What changed in this filing

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Item 1. Financial Statements

2021-05-03 compared with 2020-11-05 · 131 added, 271 removed, 305 unchanged (57% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

(in thousands except share data)

CURRENT ASSETS

Accounts receivable, less allowance for doubtful accounts of $223 and $35, respectively

Accounts receivable, net

Prepaid expenses and other assets

10 unchanged sentences

Payroll and employee benefits

Accrued retirement benefits

Deferred club membership revenue

Long-term debt, current portion

Accrued retirement benefits, currernt portion

Deferred revenue, current portion

Other current liabilities

1 unchanged sentence

LONG-TERM LIABILITIES

Long-term debt

Accrued retirement benefits, net of current portion

Deferred license fee revenue

Accrued retirement benefits

Deferred revenue

Other noncurrent liabilities

11 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

Three Months Ended

September 30,

(in thousands except

per share amounts)

OPERATING REVENUES

Resort amenities and other

Total operating revenues

OPERATING COSTS AND EXPENSES

Resort amenities and other

General and administrative

Share-based compensation

Total operating costs and expenses

OPERATING INCOME (LOSS)

Pension and other post-retirement expenses

Interest expense

LOSS FROM CONTINUING OPERATIONS

Income (Loss) from discontinued operations, net

Other comprehensive income - pension, net

TOTAL COMPREHENSIVE INCOME (LOSS)

EARNINGS (LOSS) PER COMMON SHARE-BASIC AND DILUTED

Loss from Continuing Operations

Income (Loss) from Discontinued Operations

See Notes to Condensed Consolidated Interim Financial Statements.

MAUI LAND & PINEAPPLE COMPANY, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Nine Months Ended

September 30,

Three Months Ended March 31,

(in thousands except

13 unchanged sentences

Income (Loss) from discontinued operations, net

Other compreshensive income - pension, net

TOTAL COMPREHENSIVE LOSS

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’ EQUITY

For the Three Months Ended and Nine Months Ended September 30, 2020 and 20 19

For the Three Months Ended March 31, 2021 and 2020

(in thousands)

3 unchanged sentences

Vested restricted stock issued

Shares cancelled to pay tax liability

Other comprehensive income - pension

Balance, June 30, 2020

Share-based compensation

Vested restricted stock issued

Shares cancelled to pay tax liability

Shares canceled to pay tax liability

Other comprehensive income - pension

Balance, September 30, 2020

Balance, March 31, 2021

Balance, January 1, 2020

1 unchanged sentence

Vested restricted stock issued

Stock option exercised

Shares cancelled to pay tax liability

Other comprehensive income - pension

Balance, June 30, 2019

Share-based compensation

Vested restricted stock issued

Shares cancelled to pay tax liability

Shares canceled to pay tax liability

Other comprehensive income - pension

Balance, September 30, 2019

Balance, March 31, 2020

See Notes to Condensed Consolidated Interim Financial Statements.

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

Three Months Ended March 31,

(in thousands)

NET CASH PROVIDED BY OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from investment

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

CASH USED IN INVESTING ACTIVITIES

Payments for property and deferred development costs

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

2 unchanged sentences

Debt and common stock issuance costs and other

NET CASH USED IN FINANCING ACTIVITIES

NET DECREASE IN CASH

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

NET (DECREASE) INCREASE IN CASH

CASH AT BEGINNING OF PERIOD

2 unchanged sentences

Cash paid during the period for interest:

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Common stock issued to certain members of the Company’s management totaled $865,000 and $951,000 for the nine months ended September 30, 2020 and 2019, respectively.

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:

Common stock issued to certain members of the Company’s management totaled $748,000 and $865,000 for the three months ended March 31, 2021 and 2020, respectively.

See Notes to Condensed Consolidated Interim Financial Statements.

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

For the Three Months Ended and Nine Months Ended September 30, 2020 and 2019

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated interim financial statements have been prepared by Maui Land & Pineapple Company, Inc.

(together with its subsidiaries, the “Company”) in accordance with U.S.

generally accepted accounting principles (GAAP) for interim financial information that are consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X.

(together with its subsidiaries, collectively, the “Company”) in conformity with generally accepted accounting principles in the United States (“GAAP”) for interim financial information that are consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and pursuant to the instructions to Form 10-Q and Article 8 promulgated by Regulation S-X of the U.S.

Securities and Exchange Commission (“SEC”).

Accordingly, they do not 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 financial position, results of operations and cash flows for the interim periods ended September 30, 2020 and 2019.

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 Company’s Form 10-K for the fiscal year ended December 31, 2020.

3 unchanged sentences

Amounts reflected in interim statements are not necessarily indicative of results for a full year.

