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Note 1 - Description of Business and Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2023
Notes to Financial Statements |
Significant Accounting Policies [Text Block] |
1. | DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS Maui Land & Pineapple Company, Inc. is a Delaware corporation and the successor to a business organized in 1909 as a Hawaii corporation. The Company reincorporated from Hawaii to Delaware pursuant to a plan of conversion completed on July 18, 2022. Total authorized capital stock of the Company includes 48,000,000 shares, consisting of 43,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share. Shares of the Company’s common stock are listed on the New York Stock Exchange under the ticker symbol “MLP.” The Company consists of a landholding and operating parent company, has a principal subsidiary, Kapalua Land Company, Ltd., and certain other subsidiaries (collectively, the “Company”). The Company owns approximately 22,300 acres of land and 268,000 square feet of commercial property on the island of Maui, Hawaii, which we put into productive use by planning, managing, developing, and selling, residential, resort, commercial, agricultural, and industrial real estate through the following business segments:
| Land Development & Sales: |  | Our real estate operations consist of land planning and entitlement, development, and sales activities.
| Leasing: |  | Our leasing operations include commercial, agricultural, and industrial land and property leases, licensing of our registered trademarks and trade names, management of potable and non-potable water systems in West and Upcountry Maui, and 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.
1A. | RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
Subsequent to the filing of the Annual Report on Form 10-K of the Company for the fiscal year ended December 31, 2023, originally filed with the Securities and Exchange Commission (“SEC”) on March 28, 2024 (the “Original Report”), the Company identified and corrected an error related to the reporting of approximately $1.6 million in operating revenues in the Land Development and Sales segment due to the value of a 30-acre parcel of land in Haliimaile, Hawaii, that the Company contributed as an equity contribution to the BRE2 LLC joint venture. The Company evaluated guidance from ASC 610-20-15 and 610-20-25 and determined that the recognition of the transfer of nonfinancial assets as a gain would be appropriate in accordance with the application of guidance in Topic 810 on consolidation and Topic 606 on revenue from contracts with customers. On January 3, 2025, the Company's management and the Company's Board of Directors concluded that the previously issued audited consolidated financial statements as of and for the fiscal year ended December 31, 2023, should be restated. This Amendment No. 1 on Form 10-K/A (the “Amended Report”) includes the restated audited financial statements as of and for the year ended December 31, 2023. The table below sets forth the consolidated statements of operations and comprehensive income (loss), including the balances originally reported and the restated balances as of December 31, 2023 (in thousands):
|  | Year Ended December 31, 2023 |
|  | As Previously Reported |  |  | Adjustments |  |  | As Restated |
|  | (in thousands except per share amounts) |
OPERATING REVENUES |  |  |  |  |  |  |  |  |  |  |  |
Land development and sales |  | $ | 1,626 |  |  | $ | (1,626 | ) |  | $ | - |
Leasing |  |  | 8,461 |  |  |  | - |  |  |  | 8,461 |
Resort amenities and other |  |  | 828 |  |  |  | - |  |  |  | 828 |
Total operating revenues |  |  | 10,915 |  |  |  | (1,626 | ) |  |  | 9,289 |
OPERATING COSTS AND EXPENSES |  |  |  |  |  |  |  |  |  |  |  |
Land development and sales |  |  | 595 |  |  |  | - |  |  |  | 595 |
Leasing |  |  | 4,420 |  |  |  | - |  |  |  | 4,420 |
Resort amenities and other |  |  | 1,532 |  |  |  | - |  |  |  | 1,532 |
General and administrative |  |  | 3,998 |  |  |  | - |  |  |  | 3,998 |
Share-based compensation |  |  | 2,846 |  |  |  | - |  |  |  | 2,846 |
Depreciation |  |  | 869 |  |  |  | - |  |  |  | 869 |
Total operating costs and expenses |  |  | 14,260 |  |  |  | - |  |  |  | 14,260 |
OPERATING LOSS |  |  | (3,345 | ) |  |  | (1,626 | ) |  |  | (4,971 | )
Gain from dercognition of nonfinancial asset |  |  | - |  |  |  | 1,626 |  |  |  | 1,626 |
Other income |  |  | 707 |  |  |  | - |  |  |  | 707 |
Pension and other post-retirement expenses |  |  | (436 | ) |  |  | - |  |  |  | (436 | )
Interest expense |  |  | (6 | ) |  |  | - |  |  |  | (6 | )
NET LOSS |  | $ | (3,080 | ) |  |  | - |  |  | $ | (3,080 | )
Other comprehensive income - pension, net |  |  | 1,370 |  |  |  | - |  |  |  | 1,370 |
TOTAL COMPREHENSIVE LOSS |  | $ | (1,710 | ) |  |  | - |  |  | $ | (1,710 | )
NET LOSS PER COMMON SHARE-BASIC AND DILUTED |  | $ | (0.15 | ) |  |  | - |  |  | $ | (0.15 | )
This restatement had no impact on the consolidated statement of balance sheet at December 31, 2023, and on the consolidated statements of changes in stockholders’ equity and on the consolidated statements of cash flows for the year ended December 31, 2023. In addition, the restatement did not have a financial impact on the Company’s net loss, or basic or diluted earnings per share originally reported in the Original Report. In addition to the restated consolidated financial statements, the information contained in Notes 5 and 13 have been restated.
