to the actual text of the Warrant Agreement between
the Company and American Securities Transfer, Inc. (the "Transfer and Warrant
Agent"). A copy of the Warrant Agreement may be obtained from the Company upon
the written request of a Warrant holder.

EXERCISE PRICE AND TERMS. Each Warrant entitles the holder thereof to
purchase one share of Common Stock at a price of $3.50 per share, subject to
adjustment in accordance with the anti-dilution and other provisions referred
to above under " Warrants-General." The holder of any Warrant may exercise
such Warrant by surrendering the certificate representing the Warrant to the
Transfer and Warrant Agent, with the election to purchase form on the reverse
side of such certificate properly completed and executed, together with payment
of the exercise price. Subject to compliance with applicable state securities
laws, the Warrants may be exercised at any time in whole or in part at the
applicable exercise price until expiration of the Warrants on December 30,
1999. See "RISK FACTORS -- Non-Registration in Certain Jurisdictions of Shares
Underlying the Warrants."

REDEMPTION OF WARRANTS. The Class C Warrants are subject to
redemption at $.01 per Warrant in the event that (i) the bid price of the
Company's Common Stock shall have been $5.00 or more for 30 consecutive trading
days prior to the date of the notice of redemption; (ii) 30 days advance
written notice of redemption shall be given to all Warrant holders of record;
and (iii) a Registration Statement of the Company covering the Warrants and the
shares of Common Stock issuable upon the exercise of the Warrants must be
current at all times during the 30 day notice period, and must have been
current for 30 days prior to the notice. In the event the Company exercises
the right to redeem the Warrants, such Warrants will be exercisable until the
close of business on the date for redemption fixed in such notice. If any
Warrant called for redemption is not exercised by such time, it will cease to
be exercisable and the holder will be entitled only to the redemption price.
See "RISK FACTORS -- Redemption of Warrants."

15
<PAGE> 18
CLASS D WARRANTS

The Company has issued Class D Warrants to purchase 275,000 shares of
Common Stock in a recent asset acquisition. The following is a brief summary
of certain provisions of the Warrants, but such summary does not purport to be
complete and is qualified in all respects by reference to the actual text of
the Warrant Agreement between the Company and American Securities Transfer,
Inc. (the "Transfer and Warrant Agent"). A copy of the Warrant Agreement may
be obtained from the Company upon the written request of a Warrant holder.

EXERCISE PRICE AND TERMS. Each Warrant entitles the holder thereof to
purchase one share of Common Stock at a price of $5.12 per share, subject to
adjustment in accordance with the anti-dilution and other provisions referred
to above under " Warrants-General." The holder of any Warrant may exercise
such Warrant by surrendering the certificate representing the Warrant to the
Transfer and Warrant Agent, with the election to purchase form on the reverse
side of such certificate properly completed and executed, together with payment
of the exercise price. Subject to compliance with applicable state securities
laws, the Warrants may be exercised at any time in whole or in part at the
applicable exercise price until expiration of the Warrants on August 2, 2001.
See "RISK FACTORS -- Non-Registration in Certain Jurisdictions of Shares
Underlying the Warrants."

REDEMPTION OF WARRANTS. The Class D Warrants are subject to
redemption at $.01 per Warrant in the event that (i) the bid price of the
Company's Common Stock shall have been $6.00 or more for 30 consecutive trading
days prior to the date of the notice of redemption; (ii) 30 days advance
written notice of redemption shall be given to all Warrant holders of record;
and (iii) a Registration Statement of the Company covering the Warrants and the
shares of Common Stock issuable upon the exercise of the Warrants must be
current at all times during the 30 day notice period, and must have been
current for 30 days prior to the notice. In the event the Company exercises
the right to redeem the Warrants, such Warrants will be exercisable until the
close of business on the date for redemption fixed in such notice. If any
Warrant called for redemption is not exercised by such time, it will cease to
be exercisable and the holder will be entitled only to the redemption price.
See "RISK FACTORS -- Redemption of Warrants."

PREFERRED STOCK

The Articles of Incorporation were amended by the stockholders at the
annual meeting in June, 1994 to authorize preferred stock. The Board of
Directors is authorized to issue shares of preferred stock in series by
adoption of a resolution or resolutions for the issue of such series of
preferred stock. Each series will have such distinctive designation or title
as may be fixed by the Board of Directors prior to the issuance of any shares
thereof. Upon issuance, each series will have those voting powers, if any, and
those preferences and relative, participating, optional or other special
rights, with such qualifications, limitations or restrictions of those
preferences and/or rights, as stated in such resolution or resolutions
providing for the issue of such series of preferred stock.

TRANSFER AND WARRANT AGENT

The Company has appointed American Securities Transfer, Inc., 1825
Lawrence Street, Suite 444, Denver, Colorado 80202-1817, as its registrar and
transfer agent, and the warrant agent for the warrants issued by the Company.

PLAN OF DISTRIBUTION

The 75,000 shares of Common Stock and 440,000 Warrants being offered
hereby for the benefit of the Selling Stockholders were originally issued by
the Company under an asset purchase contract and in settlement of pending
litigation against to Company. The Company agreed to register the securities
for resale by the Selling Stockholders. See "DESCRIPTION OF SECURITIES --
Registration Rights." The Company will not receive any of the proceeds from
the sale of such securities by the Selling Stockholders. If any Warrants are
exercised, the Company will receive proceeds from the exercise of such
Warrants.

The Selling Stockholders have advised the Company that they propose to
offer for sale and to sell Warrants and the Common Stock underlying the
Warrants when issued from time to time during the next 12 months through

16
<PAGE> 19
brokers in the over-the-counter market, in private transactions, negotiated
transactions, or otherwise. Accordingly, sales prices and proceeds to the
Selling Stockholders for any shares of Common Stock or Warrants sold will
depend upon market price fluctuations and the manner of sale.

If the shares or Warrants are sold through brokers, the Selling
Stockholders will pay brokerage commissions and other charges, including any
transfer taxes (which compensation as to a particular broker-dealer might be in
excess of customary commissions). The Selling Stockholders will also pay the
fees associated with their Common Stock and Warrants registered hereby and
expenses of any counsel retained by them in connection with this offering.
Except for the payment of such legal fees and expenses, brokerage commissions
and charges, the Company will bear all expenses in connection with registering
the shares offered hereby. Such expenses are estimated to total approximately
$10,000.

The offering by the Company of the 440,000 shares of Common Stock
underlying the Warrants is made exclusively to the holders of the Warrants.

LEGAL MATTERS

The legality of the securities offered hereby will be passed upon for
the Company by Robertson & Williams, Inc., a professional corporation.

EXPERTS

The consolidated balance sheets of Avalon Community Services, Inc. and
subsidiaries as of December 31, 1994 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
then ended, incorporated by reference in this Prospectus and the Registration
Statement, have been included or incorporated by reference herein in reliance
on the report of Coopers & Lybrand L.L.P., independent accountants, given on
the authority of that firm as experts in accounting and auditing.

17
<PAGE> 20
================================================================================

No dealer, salesperson, or other person has been authorized to give
any information or to make any representation not contained in this Prospectus,
and, if given or made, such information and representation must not be relied
upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction or to any person to whom it is
unlawful to make such offer or solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create an
implication that there has been no change in the facts set forth in this
Prospectus or in the affairs of the Company since the date hereof.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . 5
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . 9
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . 9
DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . 9
PRICE RANGE OF COMMON STOCK . . . . . . . . . . . . . . . . . . 10
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . 10
SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . 11
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION . . . . . . . . . . . . . . . . . . . 11
SELLING STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . 12
DESCRIPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . 13
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . 16
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 17
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>

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

515,000 SHARES OF COMMON STOCK

440,000 REDEEMABLE
COMMON STOCK PURCHASE WARRANTS

P R O S P E C T U S

SEPTEMBER ___, 1996

13401 RAILWAY DRIVE
OKLAHOMA CITY, OKLAHOMA 73114
(405) 752-8802

================================================================================
<PAGE> 21
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.(1)

<TABLE>
<S> <C>
SEC Filing Fees(2) . . . . . . . . . . . . . . $ 818.59
Registrar and Transfer Agent Fee . . . . . . . 800.00
Printing and Engraving . . . . . . . . . . . . 600.00
Legal Fees(2) . . . . . . . . . . . . . . . . 5,500.00
Accounting Fees . . . . . . . . . . . . . . . 1,500.00
Miscellaneous Fees . . . . . . . . . . . . . . 781.41
------------

Total . . . . . . . . . . . . . . . . . . $ 10,000.00
============
</TABLE>

- -------------
(1) All amounts are estimated except SEC filing fee.
(2) The Selling Shareholders will pay the fees associates with their
common stock and expenses of counsel retained by them in connection
with this offering.

15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Chapter 78 of the Nevada Revised Statutes (Private Companies) provides
that a director, officer, employee or agent of the Corporation may be
indemnified against suit or other proceeding whether it were civil, criminal,
administrative or investigative if he becomes a party to said lawsuit or
proceeding by reason of the fact that he is a director, officer, employee or
agent of the corporation. The compensation for indemnification includes
judgments, fines and amounts paid in settlement actual and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interest of the corporation.

However, no indemnification shall be made in respect of any claim,
issue or matter as to which such person shall have been judged liable for
negligence or misconduct in the performance of his duty to the corporation,
unless the court in which the action or suit is brought shall determine that
despite his liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to be indemnified for expenses such
court shall deem proper.

The By-Laws of the corporation outline the conditions under which any
director or officer of the registrant may be indemnified. Article V provides
that to the extent and in the manner permitted by the laws of the State of
Nevada, the corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
other than an action by or in the right of the corporation, by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement.

