KANP 10-K & 10-Q changes, risk factors and insider trading

The Company faces numerous numerous risks and uncertainties, including those set forth below. The risks described below are not the only risks that the Company faces. New risk risks may emerge from time to time and it is not possible to predict all such risks. These risk factors include a number of risks and uncertainties that could negatively impact Kaanapali Land's property activities and operations. If any of the risks described below or any potential new risks not yet identified occur, they may have a material adverse effect on the Company's business, consolidated financial position or results of operations.

Reference is made to Item Item 1. Business and Item 3. Legal Proceedings for further discussion of some of the risks and uncertainties factorsfacing facing Kaanapali Land.

The Kaanapali 2020 Development Development Plan (including, without limitation, Kaanapali Coffee Farms and Puukolii Village Mauka), as well as the Company's other development activities, are, apart from the risks associated with the entitlement process described above, subject to the risks generally incident to the ownership and development of real property. These include the possibility that cash generated from sales will not be sufficient to meet the Company's continuing obligations. This could result from the length of time to find a willing buyer of a property for sale, inadequate pricing or declines on asset values or pace of sales of properties or disruptions and and delays in the supply of construction material or changes in costs of construction or development; increased and continuing government government mandates; adverse changes in Hawaiian economic conditions, such as increased costs resulting from high rates of inflation, and availability of labor, increased costs of marketing and production, restricted availability of financing; adverse changes in local, national and/or international economic conditions (including adverse changes in exchange rates of foreign currencies for U.S. dollars); adverse effects of international political events, such as geopolitical events in Europe, the Middle East, Asia, and Russia’s invasion of Ukraine, additional terrorist activity in the U.S. or abroad that lessen travel, tourism and investment in Hawaii; substantial increase in cost of travel to Hawaii due to the increase in fuel costscosts, fuel shortages, or other events in the airline industry that could lessen travel and tourism in Hawaii; the spread of contagious viruses or diseases, that could negatively impact commerce generally and travel to Hawaii; the need for unanticipated improvements or unanticipated expenditures in connection with environmental matters; increase in real estate tax rates and other expenses; delays in obtaining permits or approvals for construction or development and adverse changes in laws, governmental rules and fiscal policies; acts of God, including wildfires, earthquakes, volcanic eruptions, floods, droughts, fires, tsunamis, unusually heavy or prolonged rains, and hurricanes; and other factors which are beyond the control of the Company. Declines in asset values could result in impairment in the carrying values of the Company’s real estate assets and could have a material adverse effect on the Company’s results of operations. Because of these risks and others, real estate ownership and development is subject to unexpected increases in costs.

The Company's development lands are located in an area that is susceptible to hurricanes and seismic activity. In addition, during certain times of year, heavy rainfall is not uncommon. These events may adversely impact the Company's development activities and infrastructure assets, such as roadways, reservoirs, water courses and drainage ways. Significant events may cause the Company to incur substantial expenditures for investigation and restoration of damaged irrigation infrastructure, damaged structures and facilities. Climate change, flooding, drought, fires, wind, prolonged heavy rains, and other natural perils can adversely impact agricultural production and water transmission and storage resources on lands owned or used by the Company.

