MAUI LAND & PINEAPPLE CO INC

To the Board of Directors and Stockholders of

Maui Land & Pineapple Company, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Maui Land & Pineapple Company, Inc. and its Subsidiaries (collectively, the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the two‑year period ended December 31, 2023 and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2023 and 2022, and the results of their operations and their cash flows for each of the years in the two‑year period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

The consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition

The Company has multiple revenue streams including real estate sales, leasing and licensing arrangements, and resort amenities, which are recognized upon transfer of goods or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.

Significant judgment is exercised by management in determining revenue recognition for these customer agreements, and may include the following:

Given the factors, the related audit effort in evaluating management’s judgments in determining revenue recognition for these customer and lease agreements was extensive and involved subjective estimation and complex auditor judgment.

Our audit procedures over revenue recognition and disclosures included the following:

Commitments and Contingencies

The Company is party to claims that arise in the normal course of business. Contingent liabilities are recorded in the consolidated financial statements when management determines it is probable that a liability has been incurred and the amount can be reasonably estimated. This determination requires significant judgment by management.

In assessing whether the Company should accrue a liability in its consolidated financial statements as a result of the claims, the Company considers various factors, including the legal and factual circumstances of the claims and advisement from legal counsel. As discussed in Note 9 to the consolidated financial statements, management determined an accrual was necessary. Management is unable to estimate the remaining amount or range of amounts, of any additional probable liability, if any, related to the claims.

We identified these potential contingent liabilities and disclosures as a critical audit matter because evaluating the likelihood of potential outcomes involves significant judgment by management. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the Company’s assertion that an additional loss is not probable and reasonably estimable as of December 31, 2023.

Our audit procedures related to the potential contingent liabilities and disclosures included the following:

Accrued Retirement Benefits

The Company has defined benefit retirement plans that require actuarial valuations to determine estimated benefit obligations and related amounts reported in the Company’s consolidated financial statements as of and for the year ended December 31, 2023. Management engages actuarial specialists to perform the valuation and provides the specialists with the assumptions used to measure the amounts reported in the consolidated financial statements and disclosures in the notes to the consolidated financial statements.

We identified the valuation of the accumulated retirement benefit obligation as a critical audit matter because of the highly judgmental nature of actuarial assumptions made by management. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures.

Our audit procedures over accrued retirement benefits and related amounts and disclosures included the following:

Share-based Compensation

In 2023, the Company began awarding stock options to its directors. The stock options require fair value calculations to determine the share-based compensation expense for the year ended December 31, 2023. Management engages valuation specialists to perform the stock option valuations and reviews the assumptions by the specialists used to measure the amounts reported in the consolidated financial statements and disclosures in the notes to the consolidated financial statements.

We identified the valuation of the share-based compensation as a critical audit matter because of the highly judgmental nature of valuation assumptions made by management for stock options awarded. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures.

Our audit procedures over share-based compensation expense and related amounts and disclosures included the following:

We have served as the Company’s auditor since 2014.

/s/ACCUITY LLP

Honolulu, Hawai‘i

March 28, 2024

AND COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’** EQUITY**

For the Years Ended December 31, 2023 and 2022

(in thousands)

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

See Notes to Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2023 and 2022

DESCRIPTION OF BUSINESS

Maui Land & Pineapple Company, Inc. is a Delaware corporation and the successor to a business organized in1909 as a Hawaii corporation. The Company reincorporated from Hawaii to Delaware pursuant to a plan of conversion completed on* July 18, 2022.Total authorized capital stock of the Company includes 48,000,000 shares, consisting of 43,000,000 shares of common stock, par alue $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share. Shares of the Company’s common stock are listed on the New York Stock Exchange under the ticker symbol “MLP.” The Company consists of a landholding and operating parent company, has a principal subsidiary, Kapalua Land Company, Ltd., and certain other subsidiaries (collectively, the “Company”). The Company owns approximately 22,300 acres of land and268,000* square feet of commercial property on the island of Maui, Hawaii, which we put into productive use by planning, managing, developing, and selling, residential, resort, commercial, agricultural, and industrial real estate through the following business segments:

BASIS OF ACCOUNTING AND CONSOLIDATION

The accompanying consolidated financial statements of the Company are presented in conformity with generally accepted accounting principles in the United States of America (“GAAP”) as codified by the Financial Accounting Standards Board (“FASB”). The consolidated financial statements include the accounts of Maui Land & Pineapple Company, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash on hand, deposits in banks, and money market funds.

