Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and

Results of Operations

All references to "Notes" herein are to Notes to Consolidated Financial Statements contained in this report. Information is not presented on a reportable segment basis in this section because in the Company's judgment such discussion is not material to an understanding of the Company's business.

In addition to historical information, this report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations about its businesses and the markets in which the Company operates. These statements include expectations concerning, among other things, the Company's land development plans, including anticipated timing, strategy and initiatives, the expected outcome of legal proceedings, and the impact of macroeconomic conditions. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties or other factors which may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Actual operating results may be affected by various factors including, without limitation, natural events, including the Lahaina wildfire discussed below, the effect of geopolitical, economic and market conditions in Hawaii and globally, including the rate of inflation, changes to fiscal and monetary policy, interest rate and currency fluctuations, increase in fuel costs, pressure on the global banking system, competitive market conditions, the implementation of increased new or retaliatory tariffs, delays, uncertainties and costs related to the receipt of governmental approvals, including the risk that an approval is obtained subject to conditions that are not anticipated, costs of material and labor, and actual versus projected timing of events, all of which may cause such actual results to differ materially from what is expressed or forecast in this report.

Lahaina Wildfire

The Company's Pioneer Mill Site has 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 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. 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, the Company assembled a temporary dry mill at a short term leased warehouse, where it is hulling, grading, and bagging coffee. Coffee sales resumed in December 2025. 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. The Pioneer Mill Site was 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 contractor's lease term expired July 23, 2025 and the contractor has vacated the property.

During 2023, the Company initiated claims with its insurance carriers and in October 2023 the Company received an initial, unallocated advance payment of $1 million. In June 2024, the Company received from its insurance carrier approximately $4.9 million and in August 2024 received approximately $1.1 million. Additionally, in January 2026, the Company received approximately $4 million from its insurance carrier for claims that were submitted related to the losses that were incurred during 2023. The Company's insurance coverage for business interruption relating to the fire 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.

Inflation and Interest Rates

High rates of inflation adversely affect real estate development generally because of their impact on interest rates. However, high rates of inflation may permit the Company to increase the prices that it charges in connection with land sales, subject to a slowdown in sales and increase in home construction costs and to general economic conditions affecting the real estate industry and local market factors.

High interest rates not only increase the cost of borrowed funds to the Company, but can also have a significant effect on the affordability of permanent mortgage financing to prospective purchasers. Interest rates are subject to change, including as a result of mandatory fiscal policy decisions, adverse macroeconomic conditions, and market volatility, which, in turn, could cause adverse financial impacts to the Company and real estate development generally.

Water Use Permits

By letters dated October 28, 2022, CWRM officially designated all six Aquifer System Areas of the Lahaina Aquifer Sector, Maui, as Ground Water Management Areas, as of August 6, 2022. CWRM notified the Company that by August 5, 2023, the Company would need to apply for ground and surface water use permits to continue the Company's use of certain wells that are integral to the Company's entire operations. The Company has submitted such applications for permits. In response to the Company's applications for permits, the Company received letters dated July 19, 2024 from CWRM requesting additional information for both of the Company's ground water and surface water applications. Such responses were due within 30 days of the date of the letters. The Company obtained an extension for its responses to the letters and such responses were subsequently submitted. The permits, when or if granted and subject to various conditions, would preserve the Company's existing water uses as of August 6, 2022. The Company cannot provide any assurances that CWRM will approve such permit applications for the amounts of water the Company seeks or impose conditions on such use that might affect the Company's operations. If CWRM should fail to approve the Company's water requests or impose onerous conditions on its use, CWRM's actions could delay the Company's development in substantial and material respects and affect the Company's operations and finances. Further, in the event permits adequate to the Company's plans are not received timely or at all, there could be negative impacts on the west Maui real estate market as a whole and the development and sale of the Company's lands on the Island of Maui, thereby materially and adversely affecting the Company's operations, land sales, land values, results, and financial position.

Pension Plan

In 2023, the Company terminated its former Pension Plan (the "Pension Plan") and transferred $5 million 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 and were concluded as eligible participants per the Employee Retirement Income Security Act ("ERISA") required for QRPs. Such allocations are planned to be allocated ratably over a period not to exceed seven years to comply with regulatory requirements. In February 2025 and 2024, approximately $1.1 million and $1 million, respectively, was allocated to the participants in the QRP.