16. EXHIBITS.

<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
<S> <C>
3. (i) Articles of Incorporation (1)

(ii) ByLaws (1)

(iii) Articles of Amendment to Registrant's Articles of Incorporation (2)

(iv) Unanimous Consent of Board of Directors Authorizing Extension of
</TABLE>

II-1
<PAGE> 22
<TABLE>
<S> <C>
Expiration Dates of Class "A" and Class "B" Redeemable Warrants (3)

(v) Certificate of Corporate Resolutions, dated December 15, 1993,
regarding authorization of Class B Common Stock and Amendments to
Articles (5)

4. (i) Form Stock Certificate (1)

(ii) Form of Class "A" Redeemable Warrant (1)

(iii) Form of Class "A" Warrant Agreement (1)

(iv) Form of Class "B" Redeemable Warrant (1)

(v) Form of Class "B" Warrant Agreement (1)

(vi) Form of Class "C" Redeemable Warrant (6)

(vii) Form of Class "C" Warrant Agreement (6)

(viii) Form of Class "D" Warrant Agreement*

5. Opinion of Robertson & Williams, Inc. Re: Legality*

10.(i) Contract between Southern Corrections Systems, Inc. and the
Department of Corrections of the State of Oklahoma for halfway
house services for the year ended June 30, 1996 for Oklahoma City
facility (7)

(ii) Contract between Southern Corrections Systems, Inc. and the
Department of Corrections of the State of Oklahoma for public
works inmates for the year ended June 30, 1996 (7)

(iii) Contract between Southern Corrections Systems, Inc. and the
Department of Corrections of the State of Oklahoma for halfway
house services for the year ended June 30, 1996 for Tulsa
facility (7)

(iv) Contract between Southern Corrections Systems/Kansas City
Community Center and the Nebraska Department of Correctional
Services for substance abuse treatment services from March 1, 1996
through June 30, 1997 (7)

(v) Employment Agreement with Donald E. Smith (2)

(vi) Agreement and Plan of Reorganization dated June 10, 1992, between
Avalon Enterprises, Inc. and Southern Corrections Systems, Inc. (2)

(vii) Stock Option Plan adopted by Board of Directors of Registrant on
August 16, 1994. (6)

(viii) Debt Guaranty Agreement dated May 16, 1994, between Registrant and
Donald E. Smith (6)

(ix) Placement Agent Agreement dated May 15, 1994, between Registrant
and Westminster Securities Corporation (6)

(x) Acquisition Agreement dated August 2, 1996 between Registrant,
Kensington Capital, Plc and RECOR, Inc.*
</TABLE>

II-2
<PAGE> 23
<TABLE>
<S> <C>
21. Subsidiaries of Registrant(5)

23.(i) Consent of Coopers & Lybrand L.L.P.*

(ii) Consent of Robertson & Williams, Inc.*

24. Power of Attorney* (included on page II-4)
</TABLE>

* Filed with this Registration
(1) Incorporated herein by reference to the Registrant's Registration
Statement on Form S-18 dated March 26, 1991.
(2) Incorporated herein by reference to the Registrant's Post-Effective
Amendment No. 1 to Registration Statement on Form S-18 dated August 3,
1992.
(3) Incorporated herein by reference to the Registrant's Post-Effective
Amendment No. 2 to Registration Statement on Form S-18 dated October
26, 1992.
(4) Incorporated herein by reference to the Registrant's Form 8-K dated
January 13, 1994.
(5) Incorporated herein by reference to Registrant's Form 10-KSB for
fiscal year ended December 31, 1993 and dated March 24, 1994.
(6) Incorporated herein by reference to the Registrant's Registration
Statement on Form SB-2 dated September 13, 1995 and amended.
(7) Incorporated by reference to Registrant's Post-Effective Amendment #2
to Registration Statement on Form SB-2 dated April 16, 1996.

17. UNDERTAKINGS.

1. The undersigned registrant hereby undertakes:

(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:

(1) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;

(2) To reflect in the prospectus any facts or events
which, individually or together, represent a fundamental
change in the information in the registration statement; and

(3) To include any additional or changed material
information on the plan of distribution.

2. For the purpose of determining any liability under the
Securities Act of 1933, to treat each post- effective amendment as a new
registration statement of the securities offered, and the offering of the
securities at that time to be the initial bona fide offering.

3. To file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.

4. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

II-3
<PAGE> 24
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-2 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Oklahoma City, State of Oklahoma, on September
26, 1996.

(Registrant) AVALON COMMUNITY SERVICES, INC.

By: /s/ Donald E. Smith
------------------------------------
Donald E. Smith
(Signature and Title ) Chief Executive Officer and Director

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Donald E. Smith, and each of them, his
true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same with all
exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in- fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated below:

<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ Donald E. Smith Chief Executive Officer September 26, 1996
- ------------------------------------------------ and Director
Donald E. Smith

/s/ Jerry M. Sunderland President and Director September 26, 1996
- ------------------------------------------------
Jerry M. Sunderland

/s/ Kathryn A. Avery Chief Financial Officer September 26, 1996
- ------------------------------------------------ and Vice President
Kathryn A. Avery

/s/ Robert O. McDonald Director September 26, 1996
- ----------------------------------------------
Robert O. McDonald
</TABLE>

II-4

<PAGE> 25
EXHIBIT INDEX

<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
<S> <C>
3. (i) Articles of Incorporation (1)

(ii) ByLaws (1)

(iii) Articles of Amendment to Registrant's Articles of Incorporation (2)

(iv) Unanimous Consent of Board of Directors Authorizing Extension of
Expiration Dates of Class "A" and Class "B" Redeemable Warrants (3)

(v) Certificate of Corporate Resolutions, dated December 15, 1993,
regarding authorization of Class B Common Stock and Amendments to
Articles (5)

4. (i) Form Stock Certificate (1)

(ii) Form of Class "A" Redeemable Warrant (1)

(iii) Form of Class "A" Warrant Agreement (1)

(iv) Form of Class "B" Redeemable Warrant (1)

(v) Form of Class "B" Warrant Agreement (1)

(vi) Form of Class "C" Redeemable Warrant (6)

(vii) Form of Class "C" Warrant Agreement (6)

(viii) Form of Class "D" Warrant Agreement*

5. Opinion of Robertson & Williams, Inc. Re: Legality*

(ii) Contract between Southern Corrections Systems, Inc. and the
Department of Corrections of the State of Oklahoma for public
works inmates for the year ended June 30, 1996 (7)

(iii) Contract between Southern Corrections Systems, Inc. and the
Department of Corrections of the State of Oklahoma for halfway
house services for the year ended June 30, 1996 for Tulsa
facility (7)

(v) Employment Agreement with Donald E. Smith (2)

(vi) Agreement and Plan of Reorganization dated June 10, 1992, between
Avalon Enterprises, Inc. and Southern Corrections Systems, Inc. (2)

(vii) Stock Option Plan adopted by Board of Directors of Registrant on
August 16, 1994. (6)

(viii) Debt Guaranty Agreement dated May 16, 1994, between Registrant and
Donald E. Smith (6)

(ix) Placement Agent Agreement dated May 15, 1994, between Registrant
and Westminster Securities Corporation (6)

(x) Acquisition Agreement dated August 2, 1996 between Registrant,
Kensington Capital, Plc and RECOR, Inc.*
</TABLE>
<PAGE> 26
<TABLE>
<S> <C>
21. Subsidiaries of Registrant(5)

23.(i) Consent of Coopers & Lybrand L.L.P.*

(ii) Consent of Robertson & Williams, Inc.*

24. Power of Attorney* (included on page II-4)
</TABLE>

<PAGE> 1
EXHIBIT 4(viii)

WARRANT AGREEMENT

WARRANT AGREEMENT, dated as of September ____ 1996, between Avalon
Community Services, Inc., a Nevada corporation, (the "Company") and American
Securities Transfer, Inc. of Denver, Colorado as warrant agent (the "Warrant
Agent").

W I T N E S S E T H:

WHEREAS, the Company issued without registration under the Securities
Act of 1933, as amended (the "Act") or the securities laws of any state, in
reliance upon Regulation D promulgated by the Securities and Exchange
Commission under the Act and on similar exemptions under applicable state laws
275,000 Redeemable Common Stock Purchase Warrants (the "Warrants"); and

WHEREAS, the Warrants and the shares of Common Stock to be issued upon
the exercise of the Warrants are being registered with the Securities and
Exchange Commission in an S-2 Registration Statement; and

WHEREAS, the Warrants shall be evidenced by separate warrant
certificates. Each definitive Warrant shall provide that the registered holder
thereof may exercise that Warrant, in whole or in part in the manner set forth
herein, to purchase, at the Exercise Price per share (as defined in Section 6
hereof), the number of shares of common stock set forth in the Warrant (both
the number of the shares and the Exercise Price subject to adjustment as set
forth in Section 12 hereof); and

WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, transfer, exchange, replacement and exercise of warrant certificates
and other matters as provided herein;

NOW, THEREFORE, in consideration of the premises and mutual agreements
herein set forth, and intending to be legally bound, the parties hereto agree
as follows:

SECTION 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement and the Warrant Agent
hereby accepts that appointment.

SECTION 2. Form of Warrants. The definitive Warrants to be delivered
pursuant to this Agreement shall be substantially in the form set forth in
Exhibit A attached hereto.

SECTION 3. Execution of Warrants. (a) The Warrants in definitive
form shall be signed on behalf of the Company, manually or by facsimile
signature, by its Chairman of the Board or President, and by its Secretary or
an Assistant Secretary under its corporate seal, and shall be manually
countersigned by the Warrant Agent. A Warrant signed on behalf of the Company
as aforesaid by an incumbent in office at the time of signature shall be valid,
and may be countersigned and issued by the Warrant Agent, notwithstanding the
fact that at the time of countersignature and issuance by the Warrant Agent
such signatory shall have ceased to be the incumbent in such office. The seal
of the Company may be in the form of a facsimile thereof and may be impressed,
affixed, imprinted or otherwise reproduced on the Warrants. No Warrant shall
be valid for any purpose unless countersigned manually by the Warrant Agent.

(b) Warrants shall be dated the date of countersignature
by the Warrant Agent.

SECTION 4. Registered Owners. The Company and the Warrant Agent may
deem and treat the registered holder of a Warrant as the absolute owner thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone), for the purpose of any exercise thereof and any distribution to the
holder thereof and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.

1
<PAGE> 2
SECTION 5. Registration of Warrants; Transfers and Exchanges. (a)
The Warrant Agent shall register the transfer, split-up, combination or
exchange of any outstanding Warrant upon the records to be maintained by it for
that purpose, upon surrender thereof accompanied by a written instrument or
instruments of transfer in form satisfactory to the Warrant Agent, duly
executed by the registered holder or holders thereof or by the duly appointed
legal representative thereof or by a duly authorized attorney. Upon any
registration of transfer, a new Warrant shall be issued to the transferee and
the surrendered Warrant shall be canceled by the Warrant Agent. Canceled
Warrants shall thereafter be disposed of in a manner satisfactory to the
Company.