RESTRICTED CASH

Restricted cash consisted of deposits held in escrow from the prospective buyer of a property held for sale.

ACCOUNTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES

Receivables are recorded net of an allowance for credit losses. The Company estimates future write-offs based on delinquencies, credit ratings, aging trends, and historical experience. The Company believes the allowance for doubtful accounts is adequate to cover anticipated losses; however, significant deterioration in any of the aforementioned factors or in general economic conditions could change these expectations, and accordingly, the Company’s consolidated financial condition and/or its future operating results could be materially impacted. Credit is extended after evaluating creditworthiness andno collateral is generally required from customers.

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INVESTMENT IN BOND SECURITIES

Held-to-maturity debt securities are stated at amortized cost. Investments are reviewed for impairment for each reporting period. If any impairment is considered other-than-temporary, an allowance for credit loss would be established and held-to-maturity debt securities will be presented net of the credit loss allowance. Adjustments to expected credit losses are recorded as a component of other income (expense).

ASSETS HELD FOR SALE

Assets are classified as held for sale when management approves and commits to a plan to sell the property; the property is available for immediate sale in its present condition, subject only to terms that are usual and customary; an active program to locate a buyer and other actions required to complete the plan to sell have been initiated; the sale of the property is probable and is expected to be completed withinone year; the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Assets held for sale are stated at the lower of net book value or estimated fair value less cost to sell. There wereno impairments of assets held for sale during the years ended* December 31,*2023 or2022.

DEFERRED DEVELOPMENT COSTS

Deferred development costs consist primarily of design, entitlement and permitting fees and real estate development costs related to various planned projects. Deferred development costs are written off if management decides that it isno longer probable that the Company will proceed with the related development project. There wereno impairments of deferred development costs during the years ended* December 31, 2023or2022.*

INVESTMENT IN JOINT VENTURES

Investments in joint ventures are accounted for under the equity method of accounting. The initial capital contribution of assets to a joint venture is recorded at fair value.

PROPERTY & EQUIPMENT AND DEPRECIATION

Property is stated at cost. Major replacements, renewals and betterments are capitalized while maintenance and repairs that donot improve or extend the life of an asset are charged to expense as incurred. When property is retired or otherwise disposed of, the cost of the property and the related accumulated depreciation are written off and the resulting gains or losses are included in income. Depreciation is provided over the estimated useful lives of the respective assets using the straight-line method generally over three to 40 years.

LONG-LIVED ASSETS

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset* may**not* be recoverable. When such events or changes occur, an estimate of the future cash flows expected to result from the use of the assets and their eventual disposition is made. If the sum of such expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized in an amount by which the assets’ net book values exceed their fair value. These asset impairment loss analyses require management to make assumptions and apply considerable judgments regarding, among others, estimates of the timing and amount of future cash flows, expected useful lives of the assets, uncertainty about future events, including changes in economic conditions, changes in operating performance, changes in the use of the assets, and ongoing cost of maintenance and improvements of the assets, and thus, the accounting estimates* may*change from period to period. If management uses different assumptions or if different conditions occur in future periods, the Company’s consolidated financial condition or its future operating results could be materially impacted.

ACCRUED RETIREMENT BENEFITS

The Company’s policy is to fund retirement benefit costs at a level at least equal to the minimum funding requirements under federal law, butnot more than the maximum amount deductible for federal income tax purposes.

The funded status of the Company’s defined benefit pension plan is recorded as an asset or liability in the consolidated balance sheet reflecting the difference between the fair value of plan assets and the projected benefit obligation. Changes in the funded status of the plan are recorded in the year in which the changes occur, through comprehensive income.

Deferred compensation plans for certain former management employees provide for specified payments after retirement. A liability has been recognized based on the present value of estimated payments to be made.

REVENUE RECOGNITION

The Company recognizes revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This requires the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. Operating results pertaining to the Company’s business segments are summarized in Note13 to the consolidated financial statements.

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A customer is distinguished from a noncustomer by the nature of the goods or services that are transferred. Customers are provided with goods or services that are generated by a company’s ordinary output activities, whereas noncustomers are provided with nonfinancial assets that are outside of a company’s ordinary output activities. This distinction* may**not* significantly change the pattern of income recognition but determines whether that income is classified as revenue (contracts with customers) or other gains/losses (contracts with noncustomers) in the Company’s consolidated financial statements. The Company’s revenue streams for the period were generated as ordinary output activities to customers as defined by the guidance and were properly classified as revenues.