The Company remains engaged in farming, harvesting, and milling operations relating to coffee orchards. The Company incurs significant risks relating to the cost of growing and maintaining the coffee trees and producing and selling the coffee. As discussed above, the coffee mill was destroyed in the Lahaina wildfire. The Company ishas incompleted planning andits design stagesof the relocation of buildingits a newcoffee mill atto its farm in Kaanapali,Kaanapali. whichThe isCompany has notreceived expected toits bepermits completed in time forfrom the nextCounty of Maui related to the construction of the coffee harvest.mill and anticipates construction to start in June 2026. The coffee fields were not damaged in the fire. The Company is experiencing rising costs in its farming operations as a result of local labor shortages and the recent rise in inflation. SuchThe Company may be limited in its ability to increase the price it charges to customers sufficient to realize a profit in its coffee sales and therefore, such cost increases may negatively impact the Company’s results of operations in the future and may cause disruptions in the Company’s development plans. The Company also incurs the risk that coffee farming could be materially affected because of the adverse effects on coffee yields caused by coffee berryCBB, borer (“CBB”), coffee leaf rust (“CLR”) or through regulatory risk, as described below. The Company relies on water sourced from its irrigation systems, which divert water from streams and development tunnels into a network of ditches, tunnels, flumes, siphons and reservoirs. In the event CWRM or any other regulatory body limits the Company’s ability to divert stream waters to its irrigation systems, the result could have a negative impact on the Company’s ability to continue with its agricultural operations and development plans.

In September 2020, the Company discovered the CBB on its land. The Company has been aware of the possible spread to its crops and has maintained sound management practices. The Company has developed an integrated management program designed to manage all aspects for cultural control of the CBB. Such program has resulted in an increase in the costs of farming the coffee and the CBB mayhas lowerlowered the quantity and quality of salable coffee.

Adverse macroeconomic conditions conditions continue to cause economic uncertainty and market volatility. High levels of inflation, slower growth or recession, changes to fiscal and monetary policy, higher interest rates, high costs of fuel, currency fluctuations, challenges in the supply chain, implementation of tariffs, and other adverse macroeconomic conditions,conditions (including those resulting from any increased geopolitical pressure), may continue. Such uncertainty and risk may negatively impact the Company’s performance and financial results, results, including any potential negative impact on the values of its property holdings on Maui and future planned development and sales of of parcels of such development, changes in law and/or regulation, and uncertainty regarding government and regulatory policy.

Kaanapali Land, as successor by merger to other entities, and D/C have beenin the past and continue to be named as defendants in personal injury actions allegedly based on exposure to asbestos. While there are relatively few cases that name Kaanapali Land, there were a substantial number of cases that were pending against D/C on the U.S. mainland (primarily in California). Cases against Kaanapali Land (hereafter, “Kaanapali Land asbestos cases”) arewere allegedly based on its prior business operations in Hawaii and cases against D/C were allegedly based on sale of asbestos-containing products by D/C's prior distribution business operations primarily in California. Certain asbestos-related proofs of claims in the bankruptcy case had been withdrawn in connection with closing the bankruptcy. Certain of these cases have been refiled subsequent to the closing of the bankruptcy. Each entity defending these cases believes that it has meritorious defenses against these actions, but can give no assurances as to the ultimate outcome of these cases. The defense of these cases had a material adverse effect on the financial condition of D/C as it was forced to file a voluntary petition for liquidation. SuchD/C emerged from bankruptcy casein was2023 closedwith onno June 14, 2023.assets. Kaanapali Land does not presently believe that future cases in which it may be named will result in any material liability to Kaanapali Land; however, there can be no assurance in that regard. Reference is made to Note 76. Commitments and Contingencies, to the Company’s consolidated financial statements included in Item 8 for additional discussion.

In addition to historical information, this Reportreport 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, the anticipated resolution of permit applications and regulatory comments, the Company’s liquidity and operations, and the Company’simpact landof macroeconomic development plans, goals and initiatives.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 increases in the rate of inflation, changes to fiscal and monetary policy, heightened interest rates 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 imposition of conditions on receipt of governmental approvalsapprovals, andincluding 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 events, all of which may cause such actual results to differ materially from what is expressed or forecast in this report.

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.

TheIn 2023, the Company terminated its former Pension Plan (the “Pension Plan”) and transferred $5 million, which was approximately 25% of the Pension Plan assetsmillion to a qualified replacement plan (“QRP”). The Company’s contribution to the QRP enabled the Company to reduce the excise tax due as a result of the Pension Plan termination from 50% to 20% of the amount reverted to the Company. 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. OnIn February 2025 26,and 2024, approximately $1.1 million and $1 millionmillion, respectively, was allocated to the participants in the QRP.

