MAUI LAND & PINEAPPLE CO INC 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA     REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   To the Board of Directors and Stockholders of Maui Land & Pineapple Company, Inc.   Opinion on the Consolidated Financial Statements   We have audited the accompanying consolidated balance sheets of Maui Land & Pineapple Company, Inc. and its subsidiaries (collectively, the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021 and the related notes (collectively referred to as the “consolidated financial statements”).  In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and 2020, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America.   Basis for Opinion   The consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.  We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the U.S. Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.   Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.  Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.  Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.   Critical Audit Matters   The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:  (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.   Revenue Recognition   Description of the Matter   The Company has multiple revenue streams including real estate sales; leasing and licensing arrangements; and resort amenities, which are recognized upon transfer of goods or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.   18     Significant judgment is exercised by management in determining revenue recognition for these customer agreements, and may include the following:   ●      Determination of whether agreements entered into by the Company are contracts with a customer that would be assessed under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers , or lease contracts that would be assessed under ASC Topic 842, Leases .     ●      Determination of whether there is a single or multiple, distinct performance obligation for goods or services to be provided.   ●      The pattern of delivery for each performance obligation.   ●      Identification and treatment of contract terms that may impact the timing and amount of revenue recognized.   ●      Determination of stand-alone selling prices for each distinct performance obligation and for goods and services that are not sold separately.   Given the factors, the related audit effort in evaluating management’s judgments in determining revenue recognition for these customer and lease agreements was extensive and involved subjective estimation and complex auditor judgment.   How We Addressed the Matter in Our Audit Our audit procedures over revenue recognition and disclosures included the following:   ●      We obtained an understanding, evaluated the design and implementation of internal controls that address the risks of material misstatement relating to revenue recognized for various revenue streams, including for unique transactions.   ●      We evaluated management’s significant accounting policies related to these customer agreements for reasonableness.   ●      For significant agreements, we obtained and read the agreements, and evaluated management’s assumptions used to identify appropriate contracts with customers, identify performance obligations and stand-alone prices for each distinct performance obligation, identify unique contract terms that may impact the timing and amount of revenue recognized, identify the pattern of delivery, and appropriateness of management’s application of accounting policies in accordance with Topics ASC 606 and 842.   Commitments and Contingencies   Description of the Matter The Company is party to claims that arise in the normal course of business. Contingent liabilities are recorded in the consolidated financial statements when management determines it is probable that a liability has been incurred and the amount can be reasonably estimated. This determination requires significant judgment by management.   In assessing whether the Company should accrue a liability in its consolidated financial statements as a result of the claims, the Company considers various factors, including the legal and factual circumstances of the claims and advisement from legal counsel. As discussed in Note 12 to the consolidated financial statements, the Company’s management determined an initial accrual was necessary. Management is unable to estimate the remaining amount or range of amounts, of any additional probable liability, if any, related to the claims.   We identified these potential contingent liabilities and disclosures as a critical audit matter because evaluating the likelihood of potential outcomes involves significant judgment by management. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the Company’s assertion that an additional loss is not probable and reasonably estimable as of December 31, 2021.   How We Addressed the Matter in Our Audit Our audit procedures related to the potential contingent liabilities and disclosures included the following:   ●      We obtained an understanding, evaluated the design and implementation of internal controls that address the risks of material misstatement relating to management’s review of the claims and approval of the accounting treatment based on the most recent facts and circumstances.   ●      We obtained and evaluated legal confirmations from the Company’s external legal counsel involved in the claims confirming the facts and circumstances of the claims and to understand the basis for the management’s conclusion that any additional losses from the claims are not probable and reasonably estimable as of December 31, 2021.   ●      We evaluated the accuracy and completeness of management’s disclosures in the consolidated financial statements by comparing the disclosures to the management’s internal analysis of the claims and known facts of the claims based on the information provided by the Company’s external legal counsel.   19     Accrued Retirement Benefits   Description of the Matter The Company has defined benefit retirement plans that require actuarial valuations to determine estimated benefit obligations and related amounts reported in the Company’s consolidated financial statements as of and for the year ended December 31, 2021.  Management engages actuarial specialists to perform the valuation and provides the specialists the assumptions used to measure the amounts reported in the consolidated financial statements and disclosures in the notes to the consolidated financial statements.  In 2021, the Company annuitized the scheduled pension payments of 384 participants in its pension plans.  This transaction resulted in settlement adjustments with a material effect on the Company’s consolidated financial statements.   We identified the valuation of the accumulated retirement benefit obligation as a critical audit matter because of the highly judgmental nature of actuarial assumptions made by management and the unique settlement in 2021.  This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures over the settlement.   How We Addressed the Matter in Our Audit Our audit procedures accrued retirement benefits and related amounts and disclosures included the following:   ●      We obtained an understanding, evaluated the design and implementation of internal controls that address the risks of material misstatement relating to management’s review of the determination of the actuarial assumptions used in calculating accrued retirement benefits and related amounts.   ●      We evaluated the reasonableness of the methods and significant assumptions used by management and assessed the work and competency of the third-party actuarial specialists engaged by management.     ●      We evaluated the management specialist’s reports related to the settlement transaction for accuracy and reasonableness.     /s/ ACCUITY LLP   We have served as the Company’s auditor since 2014.   Honolulu, Hawaii March 1, 2022   20 Table of Contents     MAUI LAND   & PINEAPPLE COMPANY,   INC.   & SUBSIDIARIES   CONSOLIDATED BALANCE SHEETS       December 31,       2021     2020       (in thousands except share data)   ASSETS                 CURRENT ASSETS                 Cash   $ 5,596     $ 869   Accounts receivable, net     1,103       1,362   Prepaid expenses and other assets     333       80   Assets held for sale     3,144       7,440   Total Current Assets     10,176       9,751   PROPERTY & EQUIPMENT                 Land     5,063       5,072   Land improvements     12,943       12,943   Buildings     22,869       23,465   Machinery and equipment     10,360       10,476   Total Property & Equipment     51,235       51,956   Less accumulated depreciation     ( 34,237 )     ( 33,445 ) Property, net     16,998       18,511   OTHER ASSETS                 Deferred development costs     9,564       8,901   Other noncurrent assets     1,181       1,307   Total Other Assets     10,745       10,208   TOTAL ASSETS   $ 37,919     $ 38,470                     LIABILITIES AND STOCKHOLDERS’ EQUITY                 CURRENT LIABILITIES                 Accounts payable   $ 580     $ 899   Payroll and employee benefits     949       970   Long-term debt, current portion     -       200   Accrued retirement benefits, current portion     142       165   Deferred revenue, current portion     217       260   Other current liabilities     509       453   Total Current Liabilities     2,397       2,947   LONG-TERM LIABILITIES                 Accrued retirement benefits     7,937       10,926   Deferred revenue     1,633       1,767   Deposits     2,309       2,680   Other noncurrent liabilities     53       83   Total Long-Term Liabilities     11,932       15,456   TOTAL LIABILITIES     14,329       18,403                     COMMITMENTS & CONTINGENCIES                                       STOCKHOLDERS’ EQUITY                 Common stock-- no par value, 43,000,000 shares authorized; 19,383,288 and 19,311,528 shares issued and outstanding at December 31, 2021 and 2020, respectively     82,378       81,485   Additional paid in capital     9,184       9,184   Accumulated deficit     ( 52,324 )     ( 48,904 ) Accumulated other comprehensive loss     ( 15,648 )     ( 21,698 ) Total Stockholders’ Equity     23,590       20,067   TOTAL LIABILITIES & STOCKHOLDERS' EQUITY   $ 37,919     $ 38,470     See Notes to Consolidated Financial Statements   21 Table of Contents     MAUI LAND   & PINEAPPLE COMPANY,   INC.   & SUBSIDIARIES   CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)       Years Ended December 31,       2021     2020       (in thousands except per       share amounts)   OPERATING REVENUES                 Real estate   $ 3,400     $ 772   Leasing     8,103       5,948   Resort amenities and other     940       820   Total Operating Revenues     12,443       7,540                     OPERATING COSTS AND EXPENSES                 Real estate     750       600   Leasing     3,495       2,933   Resort amenities and other     1,355       1,193   General and administrative     2,569       2,445   Share-based compensation     1,449       1,632   Depreciation     1,188       1,289   Total Operating Costs and Expenses     10,806       10,092                     OPERATING INCOME (LOSS)     1,637       ( 2,552 ) Other income     13       894   Pension and other post-retirement expenses     ( 4,732 )     ( 475 ) Interest expense     ( 122 )     ( 134 ) LOSS FROM CONTINUING OPERATIONS     ( 3,204 )     ( 2,267 ) Loss from discontinued operations, net of income taxes of $ 0     ( 216 )     ( 337 ) NET LOSS     ( 3,420 )     ( 2,604 ) Pension, net of income taxes of $ 0     6,050       ( 900 ) TOTAL COMPREHENSIVE INCOME (LOSS)   $ 2,630     $ ( 3,504 )                   LOSS PER COMMON SHARE--BASIC AND DILUTED                 Continuing Operations   $ ( 0.17 )   $ ( 0.12 ) Discontinued Operations   $ ( 0.01 )   $ ( 0.02 ) Net Loss   $ ( 0.18 )   $ ( 0.14 )   See Notes to Consolidated Financial Statements   22 Table of Contents     MAUI LAND   & PINEAPPLE COMPANY,   INC.   & SUBSIDIARIES   CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS ’ EQUITY   For the Years Ended December 31, 2021 and 2020   (in thousands)                                       Accumulated                               Additional             Other               Common Stock     Paid in     Accumulated     Comprehensive               Shares     Amount     Capital     Deficit     Loss     Total                                                     Balance, January 1, 2020     19,238     $ 80,606     $ 9,184     $ ( 46,300 )   $ ( 20,798 )   $ 22,692                                                     Share-based compensation expense                   676                   676   Issuance of shares for incentive plan     68       865                         865   Vested restricted stock issued     60       676       ( 676 )                 -   Shares canceled to pay tax liability     ( 54 )     ( 662 )                       ( 662 ) Other comprehensive loss-pension                               ( 900 )     ( 900 ) Net loss                         ( 2,604 )           ( 2,604 ) Balance, December 31, 2020     19,312     $ 81,485     $ 9,184     $ ( 48,904 )   $ ( 21,698 )   $ 20,067                                                                                                       Share-based compensation expense                   705                   705   Issuance of shares for incentive plan     60       748                         748   Vested restricted stock issued     59       705       ( 705 )                 -   Shares canceled to pay tax liability     ( 48 )     ( 560 )                       ( 560 ) Other comprehensive income-pension                               6,050       6,050   Net loss                         ( 3,420 )           ( 3,420 ) Balance, December 31, 2021     19,383     $ 82,378     $ 9,184     $ ( 52,324 )   $ ( 15,648 )   $ 23,590     See Notes to Consolidated Financial Statements   23 Table of Contents     MAUI LAND   & PINEAPPLE COMPANY,   INC.   & SUBSIDIARIES   CONSOLIDATED STATEMENTS OF CASH FLOWS       Years Ended December 31,       2021     2020       (in thousands)   CASH FLOWS FROM OPERATING ACTIVITIES                 Cash receipts from customers and other receipts   $ 13,395     $ 12,684   Cash paid to vendors     ( 10,410 )     ( 8,773 ) Cash paid for payroll and taxes     ( 1,589 )     ( 1,690 ) Cash paid for interest     ( 9 )     ( 21 ) NET CASH PROVIDED BY OPERATING ACTIVITIES     1,387       2,200                     CASH FLOWS FROM INVESTING ACTIVITIES                 Purchases of property     ( 29 )     ( 81 ) Proceeds from sale of property and equipment     4,203       -   Payments for other assets     ( 74 )     ( 436 ) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES     4,100       ( 517 )                   CASH FLOWS FROM FINANCING ACTIVITIES                 Proceeds from long-term debt     600       1,397   Payments of long-term debt     ( 800 )     ( 2,232 ) Debt and common stock issuance costs and other     ( 560 )     ( 662 ) NET CASH USED IN FINANCING ACTIVITIES     ( 760 )     ( 1,497 )                   NET INCREASE IN CASH     4,727       186   CASH AT BEGINNING OF YEAR     869       683   CASH AT END OF YEAR   $ 5,596     $ 869                     RECONCILIATION OF NET LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES:                 Net loss   $ ( 3,420 )   $ ( 2,604 ) Adjustments to reconcile net loss to net cash provided by operating activities:                 Depreciation and amortization     1,301       1,402   Bad debt provision     68       199   Share-based compensation     705       676   Impairment charges     40       196   Loss on disposal of property     29       -   Cost of real estate sales     324       -   Changes in operating assets and liabilities:                 Accounts receivable     191       ( 388 ) Retirement liabilities     3,038       324   Accounts payable     ( 319 )     ( 457 ) Other operating assets and liabilities     ( 570 )     2,852   NET CASH PROVIDED BY OPERATING ACTIVITIES   $ 1,387     $ 2,200         SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:   • Common stock issued to certain members of the Company’s management totaled $ 748,000 and $ 865,000 in 2021 and 2020, respectively.     