The Company uses thefive-step model to recognize revenue from customer contracts. Thefive-step model requires 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 willnot 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.

For each contract that involves variable consideration, the transaction price of the contract is considered the most likely outcome in estimating possible consideration amounts. The information used to determine the transaction price is similar to the information used in establishing prices of goods or services.

The Company is also required to determine if it controls the goods or services prior to the transfer to the customer in order to determine if it should account for the arrangement as a principal or agent. Principal arrangements, where the Company controls the goods or services provided, will result in the recognition of the gross amount of consideration expected in the exchange. Agent arrangements, where the Company simply arranges but doesnot control the goods or services being transferred to the customer, will result in the recognition of the net amount the Company is entitled to retain in the exchange.

Revenues from the Company’s real estate segment consist of sales of real estate. Revenues from sales of real estate are recognized in the period in which sufficient cash has been received, collection of the balance is reasonably assured, performance obligations have been performed and risks of ownership have passed to the buyer.

Sales of real estate assets that are considered central to the Company’s ongoing major operations are classified as real estate sales revenue, along with any associated cost of sales, in the Company’s consolidated statements of operations and comprehensive income. Sales of real estate assets that are considered peripheral or incidental transactions to the Company’s ongoing major or central operations are reflected as net gains or losses in the Company’s consolidated statements of operations and comprehensive income.

Leasing revenues are recognized on a straight-line basis over the terms of the leases. Lease income* may*include certain percentage rents determined in accordance with the terms of the leases. Lease income arising from rents that are contingent upon the sales of the tenant exceeding a defined threshold are recognized only after the defined sales thresholds are achieved. Reimbursements received for real estate taxes, general excise taxes, insurance and common area maintenance expenses are recognized as revenue as provided in the underlying lease terms.

The Company elected the following practical expedients upon adoption of ASC Topic842 on* January 1, 2019:*

Included in leasing revenues are grants issued by the State of Hawai‘i to subsidize the conservation and preservation efforts of the Pu‘u Kukui Watershed Preserve (“PKW”). The PKW is approximately 9,000 acres of conservation zoned lands that is a primary source of water that originates on the top of the West Maui Mountains. We currently receive government assistance viatwo grants, the Natural Area Partnership Program (“NAPP”) Grant with the State of Hawai‘i Department of Land and Natural Resources and the State of Hawai‘i Department of Health grant entitled Treatment Train: An Ahupua‘a’s Approach to Watershed Best Practices in West Maui, Hawai‘i (“DOH Grant”). The NAPP Grant was renewed on* July 1, 2023for asix*-year period. For the period* July 1, 2023to June 30, 2024provides$510,000* in government funds in support of the conservation efforts by the Company. The DOH Grant for the period from* April 1, 2019to April 30, 2024will provide $1.1 million in total funds, to date, there remains approximately $75,000 remaining in available grant funds before having to reapply for the next grant period. Actual funds received for both grants were $0.3 million for2023* and $0.4 million in2022.

Revenue from resort amenities consist of annual dues received from the Kapalua Club membership program. Member services include access, special programs, and other privileges at certain of the amenities at the Kapalua Resort. Annual membership dues are recognized on a straight-line basis overone year. Performance obligations for services are satisfied by relying on information received from the Company’s employees and vendors who have rendered services in accordance with the terms and conditions of the membership program.

The Company estimates credit losses on accounts receivable from customers by considering relevant information (past, current, and future) in assessing the collectability of cash flows. The expected credit losses of the Company’s accounts receivable are summarized in Note14 to the consolidated financial statements.

Economic factors affecting the nature, amount, timing, and uncertainty of the Company’s revenue and cash flows are identified as Risks and Uncertainties in this Note1.

OPERATING COSTS AND EXPENSES

Real estate, leasing, resort amenities, and general and administrative costs and expenses are reflected exclusive of depreciation and pension and other post-retirement expenses.

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SHARE-BASED COMPENSATION PLANS

The Company accounts for share-based compensation, including grants of restricted shares of common stock and options to purchase common shares, as compensation expense over the respective vesting periods in the consolidated financial statements based on their fair values on the grant dates. The impact of forfeitures that* may*occur prior to vesting is estimated and considered in the expense recognized.