Certain amounts in the September 30, 2019 condensed consolidated statements of operations and comprehensive income (loss) were reclassified to conform to the current period’s presentation.

Such amounts had no impact on net loss and comprehensive income (loss) previously reported.

SHARES – BASIC AND DILUTED

Basic and diluted weighted-average shares outstanding for the three and nine months ended September 30, 2020 and 2019 were as follows:

Three Months Ended

Nine Months Ended

September 30,

Basic and diluted

Potentially dilutive

Basic and diluted weighted-average shares outstanding for the three months ended March 31, 2021 and 2020 were 19,327,739 and 19,254,783, respectively.

Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding.

Diluted net loss per common share is computed similar to basic net 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 from share-based compensation arrangements had been issued.

Potentially dilutive shares arise from non-qualified stock options to purchase common stock.

The treasury stock method is utilized to determine the number of potentially dilutive shares related to the outstanding non-qualified stock options.

Property at September 30, 2020 and December 31, 2019 consisted of the following:

September 30,

Property at March 31, 2021 and December 31, 2020 consisted of the following:

(in thousands)

20 unchanged sentences

ASSETS HELD FOR SALE

Assets held for sale at September 30, 2020 and December 31, 2019 consisted of the following:

September 30,

Assets held for sale at March 31, 2021 and December 31, 2020 consisted of the following:

(in thousands)

3 unchanged sentences

In February 2020, the Company entered into an agreement to sell the Kapalua Central Resort project for $43.9 million.

The closing of the transaction is contingent upon, among other things, the satisfaction of certain customary closing conditions, including a due diligence period.

Due to the State of Hawaii’s COVID-19 restrictions, including those for transpacific travelers, the due diligence period was extended to February 15, 2021.

The closing of the transaction is contingent upon, among other things, the satisfaction of certain customary closing conditions, including a due diligence period ending on July 15, 2021.

The closing date of the sale is expected to be 30 days after the last day of the due diligence period.

In December 2019, the Company entered into an Asset Purchase Agreement to sell the PUC-regulated assets of Kapalua Water Company, Ltd.

The Company entered into an Asset Purchase Agreement in December 2019 to sell the PUC-regulated assets of Kapalua Water Company, Ltd.

and Kapalua Waste Treatment Company, Ltd.

located in the Kapalua Resort.

The sale is subject to certain closing conditions, including completion of due diligence and PUC approval.

These assets are used by Kapalua Water Company and Kapalua Waste Treatment Company to provide water and sewage transmission services for the Kapalua Resort.

Results of discontinued operations related to the sale of the Kapalua Water Company and Kapalua Waste Treatment Company assets are reflected in Note 13.

In March 2021, the sale was approved by the State of Hawaii PUC subject to certain closing conditions of its Decision and Order.

The sale, with net proceeds of $4.2 million, was completed on May 1, 2021.

The results of discontinued operations related to the sale of the Kapalua Water Company and Kapalua Waste Treatment Company assets are reflected in Note 13.

The above assets held for sale have not been pledged as collateral under the Company’s credit facility.

2 unchanged sentences

The Credit Facility matures on December 31, 2021.

Interest accrued on borrowings is based on LIBOR plus 3.50%.

At September 30, 2020 and December 31, 2019, the Credit Facility’s interest rates were 3.66% and 5.19%, respectively.

Interest on borrowings is at LIBOR plus 3.50%, or 3.62% and 3.65%, at March 31, 2021 and December 31, 2020, respectively.

The Company has pledged its 800-acre Kapalua Mauka project and approximately 30,000 square feet of commercial leased space in the Kapalua Resort as security for the Credit Facility.

3 unchanged sentences

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 Company believes that it is in compliance with the covenants under the Credit Facility as of September 30, 2020.

In March 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law establishing the Paycheck Protection Program (PPP) administered by the United States Small Business Administration (SBA).

The PPP authorized up to $349 billion in forgivable loans to small businesses.

Loan amounts are forgiven to the extent proceeds are used to cover documented payroll, mortgage interest, rent, and utility costs.

Loans have a maturity of 2 years and an interest rate of 1.0%.

Prepayments may be made without penalty.

The Company received loan funding of $246,500.

On April 23, 2020, the United States Department of the Treasury and the SBA issued revised guidance related to the PPP.

As a result, the Company returned the entire amount of the loan to comply with the subsequent guidance.

The Company was in compliance with the covenants under the Credit Facility as of March 31, 2021.

SHARE-BASED COMPENSATION

6 unchanged sentences

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 vesting quarterly over a period of three years.

Share-based compensation totaled $1,229,000 and $1,346,000 for the nine months ended September 30, 2020 and 2019, respectively.

Included in these amounts were $512,000 and $511,000 of restricted shares of common stock which vested during the first nine months of 2020 and 2019, respectively.