(b) Any Warrant may be split up, combined or otherwise
exchanged at the option of the holder thereof, upon surrender to the Warrant
Agent at its office or agency maintained for the purpose of exchanging,
transferring, exercising or converting the Warrants in Denver, Colorado (each
office being referred to as a "Warrant Agent Office"), for another Warrant or
other Warrants of like tenor and for the purchase, in the aggregate, of a like
number of Shares. Warrants so surrendered shall be canceled by the Warrant
Agent. Canceled Warrants shall then be disposed of by the Warrant Agent in a
manner satisfactory to the Company.

(c) The Warrant Agent is hereby authorized to
countersign, in accordance with the provisions of Section 3 hereof, and deliver
any new Warrants required pursuant to the provisions of this Section 5.

SECTION 6. Duration and Exercise of Warrants. (a) The Warrants
shall expire at 5:00 p.m. E.S.T. on August 2, 2001 which is the fifth
anniversary of the issue date of the Warrants by the Company (such expiration
date hereafter referred to as the "Expiration Date"). The Company may, in its
sole discretion, extend the Expiration Date upon notice thereof to the Warrant
Agent. Each Warrant may be exercised on any business day prior to the close of
business on the Expiration Date by delivery of the Warrant to the Warrant Agent
no later than the Expiration Date and by satisfaction of the other terms and
conditions as set forth herein.

(b) No fractional shares shall be issued upon surrender
of a Warrant for exercise but, in lieu of fractional shares, the Company shall
pay to the registered holder of a surrendered Warrant, as soon as practicable
after the date of surrender, an amount in cash obtained by multiplying the
current market value of a share by the fraction of the share to which such
Warrant relates. The current market value of a share shall be (i) if the
common stock is listed on a national securities exchange or admitted to
unlisted trading privileges on such an exchange, the last reported sale price
of a share of common stock on such exchange on the last business day prior to
the date of the exercise of the Warrant or if no such sale is made on such day,
the average of the closing bid and asked prices of a share on such exchange;
(ii) if the common stock is included on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ"), the last sale price reported by
NASDAQ on the last business day prior to the date of exercise of the Warrant or
if last sale prices of the common stock are not so reported, the average of the
closing bid and asked prices of a share for such day reported by NASDAQ; (iii)
if the common stock is not listed or admitted to unlisted trading privileges on
an exchange, or included on NASDAQ, the average of the highest reported bid and
lowest reported asked prices of a share as furnished by the National Quotation
Bureau on the last business day prior to the date of exercise of the Warrant;
or (iv) in all other cases, an amount determined in such reasonable manner as
may be prescribed by the Board of Directors of the Company.

(c) Subject to the provisions of this Agreement,
including Section 6(e) and 12 hereof, the holder of a Warrant shall have the
right to purchase from the Company (and the Company shall issue and sell to
that holder) the number of fully paid and nonassessable shares set forth in the
Warrant at the exercise price of $5.12 per share (the "Exercise Price") (the
number of shares and Exercise Price being subject to adjustment as provided in
this Section 6(c) and in Section 12 hereof) upon the surrender of that Warrant
to the Warrant Agent on any business day prior to the close of business on the
Expiration Date, at the Warrant Agent's Office described in Paragraph 17, with
the form of election to purchase on the reserve thereof duly filled in and
signed, and payment of the Exercise Price in lawful money of the United States
of America by certified check payable to the Company. The Warrants shall be so
exercisable at any time prior to the close of business on the Expiration Date,
at the election of the registered holder thereof, either an entirety or from
time to time in part. In the event that fewer than all the shares purchasable
upon the exercise of a Warrant are purchased at any time prior to the close of
business on the Expiration Date, a new Warrant will be issued for the remaining
number of shares purchasable upon the

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exercise of the Warrant so surrendered. No adjustments shall be made for any
cash dividends on shares issuable on the exercise of a Warrant.

The Company may in its sole discretion, reduce the Exercise Price upon
notice thereof to the Warrant Agent.

(d) Subject to Section 8 hereof, upon surrender of a
Warrant and receipt of payment of the Exercise Price, the Warrant Agent shall
requisition from the transfer agent for the common stock, for issuance and
delivery to or upon the written order of the registered holder of that Warrant
and in such name or names as the registered holder may designate, the shares
issuable upon exercise. Shares shall be deemed to have been issued and any
person so designated to be named therein shall be deemed to have become the
holder of record of those shares as of the date of the surrender of a Warrant
and payment of the appropriate Exercise Price. The Warrant Agent is hereby
authorized to countersign and deliver, in accordance with the provisions of
Section 3 hereof, any Warrant required pursuant to the provisions of this
Section 6.

(e) The Company represents and warrants to the Warrant
Agent that from and after the Registration Date (A) so long as any unexpired
warrants remain outstanding the Company will (i) file such post-effective
amendments to the Registration Statement, and provide such supplements to the
Memorandum included in the Registration Statement, as may be necessary to keep
the Registration Statement in effect and to permit it to deliver to each person
exercising a Warrant a Memorandum meeting the requirements of Section 10(a) of
the Act and otherwise complying therewith, and will deliver such a Memorandum
to each such persons, and (ii) take such other action in each state in which
the Warrants were publicly offered for sale by the Company as from time to time
may be required under the securities laws of such state to permit the Shares
issuable upon exercise of the Warrants to be lawfully issued and sold in such
state upon exercise of the Warrants; and (B) it will furnish to the Warrant
Agent, upon request, an opinion of counsel to the effect that the Registration
Statement is then in effect and that the Memorandum complies as to form in all
material respects (except as to financial statements as to which such counsel
need express no opinion) with the requirements of the act and the rules and
regulations of the SEC thereunder. The Company may authorize the Warrant Agent
to suspend the exercise of any of the Warrants during such period as is
necessary to obtain or keep effective any registration, qualification, or other
governmental approval under federal and applicable state securities laws
required in connection with the exercise of the Warrants. The exercise of any
Warrant for which an election exercise is received by the Warrant Agent prior
to the Expiration Date during the period of such a suspension shall be
effective immediately upon notice to the Warrant Agent of the removal of such
suspension, notwithstanding that the removal of the suspension occurs after the
Effective Date.

SECTION 7. Redemption of Warrants. (a) The Company may redeem the
outstanding Warrants, in whole or in part, upon not less than 30 days' prior
notice (the "Notice of Redemption"), at a price of $0.01 per Warrant (the
"Redemption Price"), provided that (a) the closing bid price of the Shares on
the NASDAQ System or NASDAQ National Market System, as applicable for 30
consecutive trading days ending on the date of the Notice of Redemption, equals
or exceeds $6.00 per Share and (b) a Registration Statement of the Company
covering the Warrants and the Shares issuable upon the exercise of the Warrants
is current at all times during the 30 days immediately preceding and following
the Notice of Redemption. If the Company shall determine so to redeem less
than all of the Warrants then outstanding, then the Warrant Agent shall
determine the Warrants to be redeemed by such manner or method as it shall deem
fair and appropriate, whether by lot or otherwise,

(b) The Company shall give notice to the Warrant Agent of
any redemption in sufficient time so that the Warrant Agent shall give the
Notice of Redemption to all Holders of Warrant Certificates to be redeemed at
least 30 days prior to the date established for such redemption (the
"Redemption Date"). Each Notice of Redemption shall: (a) specify the
Redemption Date and the Redemption Price; (b) state that payment of the
Redemption Price will be made by the Warrant Agent upon presentation and
surrender, to the Warrant Agent at the Warrant Agent's Office, of the Warrant
Certificates representing the Warrants being redeemed; (c) state that the
rights to exercise the Warrants shall terminate at 5:00 p.m. New York time, on
the Redemption date; and (d) if less than all of the Warrants then outstanding
are being redeemed, specify the serial numbers or portions of the Warrants to
be redeemed. The Company shall also make prompt public announcement of such
redemption by publication in The Wall Street Journal at the time of the Warrant
Agent's mailing of the Notice of Redemption.

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(c) On or prior to the opening of business on the
Redemption Date, the Company shall deposit with the Warrant Agent cash or an
irrevocable letter of credit issued by a national or state bank and in form
reasonably satisfactory to the Warrant agent, sufficient in amount to purchase
all of the Warrants stated in the Notice of Redemption to be redeemed. Payment
of the Redemption Price shall be made by the Warrant Agent upon presentation
and surrender of the Warrant Certificates representing such Warrants to the
Warrant Agent at the Warrant Agent's Office. If the Notice of Redemption shall
have been duly given and if the Company shall have duly deposited with the
Warrant Agent the cash or irrevocable letter of credit required by this Section
7(c), then any Warrants not exercised by 5:00 p.m., New York time, on the
Redemption Date shall no longer be deemed to be outstanding, and all rights
with respect to such Warrants shall from and after such time and date cease and
terminate, except only for the right of the Holders thereof to receive the
Redemption Price, without interest.

SECTION 8. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of shares upon the exercise of
a Warrant prior to the close of business on the Expiration Date; provided,
however, that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue of any Warrant
or any certificates for shares in a name other than that of the registered
holder of the Warrant surrendered upon the exercise of a Warrant, and neither
the Company nor the Warrant Agent shall be required to issue or deliver such
Warrant or stock certificates unless or until the person or persons requesting
the issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has
been paid.

SECTION 9. Mutilated or Missing Warrant Certificates. In case a
Warrant shall be mutilated, lost, stolen or destroyed, the Company shall issue,
and the Warrant Agent shall countersign and deliver, in exchange and
substitution for and upon cancellation of the mutilated Warrant, or in lieu of
and substitution for the Warrant lost, stolen or destroyed, a new Warrant of
like tenor and for the purchase of a like number of shares, but only upon
receipt of evidence satisfactory to the Company and the Warrant Agent of loss,
theft or destruction of that Warrant, and an indemnity bond, if requested,
satisfactory to the Company and the Warrant Agent, the expense of which shall
be borne by the Warrantholder. A Warrantholder requesting a substitute Warrant
shall so comply with all other reasonable regulations and pay all other
reasonable charges as the Company or the Warrant Agent may prescribe.

