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

KAANAPALI LAND, LLC

Condensed Consolidated Statements of Operations

Three and Nine Months Ended September 30, 20222023 and 20212022

(Unaudited)

(Dollars in Thousands, except per share data)

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

KAANAPALI LAND, LLC

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three and Nine Months Ended September 30, 20222023 and 20212022

(Unaudited)

(Dollars in Thousands)

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

KAANAPALI LAND, LLC

Condensed Consolidated Statements of Equity

Three and Nine Months Ended September 30, 20222023

(Unaudited)

(Dollars in Thousands)

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

KAANAPALI LAND, LLC

Condensed Consolidated Statements of Equity

Three and Nine Months Ended September 30, 20212022

(Unaudited)

(Dollars in Thousands)

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

KAANAPALI LAND, LLC

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 20222023 and 20212022

(Unaudited)

(Dollars in Thousands)

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

KAANAPALI LAND, LLC

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Dollars in Thousands)

(1)  Summary of Significant Accounting Policies

Organization and Basis of AccountingPresentation

Kaanapali Land, LLC ("Kaanapali Land"), a Delaware limited liability company, is the reorganized entity resulting from the Joint Plan of Reorganization of Amfac Hawaii, LLC (now known as KLC Land Company, LLC ("KLC Land")), certain of its subsidiaries (together with KLC Land, the "KLC Debtors") and FHT Corporation ("FHTC" and, together with the KLC Debtors, the "Debtors") under Chapter 11 of the Bankruptcy Code, dated June 11, 2002 (as amended, the "Plan").

The accompanying condensed consolidated financial statements include the accounts of Kaanapali Land, LLC (“Kaanapali Land”) and all of its subsidiaries and its predecessors (collectively, the “Company”), which include KLC Land and its wholly-owned subsidiaries.. Prior to July 1, 2022, the Kaanapali Coffee Farms Lot Owners’ Association (“LOA”) was consolidated into the Company’s consolidated financial statements and the interests of third-party owners of the lots in the Kaanapali Coffee Farms subdivision were reflected as equity including non controllingnoncontrolling interests. The Company sold its last owned lot in the Kaanapali Coffee Farms subdivision in early 2022 and as a consequence, the Company elected to turnover control of the LOA board of directors to the third-party owners of the lots in the subdivision. An election for a new board of directors, comprised entirely of third-party lot owners, was held during June 2022 and the results of the election were announced July 1, 2022. Therefore, effective July 1, 2022, the Company deconsolidated the LOA due to the loss of control over the LOA and derecognized the assets, liabilities, equity (including the non controlling interests) and results of operations in its financial statements. The Company does not have any direct or indirect retained interest in the LOA. The Company currently has agreements with the LOA to farm coffee, perform common area maintenance services and provide delivery of non-potable water. Through June 30, 2022, all significant intercompany transactions and balances were eliminated in consolidation.

The Company's continuing operations are in two business segments - Agriculture and Property. The Agriculture segment primarily engages in farming, harvesting and milling operations relating to coffee orchards on behalf ofpursuant to farming agreements with the applicable land owners.LOA and a related entity. The Company also cultivates, harvests and sells bananas and citrus fruits, and engages in certain ranching operations. The Property segment primarily develops land for sale and negotiates bulk sales of undeveloped land. The Property and Agriculture segments operate exclusively in the State of Hawaii.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements, and therefore, should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 20212022 (“20212022 Form 10-K”). These unaudited condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair presentation of the financial position and results of operations and cash flows for interim periods in accordance with U.S. GAAP.

A description of the Company’s significant accounting policies is included in Note 1 to the Notes to the Condensed Consolidated Financial Statements included in its 20212022 Form 10-K. Except as noted below, there were no material changes in the Company’s significant accounting policies during the three and nine months ended September 30, 2022.2023. 

Property

The Company's significant property holdings are on the island of Maui and consist of approximately 3,900 acres, of which approximately 1,500 acres are classified as conservation land, which precludes development. The Company has determined, based on its current projections for the development and/or disposition of its property holdings, that the property holdings are not currently recorded in an amount in excess of proceeds that the Company expects that it will ultimately obtain from the operation and disposition thereof.

Inventory of land held for sale of approximately $0 and $3,045, representing agricultural lots at the Kaanapali Coffee Farms subdivision, is included in Property, net in the consolidated balance sheets at September 30, 2022 and December 31, 2021, respectively, and is carried at the lower of cost or fair market value, less costs to sell, which is based on current and foreseeable market conditions, discussions with real estate brokers and review of historical land sale activity fair value hierarchy (Levels 2 and 3). Land held for sale is recognized in the Property Segment as disclosed in Note 9, Business Segment Information. Land is currently utilized for commercial specialty coffee farming operations which also support the Company's land development program, as well as farming bananas, citrus and other farm products and ranching operations. Additionally, miscellaneous parcels of land havehad been leased or licensed to third parties on a short term basis.basis prior to the Lahaina Wildfire.