Share-based compensation totaled $349,000 and $425,000 for the three months ended March 31, 2021 and 2020, respectively.

Included in these amounts were $163,000 and $186,000 of restricted shares of common stock which vested during the first three months of 2021 and 2020, respectively.

ACCRUED RETIREMENT BENEFITS

Accrued retirement benefits at September 30, 2020 and December 31, 2019 consisted of the following:

September 30,

Accrued retirement benefits at March 31, 2021 and December 31, 2020 consisted of the following:

(in thousands)

7 unchanged sentences

The non-qualified retirement plans were frozen in 2009 and future vesting of additional benefits was discontinued.

The net periodic benefit costs for pension and post-retirement benefits for the nine months ended September 30, 2020 and 2019 were as follows:

The net periodic benefit costs for pension and postretirement benefits for the three months ended March 31, 2021 and 2020 were as follows:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

1 unchanged sentence

Expected return on plan assets

Amortization of net loss

Amortization of net actuarial loss

Pension and other postretirement expenses

DEFERRED REVENUE

CONTRACT ASSETS AND LIABILITIES

Receivables from contracts with customers were $876,000, $806,000, and $673,000 at March 31, 2021, December 31, 2020 and December 31, 2019, respectively.

Deferred club membership revenue

5 unchanged sentences

The Company received a single payment royalty of $2.0 million in March 2020.

Revenue from the license agreement is recognized on a straight-line basis over its estimated economic useful life.

Revenue recognized on a straight-line basis over its estimated economic useful life of 15 years was $33,000 for the three months ended March 31, 2021.

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 continues to be established for deferred income tax assets as of September 30, 2020 and December 31, 2019, respectively.

Deferred income taxes are provided for all temporary differences between the financial statement and income tax basis of assets and liabilities using tax rates enacted by law or regulation.

A full valuation allowance continues to be established for deferred income tax assets as of March 31, 2021 and December 31, 2020, respectively.

REPORTABLE OPERATING SEGMENTS

1 unchanged sentence

Reportable operating segments are as follows:

Real Estate includes the development and sale of real estate inventory and the operations of Kapalua Realty Company, a general brokerage real estate company located within the Kapalua Resort.

Leasing primarily includes revenues and expenses from real property leasing activities, license fees and royalties for the use of certain of the Company’s trademarks and brand names by third parties, and the cost of maintaining the Company’s real estate assets, including conservation activities.

Real Estate includes the planning, entitlement, development and sale of real estate inventory.

The segment also included the operations of Kapalua Realty Company, Ltd., a general brokerage real estate company located in the Kapalua Resort, through June 30, 2020.

Leasing includes revenues and expenses from real property leasing activities, license fees and royalties for the use of certain of the Company’s trademarks and brand names by third parties, and the cost of maintaining the Company’s real estate assets, including conservation activities.

The operating segment also includes the management of ditch, reservoir and well systems that provide non-potable irrigation water to West and Upcountry Maui areas.

1 unchanged sentence

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

Reportable operating segment revenues and income for the three and nine months ended September 30, 2020 and 2019 were as follows:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Reportable operating segment revenues and income for the three months ended March 31, 2021 and 2020 were as follows:

Ended March 31,

(in thousands)

7 unchanged sentences

The Company leases land primarily to agriculture operators and space in commercial buildings, primarily to restaurant and retail tenants through 2048.

In addition, the Company provides potable and non-potable water to West and Upcountry Maui areas.

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.

1 unchanged sentence

There are no leases allowing a lessee an option to purchase the underlying asset.

Total leasing income for the three and nine months ended September 30, 2020 and 2019 were as follows:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Total leasing income for the three months ended March 31, 2021 and 2020 were as follows:

Ended March 31,

(in thousands)

2 unchanged sentences

Licensing fees

Water system sales

Other (primarily common area recoveries)

DISCONTINUED OPERATIONS

The results of discontinued operations related to the sale of the Kapalua Water Company and Kapalua Waste Treatment Company assets for the three and nine months ended September 30, 2020 and 2019 were as follows:

The results of discontinued operations related to the sale of the Kapalua Water Company and Kapalua Waste Treatment Company assets for the three months ended March 31, 2021 and 2020 were as follows:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Operating revenues

Operating costs and expenses

Deprectiation expense

Impairment loss

Income (loss) from discontinued operations

1 unchanged sentence

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 DOH has agreed to defer the Order without a hearing date while the Company continues working on a previously approved corrective action plan to resolve and remediate the facility’s wastewater effluent issues.

A new design plan for additional disposal leach fields has been approved by the DOH, which will provide proper percolation of effluent water.

Construction of the additional leach fields is expected to be completed by December 31, 2020.