See Notes to Consolidated Financial Statements.   24 Table of Contents   MAUI LAND   & PINEAPPLE COMPANY,   INC.   & SUBSIDIARIES   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS   For the Years Ended December 31, 2021 and 2020       1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES   DESCRIPTION OF BUSINESS   Maui Land & Pineapple Company, Inc. is a Hawaii corporation consisting of a landholding and operating parent company, its principal subsidiary, Kapalua Land Company, Ltd., and certain other subsidiaries (collectively, the “Company”). The Company owns approximately 23,000 acres of land on the island of Maui, Hawaii and develops, sells, and manages residential, resort, commercial, agricultural, and industrial real estate through the following business segments:   • Real Estate operations consist of land planning and entitlement, development, and sales activities. This segment also included the operations of Kapalua Realty Company, Ltd., a general brokerage real estate company located in the Kapalua Resort through August 2020.   • Leasing operations include commercial, agricultural, and industrial land and property leases, licensing of our registered trademarks and trade names, and management of potable and non-potable water delivery systems in West and Upcountry Maui, including stewardship and conservation efforts.   • Resort Amenities include the management of operations of the Kapalua Club, a private, non-equity club membership program providing special programs, access, and other privileges at certain amenities at the Kapalua Resort.   BASIS OF ACCOUNTING AND CONSOLIDATION   The accompanying consolidated financial statements of the Company are presented in conformity with generally accepted accounting principles in the United States (“GAAP”) as codified by the Financial Accounting Standards Board (“FASB”). The consolidated financial statements include the accounts of Maui Land & Pineapple Company, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.   COMPREHENSIVE INCOME (LOSS)   Comprehensive income (loss) includes all changes in stockholders’ equity, except those resulting from capital stock transactions. Comprehensive income (loss) include adjustments to the Company’s defined benefit pension plan obligations.   ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS   Receivables are recorded net of an allowance for doubtful accounts. The Company estimates future write-offs based on delinquencies, credit ratings, aging trends, and historical experience. The Company believes the allowance for doubtful accounts is adequate to cover anticipated losses; however, significant deterioration in any of the aforementioned factors or in general economic conditions could change these expectations, and accordingly, the Company’s consolidated financial condition and/or its future operating results could be materially impacted. Credit is extended after evaluating creditworthiness and no collateral is generally required from customers.   ASSETS HELD FOR SALE   Assets are classified as held for sale when management approves and commits to a plan to sell the property; the property is available for immediate sale in its present condition, subject only to terms that are usual and customary; an active program to locate a buyer and other actions required to complete the plan to sell have been initiated; the sale of the property is probable and is expected to be completed within one year; the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and actions necessary to complete the plan of sale indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. Assets held for sale are stated at the lower of net book value or estimated fair value less cost to sell. Impairment losses of $ 40,000 and $ 196,000 were recorded in 2021 and 2020, respectively.   25 Table of Contents   DEFERRED DEVELOPMENT COSTS   Deferred development costs consist primarily of design, entitlement and permitting fees and real estate development costs related to various planned projects. Deferred development costs are written off if management decides that it is no longer probable that the Company will proceed with the related development project. There were no impairments of deferred development costs in 2021 or 2020.   PROPERTY & EQUIPMENT AND DEPRECIATION   Property is stated at cost. Major replacements, renewals and betterments are capitalized while maintenance and repairs that do not improve or extend the life of an asset are charged to expense as incurred. When property is retired or otherwise disposed of, the cost of the property and the related accumulated depreciation are written off and the resulting gains or losses are included in income. Depreciation is provided over the estimated useful lives of the respective assets using the straight-line method generally over three to 40  years.   LONG-LIVED ASSETS   Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When such events or changes occur, an estimate of the future cash flows expected to result from the use of the assets and their eventual disposition is made. If the sum of such expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized in an amount by which the assets’ net book values exceed their fair value. These asset impairment loss analyses require management to make assumptions and apply considerable judgments regarding, among others, estimates of the timing and amount of future cash flows, expected useful lives of the assets, uncertainty about future events, including changes in economic conditions, changes in operating performance, changes in the use of the assets, and ongoing cost of maintenance and improvements of the assets, and thus, the accounting estimates may change from period to period. If management uses different assumptions or if different conditions occur in future periods, the Company’s consolidated financial condition or its future operating results could be materially impacted.   ACCRUED RETIREMENT BENEFITS   The Company’s policy is to fund retirement benefit costs at a level at least equal to the minimum funding requirements under federal law, but not more than the maximum amount deductible for federal income tax purposes.   The under-funded status of the Company’s defined benefit pension plan is recorded as a liability in the consolidated balance sheet and changes in the funded status of the plan is recorded in the year in which the changes occur, through comprehensive income. A pension asset or liability is recognized for the difference between the fair value of plan assets and the projected benefit obligation as of year-end.   Deferred compensation plans for certain former management employees provide for specified payments after retirement. A liability has been recognized based on the present value of estimated payments to be made.   