 Beginning on August 8, 2023, a wildfire occurred due east of historic Lahaina town in Maui. The fire spread rapidly due to extreme wind conditions caused in part by Hurricane Dora which traveled 800 miles offshore west of Maui. The fires caused multiple fatalities, widespread damage to Lahaina town and the surrounding area including the Company’s 19-acre Pioneer Mill site. The Company’s offices and coffee mill are located on the site as well as various other structures and a building which is leased to an unrelated third party and used to operate a coffee store. The Company also utilized portions of the property for short term license agreements with third parties that generates income for the Company. Although no employees were injured in the fire, the Company’s offices and coffee store building were destroyed. Additionally, it appears that most of the personal property of the licensees and the coffee mill was severely damaged if not destroyed. The widespread destruction is likely to cause disruptions in the Company’s development plans. The damage to the coffee mill has disrupted operations and will prevent the Company from processing and selling the current year coffee crop. It is also likely that the fires and devastation caused thereby will adversely affect the Maui economy and businesses operated on Maui. The Company continues to evaluate the extent of the damage to its property and equipment and has initiated claims with its insurance carriers. Access to the property remains restricted, and such restrictions are expected to continue for the near term. In October 2023, the Company received an initial, unallocated advance payment of $1,000 from its insurance carrier. Notwithstanding the advance, there can be no assurance that the Company’s insurance coverage will fully compensate the Company for its losses incurred in connection with the fire and related devastation, including the costs of its structures and equipment lost in the fire, the loss in revenue from the lack of coffee sales, or the loss of income from the licensees. The Company could experience losses in excess of our insured limits, and further, claims for certain losses could be denied or subject to deductibles or exclusions under our insurance policies. The Company has relocated its offices to temporary office facilities located on its lands in Kaanapali. Additionally, the Company was able to recover its electronic files which were stored on its servers destroyed in the fire from back up files existing at an offsite location. Recovery efforts continue.

Provisions for impairment losses related to long-lived assets, if any, are recognized when expected future cash flows are less than the carrying values of the assets. If indicators of impairment are present, the Company evaluates the carrying value of the related long-lived assets in relationship to the future undiscounted cash flows of the underlying operations or anticipated sales proceeds. The Company adjusts the net book value of property to fair value if the sum of the expected undiscounted future cash flow or sales proceeds is less than book value. Assets held for sale are recorded at the lower of the carrying value of the asset or fair value less costs to sell. As a result of the fires, the Company performed an impairment evaluation of its asset groups to determine if provisions for impairment losses should be recognized. The Company concluded a provision for impairment should not be recognized for the current period. The Company will continue to monitor and evaluate the indicators for evidence of impairment in future periods. There can be no assurance that future impairment testing will not indicate that an impairment has occurred and that a provision for impairment will be required.

While most of the personal property destroyed in the fire was fully depreciated the Company wrote off the net carrying value of destroyed equipment totaling approximately $400 at September 30, 2023. 

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Operating results for the nine months ended September 30, 20222023 are not necessarily indicative of the results that may be achieved for the full year ending December 31, 20222023 or in any other future periods.

Cash and Cash Equivalents

The Company considers as cash equivalents all investments with maturities of three months or less when purchased. Included in this balance as of September 30, 20222023 is a money market fund for $8,400 27,650that is considered to be a fair value hierarchy Level 1 investment. The Company’s cash balances are maintained primarily in two financial institutions. Restricted cash as of December 31, 2021 represents cash held by the LOA. Such balances significantly exceed the Federal Deposit Insurance Corporation insurance limits. Management does not believe the Company is exposed to significant risk of loss on cash and cash equivalents or restricted cash.equivalents.

Subsequent Events

The Company has performed an evaluation of subsequent events from the date of the financial statements included in this quarterly report through the date of its filing with the Securities and Exchange Commission.

Revenue Recognition

Revenue from real property sales is recognized at the time of closing when control of the property transfers to the customer. After closing of the sale transaction, the Company has no remaining performance obligation.

Other revenues are recognized when control of goods or services transfers to the customers, in the amount that the Company expects to receive for the transfer of goods or provision of services.

Revenue recognition standards require entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange. The revenue recognition standards have implications for all revenues, excluding those that are under the specific scope of other accounting standards.

The Company’s revenues that were subject to revenue recognition standards were as follows (in thousands):

The revenue recognition standards require the use of a five-step model to recognize revenue from customer contracts. The five-step model requires that the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.

Lease Accounting

In February 2016, the Financial Accounting Standards Board (“FASB”) updated Accounting Standards Codification (“ASC”) Topic 842 Leases (“ASC Topic 842”). Accounting Standards Update (“ASU”) 2016-02 (“ASU 2016-02”) requires lessees to record operating and financing leases as assets and liabilities on the balance sheet and lessors to expense costs that are not direct leasing costs. Subsequently, FASB issued additional ASUs that further clarified the ASU 2016-02. The ASUs became effective for the Company on January 1, 2019. Upon adoption of the lease ASUs, the Company elected the practical expedients allowable under the ASUs, which included the optional transition method permitting January 1, 2019 to be its initial application date. The adoption of this guidance did not result in an adjustment to retained earnings. Additionally, the Company elected the package of practical expedients, which permits the Company not to reassess expired or existing contracts continuing a lease, the lease classification for expired or existing contracts, and initial direct costs for any existing leases. Further, the Company elected the practical expedient regarding short-term leases, which allows lessees to elect not to apply the balance sheet recognition requirements in ASC Topic 842 to short-term leases. Finally, under ASC Topic 842, lessors are required to continually assess collectability of lessee payments, and, if operating lease payments are not probable of collection, to only recognize into income the lesser of (i) straight-line rental income or (ii) lease payments received to date. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

The Company’s lease arrangements, both as lessor and as lessee, are short-term leases. The Company leases land to tenants under operating leases, and the Company leases property, primarily office and storage space, from lessors under operating leases. During the three and nine months ended September 30, 2022,2023, the Company recognized$175 and $760, respectively, and $296 and $834, respectively, and $189 and $563, during the three and nine months ended September 30, 2021,2022, respectively, of lease income, substantially comprised of non-variable lease payments. During the three and nine months ended September 30, 2022,2023, the Company recognized$31 and $80, respectively, and $20 and $54, respectively, and $17 and $47 during the three and nine months ended September 30, 2021,2022, respectively, of lease expense, substantially comprised of non-variable lease payments.