Upon completion of the new leach fields, the Company will perform further analysis to address any other matters regarding the Order.

The Company is presently unable to estimate the amount, or range of amounts, of any probable liability, if any, related to the Order and no provision has been made in the accompanying interim unaudited condensed consolidated financial statements.

The facility was built in the 1960’s to serve approximately 200 single-family homes developed for workers in the Company’s former agricultural operations.

The facility is made up of two 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 without a hearing date while the Company continues working on a previously approved corrective action plan to resolve and remediate the facility’s wastewater effluent issues.

The construction of additional leach fields was completed in December 2020.

The installation of a surface aerator, sludge removal system, and natural pond cover, using water plants, were also completed during the three months ended March 31, 2021.

The DOH is currently reviewing the test results of these corrective action plan items.

With these actions, the test results have been in compliance with applicable standards.

No hearing date has been set since discussions with the DOH are ongoing.

The Company is presently unable to estimate the amount, or range of amounts, of any probable liability, if any, related to the Order and no provision has been made in the accompanying unaudited condensed consolidated interim financial statements.

There are various other claims and legal actions pending against the Company.

The resolution of these other matters is not expected to have a material adverse effect on the Company’s consolidated financial position or results of operations after consultation with legal counsel.

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic.

As a result, public health measures were taken to minimize exposure to the virus.

Quarantine, travel restrictions, and other governmental restrictions and guidelines to reduce the spread of COVID-19 has caused and is likely to continue to have an adverse impact on economic activity, including business closures, increased unemployment, financial market instability, and reduced tourism to Maui.

The duration of the disruption on global, national, and local economies cannot be reasonably estimated at this time.

However, should the existence of the COVID-19 pandemic continue for an extended period, the Company’s future business operations, including the results of operations, cash flows and financial position will be significantly affected.

F AIR VA LUE MEASUREMENTS

GAAP establishes a framework for measuring fair value, and requires certain disclosures about fair value measurements to enable the reader of the interim unaudited condensed 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.

Quarantine, travel restrictions and other public health measures to reduce the spread of COVID-19 has caused and is likely to continue to have an adverse impact on economic activity, including business closures, increased unemployment, financial market instability, and reduced tourism.

Notwithstanding the administration of vaccines to residents and visitors to Maui, the duration of the disruption on global, national, and local economies cannot be reasonably estimated at this time.

The Company’s future business operations, including the results of operations, cash flows and financial position will be significantly affected should the existence of the COVID-19 pandemic continue for an extended period.

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 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 in one of the following three categories:

7 unchanged sentences

The fair value of debt was estimated based on borrowing rates currently available to the Company for debt with similar terms and maturities.

The carrying amount of debt, which approximated fair value, was approximately $1.0 million at December 31, 2019.

The carrying amount of debt, which approximated fair value, was $800,000 and $200,000 (audited) at March 31, 2021 and December 31, 2020, respectively.

The fair value of debt was measured using the level 2 inputs, noted above.

RECENT ACCOUNTING PRONOUCEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued ASU 2016-13 to update the methodology used to measure current expected credit losses (“CECL”).

4 unchanged sentences

The Company is in the process of assessing the impact of the ASU on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13 related to fair value measurement disclosures.

This ASU removes the requirement to disclose the amount of and reasons for transfers between Levels 1 and 2 of the fair value hierarchy, the policy for determining that a transfer has occurred, and valuation processes for Level 3 fair value measurements.

Additionally, this ASU modifies the disclosures related to the measurement uncertainty for recurring Level 3 fair value measurements (by removing the requirement to disclose sensitivity to future changes) and the timing of liquidation of investee assets (by removing the timing requirements in certain instances).

The guidance also requires new disclosures for Level 3 financial assets and liabilities, including the amount and location of unrealized gains and losses recognized in other comprehensive income/(loss) and additional information related to significant unobservable inputs used in determining Level 3 fair value measurements.

This ASU was effective beginning in 2020 and did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In August, 2018, the FASB issued ASU 2018-14 which amends ASC Topic 715 to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans.

The ASU’s changes related to disclosures are part of the FASB’s disclosure framework project which aimed to improve the effectiveness of disclosures in notes to financial statements.

This ASU is effective for public business entities for annual reporting periods ending after December 15, 2020, with early adoption permitted.

The Company expects to adopt the new disclosure requirements on January 1, 2021.

In August 2018, the FASB issued ASU 2018-15 related to accounting for implementation costs incurred in hosted cloud computing service arrangements.

Under the new guidance, implementation costs incurred in a hosting arrangement that is a service contract should be expensed or capitalized based on the nature of the costs and the project stage during which such costs are incurred.