REVENUE RECOGNITION   The Company recognizes revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This requires the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. Operating results pertaining to the Company’s business segments are summarized in Note 10 to the consolidated financial statements.   A customer is distinguished from a noncustomer by the nature of the goods or services that are transferred. Customers are provided with goods or services that are generated by a company’s ordinary output activities, whereas noncustomers are provided with nonfinancial assets that are outside of a company’s ordinary output activities. This distinction may not significantly change the pattern of income recognition but determines whether that income is classified as revenue (contracts with customers) or other gains/losses (contracts with noncustomers) in the Company’s consolidated financial statements. The Company’s revenue streams for the period were generated as ordinary output activities to customers as defined by the guidance and were properly classified as revenues.   The Company uses the five -step model to recognize revenue from customer contracts. The five -step model requires the Company (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.   26 Table of Contents   For each contract that involves variable consideration, the transaction price of the contract is considered the most likely outcome in estimating possible consideration amounts. The information used to determine the transaction price is similar to the information used in establishing prices of goods or services.   The Company is also required to determine if it controls the goods or services prior to the transfer to the customer in order to determine if it should account for the arrangement as a principal or agent. Principal arrangements, where the Company controls the goods or services provided, will result in the recognition of the gross amount of consideration expected in the exchange. Agent arrangements, where the Company simply arranges but does not control the goods or services being transferred to the customer, will result in the recognition of the net amount the Company is entitled to retain in the exchange.   Revenues from the Company’s real estate segment consist of sales of real estate and commission income from providing brokerage services. Revenues from sales of real estate are recognized in the period in which sufficient cash has been received, collection of the balance is reasonably assured, performance obligations have been performed and risks of ownership have passed to the buyer. Commission income is recognized upon settlement of a real estate transaction.   Sales of real estate assets that are considered central to the Company’s ongoing major operations are classified as real estate sales revenue, along with any associated cost of sales, in the Company’s consolidated statements of operations and comprehensive income (loss). Sales of real estate assets that are considered peripheral or incidental transactions to the Company’s ongoing major or central operations are reflected as net gains or losses in the Company’s consolidated statements of operations and comprehensive income (loss).   Leasing revenues are recognized on a straight-line basis over the terms of the leases. Lease income may include certain percentage rents determined in accordance with the terms of the leases. Lease income arising from rents that are contingent upon the sales of the tenant exceeding a defined threshold are recognized only after the defined sales thresholds are achieved. Reimbursements received for real estate taxes, general excise taxes, insurance and common area maintenance expenses are recognized as revenue as provided in the underlying lease terms.   Revenue from resort amenities consist of annual dues received from the Kapalua Club membership program. Member services include access, special programs, and other privileges at certain of the amenities at the Kapalua Resort. Annual membership dues are recognized on a straight-line basis over one year. Performance obligations for services are satisfied by relying on information received from the Company’s employees and vendors who have rendered services in accordance with the terms and conditions of the membership program.   Other revenues included in discontinued operations are recognized when delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectability is reasonably assured. Revenue from discontinued operations include services provided by the Kapalua Water Company, Ltd. and Kapalua Waste Treatment Company, Ltd. previously reflected in a Utilities segment in prior periods.   The Company estimates credit losses on accounts receivable from customers by considering relevant information (past, current, and future) in assessing the collectability of cash flows. The expected credit losses of the Company’s accounts receivable are summarized in Note 11 to the consolidated financial statements.   Economic factors affecting the nature, amount, timing, and uncertainty of the Company’s revenue and cash flows are identified as Risks and Uncertainties in this Note 1.   OPERATING COSTS AND EXPENSES   Real estate, leasing, resort amenities, and general and administrative costs and expenses are reflected exclusive of depreciation and pension and other post-retirement expenses.   INCOME TAXES   The Company accounts for uncertain tax positions using a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return (Note  8 ).   The Company’s provision for income taxes is calculated using the liability method. Deferred income taxes are provided for all temporary differences between the financial statement and income tax bases of assets and liabilities using tax rates enacted by law or regulation. A valuation allowance is established for deferred income tax assets if management believes that it is more likely than not that some portion or all of the asset will not be realized through future taxable income.   27 Table of Contents   The Company recognizes accrued interest related to unrecognized tax benefits as interest expense and penalties in general and administrative expenses in its consolidated statements of operations and comprehensive loss and such amounts are included in income taxes payable on the Company’s consolidated balance sheets.    SHARE-BASED COMPENSATION PLANS   The Company accounts for share-based compensation, including grants of shares of common stock, as compensation expense over the service period (generally the vesting period) in the consolidated financial statements based on their fair values. The impact of forfeitures that may occur prior to vesting is estimated and considered in the amount recognized.   USE OF ESTIMATES   The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Future actual amounts could differ from these estimates.   CONCENTRATION OF CREDIT RISK   Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. The Company had deposits in excess of the FDIC limit at December 31, 2021 and 2020. No losses have been accrued to date.   