INCOME TAXES

The Company accounts for uncertain tax positions using a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

The Company’s provision for income taxes is calculated using the liability method. Deferred income taxes are provided for all temporary differences between the financial statement and income tax bases of assets and liabilities using tax rates enacted by law or regulation. A valuation allowance is established for deferred income tax assets if management believes that it is more likely thannot that some portion or all of the asset willnot be realized through future taxable income.

The Company recognizes accrued interest related to unrecognized tax benefits as interest expense and penalties in general and administrative expenses in its consolidated statements of operations and comprehensive income (loss) and such amounts are included in income taxes payable on the Company’s consolidated balance sheets.

COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) includes all changes in stockholders’ equity, except those resulting from capital stock transactions. Comprehensive income also includes adjustments to the Company’s defined benefit pension plan obligations.

INCOME (LOSS) PER COMMON SHARE

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Diluted net income (loss) per common share is computed similar to basic net income (loss) per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares from share-based compensation arrangements had been issued. Potentially dilutive shares from stock option grants to purchase common shares and non-vested restricted stock are determined using the treasury stock method. Basic weighted-average common shares outstanding at* December 31, 2023and2022* were 19.6 million and 19.4 million, respectively. Diluted weighted-average common shares outstanding at* December 31, 2023and2022* were 19.7 million and 19.4 million, respectively.

FAIR VALUE MEASUREMENTS

GAAP establishes a framework for measuring fair value and requires certain disclosures about fair value measurements to enable the reader of the consolidated financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. GAAP requires that financial assets and liabilities be classified and disclosed inone of the followingthree categories:

Level1: Quoted market prices in active markets for identical assets or liabilities.

Level2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level3: Unobservable inputs that arenot corroborated by market data.

The Company considers cash and cash equivalents to be unrestricted for purposes of the consolidated balance sheets and consolidated statements of cash flows. The fair value of receivables and payables approximate their carrying value due to the short-term nature of the instruments. The valuation is based on settlements of similar financial instruments all of which are short-term in nature and are generally settled at or near cost.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Future actual amounts could differ from these estimates.

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CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to*$250,000* per institution. The Company had deposits in excess of the FDIC limit at* December 31, 2023and2022.* No losses have been recognized in2023 or2022.

RISKS AND UNCERTAINTIES

Factors that could adversely impact the Company’s future operations or financial results include, but arenot limited to the following: periods of economic weakness and uncertainty in Hawai‘i and the mainland United States; high unemployment rates and low consumer confidence; uncertainties and changes in U.S. social, political, regulatory and economic conditions or laws and policies and concerns surrounding ongoing developments in the European Union, Middle East, and Asia; the general availability of mortgage financing, including the effect of more stringent lending standards for mortgages and perceived or actual changes in interest rates; risks related to the Company’s investments in real property, the value and salability of which could be impacted by the economic factors discussed above or other factors; the popularity of Maui in particular and Hawai‘i in general as a vacation destination orsecond-home market; increased energy costs, including fuel costs, which affect tourism on Maui and Hawai‘i generally; untimely completion of land development projects within forecasted time and budget expectations; inability to obtain land use entitlements at a reasonable cost or in a timely manner; unfavorable legislative decisions by state and local governmental agencies; impact of governmental fines and assessments; the cyclical market demand for luxury real estate on Maui and in Hawai‘i generally; increased competition from other luxury real estate developers on Maui and in Hawai‘i generally; failure of future joint venture partners to perform in accordance with their contractual agreements; environmental regulations; acts of God, such as tsunamis, hurricanes, earthquakes and other natural disasters, such as the recent Maui wildfires; the spread of contagious diseases, such as the Coronavirus; the Company’s location apart from the mainland United States, which results in the Company’s financial performance being more sensitive to the aforementioned economic risks; failure to comply with restrictive financial covenants in the Company’s credit arrangements; and an inability to achieve the Company’s short and long-term goals and cash flow requirements.

LEGAL CONTINGENCIES

The Company is party to claims and lawsuits as well as threatened or potential actions or claims concerning matters arising from the conduct of its business activities. The outcome of claims or litigation and the timing of ultimate resolution are inherently difficult to predict and significant judgment* maybe required in the determination of both the probability of loss and whether the amount of the loss is reasonably estimable. The Company’s estimates are subjective and are based on the status of legal and regulatory proceedings, the merit of the Company’s defenses and consultation with external legal counsel. An accrual for a potential litigation loss is established when information related to the loss contingency indicates both that a loss is probable and that the amount of loss can be reasonably estimated. Refer to Note9* to the consolidated financial statements for further information regarding the Company’s legal proceedings.