If the implementation costs qualify for capitalization, they must be amortized over the term of the hosting arrangement and assessed for impairment.

Companies must disclose the nature of any hosted cloud computing service arrangements.

This ASU also provides guidance for balance sheet and income statement presentation of capitalized implementation costs and statement of cash flows presentation for the related payments.

The ASU was effective beginning in the first quarter of 2020 and did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12 to simplify the accounting in ASC Topic 740, Income Taxes .

1 unchanged sentence

The guidance also clarifies and simplifies other areas of ASC Topic 740.

This ASU will be effective beginning in the first quarter of 2021.

Early adoption is permitted.

This ASU was effective beginning in the first quarter of 2021 with early adoption permitted.

Certain adjustments in this update must be applied on a prospective basis, certain amendments must be applied on a retrospective basis, and certain amendments must be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings/(accumulated deficit) in the period of adoption.

The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements and related disclosures.

The ASU did not have a significant impact on the Company’s consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04 as an update to provide optional guidance to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform (ASC Topic 848) on financial reporting.

The amendments in the ASU are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The ASU provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The ASU is effective through December 31, 2022.

Management is evaluating its impact on the Company’s consolidated financial statements and related disclosures, if elected.

M ANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our unaudited interim condensed consolidated financial condition and results of operations should be read in conjunction with our annual audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2019 and the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our unaudited condensed consolidated interim financial condition and results of operations should be read in conjunction with our annual audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2020 and the unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q.

Depending upon the context, the terms the “Company,” “we,” “our,” and “us,” refer to either Maui Land & Pineapple Company, Inc.

8 unchanged sentences

This segment also includes the operations of Kapalua Realty Company, Ltd., a general brokerage real estate company located in the Kapalua Resort.

• Leasing—Our leasing operations include residential, resort, commercial, agricultural and industrial land and property leases, licensing of our registered trademarks and trade names, sales of potable and non-potable water in West and Upcountry Maui and stewardship and conservation efforts.

• Leasing—Our leasing operations include residential, resort, commercial, agricultural and industrial land and property leases, licensing of our registered trademarks and trade names.

This operating segment also includes the management of ditch, reservoir, and well systems that provide potable and non-potable water in West and Upcountry Maui and the stewardship of conservation areas.

• Resort Amenities—We manage the operations of the Kapalua Club, a private, non-equity club program providing our members special programs, access and other privileges at certain amenities at the Kapalua Resort.

Results of Operations

Three and Nine Months Ended September 30, 2020 C ompared to Three and Nine Months Ended September 30, 2019

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Three Months Ended March 31, 2021 compared to Three Months Ended March 31, 2020

Three Months Ended March 31,

(in thousands)

3 unchanged sentences

Share-based compensation

Operating income (loss)

Operating loss

Pension and other postretirement expenses

3 unchanged sentences

Loss from Continuing Operations per Common Share

Income (Loss) from Discontinued Operations per Common Share

Income (loss) from Discontinuing Operations per Common Share

Net loss per Common Share

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Three Months Ended March 31,

(in thousands)

2 unchanged sentences

Operating loss

Our real estate operating revenues include sales commissions earned by our wholly owned subsidiary, Kapalua Realty Company, Ltd., from resales of properties owned by private residents in the Kapalua Resort and surrounding areas.

During the nine months ended September 30, 2020 and 2019, commissions were earned on eight and fourteen properties sold, respectively.

A corresponding decrease in commissions paid resulted in lower operating costs and expenses for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

In addition, legal defense costs related primarily to the project formerly known as The Ritz-Carlton Club and Residences, Kapalua Bay were incurred in 2019.

There were no sales of real estate for the three months ended March 31, 2021 and March 31, 2020, respectively.

During the three months ended March 31, 2020, our wholly-owned subsidiary, Kapalua Realty Company, Ltd., earned sales commissions from resales of properties owned by private residents in the Kapalua Resort and surrounding areas.

Effective July 1, 2020, we entered into an office lease agreement and license agreement with a real estate company to provide general brokerage services to the area.

Under terms of the license agreement, monthly royalty fees will be collected for the use of certain of our trademarks in exchange for a covenant not to compete.

As a result of this agreement, we will no longer receive commission income on resales of properties in the Kapalua Resort and surrounding areas.

There were no sales of our owned real estate in the three or nine months ended September 30, 2020 and 2019, respectively.

In February 2020, we entered into an agreement to sell the Kapalua Central Resort project for $43.9 million.

The closing of the transaction is contingent upon, among other things, the satisfaction of certain customary closing conditions, including a due diligence period.

Due to the State of Hawaii’s COVID-19 restrictions, including those for transpacific travelers, the due diligence period was extended to February 15, 2021.