RISKS AND UNCERTAINTIES   Factors that could adversely impact the Company’s future operations or financial results include, but are not limited to the following: periods of economic weakness and uncertainty in Hawaii and the mainland United States; high unemployment rates and low consumer confidence; uncertainties and changes in U.S. social, political, regulatory and economic conditions or laws and policies and concerns surrounding ongoing developments in the European Union, Middle East, and Asia; the general availability of mortgage financing, including the effect of more stringent lending standards for mortgages and perceived or actual changes in interest rates; risks related to the Company’s investments in real property, the value and salability of which could be impacted by the economic factors discussed above or other factors; the popularity of Maui in particular and Hawaii in general as a vacation destination or second -home market; increased energy costs, including fuel costs, which affect tourism on Maui and Hawaii generally; untimely completion of land development projects within forecasted time and budget expectations; inability to obtain land use entitlements at a reasonable cost or in a timely manner; unfavorable legislative decisions by state and local governmental agencies; impact of governmental fines and assessments; the cyclical market demand for luxury real estate on Maui and in Hawaii generally; increased competition from other luxury real estate developers on Maui and in Hawaii generally; failure of future joint venture partners to perform in accordance with their contractual agreements; environmental regulations; acts of God, such as tsunamis, hurricanes, earthquakes and other natural disasters; the spread of contagious diseases, such as the Coronavirus; the Company’s location apart from the mainland United States, which results in the Company’s financial performance being more sensitive to the aforementioned economic risks; failure to comply with restrictive financial covenants in the Company’s credit arrangements; and an inability to achieve the Company’s short and long-term goals and cash flow requirements.   LEGAL CONTINGENCIES   The Company is party to claims and lawsuits as well as threatened or potential actions or claims concerning matters arising from the conduct of its business activities. The outcome of claims or litigation and the timing of ultimate resolution are inherently difficult to predict and significant judgment may be required in the determination of both the probability of loss and whether the amount of the loss is reasonably estimable. The Company’s estimates are subjective and are based on the status of legal and regulatory proceedings, the merit of the Company’s defenses and consultation with external legal counsel. An accrual for a potential litigation loss is established when information related to the loss contingency indicates both that a loss is probable and that the amount of loss can be reasonably estimated. Refer to Note 12 to the consolidated financial statements for further information regarding the Company’s legal proceedings.   NEW ACCOUNTING STANDARDS ADOPTED   In December 2019, the FASB issued ASU 2019 - 12 to simplify the accounting in ASC Topic 740, Income Taxes . This guidance removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. The guidance also clarifies and simplifies other areas of ASC Topic 740. This ASU became effective in the first quarter of 2021. 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 ASU did not have a significant impact on the Company’s consolidated financial statements and related disclosures.   28 Table of Contents   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 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. In December 2021, the Company’s revolving line of credit facility was amended to discontinue the use of LIBOR as a referenced rate in determining interest due on outstanding borrowings. The Company has determined there is no impact on the Company’s consolidated financial statements or related disclosures.   ACCOUNTING STANDARDS NOT YET ADOPTED   In June 2016, the FASB issued ASU 2016 - 13 to update the methodology used to measure current expected credit losses (“CECL”). This ASU apples to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet exposures, such as loan commitments. This ASU requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The guidance must be adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings/(deficit) in the period of adoption. ASU 2019 - 10 was subsequently issued delaying the effective date to the first quarter of 2023. The Company is in the process of assessing the impact of the ASU on its consolidated financial statements and related disclosures.   In November 2021, the FASB issued ASU 2021 - 10 as an update of ASC Topic 832 to increase the transparency of government assistance received by a business entity, including disclosure of the types of transactions, the accounting for those transactions, and the effect of those transactions on its financial statements. The ASU is effective for annual periods beginning after December 15, 2021. The Company is currently evaluating the impact of the ASU on its consolidated financial statements and related disclosures.   LOSS PER COMMON SHARE   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. Basic and diluted weighted-average common shares outstanding were 19,353,647 and 19,282,157 at December 31, 2021 and 2020, respectively.       2. ASSETS HELD FOR SALE   At December 31, 2021 and 2020 assets held for sale consisted of the following:       2021     2020       (in thousands)   Kapalua Resort, 46 - acre Kapalua Central Resort project   $ 2,988     $ 2,978   Upcountry Maui, 646 -acre parcel of agricultural land     156       156   Kapalua Resort, Kapalua Water Company, Ltd. and Kapalua Waste Treatment Company, Ltd. assets     -       4,306       $ 3,144     $ 7,440     None of the above assets held for sale have been pledged as collateral under the Company’s credit facility.   In December 2021, the Company entered into an agreement to sell the Kapalua Central Resort project for $ 40.0 million. The closing of the transaction is subject to the satisfaction of certain customary closing conditions, including a due diligence period of 120 days and a closing date no later than March 31, 2022.   In February 2022, the Company entered into an agreement to sell the 646 -acre parcel in Upcountry Maui for $ 9.7 million. Terms of the agreement include a 30 -day due diligence period, a closing date 30 days after the last day of the due diligence period, and other customary closing conditions. A $ 2.0 million refundable deposit was received into escrow.   29 Table of Contents   The Company received net proceeds of approximately $ 4.2 million from the sale of the Public Utilities Commission (PUC)-regulated assets of Kapalua Water Company, Ltd. and Kapalua Waste Treatment Company, Ltd. located in the Kapalua Resort in May 2021. The sale was approved by the State of Hawaii PUC subject to certain closing conditions of its Decision and Order. The results of discontinued operations related to the sale of the Kapalua Water Company, Ltd. and Kapalua Waste Treatment Company, Ltd. assets are reflected in Note 9.       3. PROPERTY & EQUIPMENT   Land   Most of the Company’s 22,800 acres of land were acquired between 1911 and 1932 and is carried in its balance sheets at cost. Approximately 20,700 acres of land are located in West Maui and comprise a largely contiguous parcel that extends from the sea to an elevation of approximately 5,700 feet. This parcel includes approximately 900 acres within the Kapalua Resort, a master-planned, destination resort and residential community located in West Maui encompassing approximately 3,000 acres. The Company’s remaining 2,100 acres of land are located in Upcountry Maui in an area commonly known as Hali’imaile and are mainly comprised of leased agricultural fields, including related processing and maintenance facilities.   Land Improvements   Land improvements are comprised primarily of roads, utilities, and landscaping infrastructure improvements at the Kapalua Resort. Also included is the Company’s potable and non-potable water systems in West Maui. The majority of the Company’s land improvements were constructed and placed in service in the mid-to-late 1970’s or conveyed in 2017. Depreciation expense would be considerably higher if these assets were stated at current replacement cost.   