NEW ACCOUNTING STANDARD ADOPTED

In* June 2016,the FASB issued ASU2016*-13 to update the methodology used to measure current expected credit losses (“CECL”). This ASU applies to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet exposures, such as loan commitments. This ASU requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The guidance was adopted on* January 1, 2023using a modified retrospective transition method applied to receivable balances in the Company’s non-leasing segments. There wasno* cumulative-effect adjustment to retained earnings/(deficit) upon adoption of the ASU.

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Amortized cost and fair value of debt securities at* December 31, 2023and2022* consisted of the following:

Maturities of debt securities at* December 31, 2023and2022* were as follows:

The fair value of debt securities were measured using Level1 inputs which are based on quotes for trades occurring in active markets for identical assets.

Assets held for sale consisted of the46-acre Central Resort project located in Kapalua. In* December 2021,the Company entered into an agreement to sell the Kapalua Central Resort project for $40.0 million. Terms of the agreement were subsequently amended to include a closing condition requiring the Maui Planning Commission to approve afive*-year extension of a Special Management Area (“SMA”) permit issued by the County of Maui. The Company allowed the agreement with the buyer to expire on* April 11, 2023.The application for the extension of the SMA permit is being managed by the Company. In2023,* Management reclassified the accumulated costs to deferred development while the project is being developed.

Land

Most of the Company’s 22,300 acres of land were acquired between1911 and1932 and is carried in its balance sheets at cost. More than 20,000 acres of land are located in West Maui and comprise a largely contiguous parcel that extends from the sea to an elevation of approximately 5,700 feet. This parcel includes approximately 900 acres within the Kapalua Resort, a master-planned, destination resort and residential community located in West Maui encompassing approximately 3,000 acres. The Company’s remaining 1,500 acres of land are located in Upcountry Maui in an area commonly known as Hali‘imaile and are mainly comprised of leased agricultural fields, including related processing and maintenance facilities.

Land Improvements

Land improvements are comprised primarily of roads, utilities, and landscaping infrastructure improvements at the Kapalua Resort. Also included is the Company’s potable and non-potable water systems in West Maui. Majority of the Company’s land improvements were constructed and placed in service in the mid-to-late1970’s or conveyed in2017. Depreciation expense would be considerably higher if these assets were stated at current replacement cost.

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Buildings

Buildings are comprised of restaurant, retail and light industrial spaces located at the Kapalua Resort and Hali’imaile which are used in the Company’s leasing operations. Most of the Company’s buildings were constructed and placed in service in the mid-to-late1970’s. Depreciation expense would be considerably higher if these assets were stated at current replacement cost.

Machinery and Equipment

Machinery and equipment are mainly comprised of zipline course equipment installed in2008 at the Kapalua Resort and used in the Company’s leasing operations.

In* December 2023,the Company entered into a joint venture agreement with a local developer to form a Hawai‘i limited liability company ("BRE2* LLC"). The Company's initial capital contribution toBRE2 LLC consisted approximately 31 acres of former pineapple lands in Hali‘imaile valued at $1.6 million. Net proceeds from the sales of improved agricultural lots will be distributed according to terms of the joint venture agreement.

The Company has available a $15.0 million revolving line of credit facility with First Hawaiian Bank (“Credit Facility”). On* December 23, 2021,the Company executed a Fourth Loan Modification Agreement and Second Amended and Restated Credit Agreement (“Agreements”) extending the maturity date of the Credit Facility to December 31, 2025.*The Agreements provide revolving or term loan borrowing options. Interest on revolving borrowing is calculated based on the Bank’s prime rate minus 1.125 percentage points. Interest on term loan borrowing is fixed at the Bank’s commercial loan rates with interest rate swap options available. The Company has pledged approximately 30,000 square feet of commercial leased space in the Kapalua Resort as security for the Credit Facility. Net proceeds from the sale of any collateral are required to be repaid toward outstanding borrowings and will permanently reduce the Credit Facility’s revolving commitment amount. There areno commitment fees on the unused portion of the Credit Facility.