SECTION 10. Reservation of Shares. (a) The Company will at all
times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued common stock, for the purpose of
enabling it to satisfy any obligation to issue shares upon exercise of
Warrants, through the close of business on the Expiration Date, the number of
shares deliverable upon the exercise of all outstanding Warrants, and the
transfer agent for the common stock is hereby irrevocably authorized and
directed at all times to reserve that number of authorized and unissued shares
of common stock as shall be required for that purpose. The Company will keep a
copy of this Agreement on file with that transfer agent. The Warrant Agent is
hereby irrevocably authorized to requisition from time to time from the
transfer agent certificates for shares issuable upon exercise of outstanding
Warrants, and the Company will supply such transfer agent with duly executed
stock certificates for such purpose.

(b) Before taking any action which would cause an
adjustment to Section 12 hereof reducing the Exercise Price below the then par
value (if any) of the shares issuable upon exercise of the Warrants the Company
will take any corporate action which may, in the opinion of counsel (which may
be counsel employed by the Company), be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares at the Exercise
Price as so adjusted.

(c) The Company covenants that all shares issued upon
exercise of the Warrants will, upon issuance in accordance with the terms of
this Agreement, be fully paid and nonassessable and free from all liens,
charges and security interests created by the Company with respect to the
issuance thereof.

SECTION 11. Obtaining of Governmental Approvals. The Company from
time to time will use its best efforts to obtain and keep effective any and all
permits, consents and approvals of governmental agencies and authorities and to
make securities acts filings under federal and state laws, which may be or
become requisite in connection with the issuance, sale, transfer, delivery or
exercise of the Warrants.

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SECTION 12. Adjustment of Exercise Price and Number of Shares
Purchasable Hereunder. The Exercise Price and the number of Warrant shares
purchasable upon the exercise of the Warrants are subject to adjustment from
time to time upon the occurrence of the events enumerated in this Section 12.

(a) In case the Company shall at any time after the date
of this Agreement (i) declare a dividend on its capital stock payable in shares
of its capital stock (whether shares of common stock or of capital stock of any
other class), (ii) subdivide the outstanding common stock, (iii) combine the
outstanding common stock into a smaller number of shares, (iv) issue any shares
of its capital stock (other than (a) issuances of restricted securities in
connection with acquisitions by the Company; (b) the grant of stock options to
persons covered by incentive stock option plans, provided that no more than the
greater of 250,000 shares of Common Stock be issued pursuant to such plans
until the expiration or redemption of the Warrants; (c) warrants to accommodate
lines of credit or creditors, provided that no registration or registration
rights shall be afforded such warrants or the underlying Shares at any time
within one year after the Registration Date; (d) Class B Common Stock voting
shares and up to 750,000 warrants, exercisable for one share of common stock
each, at an exercise price of $1.50 to be issued to Donald E. Smith or his
designee solely upon Mr. Smith's guarantee of corporate obligations. The
Company may authorize one warrant for each one dollar of corporate obligations
guaranteed by Smith upon to the maximum amount. For this exception to the
anti-dilution provisions to apply, the corporate debt must first be approved by
the Board of Directors, be bona fide, and the guarantee must be reasonably
required by the creditor), or (v) engage in any other recapitalization, the
Exercise Price in effect at the time of the record date for such dividend or of
the effective date of such subdivision, combination, reclassification, issuance
or recapitalization, shall be proportionately adjusted so that the holder of
the Warrant exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which, if such Warrant had
been exercised immediately prior to such date, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination, reclassification, issuance or recapitalization. These
anti-dilution provisions shall remain in full force and effect until redemption
of all Warrants then outstanding or expiration of the Warrants. These
anti-dilution provisions may be terminated by the Company provided: (i) that
the bid price of the Company's common stock shall have been $4.00 or more for
sixty (60) consecutive trading days; (ii) the Company presents to Westminster
Securities Corporation, as placement agent for the Warrants ("Westminster") a
bona fide offer, agreement, term sheet, or Underwriting Agreement by a duly
licensed broker-dealer proposing to place, on a firm or best efforts basis,
securities of the Company; and (iii) effecting the agreement would trigger
application of the anti-dilution provisions. If these conditions are met, the
Company shall notify Westminster and afford Westminster ten (10) business days
in which to match the terms offered to the Company. At the expiration of the
ten (10) day period, the Company may terminate the anti-dilution provisions by
appropriate corporate action, if Westminster has not matched the offering.
Such adjustment shall be made successively whenever any event listed above
shall occur and notice of same shall be promptly provided by the Company to the
Warrant Agent accompanied by the appropriately converted numbers of Warrants
and Shares. Westminster shall have the authority, on behalf of all of the
Warrantholders, to waive the requirement for adjustments in the event of
issuance of shares of capital stock by the Company.

(b) In case the Company shall issue rights or warrants to
all holder of common stock entitling them to subscribe for or purchase common
stock (or securities convertible into common stock) at a price per share of
common stock (or having a conversion price per share of common stock, if a
security convertible into common stock) less than the current market price per
share of common stock (as defined in Section 12(d)) on the record date
mentioned below, the Exercise Price to be in effect after such record date
shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, of which the numerator shall be the
number of shares of common stock outstanding on such record date plus the
number of shares of common stock which the aggregate offering price of the
total number of shares of common stock so to be offered (or the aggregate
initial conversion price of the convertible securities so to be offered) would
purchase at such current market price and of which the denominator shall be the
number of shares of common stock outstanding on such record date plus the
number of additional shares of common stock to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be paid in
consideration, part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined by the Board of Directors of
the Company, whose determination shall be conclusive, Shares of common stock
owned by or held for the account of the Company or any majority-owned
subsidiary shall not be deemed

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<PAGE> 6
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed; and in the event that
such rights or warrants are not so issued the Exercise Price shall again be
adjusted to be the Exercise Price which would then be in effect if such record
date had not been fixed, but such subsequent adjustment shall not affect the
number of Warrant shares issued upon any exercise of a Warrant prior to the
date such adjustment is made,

(c) In case the Company shall fix a record date for the
making of a distribution to all holders of common stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness or assets
(other than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in common stock) or
subscription rights or warrants (excluding those referred to in Section 12(b)),
the Exercise Price to be in effect after such record date shall be determined
by multiplying the Exercise Price in effect immediately prior to such record
date by a fraction of which (i) the numerator shall be the current market price
per share of common stock (as defined in Section 12(d)), on such record date,
less the fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the portion of the assets
or evidences of indebtedness so to be distributed or of such subscription
rights or warrants applicable to one share of common stock, and of which (ii)
the denominator shall be such current market price per share of common stock.
Such adjustment shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the Exercise
Price shall again be adjusted to be the Exercise Price which would then be in
effect if such record date had not been fixed but such subsequent adjustment
shall not affect the number of Warrant shares issued upon any exercise of a
Warrant prior to the date such adjustment is made.

(d) For the purpose of any computation under Section
12(b) or (c) the current market price per share of common stock on any date
shall be deemed to be the average of the daily closing prices for the 30
consecutive trading days immediately preceding the date of determination. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, on the principal national securities exchange on
which the common stock is listed or admitted to trading, of if the common stock
is not listed or admitted to trading on any national securities exchange, the
average of the highest reported bid and lowest reported asked prices as
furnished by the National Association of Securities Dealers ("NASD") or similar
organization if the NASD is no longer reporting such information, or, if not so
available, the fair market price as determined by the Board of Directors of the
Company.

(e) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least five
cents ($.05) in such price; provided, however, that any adjustments which by
reason of this Section 12(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 12 shall be made to the nearest cent or to the nearest one-
hundredth of a share, as the case may be.

(f) In the event that at any time, as a result of an
adjustment made pursuant to Section 12(a) the holder of the Warrant thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company other than shares of common stock, thereafter the number of such other
shares so receivable upon exercise of the Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the common stock purchasable
pursuant to this Warrant as determined by the Company.

(g) Upon each adjustment of the Exercise Price as a
result of the calculations made in Section 12(a), (b) or (c), the Warrant
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
Warrant shares (calculated to the nearest hundredth) obtained by (i)
multiplying the number of Warrant shares purchasable upon exercise of the
Warrant immediately prior to such adjustment of the number of Warrant shares by
the Exercise Price in effect immediately prior to such adjustment of the
Exercise Price and (ii) dividing the product so obtained by the Exercise Price
in effect immediately after such adjustment of the Exercise Price.

(h) In case of any capital reorganization of the Company,
or of any reclassification of the common stock (other than a change in par
value, or from par value to no par value, or from no par value to par

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<PAGE> 7
value, or as a result of subdivision or combination), or in case of the
consolidation of the Company with or the merger of the Company with any other
corporation or association (other than a consolidation or merger in which (i)
the Company is the continuing corporation and (ii) the holders of the Company'
common stock immediately prior to such merger or consolidation continue as
holders of common stock after such merger or consolidation) or of the sale of
the properties and assets of the Company as, or substantially as, an entirety
to any other corporation or association, the Warrant shall after such
reorganization, reclassification, consolidation, merger or sale be exercisable,
upon the terms and conditions specified in this Agreement, for the number of
shares of stock or other securities or property to which a holder of the number
of Warrant shares purchasable (at the time of such reorganization,
reclassification consolidation, merger or sale) upon exercise of such Warrant
would have been entitled upon such reorganization, reclassification
consolidation, merger or sale; and in any such case, if necessary, the
provisions set forth in this Section 12 with respect to the rights and
interests thereafter of the holder of the Warrant shall be appropriately
adjusted by the Company so as to be applicable, as nearly as may reasonably be,
to any shares of stock or other securities or property thereafter deliverable
on the exercise of the Warrant. The subdivision or combination of shares of
common stock at any time outstanding into a greater or lesser number of shares
shall not be deemed to be a reclassification of the common stock for the
purposes of this Section 12(h). The Company shall not effect any such
consolidation, merger or sale, unless prior to or simultaneously with the
consummation thereof the successor corporation or association (if other than
the Company) resulting from such consolidation or merger or the entity
purchasing such assets or other appropriate entity shall assume, by written
instrument executed and delivered to the Company, the obligation to deliver to
the holder of the Warrant such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
purchase and the other obligations under this Agreement.