The closing date of the sale is expected to be 30 days after the last day of the due diligence period.

There were no significant real estate development expenditures in the first nine months of 2020 and 2019.

No sales commissions were earned during the three months ended March 31, 2021.

There were no significant real estate development expenditures in the first three months of 2021 and 2020, respectively.

Real estate development and sales are cyclical and depend on a number of factors.

Results for one period are therefore not necessarily indicative of future performance trends in this business segment.

Uncertainties associated with the novel coronavirus (COVID-19) pandemic may, among other things, reduce demand for real estate and impair prospective purchasers’ ability to obtain financing, which would adversely affect revenues from our real estate operations.

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Uncertainties associated with COVID-19 may, among other things, reduce demand for real estate and impair prospective purchasers’ ability to obtain financing, which would adversely affect revenues from our real estate operations in future periods.

Three Months Ended March 31,

(in thousands)

2 unchanged sentences

Operating income

The decrease in operating revenues for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019 was primarily due to lower percentage rental income from our commercial leasing portfolio.

The impact of COVID-19 on tenants’ sales activity resulted in no percentage rental income recognized for the three months ended September 30, 2020 compared to approximately $488,000 for the three months ended September 30, 2019.

We do not expect any significant amount of percentage rental income for the remainder of 2020.

Continued restrictions on public gatherings, such as stay-at-home orders and guidelines, and the threat of COVID-19 or other infectious disease may adversely affect our tenants’ ability to pay rent.

Additional reserves of $108,000 and $188,000 were recorded to our allowance for doubtful accounts for the three and nine months ended September 30, 2020, respectively.

During the three months ended September 30, 2020, operating expenses were reduced by insurance reimbursements of $220,000 for repairs to property damaged from Tropical Storm Olivia in October 2018.

Our leasing operations face substantial competition from other property owners in Maui and Hawaii.

Travel restrictions, social distancing regulations, and the threat of COVID-19 and its variants continue to adversely affect our tenants’ sales activity and ability to pay rent.

Percentage rental income recognized from our leasing portfolio was $117,000 and $266,000 for the three months ended March 31, 2021 and 2020, respectively.

Additional reserves of $60,000 were recorded to increase our allowance for doubtful accounts to $280,000 as of March 31, 2021.

The decrease in rental income was offset by grant income for conservation programs.

Grant income was $317,000 and $99,000 for the three months ended March 31, 2021 and 2020, respectively.

Our leasing operations face competition from other property owners in Maui and Hawaii.

RESORT AMENITIES AND OTHER

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Three Months Ended March 31,

(in thousands)

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Operating costs and expenses

Operating income (loss)

Operating loss

Our Resort Amenities segment includes the operations of the Kapalua Club, a private, non-equity club providing its members special programs, access and other privileges at certain of the amenities at the Kapalua Resort, including a 30,000 square foot full-service spa and a private pool-side dining beach club.

The Kapalua Club does not operate any resort amenities and the member dues collected are primarily used to pay contracted fees to provide access for its members to the spa, beach club, golf courses, and other resort amenities.

The increase in operating revenues for the three months ended March 31,2021, compared to the three months ended March 31, 2020, was due to a partial refund of member dues in 2020.

In March 2020, access to certain facilities and amenities was restricted due to regulations related to COVID-19.

The decrease in operating revenues for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019 was due to a partial refund of member dues as a result of these restrictions.

Contracted fees were correspondingly reduced during the three and nine months ended September 30, 2020 as compared to the three and nine months ended September 30, 2019.

Partial member dues are expected to continue until restricted access is lifted.

The increase in operating costs and expenses for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 was due to the closure of the Kapalua Plantation Golf Course for renovations in February 2019 and an increase in golf course fees charged to the Company in the first quarter of 2020.

The Company had a 51% ownership interest in Kapalua Bay Holdings, LLC (KBH).

In 2009, the investment was written down to zero.

As part of the dissolution of KBH, we received $894,000 as a return of cash collateral related to an owner controlled insurance program in May 2020.

DISCONTINUED OPERATIONS

In December 2019, the we entered into an Asset Purchase Agreement to sell the PUC-regulated assets of Kapalua Water Company, Ltd.

and Kapalua Waste Treatment Company, Ltd.

located in the Kapalua Resort.

The sale is subject to certain closing conditions, including completion of due diligence and PUC approval.

These assets are used by Kapalua Water Company and Kapalua Waste Treatment Company to provide water and sewage transmission services for the Kapalua Resort.

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic.

As a result, public health measures were taken to minimize exposure to the virus.

These measures, some of which are government-mandated, have been implemented globally resulting in a dramatic decrease in economic activity.