1B. | SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING AND CONSOLIDATION The accompanying consolidated financial statements of the Company are presented in conformity with generally accepted accounting principles in the United States of America (“GAAP”) as codified by the Financial Accounting Standards Board (“FASB”). The consolidated financial statements include the accounts of Maui Land & Pineapple Company, Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand, deposits in banks, and money market funds. RESTRICTED CASH Restricted cash consisted of deposits held in escrow from the prospective buyer of a property held for sale. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES Receivables are recorded net of an allowance for credit losses. The Company estimates future write-offs based on delinquencies, credit ratings, aging trends, and historical experience. The Company believes the allowance for doubtful accounts is adequate to cover anticipated losses; however, significant deterioration in any of the aforementioned factors or in general economic conditions could change these expectations, and accordingly, the Company’s consolidated financial condition and/or its future operating results could be materially impacted. Credit is extended after evaluating creditworthiness and no collateral is generally required from customers. INVESTMENT IN BOND SECURITIES Held-to-maturity debt securities are stated at amortized cost. Investments are reviewed for impairment for each reporting period. If any impairment is considered other-than-temporary, an allowance for credit loss would be established and held-to-maturity debt securities will be presented net of the credit loss allowance. Adjustments to expected credit losses are recorded as a component of other income (expense). ASSETS HELD FOR SALE Assets are classified as held for sale when management approves and commits to a plan to sell the property; the property is available for immediate sale in its present condition, subject only to terms that are usual and customary; an active program to locate a buyer and other actions required to complete the plan to sell have been initiated; the sale of the property is probable and is expected to be completed 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. There were no impairments of assets held for sale during the years ended December 31, 2023 or 2022. 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 during the years ended December 31, 2023 or 2022. INVESTMENT IN JOINT VENTURES As the Company does not have controlling interest, the investment in the joint venture is accounted for under the equity method of accounting. The initial capital contribution of assets to the joint venture was recorded at fair value. PROPERTY & EQUIPMENT AND DEPRECIATION Property is stated at cost. Major replacements, renewals and betterments are capitalized while maintenance and repairs that 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 funded status of the Company’s defined benefit pension plan is recorded as an asset or liability in the consolidated balance sheet reflecting the difference between the fair value of plan assets and the projected benefit obligation. Changes in the funded status of the plan are recorded in the year in which the changes occur, through comprehensive income. Deferred compensation plans for certain former management employees provide for specified payments after retirement. A liability has been recognized based on the present value of estimated payments to be made. REVENUE RECOGNITION The Company recognizes revenue to represent the transfer of goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange. This requires the Company to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. Operating results pertaining to the Company’s business segments are summarized in Note 13 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. 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 land development and sales segment consist of sales of real estate. Revenues from sales of real estate are recognized in the period in which sufficient cash has been received, collection of the balance is reasonably assured, performance obligations have been performed and risks of ownership have passed to the buyer. Sales of real estate assets that are considered central to the Company’s ongoing major operations are classified as real estate sales revenue, along with any associated cost of sales, in the Company’s consolidated statements of operations and comprehensive income. Sales of real estate assets that are considered peripheral or incidental transactions to the Company’s ongoing major or central operations are reflected as net gains or losses in the Company’s consolidated statements of operations and comprehensive income. Leasing revenues are recognized on a straight-line basis over the terms of the leases. Lease income may include certain percentage rents determined in accordance with the terms of the leases. Lease income arising from rents that are contingent upon the sales of the tenant exceeding a defined threshold are recognized only after the defined sales thresholds are achieved. Reimbursements received for real estate taxes, general excise taxes, insurance and common area maintenance expenses are recognized as revenue as provided in the underlying lease terms. The Company elected the following practical expedients upon adoption of ASC Topic 842 on January 1, 2019:
| ● | Single component practical expedient – requires the Company to account for lease and non-lease components associated with that lease, if certain criteria are met.
| ● | Short-term leases practical expedient – for operating leases with a term of 12 months or less in which the Company is the lessee, this expedient allows the Company to not record on its balance sheets the related lease liabilities, taxes collected from lessees, lessor costs paid directly by lessee to a third party and right-of-use assets.