Recently Issued Accounting Pronouncements

In June 2016,December 2022, the FASB updated ASCissued ASU No. 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 326 Financial Instruments – Credit Losses with ASU 2016-13 Measurement848”. The amendments in this Update defer the sunset date of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 enhancesTopic848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the methodology of measuring expected credit losses to include the use of forward-looking information to better inform credit loss estimates. ASU 2016-13 isrelief in Topic 848. The amendments in this Update are effective for annual periods beginning after December 15, 2019 for public companies, except for smaller reporting companies, whose effective date will be periods beginning after December 15, 2022.all entities upon issuance of this Update. While the Company is currently evaluating the effect that implementation of this update will have on its condensed consolidated financial statements, no significant impact is anticipated.

In March 2020, FASB issued ASU 2020-04, Reference Rate Reform (“ASU 2020-04”) which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuance of LIBOR or another referenced rate. ASU 2020-04 is effective for fiscal years beginning after December 31, 2022. While the Company is currently evaluating the effect that the implementation of this guidance will have on its condensed consolidated financial statements, no significant impact is anticipated.

(2)  Land Development

During the first quarter of 2006, the Company received final subdivision approval on an approximately 336 acre parcel in the region "mauka" (toward the mountains) from the main highway serving the area. This project, called Kaanapali Coffee Farms, originally consisted of 51 agricultural lots, offered to individual buyers. During the second quarter of 2021, the Company converted an approximately 55 acre cultural resources lot to an agricultural lot. The Company closed on the sale of this lot on March 22, 2022. The purchase price was $5,000, paid in cash at closing. As of September 30, 2022, theThe Company hadhas sold all the lots at Kaanapali Coffee Farms including one lot in December 2021 and one in March 2022.Farms.

In September 2014, Kaanapali Land Management Corp. (“KLMC”), pursuant to a property and option purchase agreement (“Purchase Agreement”) with an unrelated third party, closed on the sale of an approximately 14.9 acre parcel in West Maui. The purchase price was $3,300, paid in cash at closing. The agreement (as subsequently amended) commits KLMC to fund up to $583, depending on various factors, for off-site roadway, sewer and electrical improvements that will also provide service to other KLMC properties. Although certainKLMC may, at its discretion, design, construct, install, and complete all or portions of the off-site road, sewer and/or electrical improvements, in which case the developer shall pay to KLMC the total costs thereof, less the KLMC committed amount. In relation to such sewer line improvement, KLMC has entered into a contract for $1,070 to install such sewer line. KLMC has paid $972 on the contract which has been recorded as a receivable, less KLMC’s sewer line commitment of $208. In accordance with the Purchase Agreement, the receivable accrues interest of 6.5% and is secured by the 14.9 acre property. Certain other off-site construction has begun at the site, the commitment remains outstanding as construction of such improvements does not yet trigger such funding.site. In conjunction with the property and option purchase agreement,Purchase Agreement, the Company retains certain approval rights relating to the uses and designs of the site to ensure the uses and designs are aligned with the Company's planned master development. If such uses result in a dispute with the developer of the site, such dispute could delay the development of the site. The 14.9 acre site is intended to be used for a critical access hospital, skilled nursing facility, assisted living facility, and independent living facility.

(3)  Mortgage Note Payable

Certain subsidiaries of Kaanapali Land are jointly indebted to Kaanapali Land pursuant to a certain Secured Promissory Note in the principal amount of $70,000, dated November 14, 2002, and due September 30, 2029, as extended. Such note had an outstanding balance of principal and accrued interest as of September 30, 20222023 and December 31, 20212022 of $90,11590,467 and $90,56590,203, respectively. The interest rate currently is 0.39%0.39% per annum and compounds semi-annually. The note, which is prepayable, is secured by substantially all of the remaining real property owned by such subsidiaries, pursuant to a certain Mortgage, Security Agreement and Financing Statement, dated as of November 14, 2002, and placed on record in December 2002. The note has been eliminated in the condensed consolidated financial statements because the obligors are consolidated subsidiaries of Kaanapali Land.

(4)  Employee Benefit Plans and Investments

ThePrior to June 1, 2022, the Company participatesparticipated in a defined benefit pension plan (the “Pension Plan”) that covers substantially all its eligible employees. The Pension Plan iswas sponsored and maintained by Kaanapali Land in conjunction with other plans providing benefits to employees of Kaanapali Land and its affiliates.

The Company’s Pension Plan has excess assets of approximately $20 million. On January 15, 2022, Pacific Trail Holdings LLC, the manager of the Company, adopted a plan to freeze the benefit accruals under and close participation in the Pension Plan and terminate the Pension Plan on June 1, 2022. Effective February 7, 2022, the fair value hierarchy Level 1 and Level 2 plan asset investments were reallocated to a money market fund. Benefit accruals were frozen on March 31, 2022. The Company recognized a curtailment gain of $12 as of January 31, 2022, in the consolidated financial statements at March 31, 2022. The Company paid $420 inlump sum benefits totaling approximately $420to Pension Plan participants during October 2022.2022, thereby settling all benefit Pension Plan liabilities. The remaining surplusCompany’s former Pension Plan assets are expected to be distributed in 2023 fromwere approximately $19,397 as of August 30, 2023.

The Company transferred $5,000 which was approximately 25% of the Pension Plan assets to a qualified replacement plan (“QRP”). Such assets are maintained in a suspense account within the QRP pending allocation to plan participants. The assets will be allocated to the participants in the QRP who were participants in the terminated Pension Plan and the employees of certain affiliates of the Company. Such allocations are planned to be allocated ratably over a period not to exceed seven years to comply with regulatory requirements. In accordance with GAAP, the requirementsamount transferred to the QRP is reflected as Retirement plan investments on the Company’s condensed consolidated balance sheet at September 30, 2023. The remaining assets of the Internal Revenue Codeterminated Pension Plan of 1986 (as amended), which includes anapproximately $14,500 reverted to the Company on September 15, 2023.

