UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 8-K


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


                DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)

                                  December 21, 2004
                 --------------------------------------------------------------



                       Avalon Correctional Services, Inc.
                 --------------------------------------------------------------
             (Exact name of Registrant as specified in its Charter)


         Nevada                        0-20307                       13-3592263
     --------------------------------------------------------------------------
(State or other jurisdiction      (Commission File No.)           (IRS Employer
of incorporation)                                           Identification No.)


                  13401 Railway Drive, Oklahoma City, OK 73114
 ------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                  405-752-8802
 ------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))






                                        1

<PAGE>
                    INFORMATION TO BE INCLUDED IN THE REPORT


Item 1.02.  Termination of Material Definitive Agreement.

See additional discussion under Item 2.03 below, which is incorporated herein by
reference.  At the time that the Company  repurchased  the  1,622,448  shares of
redeemeable  common  stock  from RSTW  Partners  III,  L.P.,  the Note  Purchase
Agreement,  the Stock Purchase Agreement,  the Shareholder Agreement, and Senior
Subordinated Note existing between the Company and RSTW were terminated.

Item 2.03 Creation of a Direct  Financial  Obligation or an Obligation Under and
Off-Balance Sheet Arrangement of a Registrant.

     Avalon  Correctional  Services,  Inc. ("the Company") announces a financial
restructuring.  The restructuring  includes the following:

     Southern  Corrections  Systems,  Inc., a wholly  owned  Avalon  subsidiary,
issued $8 million of industrial  development  revenue bonds ("the  Bonds").  The
Bonds are the Taxable Series 2004 Industrial Development Revenue Bonds issued by
the Tulsa County Industrial  Authority.  The proceeds from the Bonds were loaned
to Southern  Corrections  Systems,  Inc. The $8 million  bonds bear  interest at
rates ranging from 8.375% to 10.25% and are repayable over a twenty-year period.
The Company utilized  $5,000,000 of the proceeds to acquire  1,622,448 shares of
redeemable  common stock from an investment  company.  The investment  company's
agreement with the Company  required the Company to repurchase the shares at the
market price at any time at the  investment  company's  option.  The shares were
classified on the Company's balance sheet as redeemable common stock and carried
at the  redemption  value at each balance  sheet date.  The  accounting  for the
purchase will reduce stockholders equity by $5,000,000 and have no gain or loss.

     The  Company  also  purchased  $2,000,000  of the  outstanding  convertible
subordinated  debentures  issued in 1997. The debentures were repurchased at par
value plus accrued  interest and issuance of 100,000  stock  options.  The stock
options  have a term of  approximately  34 months and are  exercisable  into the
Company's common stock at $3.00 per share.  The Company also negotiated  certain
amendments to the convertible  subordinated debenture agreement.  The amendments
clarify certain  provisions and permit the Company's  right to issue  additional
senior debt.

     Proceeds  of the bonds  were also  used to pay  costs  associated  with the
issuance of the Bonds and fundings a debt service reserve fund.

     Issuance of the Bonds required an amendment to the Company's  senior credit
facility with a bank.  Certain terms of the senior credit facility were amended,
a payment of $500,000 was made to reduce the senior  credit  facility  from $4.5
million to $4 million,  and the line of credit was increased from  $1,000,000 to
$1,750,000.  The Company will issue up to 1 million shares of preferred stock at
$1.00 per share. The preferred stock has a 7.5% dividend rate and is convertible
into common  stock at the 30 day  trailing  average  market price at the date of
subscription.  Proceeds  of the  offering  will be used  for  general  corporate
purposes.

     A tender offer will be made to acquire the $1,850,000 remaining convertible
subordinated  debentures.  The tender offer will be on the same terms as offered
for the debentures acquired from the investment firm.

     The  Company  will  recognize  a  loss  on  early  retirement  of  debt  of
approximately  $220,000 related to the purchase of the convertible  subordinated
debentures.

     The completion of the  restructuring  will reduce the number of outstanding
common shares by 1,622,448  shares for basic  earnings per share.  The number of
shares  outstanding for diluted earnings per share will decrease by a minimum of
2,229,114  shares to a maximum of 2,753,280  shares based on the response to the
Company's tender offer.

Item 3.02   Unregistered Sales of Equity Securities

     See  description  of issuance of  preferred  stock  described  in Item 2.03
above, which is incorporated herein by reference.


Item 5.02 Departure of Directors or Principal  Officers;  Election of Directors;
     Appointment of Principal Officers.

     At the  completion of the  transactions  described in Item 2.03 above,  the
Company  announces that effective  December 21, 2004, Mark Cooley and Jim Wilson
resigned from the Company's Board of Directors.


                                    SIGNATURE

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


                               AVALON CORRECTIONAL SERVICES, INC.