Land Development

In September 2014, Kaanapali Land Management Corp. ("KLMC"), pursuant to a property and option purchase agreement ("Purchase Agreement") with Newport Hospital Corporation ("NHC"), sold a parcel of approximately 14.9 acres in West Maui. The Purchase Agreement included an Infrastructure Improvement Agreement (as subsequently amended) which committed KLMC to fund up to $0.6 million depending on various factors, for off-site roadway, sewer and electrical improvements that will also provide service to other KLMC properties. KLMC 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 entered into a contract for $1.1 million to install the sewer line. KLMC has paid $1.1 million on the contract which has been recorded as a receivable, less KLMC's sewer line commitment of $0.2 million. In accordance with the Infrastructure Improvement Agreement, the receivable accrues interest of 6.5% and is secured by the property. Due to the receipt of a Demand for Arbitration, discussed below, the Company recorded credit loss reserves in the amount of $0.1 million and $1 million for the years ended December 31, 2025 and 2024, respectively, on its receivable with NHC based on its evaluation of the probability of default that exists at NHC. The total amount of the credit loss reserve of approximately $1.1 million represents the entire receivable amount and interest incurred as of December 31, 2025. In conjunction with the Infrastructure Improvement 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, development of the site could be delayed. 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.

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 is 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 a material impact on business and financial results for KLMC.

On June 13, 2024, Pioneer Mill Company, LLC. ("PMC"), entered into a property sale agreement ("PMC Sales Agreement") with an unrelated third party for the sale of four parcels of land, aggregating approximately 21 acres (the "PMS land parcels") located in Lahaina, Hawaii. Pursuant to the PMC Sales Agreement, the sales price for the PMS land parcels was $20 million and the closing of the sale of the PMS land parcels is subject to the due diligence period. On October 31, 2024, pursuant to a Third Amendment to the PMC Sales Agreement, the deadline was extended to November 29, 2024 for the purchaser to deliver the Notice to Proceed and such notice was properly received. The purchaser deposited a total of $2 million into an escrow account, managed by a title company, established for the sale of the property. The sale of the property closed on March 10, 2026 and at the closing PMC received $19.9 million in cash.

The Company is in the planning stages for the development of a 295-acre parcel in KCF Mauka. The parcel is to be comprised of 61 agricultural lots that will be offered to individual buyers. The Company expects to develop the parcel in phases and all phases have been submitted to the County for subdivision approval. The Company has been working with the County to resolve certain of the County's comments relating to the subdivision. The Company's understanding is that all outstanding comments from the County have been resolved verbally with County staff. The final approval letter has been pending and additional efforts are being made to secure the approval. Upon final subdivision approval of all phases and receipt of final plat of the first phase from the County, which requires a bond in the amount of the cost to develop the first phase, the Company can pre-sell the undeveloped lots in the first phase. The Company expects to market the lots in the first phase upon receiving final approvals from the County, subject to various contingencies, including, but not limited to, governmental and market factors and the availability of a bond to secure the first phase of the development. Also critical to the Company's ability to develop KCF Mauka is the Company's ability to secure water use permits from the State of Hawaii Commission on Water Resource Management (CWRM). The purveyor for potable water for the Kaanapali service area, which would supply water to KCF Mauka, is in the process of submitting an application to CWRM for a permit to secure the water needed to service the development. The Company cannot provide any assurance that CWRM will approve such permit application for the amount of water needed or CWRM could impose conditions on such use that might affect the feasibility of the development. See below for further discussion of CWRM. Therefore, there can be no assurance the Company will be able to meet such timetable, that the subdivision will ultimately be approved or that the lots will sell for prices deemed advantageous by the Company.

The Company is continuing with its planning for the development of Puukolii Village, a 241-acre residential development site in the region south of Kaanapali Coffee Farms. The conceptual master plan is comprised of 20 developable parcels planned for 940 units including a mix of affordable and market priced homes, both single and multi-family, mixed use commercial, parks, school, and community facilities. Puukolii Village is fully entitled. Critical to the Company's ability to develop Puukolii Village is the Company's ability to secure water use permits from the State of Hawaii Commission on Water Resource Management (CWRM). The purveyor for potable water for the Kaanapali service area, which would supply water to Puukolii Village, is in the process of submitting an application to CWRM for a permit to secure the water needed to service the development. In August 2025, the Company submitted an application to CWRM for a permit to secure the water needed to service Puukolii Village. The Company cannot provide any assurance that CWRM will approve such permit application for the amount of water needed or CWRM could impose conditions on such use that might affect the feasibility of the development. In conjunction with the potential development of Puukolii Village and in coordination with the possible development by an unrelated third party of the 14.9 acre site to be used for a critical access hospital, as noted above, the Company entered into a contract to install a sewer line from the Puukolii Village site to the critical care hospital site. The developer of the critical access hospital site is obligated to share in the sewer line cost for the portion of the sewer line fronting the critical care hospital site (see discussion above).

Comparison of Results of Operations

The increase in inventory as of December 31, 2025 as compared to December 31, 2024 and the related decrease in cost of sales for the year ended December 31, 2025 as compared to the year ended December 31, 2024 is primarily due to the capitalization of the costs of growing coffee during the year ended December 31, 2025 as compared to the costs of growing coffee being expensed as cost of sales for the year ended December 31, 2024 due to the Company's inability to process the 2024 coffee crop due to the destruction of the Company's coffee mill in the Lahaina wildfire.