The Company is subject to a 20% excise tax of approximately $2,900, which is included in Accounts payable and accrued expenses on the Company’s condensed consolidated balance sheet at September 30, 2023 and in Excise tax expense on the Company’s condensed consolidated Statement of operations for the three and nine months ended September 30, 2023. The excise tax was paid in October 2023. The funds free up cash to 50%, by certainbetter prepare the Company for tightening credit markets and are available for, among other things, working capital requirements, including future operating expenses, the Company’s obligations for engineering, planning, regulatory deadlines.and development costs, drainage and utilities, and potential environmental remediation costs on existing properties.

The components of the net periodic pension benefit (credit) included in selling, general and administrative in the Company’s condensed consolidated statements of operations are as follows (in thousands):

The Company recognizes the over funded or under funded status of its employee benefit plans as an asset or liability in its statement of financial position and recognizes changes in its funded status in the year in which the changes occur through comprehensive income. Included in accumulated other comprehensive income at September 30, 2022 and December 31, 2021 are the following amounts that have not yet been recognized in net periodic pension cost: unrecognized prior service costs of $0 and $0, respectively, and unrecognized actuarial gain of $3,080 ($2,279, net of tax) and $3,106 ($2,298, net of tax), respectively. The prior service cost, curtailment gain and actuarial gain recognized in net periodic pension credit for the nine months ended September 30, 2022 are $0, $12 ($9 net of tax) and $13 ($10 net of tax), respectively.

The Company maintains a nonqualified deferred compensation arrangement (the "Rabbi Trust") which provides certain former directors of Amfac and their spouses with pension benefits. The deferred compensation liability of $$356329 is included in Other liabilities in the Company's condensed consolidated balance sheet as of September 30, 2022.2023.

(5)  Income Taxes

The statutes of limitations with respect to the Company's taxes for 20182019 and more recent years remain open to examinations by tax authorities, subject to possible utilization of loss carryforwards from earlier years. Notwithstanding the foregoing, all net operating losses (“NOL”) generated and not yet utilized are subject to adjustment by the Internal Revenue Service (“IRS”). The Company believes adequate provisions for income tax have been recorded for all years, although there can be no assurance that such provisions will be adequate. To the extent that there is a shortfall any such shortfall for which the Company couldis liable, the Company’s results of operations may be liable could be material.affected adversely and materially.

The Tax Cuts and Jobs Act (the “Act”) repealed the corporate alternative minimum tax (“AMT”) and provided that prior AMT credits would be refundable. Any remaining AMT credit amount became refundable incrementally from 2018 through 2021. The Coronavirus Aid, Relief, and Economic Security Act (“CARES”) accelerated the refund schedule, enabling the Company to claim the refund in full. In February and July 2021, the Company received $1,483 and $1,486, respectively, including interest, of the refundable tax credit from the IRS.

The Act is a comprehensive tax reform bill containing a number of other provisions that either currently or in the future could impact the Company, particularly the effect of certain limitations effective for the tax year 2018 and forward (prior losses remain subject to the prior 20 year carryover period) on the use of federal NOL carryforwards, which will generally be limited to being used to offset 80% of future annual taxable income.

(6)  Transactions with Affiliates

An affiliated insurance agency, JMB Insurance Agency, Inc., which has some degree of common ownership with the Company, earns insurance brokerage commissions in connection with providing the placement of insurance coverage for certain of the properties and operations of the Company. Commissions paid for the three and nine months ended September 30, 20222023 were $$10 and $$1523, respectively, and $$01 and $$2015 for the three and nine months ended September 30, 2021,2022, respectively.

The Company reimburses its affiliates for general overhead expense and for direct expenses incurred on its behalf, including salaries and salary-related expenses incurred in connection with the management of the Company's operations. Generally, the entity that employs the person providing the services receives the reimbursement. Substantially all of such reimbursable amounts were incurred by JMB Realty Corporation or its affiliates, 900FMS, LLC, 900Work, LLC, and JMB Financial Advisors, LLC, all of which have some degree of common ownership with the Company. The total costs recorded in cost of sales and selling, general and administrative expenses in the consolidated statement of operations for the three and nine months ended September 30, 2023 and 2022 and 2021 were $$381296 and $$1,121861, respectively, and $$365381 and $$1,0991,121, respectively, of which $$348234 was unpaid as of September 30, 2022.2023.

The Company had derived revenue from farming and common area maintenance services and for providing non-potable water to the LOA. The LOA is the association of the lot owners of the Kaanapali Coffee Farms. Effective July 1, 2022, the LOA is no longer an affiliate of the Company due to the lossrelinquishment of control over the LOA. The revenues are $616 for the nine months ended September 30, 2022 respectively, and was $$323 616and $969 for the three and nine months ended September 30, 2021, respectively.. Such revenue is recognized in the Agriculture Segment as disclosed in Note 9, Business Segment Information. Through June 30, 2022, the revenue amounts have been eliminated in the consolidated financial statements.

(7)  Commitments and Contingencies

Material legal proceedings of the Company are described below. Unless otherwise noted, the parties adverse to the Company in the legal proceedings described below have not made a claim for damages in a liquidated amount and/or the Company believes that it would be speculative to attempt to determine the Company's exposure relative thereto, and as a consequence believes that an estimate of the range of potential loss cannot be made.