The terms of the Credit Facility include various representations, warranties, affirmative, negative and financial covenants and events of default customary for financings of this type. Financial covenants include a minimum liquidity (as defined) of $2.0 million, a maximum of $45.0 million in total liabilities, and a limitation on new indebtedness. The Credit Facility also contains covenants restricting the payment of cash dividends without the lender’s prior approval.

The Company was in compliance with the covenants under the Credit Facility as of* December 31, 2023.*

Accrued retirement benefits at* December 31, 2023and2022* consisted of the following:

The Company hadtwo defined benefit pension plans which covered substantially all former bargaining and non-bargaining full-time, part-time and intermittent employees. In2011, pension benefits under both plans were frozen. The Company merged thetwo defined benefit pension plans to streamline the administration of the frozen plan in2018. The Company also has an unfunded non-qualified retirement plan coveringnine of its former employees. The non-qualified retirement plan was frozen in2009 and future vesting of additional benefits was discontinued.

In* November 2022,*the Company signed a purchase agreement with an insurer to annuitize the scheduled pension payments of 167 participants currently receiving benefits. Approximately $14.5 million was paid to the insurer from plan assets for the group annuity contract.

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The measurement date for the Company’s benefit plan disclosures is* December 31of each year. The changes in benefit obligations and plan assets for the years ended December 31, 2023and2022,* and the funded status of the plans and assumptions used to determine benefit information at* December 31, 2023and2022* were as follows:

Accumulated other comprehensive loss of $6.9 million and $8.3 million at* December 31, 2023and2022,* respectively, represent the net actuarial loss which havenot yet been recognized as a component of pension and other post-retirement expense.

Components of net periodic benefit cost and other amounts recognized in comprehensive income were as follows:

The expected long-term rate of return on plan assets was based on a building-block approach. Historical markets are studied and long-term historical relationships between equities and fixed income are presumed consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors, such as inflation and interest rates, are evaluated before long-term capital markets are determined. Diversification and rebalancing of plan assets are properly considered as part of establishing long-term portfolio returns.

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At* December 31, 2023and2022,* the plan held shares of various Aon Collective Investment Trust (“ACIT”) funds. The fair value of the Company’s pension plan assets by category were as follows:

Level1 assets are priced using quotes for trades occurring in active markets for the identical asset. Level2 assets are priced using observable inputs for the asset (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs). Net asset values (“NAV”) of ACIT funds included in Level2 are readily determinable, measured daily and based on the fair value of each fund’s underlying investments. For certain ACIT funds, NAV is used as a practical expedient to estimate fair value and isnot categorized in the fair value hierarchy. These funds determine NAV based on the fair value of its underlying investments on a monthly or quarterly basis and have redemption restrictions. Redemptions* may*be requested at the fund’s quarter-end NAV under the notification requirements of each fund, including a 105 day notice.

An administrative committee consisting of certain senior management employees administers the Company’s defined benefit pension plan. The pension plan assets are allocated among approved asset types based on the plan’s current funded status and other characteristics set by the administrative committee, subject to liquidity requirements of the plan.

Estimated future benefit payments are as follows (in thousands):

The Company made a voluntary contribution of $5.7 million to its defined benefit pension plan in* August 2022.No minimum contributions were required in2023.*

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Receivables from contracts with customers were $0.4 million, $0.3 million, and $0.3 million at* December 31, 2023,*2022 and2021, respectively.

Deferred license fee revenue

The Company entered into a trademark license agreement with the owner of the Kapalua Plantation and Bay golf courses, effective* April 1, 2020.Under the terms and conditions set forth in the agreement, the licensee is granted a perpetual, terminable on default, transferable, non-exclusive license to use the Company’s trademarks and service marks to promote its golf courses and to sell its licensed products. The Company received a single payment royalty of $2.0 million in March 2020.Revenue recognized on a straight-line basis over its estimated economic useful life was $0.1 million for each of the years ended December 31, 2023and2022,* respectively.

On* December 31, 2018,the State of Hawai‘i Department of Health (“DOH”) issued a Notice and Finding of Violation and Order (“Order”) for alleged wastewater effluent violations related to the Company’s Upcountry Maui wastewater treatment facility. The facility was built in the1960’s* to serve approximately200 single-family homes developed for workers in the Company’s former agricultural operations. The facility is made up oftwo 1.5-acre wastewater stabilization ponds and surrounding disposal leach fields. The Order includes, among other requirements, payment of a $230,000 administrative penalty and development of improvements to the current wastewater treatment plant, which become final and binding unless a hearing is requested to contest the alleged violations and penalties.

