(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. Business Segment Information.

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 audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2025 (“2025 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 2025 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, 2026.

Property

The Company's significant property holdings are on the island of Maui and consist of approximately 3,880 acres, of which approximately 1,500 acres are classified as conservation land, which precludes development. The Company evaluates its long lived assets for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Based on management’s current projections for the development and/or disposition of its property holdings, including consideration of market conditions and expected proceeds, the Company has determined that the carrying amounts of its property holdings are recoverable as of the reporting date.

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.

As discussed in Note 2. Land Development, the Company closed on the sale of the Pioneer Mill site on March 10, 2026. The Company’s Pioneer Mill site had been 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 third-party licensees, were destroyed in the wildfire.

On August 4, 2025 a fire occurred on approximately 30 acres of land owned by Kaanapali Land Management Corp., a indirect subsidiary of the Company (“KLMC”). The fire burned grassland as well as various structures which were formerly used as a repair shop and storage outbuildings for the former Sugar Cane Train operated by an unrelated third party. Several train cars were also damaged in the fire. The net book value of the assets that were damaged in the fire was $0, and as a result, no impairment was recognized. The Company has initiated a claim with its insurance carrier and continues to assess the damage and related financial impact to its operations but is currently not aware of any material adverse effect to its current operations.

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.

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, 2026 are not necessarily indicative of the results that may be achieved for the full year ending December 31, 2026 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, 2026 is a money market fund for $36,691 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 consists of green coffee, which has been hulled, sorted, graded, and bagged for sale, dry parchment coffee, which has not yet been hulled, and unprocessed crops. The Company’s inventory is presented in the table below (in thousands):

The damage to the coffee mill from the Lahaina Wildfire disrupted the coffee farming operations and prevented the Company from processing and selling the 2023 and 2024 year coffee crop. In 2025, the Company harvested its coffee crop and outsourced pulping and drying to an unaffiliated coffee mill on Maui that became operational in January 2025. Separately, in 2025, the Company assembled a temporary dry mill at a short term leased warehouse, where it hulls, grades, and bags coffee. Coffee sales resumed in December 2025.

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. The Company recorded credit loss reserves in the amount of $15 and $15 for the three months ended March 31, 2026 and 2025, respectively. The credit loss reserve is recorded within other assets, net in the condensed consolidated balance sheet at March 31, 2026.

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

In accordance with the core principle of Accounting Standards Codification (“ASU”) 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.

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 are presented in the table below (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

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, 2026 and 2025, the Company recognized $18 and $51, respectively, of lease income, substantially comprised of non-variable lease payments. During the three months ended March 31, 2026 and 2025, the Company recognized $115 and $76, 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 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.