Two former subsidiaries, Oahu Sugar Company, LLC (“Oahu Sugar”) and D/C Distribution Corporation (“D/C”), filed petitions for liquidation under Chapter 7 of the Bankruptcy Code in April 2005 and July 2007, respectively, as described below. On December 17, 2019, the Oahu Sugar bankruptcy case was closed. As a consequence of D/C Chapter 7 filing, D/C has not been under control of the Company since the bankruptcy filing.

As a result of an administrative order issued to Oahu Sugar by the Hawaii Department of Health (“HDOH”), Order No. CH 98-001, dated January 27, 1998, Oahu Sugar engaged in environmental site assessment of lands it leased from the U.S. Navy and located on the Waipio Peninsula. Oahu Sugar submitted a Remedial Investigation Report to the HDOH. The HDOH provided comments that indicated that additional testing may be required. Oahu Sugar responded to these comments with additional information. On January 9, 2004, the Environmental Protection Agency (“EPA”) issued a request to Oahu Sugar seeking information related to the actual or threatened release of hazardous substances, pollutants and contaminants at the Waipio Peninsula portion of the Pearl Harbor Naval Complex National Priorities List Superfund Site. The request sought, among other things, information relating to the ability of Oahu Sugar to pay for or perform a cleanup of the land formerly occupied by Oahu Sugar. Oahu Sugar responded to the information requests and notified both the U.S. Navy and EPA that while it had some modest remaining cash that it could contribute to further investigation and remediation efforts in connection with an overall settlement of the outstanding claims, Oahu Sugar was substantially without assets and would be unable to make a significant contribution to such an effort. Attempts at negotiating such a settlement were fruitless and Oahu Sugar received an order from EPA in March 2005 that purported to require certain testing and remediation of the site. As Oahu Sugar was substantially without assets, the pursuit of any action, informational, enforcement, or otherwise, would have had a material adverse effect on the financial condition of Oahu Sugar.

Therefore, as a result of the pursuit of further action by the HDOH and EPA as described above and the immediate material adverse effect that the actions had on the financial condition of Oahu Sugar, Oahu Sugar filed with the United States Bankruptcy Court, Northern District of Illinois, Eastern Division in April 2005, its voluntary petition for liquidation under Chapter 7 of Title 11, United States Bankruptcy Code. Such filing was not expected to have a material adverse effect on the Company as Oahu Sugar was substantially without assets at the time of the filing. While it was not believed that any other affiliates had any responsibility for the debts of Oahu Sugar, EPA made a claim against Kaanapali Land as further described below.

Prior toUnder an insurance settlement the claims filing deadline, Kaanapali Land, on behalf of itself and certain subsidiaries, filed claims that aggregated approximately $224,000, primarily relating to unpaid guarantee obligations made by Oahu Sugar that were assigned to Kaanapali Land pursuant to the Plan on the Plan Effective Date. In addition, EPA and the U.S. Navy filed a joint proof of claim that sought to recover certain environmental response costs relative to the Waipio Peninsula site discussed above. The proof of claim contained a demand for previously spent costs in the amount of approximately $260, and additional anticipated response costs of between approximately $2,760 and $11,450. No specific justification of these costs, or what they are purported to represent, was included in the EPA/U.S. Navy proof of claim. There was an insignificant amount of assets remaining in the debtor's estate and it was unclear whether the United States Trustee who took control of Oahu Sugar was going to take any action to contest the EPA/U.S. Navy claim, or how it was going to reconcile such claim for the purpose of distributing any remaining assets of Oahu Sugar. Counsel for the trustee, EPA, the U.S. Navy, and forCompany reached with Fireman’s Fund one of Kaanapali Land’s insurers, explored ways in which to conclude the Oahu Sugar bankruptcy. On December 16, 2019, the Oahu Sugar bankruptcy trustee filed its final accounting with no distribution to claimants. On December 17, 2019, the Oahu Sugar bankruptcy case was closed and the trustee was discharged.

With regard to the alleged Waipio Peninsula environmental issues, EPA sent three requests for information to Kaanapali Land regarding, among other things, Kaanapali Land's organization and relationship, if any, to entities that may have, historically, operated on the site and with respect to operations conducted on the Waipio site. Kaanapali Land responded to these requests for information. By letter dated February 7, 2007, pursuant to an allegation that Kaanapali Land wasas a successor to Oahu Sugar Company, Limited, a company that operated at the site prior to 1961 ("Old Oahu"), EPA advised Kaanapali that it believed it was authorized by the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”) to amend the existing Unilateral Administrative Order against Oahu Sugar Company, LLC, for the cleanup of the site to include Kaanapali Land as an additional respondent. The purported basis for EPA's position was that Kaanapali Land, by virtue of certain corporate actions, was jointly and severally responsible for the performance of the response actions, including, without limitation, clean-up at the site. No such amendment was made. Instead, after a series of discussions between Kaanapali and EPA, on or about September 30, 2009, EPA issued a Unilateral Administrative Order to Kaanapali Land for the performance of work in supportresult of a removal action at the former Oahu Sugar pesticide mixing site located on Waipio Peninsula. The work consisted of the performance of soil and groundwater sampling and analysis, a topographic survey, and the preparation of an engineering evaluation and cost analysis of potential removal actions to abate an alleged "imminent and substantial endangerment" to public health, welfare or the environment. The order appeared to be further predicated primarily on the alleged connection of Kaanapali Land to Old Oahu and its activities on the site. Kaanapali Land engaged in performing work, including the conduct of sampling at the site, required by the order while reserving its rights to contest liability regarding the site. With regard to liability for the site, Kaanapali Land believed that its liability, if any, should have related solely to a portion of the period of operation of Old Oahu at the site, although in some circumstances CERCLA permits imposition of joint and several liability, which can exceed a responsible party's equitable share. Kaanapali Land believed that the U.S. Navy bore substantial liability for the site by virtue of its ownership of the site throughout the entire relevant period, both as landlord under its various leases with Oahu Sugar and Old Oahu and by operating and intensively utilizing the site directly during a period when no lease was in force. The Company believed that the cost of the work as set forth in the pending order would not have been material to the Company as a whole; however, in the event that EPA were to issue an order requiring remediation of the site, the Company gave no assurances that the cost of said remediation would not ultimately have a material adverse effect on the Company. In addition, the Company believed that if there were litigation regarding the site, there could be no assurances that the cost of such litigation would not be material or that such litigation would result in a judgment in favor of the Company. Kaanapali and the EPA exchanged comments