The decrease in retirement plan investments as of December 31, 2025 as compared to December 31, 2024, is primarily due to the QRP allocation that was made to plan participants during the first quarter of 2025.

The increase in accounts payable and accrued expenses as of December 31, 2025 as compared to December 31, 2024, is primarily due to the timing of coffee milling expenses relative to the year ended December 31, 2025.

The decrease in selling, general and administrative expenses for the year ended December 31, 2025 as compared to the year ended December 31, 2024 is due to the credit loss reserve established during 2024 related to the Company's receivable from Newport Hospital Corporation.

The increase in crop insurance proceeds for the year ended December 31, 2025 as compared to the year ended December 31, 2024 is due to crop insurance proceeds received during in May 2025 related to an insured event that occurred during the 2024 crop year.

The decrease in net gain on property damage and lost profits, net of insurance claims for the year ended December 31, 2025 as compared to the year ended December 31, 2024 is due to the recognition of an insurance advance during the first quarter of 2024 to purchase mill replacement equipment received from the Company's insurance carriers as a result of the Lahaina wildfire.

See also the notes to the condensed consolidated financial statements included in Item 8. Financial Statements and Supplementary Data, for additional discussion of items addressing comparability between years.

Liquidity and Capital Resources

The primary business of Kaanapali Land is the investment in and development of the Company's assets on the Island of Maui. The various development plans will take many years at significant expense to fully implement. Reference is made to Item 1. Business, and other footnotes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data. Proceeds from land sales are the Company's only source of significant cash proceeds and the Company's ability to meet its liquidity needs is dependent on the timing and amount of such proceeds.

The Company's operations have in recent periods been primarily reliant upon the net proceeds of sales of developed and undeveloped land parcels.

The Company had cash and cash equivalents of approximately $16 million as of December 31, 2025, which is available for, among other things, working capital requirements, including future operating expenses, the possible rebuilding of the coffee mill and replacement of equipment and structures destroyed in the Lahaina wildfire, and the Company's obligations for engineering, planning, regulatory and development costs, drainage and utilities, environmental remediation costs on existing and former properties, potential liabilities resulting from tax audits, and existing and possible future litigation. The Company does not anticipate making any distributions for the foreseeable future.

The Company's liquidity is influenced by many factors, including the coverage and timing of insurance proceeds, the impact of the Lahaina wildfire (including on the marketability of property), coffee sales, and completion of property sales on acceptable terms, if at all. Although the Company believes that it has sufficient liquidity to fund its operations and capital needs over the near term, should the Company be unable to satisfy its liquidity requirements from its existing resources and future property sales, it will likely pursue alternate financing arrangements. However it cannot be determined at this time what, if any, financing alternatives may be available and at what cost.

Critical Accounting Estimates

The discussion and analysis of the Company's financial condition and results of operations are based upon the Company's consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates are based on historical experience and on various other assumptions that management believes are reasonable under the circumstances; additionally management evaluates these results on an on-going basis. Management's estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Different estimates could be made under different assumptions or conditions, and in any event, actual results may differ from the estimates. The impact of a change in these estimates, assumptions, and judgments could materially affect the amounts reported in the Company's consolidated financial statements.

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. If such indications are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying value, the Company will adjust the carrying value down to its estimated fair value. Fair value is based on management's estimate of the property's fair value based on discounted projected cash flows. If significant changes occur in future periods, future operating results could be materially impacted.

Deferred income taxes are accounted for in accordance with FASB ASC Topic 740 - Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Topic 740 requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some portion of the deferred income tax asset will not be realized. The Company has a deferred tax asset related to federal net operating losses (NOLs) of $9,220, of which $4,063 has been subject to a valuation allowance. Such allowance is subject to assumptions and judgment. If the Company generates taxable income in future years and the Company determines that the valuation allowance is no longer required, the tax benefit for the remaining deferred tax asset will be recognized at that time. Reference is made to Note 4. Provision for Income Taxes, to the consolidated financial statements included in Item 8. Financial Statements and Supplemental Data, for further discussion.

Material legal proceedings of the Company include Kaanapali Land, as successor by merger to other entities, and D/C have in the past and continue to be named as defendants in personal injury actions allegedly based on exposure to asbestos. Cases against Kaanapali Land are allegedly based on its prior business operations in Hawaii and cases against D/C are allegedly based on sale of asbestos-containing products by D/C's prior distribution business operations primarily in California. Predicting the outcome of such claims and estimating the costs and exposure requires the Company to make estimates, assumptions, and judgments that could result in actual costs to be materially different from such estimates. Reference is made to Note 6. Commitments and Contingencies, to the consolidated financial statements included in Item 8. Financial Statements and Supplemental Data, for further discussion.