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, as amended,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 14.9 acre property. Due to the receipt of a Demand for Arbitration, discussed below, as of December 31, 2024, the Company recorded credit aloss reserves in the amount of $0.1 million and $1 million creditfor lossthe reserveyears 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, 2024.2025. 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 arbitration hearing is expected to begin in August 2025. 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 3,13, 2024, KLMCPioneer Mill Company, LLC. (“PMC”), entered into a property sale agreement (“PVMPMC Sales Agreement”) with an unrelated third party for the sale of several four parcels of land, aggregating approximately 24121 acres (the “PVMPMS land parcels”) within Pu’ukoli’i Village Mauka located near the Kaanapali resort area, north of in Lahaina, Hawaii. ThePursuant 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 PVMproperty. landThe parcels was subject to the satisfactory completionsale of the developer’sproperty investigationclosed on March 10, 2026 and evaluation ofat the PVMclosing landPMC parcelsreceived during$19.9 amillion specifiedin due diligence period, and prior to the expiration of the due diligence period on November 15, 2024, the developer had not delivered a notice to proceed. Therefore, the PVM Sales Agreement terminated pursuant to its terms on November 15, 2024.cash.

Due to the termination of the PVM Sales Agreement, theThe 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 known as Puukolii Village.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 preparingsubmitting an application to CWRM for a permit to secure the water needed to service the development. TheIn August 2025, the Company issubmitted providingan necessary informationapplication to supportCWRM for a permit to secure the application.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. See below for further discussion of CWRM. 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).

The decreaseincrease in depositsaccounts payable and deferredaccrued gainsexpenses as of December 31, 20242025 as compared to December 31, 20232024, is primarily due to the recognitiontiming of ancoffee insurancemilling expenses advance during 2024relative to purchasethe millyear replacementended equipment.December 31, 2025.

The increasedecrease in selling, general and administrative expenses for the year ended December 31, 20242025 as compared to the year ended December 31, 20232024 is due to the thecredit derecognitionloss ofreserve aestablished contingentduring liability2024 related to the D/CCompany’s Distributionreceivable bankruptcyfrom caseNewport duringHospital second quarter 2023.Corporation.

The decreaseincrease in excisecrop taxinsurance expenseproceeds for the year ended December 31, 20242025 as compared to the year ended December 31, 20232024 is due to thecrop exciseinsurance taxesproceeds paidreceived during in 2023May 2025 related to an insured event that occurred during the terminated2024 Pensioncrop Plan.year.

The increasedecrease in net gain on property damage and lost profits, net of insurance proceeds claims for the year ended December 31, 20242025 as compared to the year ended December 31, 20232024 is due to the recognition of an insurance advance during the first quarter of 2024 to purchase mill replacement equipment as well as approximately $6 million received from the Company’s insurance carriers as a result of the Lahaina wildfire.

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

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 -1. Business, Note 6 to the consolidated financial statements 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 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 had cash and and cash equivalents of approximately $23$16 million as of December 31, 2024,2025, which is available for, among other things, working capital 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.

Critical Accounting Estimates and Significant Accounting Policies

Deferred income taxes are accounted accounted for in accordance with FASB ASC Topic 740 – Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. 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 of $8,289,$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 44. Provision for Income Taxes, to the consolidated financial statements included in Item 88. 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 havinghave beenin 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 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 7 6. Commitments and Contingencies, to the consolidated financial statements included in Item 88. Financial Statements and Supplemental Data, for further discussion.

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 the 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, 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, and the other factors described in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Form 10-K”), this report and any other periodic reports the Company files with the U.S. Securities and Exchange Commission (the “SEC”), all of which may cause actual results, performance or achievements of the Company, to differ materially from what is expressed, implied or forecast by any such forward-looking statements in this report.