In the State of Hawaii, the Governor issued “stay-at-home” orders for its residents and visitors beginning in March 2020, followed by subsequent “safer-at-home” and “act with care” proclamations.

In addition, the Governor issued emergency proclamations ordering all transpacific passengers to a mandatory 14-day self-quarantine.

Quarantine, travel restrictions and other governmental orders to reduce the spread of COVID-19 continue to have an adverse impact on most businesses in Hawaii, including our own.

In its third quarter report, the State of Hawaii’s Department of Business, Economic Development & Tourism projects Hawaii’s economic growth rate, as measured by the real gross domestic product, will decline by 12.3 percent in 2020 in its 3 rd quarter report.

According to visitor statistics from the Hawaii Tourism Authority, passenger volume to Maui County in the third quarter of 2020 and 2019 was 11,550 and 671,559, respectively, a decrease of 98%.

Beginning October 15, 2020, travelers to the State of Hawaii may avoid the quarantine rules under a pre-travel testing program if proof of a negative result from a valid COVID-19 Nucleic Acid Amplification Test is presented.

The duration of the disruption on global, national, and local economies cannot be reasonably estimated at this time.

The decrease in operating costs and expenses for the three months ended March 31, 2021, compared to the three months ended March 31, 2020, was primarily due to lower golf course fees charged to the Company in 2021.

IMPACT OF COVID-19

During the year ended December 31, 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic.

In response, many federal, state, local, and foreign governments put in place travel restrictions, “shelter-in-place” orders, and similar government orders and restrictions, in an attempt to control the spread and mitigate the impact of the disease.

Such restrictions or orders resulted in the mandatory closure of “non-essential” businesses, increased unemployment rates, “social distancing” restrictions, reduced tourist activity, work-from-home policies, and other changes that have led to significant disruptions to businesses and global financial markets.

The overall impact of the pandemic on our business and future results of operations is highly uncertain and subject to change, and we are not able to accurately predict the magnitude or scope of such impacts at this time.

Quarantine, travel restrictions and other public health measures to reduce the spread of COVID-19 continue to have an adverse effect on most businesses in the State of Hawaii, including our own.

According to visitor statistics from the Hawaii Tourism Authority, the average daily census of visitors to Maui for the three months ended March 31, 2021 and 2020 were 29,060 and 69,281, respectively, a decrease of 58%.

Although the Centers for Disease Control and Prevention released updated guidance on April 2, 2021, Hawaii’s mandatory 10-day quarantine remains in place as of the date of this filing.

Currently, travelers are allowed to avoid the State of Hawaii’s quarantine rules under its Safe Travels program if proof of a negative result from a valid COVID-19 Nucleic Acid Amplification Test performed by a trusted testing partner is presented.

The duration of the continued disruption on global, national, and local economies cannot be reasonably estimated at this time.

However, should the existence of the COVID-19 pandemic continue for an extended period, our future business operations, including the results of operations, cash flows and financial position will be significantly affected.

We continue to monitor the economic impact of the COVID-19 pandemic, as well as mitigating emergency assistance programs, such as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), on us, our customers, and our vendors.

Appropriate remote work arrangements have been established for our employees in order to maintain our financial reporting systems.

We continue to monitor the economic impact of the COVID-19 pandemic, as well as mitigating stimulus programs from recent legislation, such as the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), Consolidated Appropriations Act of 2021 (“CAA”), and America Rescue Plan Act (“ARPA”), on us, our customers, and our vendors.

Remote work arrangements continue to be established for our employees to the extent possible in order to maintain financial reporting systems.

LIQUIDITY AND CAPITAL RESOURCES

We had cash on hand of approximately $324,000 and $683,000 (audited) at September 30, 2020 and December 31, 2019, respectively.

The $15.0 million revolving line of credit facility with First Hawaiian Bank (Credit Facility) matures on December 31, 2021.

Interest on borrowings is accrued at LIBOR plus 3.50%.

We had cash on hand of approximately $458,000 and $869,000 (audited) at March 31, 2021 and December 31, 2020, respectively.

At March 31, 2021, $14.2 million remained available under our $15.0 million revolving line of credit facility with First Hawaiian Bank (“Credit Facility”).

The $15.0 million revolving line of credit facility matures on December 31, 2021.

Interest on borrowings is at LIBOR plus 3.50% (3.62% at March 31, 2021).

We have pledged our 800-acre Kapalua Mauka project and 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.

The full amount of our Credit Facility is currently available for borrowing.

There are no commitment fees on the unused portion of the Credit Facility.

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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.

As of September 30, 2020, we were in compliance with the covenants under the Credit Facility.

If the current economic conditions created by the COVID-19 pandemic persist, we expect to borrow under our Credit Facility.

Net cash flow provided by our operating activities was approximately $545,000 for the nine months ending September 30, 2020.