SECTION 13. Merger, Consolidation or Change of Name of Warrant Agent.
Any corporation or entity into which the Warrant Agent may be merged or
converted or with which it may be consolidated, or any corporation or entity
resulting from any merger, conversion or consolidation to which the Warrant
Agent shall be a party, or any corporation or entity succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further action on the part of any of the parties hereto, provided that such
corporation or entity would be eligible for appointment as a successor Warrant
Agent under the provisions of Section 16 hereof. In case at the time the
successor to the Warrant Agent shall succeed under this Agreement any Warrants
shall have been countersigned but not delivered, the successor to the Warrant
Agent may adopt the countersignature of the original Warrant Agent, and in case
at that time any Warrants shall not have been countersigned, any successor to
the Warrant Agent may countersign such Warrants either in the name of the
predecessor Warrant Agent or in the name of the successor Warrant Agent; and in
all the foregoing cases Warrants shall have the full force provided in the
Warrant certificates and in this Agreement.

In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent whose name has changed may adopt the
countersignature under its prior name, and in case at that time any Warrants
shall not have been countersigned, the Warrant Agent may countersign such
Warrants either in its prior name or in its changed name, and in all such cases
such Warrants shall have the full force provided in the Warrants and in this
Agreement.

SECTION 14. Warrant Agent. The Warrant Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Warrants by their
acceptance thereof, shall be bound:

(a) the statements contained herein and in the Warrants
shall be taken as statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as described
the Warrant Agent or action taken or to be taken by it. The Warrant Agent
assumes no responsibility with respect to the execution, delivery or
distribution of the Warrants except as herein otherwise provided.

(b) The Warrant Agent shall not be responsible for any
failure of the Company to comply with any of the covenants contained in this
Agreement or in the Warrants to be complied with by the Company nor shall it at
any time be under any duty or responsibility to any holder of a Warrant to make
or cause to be made any adjustment in the Exercise Price or in the number of
shares issuable (except as instructed in writing by the

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<PAGE> 8
Company), or to determine whether any facts exist which may require any
adjustments, or with respect to the nature or extent of or method employed in
making any adjustments when made, or to verify the accuracy of any
representation made to it by the Company as to a change in the Exercise Price
or the amount of shares which may be purchased with a warrant.

(c) The Warrant Agent may consult at any time with
counsel satisfactory to it (who may be counsel for the Company or an employee
of the Warrant Agent) and the Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
accordance with the opinion or the advice of such counsel.

(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any Warrantholder for any action taken in
reliance on any notice, resolution, waiver, consent, order, certificate or
other paper, document or instrument believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties.

(e) The Company shall pay to the Warrant Agent for its
services under this Agreement such compensation as they shall agree upon, to
reimburse the Warrant Agent upon demand for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of its duties under this Agreement and to
indemnify the Warrant Agent and hold it harmless against any and all losses,
liability and expenses, including, but not limited to any judgments, costs and
counsel fees, or anything done or omitted by the Warrant Agent arising out of
or in connection with this Agreement except as a result of its gross negligence
or bad faith.

(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceedings or to take any other action
likely to involve expenses unless the Company or one or more registered holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnify the Warrant Agent for any costs and expenses which may be incurred
and promptly pay such costs as they are incurred. All rights of action under
this Agreement or under any of the Warrants may be enforced by the Warrant
Agent without the possession of any Warrants or the production thereof at any
trial or other proceeding relative thereto, and any action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as Warrant Agent,
and any recovery of judgment shall be for the ratable benefit of the registered
holders of the Warrants, as their respective rights or interests may appear.

(g) The Warrant Agent, and any stockholder, director,
officer or employee thereof, may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for the Company or for any other legal
entity.

(h) The Warrant Agent shall act hereunder solely as agent
for the Company, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not be liable for anything which it may do or
refrain from doing in connection with this Agreement except for its own gross
negligence or bad faith.

(i) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all further and other acts, instruments and assurances as may
reasonably be required by the Warrant Agent for the carrying out or performing
of the provisions of this Agreement.

(j) The Warrant Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution hereof by the Warrant Agent) or
in respect of the validity or execution of any Warrant (except its
countersignature thereof; nor shall the Warrant Agent by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of the Shares to be issued pursuant to this Agreement or any
Warrant or as to whether the Shares will when validly issued, fully paid and
nonassessable or as to the Exercise Price or the number of Shares issuable upon
the exercise of any Warrant.

8
<PAGE> 9
(k) The Warrant Agent is hereby authorized and directed
to accept instructions with respect the performance of its duties hereunder
from the Chairman of the Board, the President, the Secretary or an Assistant
Secretary of the Company, and to apply to those officers for advice or
instructions in connection with its duties, and shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instruments of any of those officers or in good faith reliance upon any
statement signed by any one of those officers of the Company with respect to
any fact or matter (unless other evidence in respect thereof is herein
specifically prescribed) which may be deemed to be conclusively proved and
established by such signed statement.

SECTION 15. Disposition of Proceeds from Exercise of Warrants. The
Warrant Agent shall account promptly to the Company with respect to Warrants
exercised and concurrently pay to the Company all moneys received by the
Warrant Agent on the purchase of the Shares through the exercise of Warrants.

SECTION 16. Change of Warrant Agent. If the Warrant Agent shall
resign (such resignation to become effective not earlier than 30 days after the
giving of written notice thereof to the Company and the registered holders of
Warrant certificates) or shall become incapable of acting as Warrant Agent, the
Company shall appoint a successor. If the Company shall fail to make that
appointment within a period of 30 days after it has been so notified in writing
by the Warrant Agent or by the registered holder of a Warrant (in the case of
incapacity), then the registered holder of any Warrant may apply to any court
of competent jurisdiction for the appointment of a successor to the Warrant
Agent. Pending appointment of a successor to the Warrant Agent, either by the
Company or by such a court, the duties of Warrant Agent shall be carried out by
the Company. Any successor Warrant Agent whether appointed by the Company or
by a court, shall be a bank, trust company or transfer agent, in good standing,
incorporated under the laws of the State of Oklahoma, New York or of the United
States of America, and must have at the time of its appointment as Warrant
Agent. After appointment the successor Warrant Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Warrant Agent without further act or deed; but the former Warrant
Agent shall deliver and transfer to the successor Warrant Agent any property at
the time held by it hereunder and execute and deliver, at the expense of the
Company, any further assurance, conveyance, act or deed necessary for the
purpose. Failure to give any notice provided for in this Section 16, however,
or any defect therein shall not affect the legality or validity of the removal
of the Warrant Agent or the appointment of a successor Warrant Agent as the
case may be.

SECTION 17. Notices to Company and Warrant Agent. Any notice or
demand authorized by this Agreement to be given or made by the Warrant Agent or
by the registered holder of any Warrant to or on the Company shall be
sufficiently given or made if sent by mail, first class or registered, postage
prepaid, addressed (until another address is filed in writing by the Company
with the Warrant Agent) as follows:

Avalon Community Services, Inc.
13401 Railway Drive
Oklahoma City, Oklahoma 73114
Attention: Tim M. Rains

Copy to: Robertson & Williams
6108 North Western Avenue
Oklahoma City, Oklahoma 73118
Attention: Mark A. Robertson

In case the Company shall fail to maintain that office or agency or
shall fail to give notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
Warrant Agent's Office.

Any notice pursuant to this Agreement to be given by the Company or by
the registered holder of any Warrant to the Warrant Agent shall be sufficiently
given if sent by first class mail, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent of the Company) to the Warrant
Agent as follows:

9
<PAGE> 10
American Securities Transfer, Inc.
1825 Lawrence Street, Suite 444
Denver, Colorado 80202-1817

SECTION 18. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
consent or concurrence of any holders of Warrants in order to cure the
ambiguity, manifest error or other mistake in this Agreement, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not adversely affect, alter or change the interest of the holders of Warrants.

SECTION 19. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company and of the Warrant Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.

SECTION 20. Termination. This Agreement shall terminate at the close
of business within a reasonable time, after the Expiration Date.
Notwithstanding the foregoing, this Agreement will terminate on any earlier
date if all Warrants have been exercised. The provisions of Section 14 hereof
shall survive the termination.

SECTION 21. Governing Law. This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State of
Oklahoma and for all purposes shall be construed in accordance with the laws of
said State.

SECTION 22. Benefits of this Agreement. Nothing in this Agreement
shall be construed to give to any person or corporation other than the Company,
the Warrant Agent and the registered holders of the Warrants any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Warrant Agent and the
registered holders of the Warrants.

SECTION 23. Counterparts. This Agreement may be executed in any
number of counterparts and each of the counterparts shall for all purposes be
deemed to be an original, and all the counterparts shall together constitute
but one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year fist above written.

AVALON COMMUNITY SERVICES, INC.

By:
-------------------------------------

Attest:
---------------------------------
[Corporate Seal]

AMERICAN SECURITIES TRANSFER, INC.

By:
-------------------------------------

Attest:
---------------------------------
[Corporate Seal]

<PAGE> 1
EXHIBIT 5

ROBERTSON & WILLIAMS
Attorneys and Counselors at Law

6108 North Western Avenue
Oklahoma City, Oklahoma 73118-1044
(405) 848-1944 * Fax (405) 843-6707

September 26, 1996

Avalon Community Services, Inc.
13401 Railway Drive
Oklahoma City, Oklahoma 73114

Re: Form S-2 Registration Statement

Gentlemen:

We have acted as counsel to Avalon Community Services, Inc., a Nevada
corporation ("Company"), in connection with the registration under the
Securities Act of 1933, as amended ("Act"), of certain Company securities
consisting of 515,000 shares of common stock, par value $0.001 per share
("Common Stock") of which 440,000 is offered by the Company and 75,000 is
offered by selling shareholders, and warrants in various classes to purchase up
to 440,000 shares of Common Stock at various exercise prices per share.

A Registration Statement on Form S-2 under the Act with respect to the
shares of Common Stock, the warrants and the shares of Common Stock of the
Company underlying the warrants is being filed with the Securities and Exchange
Commission on September 26, 1996.

We have examined and are familiar with originals or copies, the
authenticity of which has been established to our satisfaction, of all such
documents, corporate records, and other instruments as we have deemed necessary
to express the opinion hereinafter set forth.