relative to further studies to be performed at the site, including a possible ecological risk assessment. After years of performing work at the site, the parties engaged in discussions to resolve the matter. The matter was ultimately resolved pursuant to the Consent Decree set forth below.

On February 11, 2015,complaint the Company filed a complaint for declaratory judgment, bad faith and damages against Fireman’s Fund Insurance Company (“Fireman’s Fund”) in the Circuit Court of the First Circuit, State of Hawaii, Civil No. 15-1-0239-02, in connection with costs and expenses it might incur in connection with the Waipio site. In the five-count complaint, the Company sought, among other things, a declaratory judgment of its rights under various Fireman’s Fund policies and an order that Fireman’s Fund defend and indemnify Kaanapali Land from all past, present and future costs and expenses in connection with the site, including costs of investigation and defense incurred by Kaanapali and the professionals it has engaged. In addition, Kaanapali sought general, special, and punitive damages, prejudgment and post judgment interest, and such other legal or equitable relief as the court deems just and proper. Fireman’s Fund filed a responsive pleading. This litigation was settled and dismissed with prejudice pursuant to an agreement between Fireman’s Fund and the Company dated on or about November 24, 2021 (“Insurance Settlement”). The dismissal order was entered on March 31, 2022.

Under the Insurance Settlement,2015, Fireman’s Fund paid $$6,800 into an escrow during the first quarter of 2022 that was used to fund thea settlement amount pursuant to a Consent Decree described below, that(described below) which was entered into with various federal agencies. The $6,800 was included as a reduction of Selling, general and administrative expenses on the Company’s consolidated statement of operations for the year ended December 31, 2021. The insurance recovery caused the total Selling, general and administrative expense for the year ended December 31, 2021 to be a negative expense. That Consent Decree, entered by United States District Court for the District of Hawaii (the “Court”), and as more fully described below, resolved certain environmental claims against the Company with respect to the former mixing site on Waipio Peninsula on Oahu in Hawaii (the “Mixing Site”). After the Consent Decree was entered and finally approved by the Court in the form initially submitted by the Company and the federal government, the escrowed funds plus interest were paid to the Environmental Protection Agency on March 3, 2022 to fund the settlement that is the subject of the Consent Decree. The Insurance Settlement provided, among other terms and conditions, mutual releases of claims for coverage for environmental claims at the Mixing Site under known and unknown Fireman’s Fund insurance policies.

On April 16, 2021, the U.S. Department of Justice and the U.S. Environmental Protection Agency, on behalf of various federal agencies of the United States of America, executed a Consent Decree with Kaanapali Land, LLC, a Delaware limited liability company (the “Company”) that, if entered by the U.S. District Court sitting in the District of Hawaii, United States of America v. Kaanapali Land, and Oahu Sugar Company, LLC Case No. 1:21-CV-00190, resolved the U.S. federal government’s current environmental claims against the Company with respect to contamination at the former mixing site on Waipio Peninsula on Oahu in Hawaii that had been leased by Oahu Sugar Company LLC, a former subsidiary of the Company. In return for payments by the Company totaling $7,500,$7,500, the Consent Decree resolved liability asserted by the U.S. government against the Company under CERCLAthe Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”) as well as under the Clean Water Act, both for response costs (those costs expended for investigation and cleanup) and for natural resource damages. The U.S. District Court in Hawaii entered an Order approving the Consent Decree on February 11, 2022 and payment of the settlement amount was received by the government on March 3, 2022.

A subsidiary of the Company, D/C Distribution Corporation (“D/C”), filed a petition for liquidation under Chapter 7 of the Bankruptcy Code in July 2007. During the pendency of the bankruptcy case, D/C was not under control of the Company.

At the time of the filing of the bankruptcy petition, Kaanapali Land, as successor by merger to other entities, and D/C havehad been named as defendants in personal injury actions allegedly based on exposure to asbestos. While there arewere relatively few cases that name Kaanapali Land, there were a substantial number of cases that were pending against D/C on the U.S. mainland (primarily in California). Cases against Kaanapali Land (hereafter, “Kaanapali Land asbestos cases”) arewere allegedly based on its prior business operations in Hawaii and cases against D/C arewere allegedly based on sale of asbestos-containing products by D/C's prior distribution business operations primarily in California. Each entity defending these cases believes that it has meritorious defenses against these actions, but can give no assurances as to the ultimate outcome of these cases. The defense of these cases had a material adverse effect on the financial condition of D/C as it has been forced to file a voluntary petition for liquidation as discussed below. Kaanapali Land does not believe that it has liability, directly or indirectly, for D/C's obligations in those cases. Kaanapali Land does not presently believe that the cases in which it is named will result in any material liability to Kaanapali Land; however, there can be no assurance in that regard.