Buildings   Buildings are comprised of restaurant, retail and light industrial spaces located at the Kapalua Resort and Hali’imaile which are used in the Company’s leasing operations. The majority of the buildings were constructed and placed in service in the mid-to-late 1970’s. Depreciation expense would be considerably higher if these assets were stated at current replacement cost.   Machinery and Equipment   Machinery and equipment are mainly comprised of zipline course equipment installed in 2008 at the Kapalua Resort and used in the Company’s leasing operations.       4. LONG-TERM DEBT   Long-term debt is comprised of amounts outstanding under the Company’s $ 15.0 million revolving line of credit facility with First Hawaiian Bank (“Credit Facility”). On December 23, 2021, the Company executed a Fourth Loan Modification Agreement and Second Amended and Restated Credit Agreement (“Agreements”) extending the maturity date of the Credit Facility to December 31, 2025. The Agreements provide revolving or term loan borrowing options. Interest on revolving borrowing is calculated based on the Bank’s prime rate minus 1.125 percentage points. Interest on term loan borrowing is fixed at the Bank’s commercial loan rates with interest rate swap options available. The Company has pledged approximately 30,000 square feet of commercial leased space in the Kapalua Resort as security for the Credit Facility. Net proceeds from the sale of any collateral are required to be repaid toward outstanding borrowings and will permanently reduce the Credit Facility’s revolving commitment amount. There are no commitment fees on the unused portion of the Credit Facility.   The terms of the Credit Facility include various representations, warranties, affirmative, negative and financial covenants and events of default customary for financings of this type. Financial covenants include a minimum liquidity (as defined) of $ 2.0 million, a maximum of $ 45.0 million in total liabilities, and a limitation on new indebtedness. The Credit Facility also contains covenants restricting the payment of cash dividends without the lender’s prior approval.   The Company is in compliance with the covenants under the Credit Facility as of December 31, 2021.   30 Table of Contents       5. LEASING ARRANGEMENTS   The Company leases land primarily to agriculture operators and space in commercial buildings, primarily to restaurant and retail tenants through 2048. These operating leases generally provide for minimum rents, licensing fees, percentage rentals based on tenant revenues, and reimbursement of common area maintenance and other expenses. Certain leases allow the lessee an option to extend or terminate the agreement. There are no leases allowing a lessee an option to purchase the underlying asset. Total leasing income subject to ASC 842 for the years ended December 31, 2021 and 2020 were as follows:       2021     2020       (in thousands)                     Minimum rentals   $ 3,029     $ 2,719   Percentage rentals     1,503       427   Licensing fees     732       456   Other     1,659       1,236       $ 6,923     $ 4,838     Leased property, net of accumulated depreciation, was $ 11.2 and $ 12.7 million at December 31, 2021 and 2020, respectively.   Future minimum rental income for the next five years and thereafter are as follows (in thousands):   Years ending December 31,         2022   $ 2,346   2023   $ 1,436   2024   $ 911   2025   $ 886   2026   $ 832   Thereafter   $ 8,535         6. ACCRUED RETIREMENT BENEFITS   Accrued retirement benefits at December 31, 2021 and 2020 consisted of the following:       2021     2020       (in thousands)                     Defined benefit pension plan   $ 5,932     $ 8,790   Non-qualified retirement plan     2,147       2,301   Total     8,079       11,091   Less current portion     ( 142 )     ( 165 ) Non-current portion of accrued retirement benefits   $ 7,937     $ 10,926     The Company had two defined benefit pension plans which covered substantially all of its former bargaining and non-bargaining full-time, part-time and intermittent employees. In 2011, pension benefits under both plans were frozen. The Company merged the two defined benefit pension plans to streamline the administration of the frozen plan in 2018. The Company also has an unfunded non-qualified retirement plan covering nine of its former employees. The non-qualified retirement plan was frozen in 2009 and future vesting of additional benefits was discontinued.   In November 2021, the Company signed a purchase agreement with an insurer to annuitize the scheduled pension payments of 384 participants currently receiving benefits. Approximately $ 10.4 million was paid to the insurer from plan assets for the group annuity contract.   31 Table of Contents   The measurement date for the Company’s benefit plan disclosures is December  31  of each year. The changes in benefit obligations and plan assets for 2021 and 2020, and the funded status of the plan and assumptions used to determine benefit information at December 31, 2021 and 2020 were as follows:       2021     2020       (in thousands)   Change in benefit obligations:                 Benefit obligations at beginning of year   $ 54,655     $ 54,128   Interest cost     1,237       1,633   Actuarial (gain) loss     ( 1,160 )     3,588   Benefits paid     ( 14,550 )     ( 4,694 )                   Benefit obligations at end of year     40,182       54,655                     Change in plan assets:                 Fair value of plan assets at beginning of year     43,587       44,284   Actual return on plan assets     1,384       3,869   Employer contributions     1,682       128   Benefits paid     ( 14,550 )     ( 4,694 )                   Fair value of plan assets at end of year     32,103       43,587                     Funded status   $ ( 8,079 )   $ ( 11,068 ) Accumulated benefit obligations   $ 40,182     $ 54,655       Weighted average assumptions to determine benefit obligations:   Discount rate     2.69 - 2.74 %       2.28 - 2.35 %   Expected long-term return on plan assets       4.00 %           4.50 %     Rate of compensation increase       n/a           n/a         Accumulated other comprehensive loss of $ 15.6 and $ 21.7 million at December 31, 2021 and 2020, respectively, represent the net actuarial loss which has not yet been recognized as a component of pension expense.   Components of net periodic benefit cost and other amounts recognized in comprehensive income were as follows:       2021     2020       (in thousands)   Pension and other benefits:                 Interest cost   $ 1,237     $ 1,633   Expected return on plan assets     ( 1,680 )     ( 2,020 ) Recognized net actuarial loss     933       839   Settlement expense     4,252       -   Pension expense   $ 4,742     $ 452                     Other changes in plan assets and benefit obligations recognized in comprehensive income:                 Net loss (gain)   $ ( 865 )   $ 1,739   Amortization of recognized loss     ( 5,185 )     ( 839 ) Total recognized (gain) loss in comprehensive income   $ ( 6,050 )   $ 900     Weighted average assumptions used to determine net periodic benefit cost:   2021     2020                             Discount rate     2.28 - 2.35 %       3.10 - 3.14 %   Expected long-term return on plan assets       4.50 %           4.75 %     Rate of compensation increase       n/a           n/a       The expected long-term rate of return on plan assets was based on a building-block approach. Historical markets are studied and long-term historical relationships between equities and fixed income are presumed consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors, such as inflation and interest rates, are evaluated before long-term capital markets are determined. Diversification and rebalancing of plan assets are properly considered as part of establishing long-term portfolio returns.   