(1)  Summary of Significant Accounting Policies

Basis of Presentation

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”).

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 and 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. For further information on the Company’s business segments see Note 8.

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 promulgated by the U.S. Securities and Exchange Commission (the “SEC”). 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, 2024 (“2024 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 Consolidated Financial Statements included in the 2024 Form 10-K. Except as noted below, there were no material changes in the Company’s significant accounting policies during the three months ended March 31, 2025.

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, if any, 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 (Levels 2 and 3). The Company has determined that none of its properties currently meet held for sale criteria. 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 had been leased or licensed to third parties on a short term basis prior to the Lahaina wildfire, as discussed below.

The Company’s Pioneer Mill Site continues to be negatively impacted by the Lahaina, Hawaii wildfires that occurred on August 8, 2023. The Company’s offices and coffee mill were located on the site as well as various other structures and a building which was 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 generated income for the Company. The Company’s offices, coffee store building, coffee mill and warehouses, as well as most of the personal property of the licensees was destroyed. The damage to the coffee mill has disrupted the coffee farming operations and prevented the Company from processing and selling the 2023 and 2024 year coffee crop. The Company currently plans to process its 2025 coffee crop in a coffee mill that was completed and became operational in early January 2025. The coffee mill is owned by an unaffiliated company in Maui. The widespread destruction to Lahaina town and the surrounding area has also adversely affected the long-term economy on Maui, especially the businesses and economy in west Maui where the Company’s operations exist, and as a result has caused disruptions in the Company’s development plans. The Pioneer Mill Site is currently leased by a U.S. Army Corps of Engineers (“USACE”) contractor and was used as a base yard for the clean-up of residential lots impacted by the fires in Lahaina, which clean-up has been completed. The lease term expires July 2025 with an option to extend for six months.

During 2023, the Company initiated claims with its insurance carrier and in October 2023 the Company received an initial, unallocated advance payment of $1,000. In June 2024, the Company received $4,882 and in August 2024 received $1,088 from its insurance carrier. Although the Company currently expects that the Company’s insurance coverage will compensate the Company for the majority of 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 and the loss of income from the licensees, there can be no assurances the Company will be fully compensated for such losses. The Company’s insurance coverage for business interruption relating to the fire expires in August 2025. The Company could experience losses in excess of its insured limits, and further claims for certain losses could be denied or subject to deductibles or exclusions under its insurance policies. The Company has relocated its offices to temporary office facilities located on its lands in Kaanapali and is in the planning and design stages of relocating its coffee mill to its farm in Kaanapali.

The Company reviews its property for impairment of value if events or circumstances indicate that the carrying amount of its property may not be recoverable. Such reviews contain uncertainties due to assumptions and judgments considering certain indicators of impairment such as significant changes in asset usage, significant deterioration in the surrounding economy or environmental problems.

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 relation 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. Based on the evaluation and continued monitoring, 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 impairment has occurred and that a provision for impairment will be required.

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 three months ended March 31, 2025 are not necessarily indicative of the results that may be achieved for the full year ending December 31, 2025 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 March 31, 2025 is a money market fund for $19,383 that is considered to be a fair value hierarchy Level 1 investment. Interest and other income include interest earned on the money market funds. The Company’s cash balances are maintained primarily in two financial institutions. 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.

Inventory

The costs of growing crops, including but not limited to labor, fertilization, fuel, crop nutrition, irrigation, depreciation, and processing are capitalized into inventory throughout the respective crop year. Such costs, valued using an average cost method, are expensed as cost of sales when the crops are sold. Inventory is stated at the lower of cost or net realizable value. Inventory as of March 31, 2025 consists of unprocessed crops.

Allowance for Credit Loss Reserve

Allowances for credit loss are based on the Company’s assessment of the collectability of receivables considering delinquency status and related aging, if applicable, and an evaluation of expected risk of credit loss based on current conditions and reasonable and supportable forecasts of future economic conditions over the life of receivable. Account balances would be charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company’s exposure to credit losses on accounts receivable is limited to its receivable from Newport Hospital Corporation (“NHC”). The Company established a reserve for credit loss based on the receipt of a Demand for Arbitration received from NHC and as of March 31, 2025, the Company recorded a $1,005 credit loss reserve. The credit loss reserve is recorded within other assets, net in the consolidated balance sheet at March 31, 2025. Reference is made to Note 2, Land Development for further discussion.

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 buyer. 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 for the three months ended March 31, 2025 and 2024 were $100 and $100, respectively, related to coffee and other sales.

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.

In accordance with the core principle of ASC 606, 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. When the sale does not meet the requirements for full profit recognition, all or a portion of the profit is deferred until such requirements are met.

Other revenues in the scope of ASC 606 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.

Lease Accounting

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 months ended March 31, 2025 and 2024, the Company recognized $51 and $58, respectively, of lease income, substantially comprised of non-variable lease payments. During the three months ended March 31, 2025 and 2024, the Company recognized $76 and $26, respectively, of lease expense, substantially comprised of non-variable lease payments.

Recently Issued Accounting Pronouncements

In October 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2023-06 (“ASU 2023-06”), Disclosure Improvements - Codification Amendment in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU modified the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC’s regulations. The amendments to the various topics should be applied prospectively, and the effective date will be determined for each individual disclosure based on the effective date of the SEC’s removal of the related disclosure. If the SEC has not removed the applicable requirements from Regulation S-X or Regulation S-K by June 30, 2027, then this ASU will not become effective. Early adoption is prohibited. While the Company is currently evaluating the effect that implementation of this update will have on its consolidated financial statements, no significant impact is anticipated.

In December 2023, the FASB issued ASU No. 2023-09 (“ASU 2023-09”), Income Taxes (Topic 740): Improvement to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures, primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, on a prospective basis. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-03 (“ASU 2024-03”), Income Statement - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires entities to improve the disclosures about business expenses and provide more detailed information about the types of expenses in commonly presented expense captions. In addition, the amendments in the ASU improve financial reporting by requiring that entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, and requires retrospective application to all prior periods presented in the financial statements. Early adoption is permitted. While the Company is currently evaluating the effect that implementation of this update will have on its consolidated financial statements, no significant impact is anticipated.

Other Liabilities

Other liabilities are comprised of estimated liabilities for losses, commitments and contingencies related to various divested assets or operations. These estimated liabilities include the estimated effects of certain asbestos related claims, obligations related to former officers and employees such as pension, post-retirement benefits and workmen’s compensation. Management’s estimates are based, as applicable, on taking into consideration claim amounts filed by third parties, life expectancy of beneficiaries, advice of consultants, negotiations with claimants, historical settlement experience, the number of new cases expected to be filed and the likelihood of liability in specific situations. Management periodically reviews the adequacy of each of its loss contingency amounts and adjusts such as it determines the appropriate loss contingency amount to reflect current information. Reference is made to Note 6, Commitments and Contingencies for further discussion.