On February 12, 2014, counsel for Fireman’s Fund, the carrier that had been paying defense costs and settlements for the Kaanapali Land asbestos cases, stated that it would no longer pay settlements or judgments in the Kaanapali Land asbestos cases due to then pending D/C and Oahu Sugar bankruptcies. In its communications with Kaanapali Land, Fireman’s Fund expressed its view that the automatic stay in effect in the D/C bankruptcy case barred Fireman’s Fund from making any payments to resolve the Kaanapali Land asbestos claims because D/C Distribution was also alleging a right to coverage under those policies for asbestos claims against it. However, in the interim, Fireman’s Fund advised that it intended to continue to pay defense costs for those cases, subject to whatever reservations of rights that might be in effect and subject further to the policy terms. Fireman’s Fund also indicated that, to the extent that Kaanapali Land cooperated with Fireman’s Fund in addressing settlement of the Kaanapali Land asbestos cases through coordination with its adjusters, it was Fireman’s Fund’s intention to reimburse any such payments by Kaanapali Land, subject, among other things, to the terms of any lift-stay order, the limits and other terms and conditions of the policies, and prior approval of the settlements. Kaanapali Land and Fireman’s Fund entered into a settlement agreement on or about November 24, 2021 whereby Fireman’s Fund paid $2,441 for certain listed Kaanapali Land asbestos cases upon a Final Order of the D/C bankruptcy court lifting the automatic stay to allow the payments. The D/C court issued the lift-stay order on March 1, 2022. On April 12, 2022, the Company received $2,441 as reimbursement for the various settlements Kaanapali made that were subject to the lift-stay order of March 1, 2022. The $2,441 was included as a reduction of Selling, general and administrative expenses on the Company’s consolidated statement of operations for the three and nine months ended September 30,March 31, 2022.

On February 15, 2005, D/C was served with a lawsuit entitled American & Foreign Insurance Company v. D/C Distribution and Amfac Corporation, Case No. 04433669 filed in the Superior Court of the State of California for the County of San Francisco, Central Justice Center. No other purported party was served. In the eight-count complaint for declaratory relief, reimbursement and recoupment of unspecified amounts, costs and for such other relief as the court might grant, plaintiff alleged that it was an insurance company to whom D/C tendered for defense and indemnity various personal injury lawsuits allegedly based on exposure to asbestos containing products. Plaintiff alleged that because none of the parties had been able to produce a copy of the policy or policies in question, a judicial determination of the material terms of the missing policy or policies is needed. Plaintiff sought, among other things, a declaration: of the material terms, rights, and obligations of the parties under the terms of the policy or policies; that the policies were exhausted; that plaintiff is not obligated to reimburse D/C for its attorneys' fees in that the amounts of attorneys' fees incurred by D/C had been incurred unreasonably; that plaintiff was entitled to recoupment and reimbursement of some or all of

the amounts it has paid for defense and/or indemnity; and that D/C breached its obligation of cooperation with plaintiff. D/C filed an answer and an amended cross-claim. D/C believed that it had meritorious defenses and positions, and intended to vigorously defend against plaintiff’s claims. In addition, D/C believed that it was entitled to amounts from plaintiffs for reimbursement and recoupment of amounts expended by D/C on the lawsuits previously tendered. In order to fund such action and its other ongoing obligations while such lawsuit continued, D/C entered into a Loan Agreement and Security Agreement with Kaanapali Land, in August 2006, whereby Kaanapali Land provided certain advances against a promissory note delivered by D/C in return for a security interest in any D/C insurance policy at issue in this lawsuit. In June 2007, the parties settled this lawsuit with payment by plaintiffs in the amount of $1,618. Such settlement amount was paid to Kaanapali Land in partial satisfaction of the secured indebtedness noted above.

Because D/C was substantially without assets and was unable to obtain additional sources of capital to satisfy its liabilities, D/C filed with the United States Bankruptcy Court, Northern District of Illinois, its voluntary petition for liquidation under Chapter 7 of Title 11, United States Bankruptcy Code during July 2007, Case No. 07-12776. Such filing iswas not expected to have a material adverse effect on the Company as D/C was substantially without assets at the time of the filing. Kaanapali Land filed claims in the D/C bankruptcy that aggregated approximately $26,800, relating to both secured and unsecured intercompany debts owed by D/C to Kaanapali Land. In addition, a personal injury law firm based in San Francisco that represents clients with asbestos-related claims filed proofs of claim on behalf of approximately two thousand claimants. While it is not likely that a significant number of these claimants have a claim against D/C that could withstand a vigorous defense, it is unknown how the trustee will deal with these claims. It is not expected, however, that the Company will receive any material additional amounts in the liquidation of D/C.

On January 21, 2020, certain asbestos claimants filed a Stay Relief Motion in the Bankruptcy Court for the Northern District of Illinois, Eastern Division, Case No. 07-12776 (“motion to lift stay”) in connection with the D/C proceeding. The motion sought the entry of an order, among other things, modifying the automatic stay in the D/C bankruptcy to permit those claimants to prosecute various lawsuits in state courts against D/C Distribution, LLC, and to recover on any judgment or settlement solely from any available insurance coverage. Various oppositions to the motion to lift stay were filed, and the matter was heard and taken under advisement in April 2020. On July 21, 2020, the bankruptcy court issued an order granting the motion to lift stay to permit the movants to pursue their claims and to recover any judgment or settlement from and to the extent of any available insurance coverage of D/C Distribution, LLC, only.

The bankruptcy trustee for D/C is now in the process of closing the bankruptcy case.

