(6)  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 a reasonable estimate of the range of potential loss cannot be made.

Kaanapali Land and a subsidiary of the Company, D/C Distribution Corporation (“D/C”), have in the past and continue to be named as defendants in personal injury actions allegedly based on exposure to asbestos. While there were 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 were allegedly based on its prior business operations in Hawaii and cases against D/C were allegedly based on sale of asbestos-containing products by D/C's prior distribution business operations primarily in California. D/C emerged from bankruptcy in 2023 with no assets. However, personal injury claimants have asserted and may in the future assert, asbestos-related claims against D/C. In that regard, the Company maintains a contingent liability relating to the continued filings of asbestos claims. Such filings are not expected to have a material adverse effect on the Company, but no assurance can be given.

The Company has received notice from Hawaii’s Department of Land and Natural Resources (“DLNR”) that DLNR 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 July 2024. 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 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 materially increase the cost of managing and maintaining these reservoirs. The Company does not believe that this classification is warranted for either of the 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.

On August 5, 2024, NHC served KLMC with a Demand for Arbitration administrated by Dispute Prevention and Resolution, Inc. (“DPR”), relating to the Infrastructure Improvement Agreement and NHC’s development of the site. NHC alleges, among other things, that KLMC wrongfully caused significant delays, increased costs and related damages to NHC with respect to NHC’s planning and construction of the infrastructure improvements required of NHC under the Infrastructure Improvement Agreement (as subsequently amended). NHC seeks judgment for declaratory relief that the Infrastructure Improvement Agreement between NHC and KLMC is void; in the alternative, for reformation of the Infrastructure Improvement Agreement; for award of damages in an amount to be proven at arbitration; for attorneys’ fees and costs; for prejudgment and post-judgment interest on any monetary award; and for such other and further relief as the arbitrator deems appropriate. On October 25, 2024, KLMC filed an Answering Statement to NHC’s Demand for Arbitration and KLMC’s counterclaim against NHC. On November 5, 2024, DPR confirmed the assignment of a mutually agreed upon arbitrator. The pre-arbitration discovery process remains ongoing. The parties mutually agreed to defer the arbitration proceedings as the parties evaluate an alternative to arbitration. The arbitration proceedings have been rescheduled for July 13, 2026, if the parties are unable to agree to an alternative to arbitration. KLMC will continue to vigorously defend. However, there can be no assurance that the eventual outcome of the arbitration will not result in any material liability or have a material impact on business and financial results for KLMC.

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, none of such proceedings, either individually or in the aggregate, are expected to have a material adverse effect on 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. Coffee production and yields are subject to many factors, particularly weather related factors, including rainfall and the availability of sufficient irrigation water flowing through its irrigation system. Yields may be reduced in years of drought when irrigation water and rainfall is insufficient. The Company purchases crop insurance annually which reduces certain coffee crop production risks. In March 2026, the Company received $500 in crop insurance proceeds related to an insured event that occurred during the 2025 crop year. This amount has been recorded within crop insurance proceeds in the Company’s condensed consolidated statement of operations for the three months ended March 31, 2026. In May 2025, the Company received $682 in crop insurance proceeds related to an insured event that occurred during the 2024 crop year. As a result of the Lahaina wildfire, the Company received an initial, unallocated advance payment of $1,000. The Company also received insurance payments of $4,882 in June 2024, and $1,088 in August 2024, from its insurance carrier. Additionally in January 2026, the Company received an insurance payment of $4,038, which is recorded within net gain on property damage and lost profits, net of insurance claims in the condensed consolidated statement of operations for the three months ended March 31, 2026. Reference is made to Note 1. Property, for further discussion regarding the Lahaina wildfire.

The Company’s insurance coverage for business interruption relating to the Lahaina wildfire expired in August 2025. The Company’s insurance carrier has compensated the Company for the majority of its losses relating to business interruption through July 2025 for the lack of coffee sales in the coffee farming operations and loss of income for licensees at the Pioneer Mill site as well as partial payments for initial estimates of losses relating to structures and equipment destroyed in the fire and other claim related costs. The Company has completed the design of the relocation of its coffee mill to agriculture land owned by the Company and is currently assessing bids it received in March 2026 to determine feasibility of rebuilding the coffee mill. There can be no assurances the Company will be fully compensated for losses incurred to structures destroyed in the fire or that insurance proceeds will be sufficient to rebuild the coffee mill or other structures. Additionally, the Company could experience losses that exceed 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.

KLMC is a party to an agreement with the State of Hawaii for the development of the Lahaina Bypass Highway. Approximately 2.4 miles of this two lane state highway have been completed. Construction to extend the southern terminus was completed mid-2018. The northern portion of the Bypass Highway, which extends to KLMC’s lands, is in the early stage of planning by the state of Hawaii. 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 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 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.