Based on the foregoing, it is our opinion that:

1. The shares of Common Stock and the warrants to be sold by the
Company in the manner described in the Registration Statement, will,
upon payment therefor and delivery thereof, be validity issued
securities of the Company, fully paid and non-assessable;

2. The shares of Common Stock to be sold by the selling shareholders
are validly issued, fully paid and non- assessable shares; and

3. The shares of Common Stock of the Company issuable upon the proper
exercise of the warrants have been reserved by the Company for
issuance and will, upon payment therefor and delivery thereof in
accordance with the terms of such warrants, be validly issued, fully
paid and non-assessable.
<PAGE> 2
September 26, 1996
Page 2

The opinion expressed herein is as of the date hereof, is rendered solely
to Avalon Community Services, Inc. in connection with the transaction described
herein, and may be relied upon only by Avalon Community Services, Inc. for the
specific purposes herein set forth. Any other use of this opinion without our
express consent is prohibited.

We consent to the use of this opinion as an Exhibit to the above mentioned
Registration Statement and to the use of our name in such Registration
Statement and the Prospectus included therein under the heading "Legal
Matters".

Very truly yours,

ROBERTSON & WILLIAMS,
A Professional Corporation

By:
---------------------------
Mark A. Robertson

MAR:dt

<PAGE> 1
EXHIBIT 10(x)

ACQUISITION AGREEMENT

This ACQUISITION AGREEMENT is dated as of August 2nd, 1996. The
parties are RECOR, Inc. (Hereinafter "RECOR" ), KENSINGTON CAPITAL, PLC (the
"Buyer"), or its assigns, and AVALON COMMUNITY SERVICES, INC. ("Avalon"). The
Company and RECOR are Texas corporations. The Buyer is a Nevis corporation.
Avalon is a Nevada corporation.

RECOR owns all of the issued and outstanding shares of capital stock
(the "Shares") of SECURE CORRECTIONS, INC. (the "Company"). The Buyer
desires to purchase from RECOR, and RECOR desire to sell to the Buyer, all of
the Shares in exchange for the consideration herein contained and in accordance
with the terms and conditions set forth in this Agreement. Likewise, Avalon
desires to acquire operations of that certain Intermediate Sanction Facility
located at El Paso, Texas, and the contract management rights for that certain
Adult Detention Facility to be located at McKinley County, New Mexico.

NOW, THEREFORE, in consideration of the respective covenants,
representations and warranties herein contained, and intending to be legally
bound hereby, the parties hereto agree as follows:

1. SALE AND PURCHASE OF THE SHARES.

At the Closing RECOR shall sell and transfer to the Buyer all of the
Shares owned by RECOR in exchange for the payment and transfer of the
following consideration, to be delivered and distributed as follows:

A. Upon the execution of this Agreement and transfer and delivery
of the Shares to the Buyer, Buyer shall pay to RECOR the sum
of TWO HUNDRED THOUSAND DOLLARS ($200,000.00)

B. Upon the execution of this Agreement, Buyer shall deliver to
Lawyers Title of Pensacola, or such other escrow agent as
shall be agreed upon by the parties (hereinafter the "Escrow
Agent") (i) 50,000 shares of common stock of Avalon, and (ii)
Purchase Warrants for 200,000 shares of common stock of Avalon
at market ask price at the date of Closing. All such
consideration shall be held by the Escrow Agent under the
terms and conditions of the Escrow Agreement executed by and
among the parties hereto and the Escrow Agent. The 50,000
shares of common stock shall be issued and delivered to the
escrow agent to be held in the name of the following parties,
as part of the consideration passing between the parties to
this Agreement:

5,000 shares of common stock shall be issued to Rick Pierce
22,500 shares of common stock shall be issued to Edwin Bruce
Lowman II (RECOR has advised that this stock is to be issued
to Mr. Lowman in consideration for services rendered to RECOR
by Mr. Lowman) 22,500 shares of common stock shall be issued
to RECOR, Inc.
<PAGE> 2
The purchase warrants shall be issued in the following manner:

Purchase Warrant for 20,000 shares of common stock shall be
issued to Rick Pierce Purchase Warrant for 90,000 shares of
common stock shall be issued to Edwin Bruce Lowman II (RECOR
has advised that this Purchase Warrant is to be issued to Mr.
Lowman in consideration for services rendered to RECOR by Mr.
Lowman) Purchase Warrant for 90,000 shares of common stock
shall be issued to RECOR, Inc.

C. As additional consideration, (with the exception of payroll
taxes) Buyer agrees to pay directly to the Company's creditors
at the time of Closing the Company's identified and disclosed
current and past due liabilities of Secure Corrections, Inc.,
as set forth on the Schedule of Class "B" Creditors as set
forth on the Disclosure of Liabilities, Exhibit "A" hereto.
The additional consideration of $44,782.54 shall be delivered
to the Escrow Agent at time of Closing, to be distributed to
RECOR in the manner hereinafter provided. With respect to
payroll taxes, the parties agree that the payroll taxes
identified on Exhibit "A" hereto are estimates only, and may
not be properly assessable against Secure Corrections, Inc.
The Buyer agrees to assume the liability to pay all payroll
taxes (including penalty and interest) ultimately determined
to be properly assessable against Secure Corrections, Inc.,
but the liability of the Buyer for payroll taxes, penalty and
interest shall not exceed those amounts shown on Exhibit "A".
Any liability for payroll taxes, and penalties and interest
thereon, in excess of that shown on Exhibit "A" hereto shall
be treated as an undisclosed liability hereunder, and shall
remain the responsibility of RECOR. If it shall be determined
(as confirmed by the IRS) that the payroll tax liability is
less than that shown on Exhibit "A" hereto, then the
difference between the actual liability and the estimated
liability shown on Exhibit "A" hereto shall be immediately
remitted to RECOR.

D. The Company and RECOR are currently preparing the unaudited
balance sheet of the Company as of July 15, 1996, and the
related unaudited statement of income and retained earnings,
also as of July 15, 1996. (Said balance sheet and statement
of income collectively referred to herein as the "Financial
Statements" of the Company). All Liabilities of the Company as
of July 15, 1996 required to be reflected or reserved for by
generally accepted accounting principles consistently applied
are to be fully reflected or reserved for in the Company's
balance sheet. It is agreed by the parties hereto that the
Escrow Agent shall maintain possession of the consideration
identified in Paragraph 1.B. above until such time as the
following contingencies occur: (1) Financial Statements are
completed and delivered to Avalon and Buyer; and (2) filing of
income and franchise tax returns due prior to July 15, 1996,
for the Company and delivery

2
<PAGE> 3
of satisfactory calculations federal income tax loss
carryforward for the Company and (3) the Company is released,
dismissed or discharged without liability from the Litigation
described in Paragraph 4.10 of this Agreement. Upon the
completion of these contingencies, then Buyer, Avalon and
RECOR shall issue written instructions to the Escrow Agent
signed by all parties hereto to deliver the escrowed common
stock and purchase warrants to the parties described in
Paragraph 1.B. and the funds to RECOR as follows:

The Escrow Agent will deliver to the parties described in
Paragraph 1.B. the escrowed 50,000 shares of Avalon Common
Stock. The shares of Avalon Common Stock will be restricted
for three (3) years from the date of the issuance of the
delivery of the Common Stock. One-third (1/3) of the shares
will become freely trading beginning three years from the date
of delivery, an additional one-third (1/3) of the shares will
become freely trading beginning four years from the date of
the delivery, and the remaining one-third (1/3) of the shares
will become freely trading beginning five years from the date
of delivery. A restrictive legend will be affixed to the
shares and notification provided to the Avalon transfer agent
to evidence this transaction.

The Escrow Agent will deliver to RECOR purchase warrants at
the market ask price at the date of closing for 200,000 shares
of Avalon Common Stock, said Purchase Warrants to expire 5
years from the date of issuance. The Warrants will be filed
with the SEC within 120 days of Closing.

With respect to the consideration identified in Paragraph 1.C.
(being the fund of $44,782.54), that fund will be distributed
to RECOR upon the occurrence of the following two
contingencies within 60 days of date hereof: (1) Financial
Statements are completed and delivered to Avalon and Buyer;
and (2) the delivery of filed income tax returns which were
due prior to July 15, 1996, and delivery of satisfactory
calculations of federal income tax loss carryforward for the
Company. Provided, however, that in the event that other
past due or current liabilities of the Company not revealed on
the Disclosure of Liabilities, Exhibit "A" hereto, should be
discovered or revealed prior to the time for distribution of
the escrowed consideration, all such liabilities of the
Company shall be paid out of the escrowed funds to the third
party creditors, with the balance, if any, being distributed
to RECOR. If the money held in the escrow fund is
insufficient to pay off the past due or current liabilities of
the Company, RECOR shall promptly pay such additional funds as
are needed to satisfy such past due or current liabilities.
If, after written demand from the Buyer and/or Avalon, RECOR
fails or refuses to advance the additional funds necessary for
payoff of the liabilities, including any amounts assessed
against the Company as a result of the Litigation pending
against the Company, then the Buyer and Avalon shall notify
the escrow agent that the number of shares of Avalon common
stock and/or Avalon Stock Purchase Warrants to be delivered to

3
<PAGE> 4
RECOR shall be reduced by the value of Avalon Common Stock
shares and/or Avalon Stock Purchase Warrants necessary to
satisfy the unpaid liabilities. The value of the Avalon Common
Stock and/or Warrants shall be measured at the market asking
price of the Stock and/or exercise price of the Stock Purchase
Warrants at the date of the distribution of the escrowed
consideration.

2. ASSIGNMENT OF RIGHTS UNDER MCKINLEY COUNTY OPERATIONS AND MANAGEMENT
AGREEMENT.

2..1. RECOR has applied to operate, maintain and manage an Adult
Detention Facility under contract with McKinley County, New Mexico. RECOR does
hereby assign to Southern Corrections Systems, Inc., the wholly owned
subsidiary of Avalon, all present and hereafter acquired right, title and
interest of RECOR, if any, in and under said Operations and Management
Agreement with McKinley County, New Mexico. RECOR further agrees to allow
representatives of Avalon or Southern Corrections Systems, Inc., to hereafter
fully participate in all negotiations and communications with McKinley County,
New Mexico, regarding the execution of the Operations and Management Agreement
for the Adult Detention Facility. The parties hereto understand that McKinley
County, New Mexico, must consent to any assignment of rights and obligations
under the Operations and Management Agreement for the Adult Detention Facility.
Therefore, it is a condition precedent to any obligations of Avalon for payment
of consideration allocated herein for assignment of rights under the McKinley
County, New Mexico, Adult Detention Facility contract that McKinley County must
give all required consents to allow Southern Corrections Systems, Inc. to
operate the Adult Detention Facility.