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 located in Lahaina, Hawaii. The sale of the property closed on March 10, 2026, and at the closing of the transaction, PMC received $19.9 million in cash from the buyer for the sale (subject to adjustment for closing costs, escrow agent fees, and applicable prorated items pursuant to the PMC Sales Agreement).

The Company’s Pioneer Mill site was 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 disrupted the coffee farming operations and prevented the Company from processing and selling the 2023 and 2024 year coffee crop. In 2025, the Company harvested its coffee crop and outsourced pulping and drying to an unaffiliated coffee mill on Maui that became operational in January 2025. Separately, in 2025, the Company assembled a temporary dry mill at a short term leased warehouse, where it hulls, grades and bags coffee. Coffee sales resumed in December 2025. 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, as well as exploring alternatives to rebuilding the mill.

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 affiliated companies, all of which have some degree atof common ownership with the Company and were concluded as eligible participants per the Employee Retirement Income Security Act (“ERISA”) requirements for QRPs. Such allocations are planned to be allocated ratably over a period not to exceed seven years to comply with regulatory requirements. On February 18, 2026, approximately $1.2 million was allocated to the participants in the QRP.

In September 2014, Kaanapali 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 commits 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, in 2023, KLMC entered into a contract for $1.1 million to install the sewer line. KLMC 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 14.9 acre property. Due to the receipt of a Demand for Arbitration, discussed below, as of MarchJune 31,30, 2026, the Company recorded a $1.1 million credit loss reserve on its receivable with NHC based on its evaluation of the probability of default that exists at NHC. The amount of the credit loss reserve represents the entire receivable amount and interest incurred as of June March 31,30, 2026. In conjunction with the Infrastructure Improvement Agreement, the Company retains certain approval rights 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 acre site is intended to be used for a critical access hospital, skilled nursing facility, assisted living facility, and independent living 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 remains ongoing. The parties mutually agreed to defer the arbitration proceedings as the parties evaluate an alternative to arbitration. The arbitration proceedings have been rescheduled for JulyNovember 13,18, 2026, if the parties are unable to agree to an alternative to arbitration. 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.

The decrease in property, net as of MarchJune 31,30, 2026 as compared to December 31, 2025 and the related increase in sales and lease income and cost of sales for the the threesix months ended MarchJune 31,30, 2026 as compared to the threesix months ended MarchJune 31,30, 2025 is primarily due to the sale of the Pioneer Mill Mill site that closed on March 10, 2026.

The decrease in retirement plan investments as of MarchJune 31,30, 2026 as compared to December 31, 2025, is primarily due to the QRP allocation that was made to plan participants during the three months ended March 31, 2026.

The increase in net gain on property damage and lost profits, net ofcrop insurance claims proceeds for the three and six months ended MarchJune 31,30, 2026 as compared to the three and six months ended MarchJune 31,30, 2025 is due to crop insurance proceeds the Company received from its insurance carrier in January 2026 for claims that were submitted related to thean lossesinsurable event that were incurredoccurred during 2023the Lahaina2025 wildfire.crop year.

See also the notes to the condensed consolidated financial statements included in Item 1. Financial Statements, for additional discussion of items addressing comparability between the three and six months ended MarchJune 31,30, 2026 and 2025.

The Company had cash and cash equivalents of approximately $38 million as of MarchJune 31,30, 2026 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, certain commitments with the State of Hawaii for the development of the Lahaina Bypass Highway, potential liabilities resulting from tax audits, and existing and possible future litigation. The Company does not anticipate making any distributions for the foreseeable future.

Net cash flows flows provided by investing activities for the threesix months ended MarchJune 31,30, 2026 were approximately $2 million due to insurance proceeds received related to the Lahaina wildfire,wildfires, as well as, proceeds from retirement plan investments. Net cash flows used in financing activities for the threesix months ended MarchJune 31,30, 2026 was approximately $1 million due to retirement plan investments allocated to participants in the QRP who are employees of certain affiliates of the Company.