The DOH agreed to defer the Order as we continue to work to resolve and remediate the facility’s wastewater effluent issues through an approved corrective action plan. The construction of additional leach fields and installations of a surface aerator, sludge removal system, and natural pond cover using water plants were completed. Test results from wastewater monitoring indicate effluent concentration amounts within allowable ranges. A feasibility study was prepared and submitted identifying various technical solutions that could be implemented to resolve the Order. The Company submitted a plan and proposed solution to resolve the Order. The plan included the installation of an additional pond that will be lined and installed with aerators. One of the existing ponds will be lined and renovated as necessary and the other pond will be taken offline and used as a backup pond if needed. The Company is awaiting comments, feedback and approval from the DOH at the time of filing the Form10-K.

Pursuant to a1999 settlement agreement with the County of Maui, the Company and several chemical manufacturers have agreed to pay for90% of capital costs to install filtration systems in any future water wells if the presence of a nematicide, commonly known as DBCP, exceeds specified levels, and for the ongoing maintenance and operating cost for filtration systems on existing and future wells. The Company paid approximately $22,000 and $21,000 for the reimbursement of filtration and maintenance costs during the years ending* December 31, 2023and2022,* respectively. The Company is presentlynot aware of any plans by the County of Maui to install other filtration systems or to drill any water wells in areas affected by agricultural chemicals. Accordingly,no reserve for costs relating to any future wells has been recorded as the Company is unable to estimate the amount, or range of amounts, of any probable liability, if any.

In addition, from time to time, the Company is the subject of various other claims, complaints and other legal actions which arise in the normal course of the Company’s business activities. The Company believes the resolution of these other matters, in the aggregate, isnot likely to have a material adverse effect on the Company’s consolidated financial position or operations.

The Company leases land primarily to agriculture operators and space in commercial buildings, primarily to restaurant and retail tenants through2048. These operating leases generally provide for minimum rents, licensing fees, percentage rentals based on tenant revenues, and reimbursement of common area maintenance and other expenses. Certain leases allow the lessee an option to extend or terminate the lease agreement. There areno agreements allowing a lessee an option to purchase the underlying asset. Total leasing income subject to ASC Topic842 for the years ended* December 31, 2023and2022* were as follows:

Leased property, net of accumulated depreciation, was $10.3 million and $10.1 million at* December 31, 2023and2022,* respectively.

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Future minimum rental income for the nextfive years and thereafter are as follows (in thousands):

The Company recognized rent expense from operating leases of $34,000 and $49,000 for the years ended* December 31, 2023and2022,* respectively. A right-of-use asset was recorded in Other current assets and the related lease liability in Other current liabilities. The present value of remaining contractual payments related to operating leases were $23,000 and $53,000 at* December 31, 2023and2022,* respectively.

The Company’s directors and certain members of management receive a portion of their compensation in shares of the Company’s common stock granted under the Company’s2017 Equity and Incentive Award Plan (“Equity Plan”).

Share-based compensation is awarded annually to certain members of the Company’s management based on their achievement of predefined performance goals and objectives under the Equity Plan. Such share-based compensation is comprised of an annual incentive paid in shares of common stock and a long-term incentive paid in restricted shares of common stock vesting quarterly over a period ofthree years. Share-based compensation is valued based on the average of the high and low share price on the date of grant. Shares are issued upon execution of agreements reflecting the grantee’s acceptance of the respective shares subject to the terms and conditions of the Equity Plan. Restricted shares issued under the Equity Plan have voting and regular dividend rights but cannot be disposed of until such time as they are vested. All unvested restricted shares are forfeited upon the grantee’s termination of directorship or employment from the Company.

Directors receive both cash and equity compensation under the Equity Plan. Share-based compensation is comprised of restricted shares of common stock vesting quarterly over the directors’ annual period of service which are valued based on the average of the high and low share price on the date of grant. Shares are issued upon execution of agreements reflecting the grantee’s acceptance of the respective shares subject to the terms and conditions of the Equity Plan. Restricted shares issued under the Equity Plan have voting and regular dividend rights but cannot be disposed of until such time as they are vested. All unvested restricted shares are forfeited upon the grantee’s termination of directorship from the Company.