                               s// Donald E.  Smith
                               DONALD E. SMITH
                               Chairman of the Board and Chief Executive Officer

                               Dated:   December 22, 2004

                                        2
<PAGE>
[{"type": "8-K", "sequence": "1", "filename": "k81204.txt", "description": "FORM 8-K FOR DECEMBER 21, 2004", "secsgml_size_bytes": 7159}]
{"company-data": {"conformed-name": "AVALON CORRECTIONAL SERVICES INC", "cik": "0000872202", "assigned-sic": "8744", "irs-number": "133592263", "state-of-incorporation": "NV", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-20307", "film-number": "041220654"}, "business-address": {"street1": "13401 RAILWAY DR", "city": "OKLAHOMA CITY", "state": "OK", "zip": "73114", "phone": "4057528802"}, "mail-address": {"street1": "13401 RAILWAY DRIVE", "city": "OKLAHOMA CITY", "state": "OK", "zip": "73114"}, "former-company": [{"former-conformed-name": "AVALON COMMUNITY SERVICES INC", "date-changed": "19930328"}, {"former-conformed-name": "AVALON ENTERPRISES INC", "date-changed": "19600201"}]}
UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

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

                DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)

                                  December 21, 2004
                 --------------------------------------------------------------

                       Avalon Correctional Services, Inc.
                 --------------------------------------------------------------
             (Exact name of Registrant as specified in its Charter)

         Nevada                        0-20307                       13-3592263
     --------------------------------------------------------------------------
(State or other jurisdiction      (Commission File No.)           (IRS Employer
of incorporation)                                           Identification No.)

                  13401 Railway Drive, Oklahoma City, OK 73114
 ------------------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                  405-752-8802
 ------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))

                                        1
INFORMATION TO BE INCLUDED IN THE REPORT

Item 1.02.  Termination of Material Definitive Agreement.

See additional discussion under Item 2.03 below, which is incorporated herein by
reference.  At the time that the Company  repurchased  the  1,622,448  shares of
redeemeable  common  stock  from RSTW  Partners  III,  L.P.,  the Note  Purchase
Agreement,  the Stock Purchase Agreement,  the Shareholder Agreement, and Senior
Subordinated Note existing between the Company and RSTW were terminated.

Item 2.03 Creation of a Direct  Financial  Obligation or an Obligation Under and
Off-Balance Sheet Arrangement of a Registrant.

     Avalon  Correctional  Services,  Inc. ("the Company") announces a financial
restructuring.  The restructuring  includes the following:

     Southern  Corrections  Systems,  Inc., a wholly  owned  Avalon  subsidiary,
issued $8 million of industrial  development  revenue bonds ("the  Bonds").  The
Bonds are the Taxable Series 2004 Industrial Development Revenue Bonds issued by
the Tulsa County Industrial  Authority.  The proceeds from the Bonds were loaned
to Southern  Corrections  Systems,  Inc. The $8 million  bonds bear  interest at
rates ranging from 8.375% to 10.25% and are repayable over a twenty-year period.
The Company utilized  $5,000,000 of the proceeds to acquire  1,622,448 shares of
redeemable  common stock from an investment  company.  The investment  company's
agreement with the Company  required the Company to repurchase the shares at the
market price at any time at the  investment  company's  option.  The shares were
classified on the Company's balance sheet as redeemable common stock and carried
at the  redemption  value at each balance  sheet date.  The  accounting  for the
purchase will reduce stockholders equity by $5,000,000 and have no gain or loss.

     The  Company  also  purchased  $2,000,000  of the  outstanding  convertible
subordinated  debentures  issued in 1997. The debentures were repurchased at par
value plus accrued  interest and issuance of 100,000  stock  options.  The stock
options  have a term of  approximately  34 months and are  exercisable  into the
Company's common stock at $3.00 per share.  The Company also negotiated  certain
amendments to the convertible  subordinated debenture agreement.  The amendments
clarify certain  provisions and permit the Company's  right to issue  additional
senior debt.

     Proceeds  of the bonds  were also  used to pay  costs  associated  with the
issuance of the Bonds and fundings a debt service reserve fund.

     Issuance of the Bonds required an amendment to the Company's  senior credit
facility with a bank.  Certain terms of the senior credit facility were amended,
a payment of $500,000 was made to reduce the senior  credit  facility  from $4.5
million to $4 million,  and the line of credit was increased from  $1,000,000 to
$1,750,000.  The Company will issue up to 1 million shares of preferred stock at
$1.00 per share. The preferred stock has a 7.5% dividend rate and is convertible
into common  stock at the 30 day  trailing  average  market price at the date of
subscription.  Proceeds  of the  offering  will be used  for  general  corporate
purposes.

     A tender offer will be made to acquire the $1,850,000 remaining convertible
subordinated  debentures.  The tender offer will be on the same terms as offered
for the debentures acquired from the investment firm.

     The  Company  will  recognize  a  loss  on  early  retirement  of  debt  of
approximately  $220,000 related to the purchase of the convertible  subordinated
debentures.

     The completion of the  restructuring  will reduce the number of outstanding
common shares by 1,622,448  shares for basic  earnings per share.  The number of
shares  outstanding for diluted earnings per share will decrease by a minimum of
2,229,114  shares to a maximum of 2,753,280  shares based on the response to the
Company's tender offer.

Item 3.02   Unregistered Sales of Equity Securities

     See  description  of issuance of  preferred  stock  described  in Item 2.03
above, which is incorporated herein by reference.

Item 5.02 Departure of Directors or Principal  Officers;  Election of Directors;
     Appointment of Principal Officers.

     At the  completion of the  transactions  described in Item 2.03 above,  the
Company  announces that effective  December 21, 2004, Mark Cooley and Jim Wilson
resigned from the Company's Board of Directors.

                                    SIGNATURE

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

                               AVALON CORRECTIONAL SERVICES, INC.

                               s// Donald E.  Smith
                               DONALD E. SMITH
                               Chairman of the Board and Chief Executive Officer

                               Dated:   December 22, 2004

                                        2