2..2. In consideration for the mutual covenants and promises herein
contained, at the time that an Operations and Management Agreement is awarded
to Southern Corrections Systems, Inc., for operations, maintenance and
management of the McKinley County Adult Detention Facility on terms and
conditions that are satisfactory to Southern Corrections Systems, Inc., Avalon
agrees to deliver the following consideration:

A. Twenty Five Thousand (25,000) shares of Avalon Common Stock.
The shares of Avalon Common Stock will be restricted for three
(3) years from the date of the issuance and delivery to RECOR.
One-third (1/3) of the shares will become freely trading
beginning three years from the date of issuance and delivery,
an additional one-third (1/3) of the shares will become freely
trading beginning four years from the date of issuance and
delivery, and the remaining one-third (1/3) of the shares will
become freely trading beginning five years from the date
issuance and delivery. A restrictive legend will be affixed
to the shares and notification provided to the Avalon transfer
agent to evidence this transaction.

B. Seventy Five Thousand (75,000) Avalon Common Stock purchase
warrants at the market ask price at the date of Closing, said
Warrants to expire 5 years

4
<PAGE> 5
from the date of issuance. The Warrants will be filed with
the SEC within 120 days of Closing.

C. At the time of issuance of the said 25,000 shares of common
stock, the stock shall be issued to the following parties, as
part of the consideration passing between the parties to this
Agreement:

2,500 shares of common stock to Rick Pierce
11,250 shares of common stock to Edwin Bruce Lowman II ( in
consideration for past services rendered by Mr. Lowman to
RECOR) 1,250 shares of common stock to Bruce Williams.

3. CLOSING.

3..1. Closing Date. The Closing (the "Closing") of the sale and purchase of
the Shares shall take place in the following manner: The Buyer shall wire
transfer to Mr. Bruce A. Haught, Attorney at Law, Destin, Florida, the sum of
$200,000. RECOR shall deliver to Mr. Bruce A. Haught all documents required to
be delivered to the Buyer hereunder. Upon confirmation to the parties that Mr.
Haught has received the said $200,000 from the Buyer and the required documents
from RECOR, the parties shall authorize Mr. Haught in writing to immediately
release the said $200,000 to RECOR, and all of the documents required from
RECOR (which shall consist of the delivery of an executed copy of this
Acquisition Agreement, transfer of all outstanding stock of the Company, and
the delivery of the resignation of all officers and directors of the Company),
shall be immediately delivered to the Buyer. All remaining documents and funds
required under this Agreement shall be thereafter transferred into the hands of
the escrow agent to be designated by the parties.

3..2. Deliveries. At the Closing, subject to the provisions of this
Agreement, RECOR shall deliver to the Buyer, free and clear of all Liens, the
certificates for the Shares of the Company to be sold by such RECOR in
negotiable form, duly endorsed in blank, or with separate notarized stock
transfer powers attached thereto and signed in blank, in exchange for the
delivery by the Buyer to the Escrow Agent the consideration required by this
Agreement. At the Closing, RECOR will make available to the Buyer the written
resignations of all the directors and officers of the Company effective as of
the Closing except for such directors and officers as the Buyer shall designate
in writing, and shall cause to be made available to the successor dir, stock
record books, books of account, corporate seals, Contracts and other documents,
instruments and papers belonging to the Company and shall cause full
possession and control of all of the Assets and of all other things and matters
pertaining to the operation of the Business to be transferred and delivered to
the directors and officers elected to succeed the resigned directors and
officers of the Company. As used herein the term "Assets" means all of the
Company's assets, properties, business, goodwill and rights of every kind and
description, real and personal, tangible and intangible, wherever situated.
The term "Assets" further specifically includes the El Paso Intermediate
Sanction Facility, all personal property and improvements connected with said
facility, Lot 2, Block 8, of Horizon Hills, El Paso County, State of Texas,
and all contract rights existing between the Company and the West

5
<PAGE> 6
Texas Community Supervision and Corrections Department or any other contracts
that regard or relate to the El Paso Adult Intermediate Sanction Facility. If
RECOR or RECOR hold any rights regarding or relating to the El Paso Adult
Intermediate Sanction Facility or any other Assets, they shall also assign and
transfer all such rights to Buyer at the time of Closing.

3..3. Termination. In the event that the Closing shall not have taken place
on or before August 12, 1996, or such later date as shall be mutually agreed to
in writing by the Buyer and RECOR, all of the rights and obligations of the
parties under this Agreement shall terminate without liability, except for
liability in the event the Closing does not occur and this Agreement terminates
by reason of a default or breach by any party hereto.

4. REPRESENTATIONS AND WARRANTIES OF RECOR. RECOR hereby jointly and
severally represent and warrant to the Buyer and to Avalon:

4..1. Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of Texas,
having fully on the business as it has been and is now being conducted and to
own, lease and operate the Assets. The Company is duly qualified to do business
and is in good standing in every jurisdiction in which the business or the
character of the Assets requires such qualification. The Company has no
subsidiaries.

4..2. Authority and Binding Effect. RECOR has the full power and authority
to execute, deliver and perform this Agreement and has taken all actions
necessary to secure all approvals required in connection therewith. RECOR owns
all of the Shares of the Company free of any liens or encumbrances.

4..3. Validity of Contemplated Transactions. The execution and
performance of this Agreement will not violate any laws, regulations or Court
orders, nor require any prior approval from a third party.

4..4. Third-Party Options. There are no existing Contracts, options,
commitments or rights with, to or in any third party to acquire the Company,
any of the Assets or any interest therein or in the business of the Company.

4..5. Financial Statements and Disclosure Statement of Liabilities. With
the assistance of Avalon and the Buyer as needed, as soon as practicable the
Company and RECOR shall deliver to the Buyer accurate Financial Statements of
the Company's financial position as of July 15, 1996. All liabilities of the
Company are set forth on the Disclosure Statement which is attached to this
Agreement as Exhibit "A" and incorporated herein by this reference. Except as
disclosed in the Disclosure of Liabilities Statement which is Exhibit "A" to
this Agreement, the Company has no other liabilities or obligations. It is
agreed that Buyer and Avalon do not assume any liability for any debts owed to
any affiliated company of the Company, including debts owed by the Company to
Bruce Williams or to RECOR.

4..6. Title to Assets. The Company owns outright and has good and marketable
title to all

6
<PAGE> 7
of the Assets of the Company, free and clear of all liens, except liens
permitted by the written consent of the Buyer and Avalon.

4..7. Condition of Assets. All assets and properties which are part of the
Assets are in good operating condition and repair and are usable in the
ordinary course of business consistent with past practice and conform in all
material respects to all applicable Regulations relating to their construction,
use and operation.

4..8. All of the Contracts to which the Company is party or by which it
or any of the Assets is bound or affected are valid, binding and enforceable in
accordance with their terms. The Company has conducted and is conducting the
Company's business in compliance with all applicable Laws of all governments
and governmental agencies. Neither the real or personal properties owned,
leased, operated or occupied by the Company, nor the use, operation or
maintenance thereof, (a) violates any Laws of any government or governmental
agency, or (b) violates any restrictive or similar covenant, agreement,
commitment, understanding or arrangement.

4..9. Licenses; Permits; Related Approvals. The Company possesses all
contracts, licenses, permits, consents, approvals, authorizations,
qualifications and orders (hereinafter collectively referred to as "Permits")
of all governments and governmental agencies lawfully required to enable the
Company to conduct the Company's business as an Intermediate Sanction Facility
in El Paso County, Texas, or otherwise conduct the Company's business in any
other facility and jurisdiction. All of the contracts and Permits are in full
force and effect, and no suspension, modification or cancellation of any of the
contracts and Permits is pending or threatened.

4..10. Claims. There is no Litigation pending or threatened against the
Company, the Business or the Assets, except for the following pending matters:

a. Thomas H. Applewhite and Harriet M. Applewhite vs. Recor,
Inc., Secure Corrections, Inc., et al., Case No. 94-07157;
250th Judicial District Court of Travis County, State of
Texas; and

b. William E. Burke vs. Recor, Inc., Secure Corrections, Inc., et
al., Case No. 94-07156; 201st Judicial District Court of
Travis County, State of Texas; and

c. Gloria Moreno vs. Recor, Inc., Secure Corrections, Inc., et
al.; Case No. 94-09493; 200th Judicial District Court of
Travis County, State of Texas; and

d. M. Collier Perry dba Perry & Perry Builders, Inc., vs. Recor,
Inc.; Case No. 24,947; 20th Judicial District Court of Milam
County, State of Texas.

No other claim has been asserted and no event has occurred that might result in
other Litigation against the Company or the Assets.

7
<PAGE> 8
4..11. Tax Matters. The Disclosure of Liabilities attached hereto as
Exhibit "A" sets forth an estimate of current or past due taxes owed through
July 15, 1996. A consolidated Federal Income Tax Return for the year ended
December 31, 1995, will be filed by RECOR, and will include Secure Corrections,
Inc. Any amounts owing on that 1995 Federal Income Tax Return will be paid by
RECOR. The buyer will be indemnified for any and all taxes found to be owed
for the periods ending July 15, 1996. Any additional notices of taxes,
interest, penalties, assessments and deficiencies owed, for any period prior to
July 15, 1996, will be paid by RECOR.

4..12. No Material Adverse Developments. Since the date of the financial
information furnished by Buyer, there has been no actual or threatened change
in the financial condition of the Company or, to the best of the Company's and
each RECOR's knowledge, any event, condition or state of facts, in either case
that is or might be material and adverse to the Company or the Assets.

4..13. Full Disclosure. The representations made by RECOR herein and in
any documents signed in the performance of this Agreement are true. RECOR has
told the Buyer and Avalon all material facts necessary for a complete and
honest disclosure of the financial condition of the Company and the condition
of the Assets.

5. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER AND AVALON.
Except as provided in Paragraph 1.C. and 1.D of this Agreement, the obligations
of the Buyer and Avalon under this Agreement are subject to the fulfillment
prior to or at the Closing of each of the following conditions:

5..1. Representations True at Closing. The representations and warranties
of RECOR set forth in Section 4 shall be true and correct on the Closing Date
with the same effect as if made at that time. The representations and
warranties made by RECOR herein shall survive the Closing.