Options to purchase shares of the Company’s common stock under the Equity Plan were granted to directors during the quarter ended* June 30, 2023.*The number of common shares subject to option for annual board service, board committee service, and continued service of the Chairman of the Board are 0.3 million shares,0.1 million shares, and 0.4 million shares, respectively. Stock option grants are valued at the commitment date, based on the fair value of the equity instruments, and recognized as share-based compensation expense on a straight-line basis over its respective vesting periods. The option agreements provide for accelerated vesting if there is a change in control in ownership.

For annual board service and board committee service, stock option grants have a contractual period often years and vest quarterly over 12 months. The exercise price per share is based on the average of the high and low share price on the date of grant, or $12.11 per share. The fair value of these grants using the Black-Scholes option-pricing model was $3.88 per share based on an expected term of 5.25 years, expected volatility of 28%, and a risk-free rate of 4.16%. During the year ended* December 31, 2023,0.3 million of stock options vested andnone were exercised or forfeited. There were 0.1 million of unvested share options, or $0.3 million of unrecognized compensation cost, related to annual board services and board committee service at December 31, 2023.*

For continued service of the Board's Chairman, the stock option grant has a contractual period often years and vests annually as follows:0.1 million shares on* June 1, 2024,0.1 million shares on June 1, 2025,and 0.1 million shares on June 1, 2026.The exercise price per share is based on the average of the high and low share price on the date of grant, or $9.08 per share. The fair value of the grant using the Black-Scholes option-pricing model was $3.94 per share based on an expected term of 6.12 years, expected volatility of 37%, and a risk-free rate of 3.49%. There were 0.4 million of unvested share options, or $1.2 million or unrecognized compensation cost, related to the continued service of the Board's Chairman at December 31, 2023*

The simplified method described in Staff Accounting BulletinNo. 107 was used by management due to the lack of historical option exercise behavior, Management doesnot anticipate future forfeitures to be material. The Company doesnot currently issue dividends.

Share-based compensation expense totaled*$2.8 million* and*$1.3 million* for the years ended* December 31, 2023and2022,* respectively. Included in these amounts were*$1.2 million* and*$0.9 million* of restricted common stock vested during the years ended* December 31, 2023and2022,* respectively, and $1.4 million of stock options vested during the year ended* December 31, 2023.*

In* January 2024,an option to purchase 0.4 million shares of the Company’s common stock under the Equity Plan was granted to the Company's CEO. The stock option grant has a contractual period often years and vests annually as follows:0.1 million shares on January**1,* 2025, 0.1 million shares on* January 1, 2026,and 0.1 million shares on January 1, 2027.The exercise price per share is based on the average of the high and low share price on the date of grant, or $15.75 per share. The stock option grant is valued at the commitment date, based on the fair value, and recognized as share-based compensation expense on a straight-line basis over its vesting period beginning in January 2024.The fair value of the grant using the Black-Scholes option-pricing model was $6.02 per share at January 1, 2024*based on an expected term of 6.00 years, expected volatility of 31%, and a risk-free rate of 3.82%.

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GAAP prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

The Company’s provision for income taxes is calculated using the liability method. Deferred income taxes are provided for all temporary differences between the financial statement and income tax bases of assets and liabilities using tax rates enacted by law or regulation.

Reconciliations between the total income tax expense (benefit) and the amount computed using the statutory federal rate of 21% for the years ended* December 31, 2023and2022* were as follows:

Deferred tax assets were comprised of the following temporary differences as of* December 31, 2023and2022:*

Valuation allowances at* December 31, 2023and2022* have been established to reduce future tax benefitsnot expected to be realized. Net Operating Loss (NOL) carryforwards created in tax years beginning after* December 31, 2017are limited by the TCJA but donot* expire. At* December 31, 2023,the Company had approximately $67.5 million in federal NOL carryforwards and approximately $81.4 million in state NOL carryforwards expiring from2030* through2034. The Company also had approximately $8.3 million in federal and state NOL carryforwards at* December 31, 2023that donot* expire.

The Company’s reportable operating segments are comprised of the discrete business units whose operating results are regularly reviewed by the Company’s Chief Executive Officer, its chief decision maker, and the Board of Directors in assessing performance and determining the allocation of resources. Reportable operating segments in2023 were as follows:

The Company’s reportable operating segment results were measured based on operating income, exclusive of interest, pension and other postretirement expenses.

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Condensed consolidated financial information for each of the Company’s reportable segments for the years ended* December 31, 2023and2022* (in thousands) were as follows:

Allowance for credit losses for2023 and2022 were as follows:

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