MAUI LAND & PINEAPPLE CO INC

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

For the Three Months Ended March 31, 2024 and 2023

The accompanying unaudited condensed consolidated interim financial statements have been prepared by Maui Land & Pineapple Company, Inc. (together with its subsidiaries, the “Company”) in conformity with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information that are consistent in all material respects with those applied in the Company’s Annual Report on Form10-K for the year ended* December 31, 2023 (the “Annual Report”), and pursuant to the instructions to Form10*-Q and Article8 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they donot include all of the information and notes to the annual audited consolidated financial statements required by GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated interim financial statements contain all normal and recurring adjustments necessary to fairly present the Company’s consolidated financial position, results of operations and cash flows for the interim periods ended* March 31, 2024and2023.* The unaudited condensed consolidated interim financial statements and notes should be read in conjunction with the annual audited consolidated financial statements and notes thereto included in the Annual Report.

Maui Land & Pineapple Company, Inc. is a Delaware corporation and the successor to a business organized in1909 as a Hawai‘i corporation. The Company reincorporated from Hawai‘i 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 value $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 (“NYSE”) under the ticker symbol “MLP.”

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

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).

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Amortized cost and fair value of corporate debt securities at* March 31, 2024and December 31, 2023*consisted of the following:

Maturities of debt securities at* March 31, 2024and December 31, 2023*were as follows:

The fair value of debt securities was measured using Level2 inputs, which are based on quotes for trades occurring in active markets for identical assets.

Property and equipment at* March 31, 2024and December 31, 2023*consisted of the following:

Land

The Company holds approximately 22,300 acres of land. Most of this land was acquired between1911 and1932 and is carried in its balance sheets at cost. More than 20,400 acres are located in West Maui and are comprised of largely contiguous parcels which extend from the ocean to an elevation of approximately 5,700 feet. The West Maui landholdings include approximately 1,000 acres within Kapalua Resort, a master-planned, destination resort and residential community. Approximately 1,400 acres are located in Upcountry Maui in an area commonly known as Hali’imaile and is mainly comprised of leased agricultural fields, commercial and light industrial properties.

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. A majority of the Company’s land improvements were either constructed and placed in service in the mid-to-late1970s or conveyed in2017. Depreciation expense would be considerably higher if these assets were stated at current replacement cost.

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Buildings

The Company holds approximately 266,000 square feet of leasable area on the island of Maui. Buildings are comprised of restaurant, retail, and light industrial spaces located at the Kapalua Resort and in Hali’imaile. A majority of the Company’s buildings were constructed and placed in service in the mid-to-late1970s. Depreciation expenses 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 of approximately 30 acres of former pineapple lands in Hali‘imaile valued at $1.6 million. The Company provided toBRE2LLC additional funding of $19,000 during thethree months ended* March 31,*2024. Net proceeds from the sales of improved agricultural lots will be distributed, when funds are available for distribution, according to terms of the joint venture agreement.

Receivables from contracts with customers were $0.7 million and $0.4 million at* March 31, 2024and December 31, 2023,*respectively.

Deferred club membership revenue

The Company operates the Kapalua Club, a private, non-equity club program providing members special programs, access and other privileges at certain of the amenities within the Kapalua Resort. Deferred revenues from membership dues received from the Kapalua Club are recognized on a straight-line basis overone year. Revenue recognized for each of thethree months ended* March 31, 2024and2023* was $0.2 million.

Deferred license fee revenue

Effective* April 1, 2020,the Company entered into a trademark license agreement (the “Agreement”) with Kapalua Golf (the “Licensee”), the owner of Kapalua Plantation and Bay golf courses. 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 royalty payment of $2.0 million in March 2020.Revenue recognized on a straight-line basis over its estimated economic useful life of 15 years was $33,333 for each of thethree* months ended* March 31, 2024and2023.*

Long-term debt is comprised of amounts outstanding under the Company’s $15.0 million revolving line of credit facility (“Credit Facility”) with First Hawaiian Bank (“Bank”) maturing on* December 31, 2025.The Credit Facility provides options for revolving or term loan borrowing. Interest on loan borrowing is based on the Bank’sprime rate minus 1.125 percentage points. Interest on term loan borrowing may*be fixed at the Bank’s commercial loan rates using an interest rate swap option. 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 of new indebtedness on collateralized properties without the prior written consent of the Bank.

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The outstanding balance of the Credit Facility waszero at* March 31, 2024and December 31, 2023.The Company was in compliance with Credit Facility at March 31, 2024.*

Accrued retirement benefits at* March 31, 2024and December 31, 2023*consisted of the following:

The Company has a defined benefit pension plan, which covers many of its former bargaining unit employees and an unfunded non-qualified plan coveringnine former non-bargaining unit management employees and former executives. In2009, the non-qualified retirement plan was frozen, and in2011, the pension benefits under the qualified plan were frozen. All future vesting of additional benefits were discontinued effective in2009 for the non-qualified plan and in2011 for the qualified plan. The Board of Directors approved the termination of the defined benefit pension plan and the non-qualified retirement plan in2023.