5..2. Performance by RECOR. With the exception of the satisfaction of the
contingencies required by Paragraph 1.D. of this Agreement, RECOR shall have
performed and satisfied all agreements and conditions which each of them is
required by this Agreement and the Letter Agreement of July 15, 1996, to
perform or satisfy prior to or on the Closing Date.

5..3. Form and Content of Documents. The form and content of all documents,
certificates and other instruments to be delivered by RECOR shall be reasonably
satisfactory to the Buyer.

5..4. Material Adverse Changes. From the date hereof to the Closing Date,
neither the Company nor the Assets shall have been materially adversely
affected in any way, including, without limitation, by fire, casualty, act of
God or otherwise. There shall be no conditions existing or threatened with
respect to the Company, or the Assets that might be expected to have a material
adverse effect on any of them.

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5..5. Regulatory Compliance and Approvals. The Buyer and Avalon shall be
satisfied that all approvals required under any Regulations to carry out the
acquisition shall have been obtained and that the parties shall have complied
with all Regulations applicable to the acquisition of Secure Corrections, Inc.

5..6. Consents. RECOR or the Company shall have delivered to the Buyer all
consents required to be obtained in connection with the Acquisition in order to
avoid a Default under any Contract to or by which the Company is a party or may
be bound. Each of the foregoing must be free from burdensome restrictions and
conditions not applicable to the Company prior to the date of this Agreement.

5..7. Buyer Review. The Buyer and Avalon shall have completed and be
satisfied with its confidential and nondisclosed review of the business,
management, finances and accounts receivable of the Company.

5..8. Current Contracts. The Company is currently operating the El Paso
Intermediate Sanction Facility under the terms and provisions of the Contract
by and between Secure Corrections, Inc, as Contractor, and West Texas Community
Supervision and Corrections Department, Contracting Agency, dated December
19th, 1990, as extended by the Contracting Agency. It is a condition to
Buyer's and Avalon's obligations under this agreement that the West Texas
Community Supervision and Corrections Department (a) consent to the acquisition
of ownership of Secure Corrections, Inc., by the Buyer herein, and (b) consent
to an extension of the contract for operation of the El Paso Intermediate
Sanction Facility for a minimum period of 15 years, and (c) consent to a
transfer of operations of the El Paso Intermediate Sanction Facility to the
subsidiary of Avalon, Southern Corrections Systems, Inc. If these
contingencies are not met by August 12, 1996, then Buyer and Avalon shall have
the right to terminate this Agreement and terminate all of their obligations to
the Company and all other parties to this Agreement. Buyer and Avalon shall
likewise be entitled to immediate return of all consideration paid or to be
paid under this Agreement, including all consideration previously delivered to
the Escrow Agent.

6. CONDITIONS PRECEDENT TO OBLIGATIONS OF RECOR. The obligations of
RECOR under this Agreement are subject to the fulfillment prior to or at the
Closing of each of the following conditions:

6..1. Performance by the Buyer. The Buyer and Avalon shall have performed
and satisfied all agreements and conditions which it is required by this
Agreement to perform or satisfy prior to or on the Closing Date.

6..2. Form and Content of Documents. The form and content of all document
instruments to be delivered by the Buyer or Avalon shall be reasonably
satisfactory to RECOR.

7. NON - COMPETE AGREEMENT. After closing, and for a period of five
years thereafter, RECOR agrees to refrain from owning, managing, operating,
controlling or participating in the

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<PAGE> 10
ownership, management, operation, control or financing of any community
corrections services, residential care facilities, drug or alcohol treatment
programs, "half-way house" programs, or any other programs within 200 miles of
the El Paso Intermediate Sanction Facility or (in the event that Southern
Corrections Systems, Inc., acquires operation and management of the McKinley
County Adult Detention Facility) the McKinley County Adult Detention Facility.
Provided, however, that RECOR may continue to operate any juvenile programs
that it now has which are within the 200 mile limit.

8. INDEMNIFICATION. RECOR shall indemnify and hold harmless the Buyer
and Avalon from, against and in respect of any and all damages, losses,
deficiencies, liabilities, costs and expenses resulting from, relating to or
arising out of any (1) liabilities or claims not disclosed on the Disclosure
Statement which is attached hereto as Exhibit "A", or (2) any
misrepresentations made by the Company to the Buyer or Avalon, or (3)
non-fulfillment of any agreement or covenant on the part of RECOR or the
Company hereunder, or (4) any claims regarding or relating to any employment
agreements with Paul Crozier; or (5) any and all claims arising from or out of
the Litigation described in Paragraph 4.10 of this Agreement.

9. MISCELLANEOUS.

9..1. Payment of Expenses. RECOR, the Buyer and Avalon will pay all legal,
accounting and other fees and expenses which such party incurs in connection
with this Agreement and the transactions contemplated hereby, and none of the
expenses of RECOR shall be paid by the Company or out of any of the Assets.
However, if the failure to satisfy a condition of Closing arises out of the
breach, existing at the time of the execution of this Agreement, of a
representation or warranty contained in this Agreement, the party terminating
this Agreement shall be entitled to receive from the breaching party or parties
the expenses of the terminating party incurred between the date of this
Agreement and the date of termination.

9..2. Termination by Mutual Consent. This Agreement may be terminated at
any time on or prior to the Closing Date by mutual consent of RECOR, RECOR, the
Buyer, and Avalon, which mutual consent shall be in writing and signed by all
parties to this Agreement.

9..3. Termination for Breach. If RECOR shall have breached any of its
representations, warranties or other obligations under this Agreement in any
material respect, the Buyer or Avalon may give written notice to RECOR of the
occurrence of the breach or default, together with a request that RECOR take
immediate remedial action to cure the breach or default. If, within 10 days of
receipt of the notice of breach or default, RECOR has failed to provide
satisfactory proof of cure of the breach, then the Buyer and Avalon may
terminate their obligations under this Agreement. RECOR may likewise
terminate its obligations under this Agreement at any time prior to the Closing
Date if the Buyer or Avalon shall have breached any of their representations,
warranties or other obligations under this Agreement in any material respect,
and failed to cure such breach or default within 10 days after written demand
by RECOR for cure of the breach. Such termination may be effected by written
notice from either the Buyer, Avalon, or RECOR, as appropriate, citing the
reasons for termination and

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shall not subject the terminating party to any liability for any valid
termination.

9..4. Assignment and Binding Effect. This Agreement may not be assigned
prior to the Closing by any party hereto without the prior written consent of
the other parties. Subject to the foregoing, all of the terms and provisions of
this Agreement shall be binding upon and inure to the benefit of and be
enforceable by the heirs, executors, legal representatives, successors and
assigns of RECOR and by the successors and assigns of the Buyer or Avalon.

9..5. Waiver. Any term or provision of this Agreement may be waived at any
time by the party entitled to the benefit thereof by a written instrument
executed by such party.

9..6. Notices. Any notice, request, demand, waiver, consent, approval or
other communication which is required or permitted hereunder shall be in
writing and shall be deemed given only if delivered personally to the address
set forth below (to the attention of the person identified below) or sent by
telegram or by registered or certified mail, postage prepaid, as follows:

If to Buyer, to:

Attention: Kensington Capital, PLC
c/o Mr. Mark Robertson
Attorney at Law
Robertson & Williams
3033 N.W. 63rd Street, Suite 160
Oklahoma City, OK 73116-3607
Telephone (405) 848-1944
Telefax: (405) 843-6707

If to Avalon, to:

Attention: Mr. Donald E. Smith
Avalon Community Services, Inc.
P.O. Box 57012
13401 Railway Drive
Oklahoma City, Oklahoma 73157
Telephone: (405) 752-8802
Telefax: (405) 752-8852

If to RECOR, to:

Mr. Bruce Williams
RECOR, Inc.
1234 Airport Road, Suite 116
Destin, Florida 32541
Telephone: (904) 654-7150
Telefax: (904) 654-9472

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with a required copy to:

Mr. Charles E. Jones
Jones & Young
208 Elm Street
Post Office Box 188
Sweetwater, TX 79556-0188

or to such other address as the addressee may have specified in a notice duly
given to the sender and to counsel as provided herein. Such notice, request,
demand, waiver, consent, approval or other communication will be deemed to have
given as of the date so delivered or telegraphed or, if mailed, three business
days after the date so mailed.

9..7. Texas Law to Govern. This Agreement shall be governed by and
interpreted and enforced in accordance with the substantive laws of Texas.

9..8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which is an original and all of which together shall be
deemed to be one and the same instrument. This Agreement shall become binding
when one or more counterparts taken together shall have been executed and
delivered by all of the parties. It shall not be necessary in making proof of
this Agreement or any counterpart hereof to produce or account for any of the
other counterparts. Telefax transmissions shall be accepted as originals.
Provided, however, that the original signatures shall be immediately
transmitted by express mail services.

9..9. In the event that any stock of any party hereto is put into
escrow, the parties expressly authorize the continuation of all business and
activities, including the power to buy and sell property, of the entity whose
stock has been escrowed.

9..10. It is understood and agreed that all of the revenues from
operations of the El Paso Intermediate Sanction Facility attributable to the
period of July 1 through July 15, 1996 shall be paid to RECOR as soon as such
revenues are received by the Company. $53,862

IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.

RECOR, INC.

Witness: /s (illegible) By: /s Bruce Williams
---------------------------- ------------------------------------

KENSINGTON CAPITAL, PLC

By: /s Mark A. Robertson, agent
------------------------------------

AVALON COMMUNITY SERVICES, INC.

By: /s Jerry Sunderland
------------------------------------

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EXHIBIT "A"

DISCLOSURE STATEMENT OF LIABILITIES
OF
SECURE CORRECTIONS, INC.

<PAGE> 1
Exhibit 23.(i)

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference into this Registration
Statement on Form S-2 of our report dated March 21, 1996, on our audit of the
consolidated balance sheets of Avalon Community Services, Inc. and subsidiaries
as of December 31, 1994 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years then ended. We
also consent to the reference to our firm under the caption "Experts."

COOPERS & LYBRAND L.L.P.

Oklahoma City, Oklahoma
September 27, 1996

<PAGE> 1
Exhibit 23.(ii)

CONSENT OF COUNSEL

Robertson & Williams, Inc., a professional corporation, hereby
consents to the use of its name under the heading "LEGAL MATTERS" in the
Prospectus constituting a part of this Registration Statement.

ROBERTSON & WILLIAMS, INC.

Oklahoma City, Oklahoma
September 26, 1996