Included in leasing revenues are grants issued by the State of Hawai‘i to subsidize the conservation and preservation efforts of the Pu‘u Kukui Watershed Preserve (“PKW”). The PKW is approximately 9,000 acres of conservation zoned lands that is a primary source of water that originates on the top of the West Maui Mountains. We currently receive government assistance via two grants, the Natural Area Partnership Program (“NAPP”) Grant with the State of Hawai‘i Department of Land and Natural Resources and the State of Hawai‘i Department of Health grant entitled Treatment Train: An Ahupua‘a’s Approach to Watershed Best Practices in West Maui, Hawai‘i (“DOH Grant”). The NAPP Grant was renewed on July 1, 2023 for a six-year period. For the period July 1, 2023 to June 30, 2024 provides $510,000 in government funds in support of the conservation efforts by the Company. The DOH Grant for the period from April 1, 2019 to April 30, 2024 will provide $1.1 million in total funds, to date, there remains approximately $75,000 remaining in available grant funds before having to reapply for the next grant period. Actual funds received for both grants were $0.3 million for 2023 and $0.4 million in 2022. 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. 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 14 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. SHARE-BASED COMPENSATION PLANS The Company accounts for share-based compensation, including grants of restricted shares of common stock and options to purchase common shares, as compensation expense over the respective vesting periods in the consolidated financial statements based on their fair values on the grant dates. The impact of forfeitures that may occur prior to vesting is estimated and considered in the expense recognized. INCOME TAXES The Company accounts for uncertain tax positions using a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company’s provision for income taxes is calculated using the liability method. Deferred income taxes are provided for all temporary differences between the financial statement and income tax bases of assets and liabilities using tax rates enacted by law or regulation. A valuation allowance is established for deferred income tax assets if management believes that it is more likely than not that some portion or all of the asset will not be realized through future taxable income. The Company recognizes accrued interest related to unrecognized tax benefits as interest expense and penalties in general and administrative expenses in its consolidated statements of operations and comprehensive income (loss) and such amounts are included in income taxes payable on the Company’s consolidated balance sheets. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) includes all changes in stockholders’ equity, except those resulting from capital stock transactions. Comprehensive income also includes adjustments to the Company’s defined benefit pension plan obligations. INCOME (LOSS) PER COMMON SHARE Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Diluted net income (loss) per common share is computed similar to basic net income (loss) per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares from share-based compensation arrangements had been issued. Potentially dilutive shares from stock option grants to purchase common shares and non-vested restricted stock are determined using the treasury stock method. Basic weighted-average common shares outstanding at December 31, 2023 and 2022 were 19.6 million and 19.4 million, respectively. Diluted weighted-average common shares outstanding at December 31, 2023 and 2022 were 19.7 million and 19.4 million, respectively. FAIR VALUE MEASUREMENTS GAAP establishes a framework for measuring fair value and requires certain disclosures about fair value measurements to enable the reader of the consolidated financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. GAAP requires that financial assets and liabilities be classified and disclosed 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 cash and cash equivalents to be unrestricted for purposes of the consolidated balance sheets and consolidated statements of cash flows. The fair value of receivables and payables approximate their carrying value due to the short-term nature of the instruments. The valuation is based on settlements of similar financial instruments all of which are short-term in nature and are generally settled at or near cost. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Future actual amounts could differ from these estimates. CONCENTRATION OF CREDIT RISK Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per institution. The Company had deposits in excess of the FDIC limit at December 31, 2023 and 2022. No losses have been recognized in 2023 or 2022. 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 Hawai‘i and the mainland United States; high unemployment rates and low consumer confidence; uncertainties and changes in U.S. social, political, regulatory and economic conditions or laws and policies and concerns surrounding ongoing developments in the European Union, Middle East, and Asia; the general availability of mortgage financing, including the effect of more stringent lending standards for mortgages and perceived or actual changes in interest rates; risks related to the Company’s investments in real property, the value and salability of which could be impacted by the economic factors discussed above or other factors; the popularity of Maui in particular and Hawai‘i in general as a vacation destination or second-home market; increased energy costs, including fuel costs, which affect tourism on Maui and Hawai‘i generally; untimely completion of land development projects within forecasted time and budget expectations; inability to obtain land use entitlements at a reasonable cost or in a timely manner; unfavorable legislative decisions by state and local governmental agencies; impact of governmental fines and assessments; the cyclical market demand for luxury real estate on Maui and in Hawai‘i generally; increased competition from other luxury real estate developers on Maui and in Hawai‘i generally; failure of future joint venture partners to perform in accordance with their contractual agreements; environmental regulations; acts of God, such as tsunamis, hurricanes, earthquakes and other natural disasters, such as the recent Maui wildfires; the spread of contagious diseases, such as the Coronavirus; the Company’s location apart from the mainland United States, which results in the Company’s financial performance being more sensitive to the aforementioned economic risks; failure to comply with restrictive financial covenants in the Company’s credit arrangements; and an inability to achieve the Company’s short and long-term goals and cash flow requirements. LEGAL CONTINGENCIES The Company is party to claims and lawsuits as well as threatened or potential actions or claims concerning matters arising from the conduct of its business activities. The outcome of claims or litigation and the timing of ultimate resolution are inherently difficult to predict and significant judgment 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 9 to the consolidated financial statements for further information regarding the Company’s legal proceedings. NEW ACCOUNTING STANDARD ADOPTED In June 2016, the FASB issued ASU 2016-13 to update the methodology used to measure current expected credit losses (“CECL”). This ASU applies to financial assets measured at amortized cost, including loans, held-to-maturity debt securities, net investments in leases, and trade accounts receivable as well as certain off-balance sheet exposures, such as loan commitments. This ASU requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The guidance was adopted on January 1, 2023 using a modified retrospective transition method applied to receivable balances in the Company’s non-leasing segments. There was no cumulative-effect adjustment to retained earnings/(deficit) upon adoption of the ASU.

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