Certain asbestos-related proofs claims in the bankruptcy case have been withdrawn in connection with closing. There is a small amount of money on-hand for possible distributionA court hearing was held on closing. AlthoughMarch 29, 2023 in which the court awarded the trustee’s compensation and expenses and therefore D/C will no longer havehas any assets afterassets. On June 6, 2023, the trustee’sbankruptcy trustee filed a final distributionaccount and application to close the D/C bankruptcy and on June 14, 2023, the D/C bankruptcy court closed the case and the trustee was discharged. Due to the closing of the case, therethe Company derecognized a related contingent liability. The derecognition of the contingent liability is no guaranty thatincluded as a reduction of Selling, general and administrative expenses and resulted in a credit in expenses on the Company’s consolidated statement of operations for the nine months ended September 30, 2023. However, personal injury claimants will nothave asserted, and may in the future assert, asbestos-related claims against D/C in the future.

C.

The Company has received notice from Hawaii’s Department of Land and Natural Resources (“DNLR”) that DNLR on a periodic basis would inspect all significant dams and reservoirs in Hawaii, including those maintained by the Company on Maui in connection with its agricultural operations. A series of such inspections have taken place over the period from 2006 through the most recent inspections that occurred in April 2022. To date, the DLNR has cited certain deficiencies concerning two of the Company’s reservoirs relating to dam and reservoir safety standards established by the State of Hawaii. These deficiencies include, among other things, vegetative overgrowth, erosion of slopes, uncertainty of inflow control, spillway capacity, and freeboard, and uncertainty of structural stability under certain loading and seismic conditions. The Company has taken certain corrective actions, including lowering the reservoir operating level, as well as updating important plans to address emergency events and basic operations and maintenance. In 2018, the Company contracted with an engineering firm to develop plans to address certain DLNR cited deficiencies on one of the Company’s reservoirs. Remediation plans for addressing all deficiencies have been submitted to DLNR. In 2012, the State of Hawaii issued new Hawaii Administrative Rules for Dams and Reservoirs which require dam owners to obtain from DLNR Certificates of Impoundment (“permits”) to operate and maintain dams or reservoirs. Obtaining such permits requires owners to completely resolve all cited deficiencies. Therefore, the process may involve further analysis of dam and reservoir safety requirements, which will involve continuing engagement with specialized engineering consultants, and ultimately could result in significant and costly improvements which may be material to the Company.

The DLNR categorizes the reservoirs as "high hazard" under State of Hawaii Administrative Rules and State Statutes concerning dam and reservoir safety. This classification, which bears upon government oversight and reporting requirements, may increase the cost of managing and maintaining these reservoirs in a material manner. The Company does not believe that this classification is warranted for either of these reservoirs and has initiated a dialogue with DLNR in that regard. In April 2008, the Company received further correspondence from DLNR that included the assessment by their consultants of the potential losses that result from the failure of these reservoirs. In April 2009, the Company filed a written response to DLNR to correct certain factual errors in its report and to request further analysis on whether such "high hazard" classifications are warranted. It is unlikely that the “high hazard” designation will be changed.

Other than as described above, the Company is not involved in any material pending legal proceedings, other than ordinary routine litigation incidental to its business. The Company and/or certain of its affiliates have been named as defendants in several pending lawsuits. While it is impossible to predict the outcome of such routine litigation that is now pending (or threatened) and for which the potential liability is not covered by insurance, the Company is of the opinion that the ultimate liability from any of this litigation will not materially adversely affect the Company's consolidated results of operations or its financial condition.

The Company often seeks insurance recoveries under its policies for costs incurred or expected to be incurred for losses or claims under which the policies might apply. During secondthird quarter 2022,2023, the Company received $155509 in insurance proceeds related to an insured event that occurred during the 20212022 crop year. This amount has been reflected in sales and rental revenuescrop insurance proceeds in the Company’s consolidated financial statements.

KLMC is a party to an agreement with the State of Hawaii for the development of the Lahaina Bypass Highway. An approximately 2.4 mile portion of this two lane state highway has been completed. Construction to extend the southern terminus was completed mid-2018. The northern portion of the Lahaina Bypass Highway, which extends to KLMC’s lands, is in the early stage of planning. Under certain circumstances, which have not yet occurred, KLMC remains committed for approximately $1,100 of various future costs relating to the planning and design of the uncompleted portion of the Lahaina Bypass Highway. Under certain conditions, which have not yet been met, KLMC has agreed to contribute an amount not exceeding $6,700 toward construction costs. Any such amount contributed would be reduced by the value of KLMC’s land actually contributed to the State for the Lahaina Bypass Highway.

These potential commitments have not been reflected in the accompanying condensed consolidated financial statements. While the completion of the Lahaina Bypass Highway would add value to KLMC’s lands north of the town of Lahaina, there can be no assurance that it will be completed or when any future phases will be undertaken.

Adverse macroeconomic conditions, which originated as a result of the COVID-19 pandemic, are expected to continue to cause economic uncertainty and market volatility and pose risks to us and the real estate industry. Heightened inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, currency fluctuations, challenges in the supply chain and other adverse macroeconomic conditions, along with disruptions caused by the emergence of COVID-19 variants or resurgences of the virus or other public health emergencies could negatively impact the Maui real estate market, which could have an adverse effect on the Company’s results of operations and financial position.

(8)  Calculation of Net Income (Loss) Per Share

The following tables set forth the computation of net lossincome (loss) per share - basic and diluted:

(9)  Business Segment Information

As described in Note 1, the Company operates in two business segments. Total revenues and operating profit by business segment are presented in the tables below.

Total revenues by business segment includes primarily (i) sales, all of which are to unaffiliated customers, and (ii) interest income that is earned from outside sources on assets which are included in the individual industry segment's identifiable assets.

Operating income (loss) is comprised of total revenue less cost of sales and operating expenses. In computing operating income (loss), none of the following items have been added or deducted: general corporate revenues and expenses, interest expense and income taxes.