The net periodic benefit costs for pension and post-retirement benefits for thethree months ended* March 31, 2024and2023* were as follows:

No contributions are required to be made to the defined benefit pension plan in2024.

On* December 31, 2018,the State of Hawaii 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 the1960s* to serve approximately200 single-family homes developed for workers in the Company’s former agricultural operations. The facility is comprised 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 a new 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 on* February 15, 2024,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 in2023.* Test results from wastewater monitoring indicate effluent concentration amounts within allowable ranges. A feasibility study was prepared and submitted on* January 15, 2024,identifying various technical solutions that could be implemented to resolve the Order. The Company submitted a plan and proposed solution to resolve the Order on March 14, 2024.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*-Q.

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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 leases space in commercial buildings primarily to restaurant and retail tenants with terms through2048. These operating leases generally provide for minimum rents and, in some cases, 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 agreement. There areno leases allowing a lessee an option to purchase the underlying asset. Leasing income subject to ASC Topic842 for thethree months ended* March 31, 2024and2023* were as follows:

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 or employment from the Company.

Options to purchase shares of the Company’s common stock under the Equity Plan were granted to directors in2023. 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 250,000 shares,78,000 shares, and 400,000, 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 overone year. The exercise price per share was 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 thethree months ended* March 31, 2024,*82,000 shares of stock options vested to directors for annual board and committee service.

For continued board service of the Chairman, the stock option grant has a contractual period often years which vests as follows:133,334 shares on* June 1, 2024,133,333 shares on June 1, 2025,and 133,333 shares on June 1, 2026.The exercise price per share was 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 these grants 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 3.53%. There were 400,000 of unvested share options, or $1.1 million or unrecognized compensation cost, related to the continued service of Chairman of the Board at March 31, 2024.*

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An option to purchase 400,000 shares of the Company’s common stock under the Equity Plan was granted to the Company's Chief Executive Officer during thethree months ended* March 31,2024. The stock option grant has a contractual period often years and vests annually as follows:133,334 shares onJanuary 1, 2025, 133,333 shares on January 1, 2026,and 133,333 shares on January 1, 2027.The exercise price per share wass 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 modelwas $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%. There were 400,000 shares of unvested share options, or $2.2 million of unrecognized compensation cost at March 31, 2024*

The simplified method described in Staff Accounting BulletinNo. 107 was used by management due to the lack of historical option exercise behavior. The Company doesnot currently issue dividends. There wereno forfeitures of stock option grants as of* March 31, 2024.Management doesnot* anticipate future forfeitures to be material.

Share-based compensation expenses totaled $1.0 million for each of thethree months ended* March 31, 2024and2023.* Included in these amounts were $0.2 million and $0.8 million of restricted common stock vested during thethree months ended* March 31, 2024and2023,* respectively, and $0.6 million of stock options vested during thethree months ended* March 31, 2023.*

The Company uses 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 full valuation allowance was established for deferred income tax assets at* March 31, 2024,and December 31, 2023,*respectively.

Basic net income (loss) per common share is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted net income 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 the dilutive potential common shares had been issued. Potentially dilutive shares arise from non-vested restricted stock and non-qualified stock options granted under the Company’s Equity Plan. The treasury stock method is applied to determine the number of potentially dilutive shares.

Basic and diluted weighted-average shares outstanding for thethree months ended* March 31, 2024were 19.6 million and 19.9 million, respectively. Basic and diluted weighted-average shares outstanding for thethree* months ended* March 31, 2023,*were 19.5 million.

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 operating decision maker – in assessing performance and determining the allocation of resources and by the Board of Directors. Reportable operating segments are as follows:

The Company’s reportable operating segment results are measured based on operating income (loss), exclusive of interest, depreciation, general and administrative, and share-based compensation.

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Reportable operating segment revenues and income for thethree months ended* March 31, 2024and2023* didnot include any revenue from land sales in these respective periods asno sales were made in either such period. The lack of such sales is is purposeful as the Company is evaluating its commercial assets and land holdings to determine better utilization for the value creation of its assets. The reportable segment data is presented as follows:

GAAP establishes a framework for measuring fair value and requires certain disclosures about fair value measurements to enable the reader of the unaudited condensed consolidated interim 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 all cash on hand to be unrestricted cash for the purposes of the unaudited condensed consolidated balance sheets and unaudited condensed 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 method to determine the valuation of stock options granted to directors during thethree months ended* March 31, 2024is described in Note11.*