32 Table of Contents   At December 31, 2021 and 2020, the plan held shares of various Aon Collective Investment Trust (“ACIT”) funds. The fair value of the Company’s pension plan assets by category were as follows:       2021 Fair Value Measurements (in thousands)                       Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Measured at NAV as a practical expedient     Total   ACIT equity funds   $ -     $ 6,385       1,425     $ 7,810   ACIT fixed income funds     -       21,114       1,746       22,860   Cash management funds     -       1,433       -       1,433                                         $ -     $ 28,932       3,171     $ 32,103         2020 Fair Value Measurements (in thousands)                       Quoted Prices in Active Markets for Identical Assets (Level 1)     Significant Other Observable Inputs (Level 2)     Measured at NAV as a practical expedient     Total   ACIT equity funds   $ -     $ 9,406       1,152     $ 10,558   ACIT fixed income funds     -       29,958       2,108       32,066   Cash management funds     -       963       -       963                                         $ -     $ 40,327       3,260     $ 43,587       Net asset values (“NAV”) of ACIT and AGHT funds included in Level 1 and Level 2 are readily determinable, measured daily and based on the fair value of each fund’s underlying investments. Level 1 assets are priced using quotes for trades occurring in active markets for the identical asset. Level 2 assets are priced using observable inputs for the asset (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).   Other investments determine NAV on a monthly or quarterly basis and/or have redemption restrictions. NAVs are based on the fair value of each fund’s underlying investments. For these investments, NAV is used as a practical expedient to estimate fair value and are not categorized in the fair value hierarchy. Redemptions may be requested at the fund’s NAV under the notification requirements of each fund.   An administrative committee consisting of certain senior management employees administers the Company’s defined benefit pension plan. The pension plan assets are allocated among approved asset types based on the plan’s current funded status and other characteristics set by the administrative committee, subject to liquidity requirements of the plan.   Estimated future benefit payments are as follows (in thousands):   Years ending December 31,   2022     $ 3,087   2023     $ 2,994   2024     $ 2,905   2025     $ 2,822   2026     $ 2,732   2027 - 2031     $ 12,234     The Company made a minimum required contribution of $ 0.6 million to its pension plan in January 2021. The CARES Act included limited funding relief provisions for single employer defined benefit plans allowing the deferral of required contributions that would have been otherwise due in 2020. In August 2021, the Company made a voluntary contribution of $ 1.0 million to its pension plan.   33 Table of Contents       7. SHARE-BASED COMPENSATION   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’s 2017 Equity and Incentive Award Plan (Equity Plan). 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 vest quarterly and 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.   Share-based compensation is determined and awarded annually to certain of the Company’s officers and management based on their achievement of certain 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 vesting quarterly over a period of three years.   Share-based compensation totaled $ 1.4 million and $ 1.6 million for the years ended December 31, 2021 and 2020, respectively. Included in these amounts were approximately $ 0.7 million of restricted shares of common stock which vested in both 2021 and 2020.       8. INCOME TAXES   GAAP prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.   The Company’s provision for income taxes is calculated using the liability method. Deferred income taxes are provided for all temporary differences between the financial statement and income tax bases of assets and liabilities using tax rates enacted by law or regulation.   Reconciliations between the total income tax benefit and the amount computed using the statutory federal rate of 21 % for the years ended December 31, 2021 and 2020 were as follows:       2021     2020       (in thousands)                     Federal income tax benefit at statutory rate   $ ( 718 )   $ ( 547 ) Adjusted for:                 Permanent differences and other     102       72   Valuation allowance     616       475   Income tax expense   $ -     $ -     Deferred tax assets were comprised of the following temporary differences as of December 31, 2021 and 2020:       2021     2020       (in thousands)                     Net operating loss and tax credit carryforwards   $ 25,132     $ 24,956   Joint venture and other investments     ( 27 )     ( 27 ) Accrued retirement benefits     2,545       3,329   Property net book value     2,862       3,357   Deferred revenue     1,083       715   Reserves and other     ( 5 )     29   Total deferred tax assets     31,590       32,359   Valuation allowance     ( 31,590 )     ( 32,359 ) Net deferred tax assets   $ -     $ -     Valuation allowances have been established to reduce future tax benefits not expected to be realized. The change in the deferred tax asset related to accrued retirement benefits and the valuation allowance includes the pension adjustment included in accumulated other comprehensive loss, which is not included in the current provision. Net Operating Loss (NOL) carryforwards created in tax years beginning after December 31, 2017 are limited by the TCJA. The Company had approximately $ 71.7  million in federal NOL carry forwards at December 31, 2021, that expire from 2028 through 2034. The Company had approximately $ 85.7 million in state NOL carry forwards at December 31, 2021, that expire from 2028 through 2034. The Company had approximately $ 5.9 million in federal and state NOL carry forwards at December 31, 2021 that do not expire.   34 Table of Contents       9. DISCONTINUED OPERATIONS   In December 2019, the Company entered into an Asset Purchase Agreement to sell the Public Utilities Commission (“PUC”) regulated assets of Kapalua Water Company, Ltd. and Kapalua Waste Treatment Company, Ltd. located in the Kapalua Resort, subject to certain closing conditions, including PUC approval.   In March 2021, the sale was approved by the PUC subject to certain closing conditions of its Decision and Order. The Company received net proceeds of approximately $ 4.2 million upon closing of the sale in May 2021.   The results related to the operation of these assets have been reported as discontinued operations in 2021 and 2020 as follows:       2021     2020       (in thousands)                     Operating revenues   $ 819     $ 2,646   Operating costs and expenses     ( 995 )     ( 2,787 ) Impairment loss     ( 40 )     ( 196 ) Loss from discontinued operations   $ ( 216 )   $ ( 337 )       10. SEGMENT INFORMATION   The Company’s reportable operating segments are comprised of the discrete business units whose operating results are regularly reviewed by the Company’s Chief Executive Officer – its chief decision maker – in assessing performance and determining the allocation of resources. Reportable operating segments in 2021 are as follows:     • Real Estate includes the development and sale of real estate inventory. The segment also includes operations of Kapalua Realty Company, Ltd., a general brokerage real estate company located within the Kapalua Resort through August 2020.     • 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. The operating segment also includes the management of ditch, reservoir and well systems that provide potable and non-potable water to West and Upcountry Maui areas.     • Resort Amenities include a membership program that provides certain benefits and privileges within the Kapalua Resort for its members.   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.   Condensed consolidated financial information for each of the Company’s reportable segments for the years ended December 31, 2021 and 2020 (in thousands) were as follows:       Real             Resort                       Estate     Leasing     Amenities     Other     Consolidated   2021                                         Operating revenues (1)   $ 3,400     $ 8,103     $ 940     $ -     $ 12,443   Operating costs and expenses     ( 750 )     ( 3,495 )     ( 1,355 )     -       ( 5,600 ) Depreciation expense     -       ( 1,177 )     -       ( 11 )     ( 1,188 ) General and administrative expenses     ( 1,049 )     ( 1,121 )     ( 487 )     ( 1,361 )     ( 4,018 ) Operating income (loss)     1,601       2,310       ( 902 )     ( 1,372 )     1,637   Pension and other post-retirement expenses                             ( 4,732 ) Interest expense                             ( 122 ) Other income                             13   Loss from continuing operations                           $ ( 3,204 )                                           Capital expenditures (3)   $ 74     $ 29     $ -     $ -     $ 103   Assets (4)   $ 15,525     $ 14,684     $ 800     $ 6,910     $ 37,919     35 Table of Contents       Real             Resort                       Estate     Leasing     Amenities     Other (2)     Consolidated   2020                                         Operating revenues (1)   $ 772     $ 5,948     $ 820     $ -     $ 7,540   Operating costs and expenses     ( 600 )     ( 2,933 )     ( 1,193 )     -       ( 4,726 ) Depreciation expense     -       ( 1,278 )     -       ( 11 )     ( 1,289 ) General and administrative expenses     ( 1,075 )     ( 1,131 )     ( 492 )     ( 1,379 )     ( 4,077 ) Operating income (loss)     ( 903 )     606       ( 865 )     ( 1,390 )     ( 2,552 ) Pension and other post-retirement expenses                             ( 475 ) Interest expense                             ( 134 ) Other income                             894   Loss from continuing operations                           $ ( 2,267 )                                           Capital expenditures (3)   $ 436     $ 81     $ -     $ -     $ 517   Assets (4)   $ 14,851     $ 16,109     $ 830     $ 6,680     $ 38,470     ( 1 ) Amounts are principally revenues from external customers and exclude equity in earnings of affiliates. ( 2 ) Includes assets related to discontinued operations of $ 4.7  million at December 31, 2020. ( 3 ) Includes expenditures for property and deferred costs. ( 4 ) Segment assets are located in the United States.       11. RESERVES   Allowance for doubtful accounts for 2021 and 2020 were as follows:   Description   Balance at Beginning of Year     Increase (Decrease)     Balance at End of Year       (in thousands)   Allowance for Doubtful Accounts                         2021   $ 220     $ ( 66 )   $ 154   2020   $ 35     $ 185     $ 220         12. COMMITMENTS AND CONTINGENCIES   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 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 as of December 31, 2020. Additionally, the installation of a surface aerator, sludge removal system, and natural pond cover using water plants was completed in 2021. Continued testing of wastewater effluent consistently returns results within the allowable ranges. No hearing date has been set as discussions with the DOH are still ongoing to address any other matters regarding the Order. At December 31, 2021, approximately $ 23,000 was accrued related to the administrative penalty. The Company is presently unable to estimate the remaining amount, or range of amounts, of any probable liability, if any, related to the Order and no additional provision has been made in the accompanying consolidated financial statements.   36 Table of Contents   Pursuant to a 1999 settlement agreement with the County of Maui, the Company and several chemical manufacturers have agreed to pay for 90% of capital costs to install filtration systems in any future water wells if the presence of a nematocide, commonly known as DBCP, exceeds specified levels, and for the ongoing maintenance and operating cost for filtration systems on existing and future wells. In 2021, the Company paid approximately $ 59,000 for the reimbursement of filtration and maintenance costs for the three year period ending December 31, 2020. The Company is presently not aware of any plans by the County of Maui to install other filtration systems or to drill any water wells in areas affected by agricultural chemicals. Accordingly, no reserve for costs relating to any future wells has been recorded since the Company is unable to estimate the amount, or range of amounts, of any probable liability, if any.   In addition, from time to time, the Company is the subject of various other claims, complaints and other legal actions which arise in the normal course of the Company’s business activities. The Company believes the resolution of these other matters, in the aggregate, is not likely to have a material adverse effect on the Company’s consolidated financial position or operations.     13. FAIR VALUE MEASUREMENTS   GAAP establishes a framework for measuring fair value and requires certain disclosures about fair value measurements to enable the reader of the consolidated financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. GAAP requires that financial assets and liabilities be classified and disclosed in one of the following three categories:   Level 1: Quoted market prices in active markets for identical assets or liabilities.   Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.   Level 3: Unobservable inputs that are not corroborated by market data.   The Company considers all cash on hand to be unrestricted cash for the purposes of the consolidated balance sheets and consolidated statements of cash flows. The fair value of receivables and payables approximate their carrying value due to the short-term nature of the instruments. The valuation is based on settlements of similar financial instruments all of which are short-term in nature and are generally settled at or near cost. 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 at December 31, 2020 was $ 0.2 million which approximated fair value. The fair value of debt was measured using the Level 2 inputs. See Note 6 for the classification of the fair value of pension assets.       14. CONTRACT ASSETS AND LIABILITIES   Receivables from contracts with customers were $ 0.3 million, $ 0.8 million, and $ 0.7 million at December 31, 2021, 2020, and 2019, respectively.   Deferred license fee revenue   The Company entered into a trademark license agreement with the owner of the Kapalua Plantation and Bay golf courses, effective April 1, 2020. Under the terms and conditions set forth in the agreement, the licensee is granted a perpetual, terminable on default, transferable, non-exclusive license to use the Company’s trademarks and service marks to promote its golf courses and to sell its licensed products. The Company received a single payment royalty of $ 2.0 million in March 2020. Revenue recognized on a straight-line basis over its estimated economic useful life was $ 0.1 million for each of the years ended December 31, 2021 and 2020, respectively.   37 Table of Contents     Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE   None.