In March 2020, we received $2.0 million for a perpetual, non-exclusive licensing agreement granting the use of our trademarks and service marks effective April 1, 2020.

In May 2020, we received $894,000 from our investment in KBH.

The proceeds relate to a return of cash collateral held in an owner controlled insurance program.

In absence of the return of this cash collateral, we would have borrowed funds under our Credit Facility to maintain a positive cash balance.

The outstanding balance of our Credit Facility was reduced to zero as of September 30, 2020.

Interest payments on our Credit Facility totaled $20,000 and 118,000 for the nine months ended September 30, 2020 and 2019, respectively.

We were not required to make any minimum funding contributions to our defined benefit pension plan during the nine months ended September 30, 2020.

The CARES Act includes limited funding relief provisions for single employer defined benefit plans.

The CARES Act allows us to defer until January 1, 2021 the required contributions of approximately $542,000 that would otherwise be due in 2020.

Pa ycheck Protection Program

In April 2020, we received a loan of approximately $246,500 under the Paycheck Protection Program (PPP) of the CARES Act.

On April 23, 2020, the United States Department of Treasury and the SBA issued revised guidance related to the PPP.

As a result, we returned the entire amount of the loan to comply with the subsequent guidance.

There were no prepayment penalties associated with the loan.

As of March 31, 2021, we were in compliance with the covenants under the Credit Facility.

Net cash flow used in our operating activities totaled $513,000 for the three months ended March 31, 2021.

During the year ended December 31, 2020, net cash flow provided by our operating activities totaled $1.5 million, primarily due to the receipt of a single royalty payment of $2 million from a license agreement of our trademarks.

Interest payments on our Credit Facility totaled $5,000 and $14,000 for the three months ended March 31, 2021 and 2020, respectively.

The outstanding balance of our Credit Facility increased by $600,000 during the three months ended March 31, 2020.

We made a minimum funding contribution of $553,000 to our defined benefit pension plan during the three months ended March 31, 2021.

The CARES Act included limited funding relief provisions for single employer defined benefit plans allowing us to defer the required contributions that would have been otherwise due in 2020 until January 4, 2021.

No further contributions are required to be made to the plan in 2021.

The sale of PUC-regulated assets of Kapalua Water Company, Ltd.

and Kapalua Waste Treatment Company, Ltd.

located in the Kapalua Resort was completed on May 1, 2021, with net proceeds of $4.2 million.

Future Cash Inflows and Outflows

Our business initiatives for the next year include investing in our operating infrastructure, continued planning and entitlement efforts on our development projects, and addressing the impact of COVID-19 on our business segments.

Our income from real estate commissions, leasing activities and Kapalua Club membership dues, were all impacted for the nine months ended September 30, 2020, and may continue to be impacted in the future for an uncertain period of time.

Our income from leasing activities and Kapalua Club membership dues continued to be impacted for the three months ended March 31, 2021, and may continue to be impacted in the future for an uncertain period of time.

This may require borrowing under our Credit Facility or other indebtedness, repayment of which may be dependent on selling of our real estate assets at acceptable prices in condensed timeframes.

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Critical Accounting Policies and Estimates

The preparation of the interim unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of accounting estimates.

Changes in these estimates and assumptions are considered reasonably possible and may have a material effect on the interim unaudited condensed consolidated financial statements and thus actual results could differ from the amounts reported and disclosed herein.

The preparation of the unaudited condensed consolidated interim financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of accounting estimates.

Changes in these estimates and assumptions are considered reasonably possible and may have a material effect on the unaudited condensed consolidated interim financial statements and thus actual results could differ from the amounts reported and disclosed herein.

Our critical accounting policies that require the use of estimates and assumptions were discussed in detail in our most recently filed Form 10-K.

There have been no significant changes in our critical accounting policies during the nine months ended September 30, 2020.

Cautionary Note Regarding Forward-Looking Statements and Risks

There have been no significant changes in our critical accounting policies during the three months ended March 31, 2021.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q and other reports filed by us with the U.S.

Securities and Exchange Commission (SEC) contain “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.

Securities and Exchange Commission contain “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.

These statements relate to future events or our future financial performance and are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

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our ability to raise capital through the sale of certain real estate assets;

risks related to reference rate reform

availability of capital on terms favorable to us, or at all;

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We qualify all of our forward-looking statements by these cautionary statements.

Q UANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have no material exposure to changes in interest rates related to our borrowing and investing activities used to maintain liquidity and to fund business operations.

We have no material exposure to foreign currency risks.

We are subject to potential changes in consumer behavior and regulatory risks through travel restrictions due to our location.

Potential tenant deferrals and abatements may impact our base and percentage rental income.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements