Note 11 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2025

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

11. COMMITMENTS AND CONTINGENCIES

On December 31, 2018, the State of Hawai‘i 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 1960s to serve approximately 200 single-family homes developed for workers in the Company’s former agricultural operations. The facility is comprised 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 repair and improvement of a new wastewater treatment plant, which become final and binding unless a hearing is requested to contest the alleged violations and penalties.

The construction of additional leach fields and installation of a surface aerator, sludge removal system, and natural pond cover using water plants were completed in 2023. Test results from wastewater monitoring indicate effluent concentration amounts within allowable ranges. A feasibility study was prepared for and submitted to the Company on January 15, 2024, identifying various technical solutions that could be implemented to resolve the Order. The DOH agreed to defer the Order on February 15, 2024, as the Company continues to work to resolve and remediate the facility’s wastewater effluent issues through an approved corrective action plan. The Company submitted a plan (the Plan) and proposed solution to resolve the Order on March 14, 2024. The Plan included the installation of an additional pond that will be lined and installed with aerators. One of the existing ponds will be lined and renovated as necessary and the other pond will be taken offline and used as a backup pond if needed. The Company continues to work with the DOH to coordinate the timing and approval of the Plan to implement the technical solution to resolve the Order. Meetings continue to be scheduled to provide status updates and progress being made towards resolution.

On August 18, 2025, a complaint was filed in the Circuit Court of the Second Circuit, State of Hawaii, against the Company by TY Management Corporation, the owner of two golf courses, and the Plantation Estates Lot Owners Association (“PELOA”), the Association of Apartment Owners of the Coconut Grove on Kapalua, and the Association of Apartment Owners of the Ridge at Kapalua (three owner associations located within the Kapalua Resort Association), and Hui Momona Farms LLC, a Hawaii based LLC that is a member of PELOA, alleging the Company did not provide them irrigation water from Honokohau Stream due to a purported failure to maintain the ditch system that transports water from the stream. The complaint seeks declaratory and injunctive relief and unspecified monetary damages.

In September 2025, the Company answered the complaint and filed a counterclaim based on, among other things, the plaintiffs’ violations of irrigation use restrictions that protect public trust purposes and fire protection for the entire Kapalua community and defamatory statements. At the time of filings, the financial impact to the Company, if any, cannot be determined nor estimated. The Company will fully defend against the allegations and prosecute its counterclaims.

Since 2019, the availability of divertible water from Honokohau Stream has been reduced by Hawaii state law. The stream has also been experiencing record low stream flows due to ahistoric drought impacting the island of Maui. At its September 2025 meeting, the state agency responsible for administering the state water code (Commission on Water Resource Management) explained that rainfall contributes to runoff and baseflow to streams, and between September 2024- August 2025, annual rainfall in Honokohau Valley was 46% of normal. In sum, between reduced rainfall and Hawaii state law aimed at protecting public trust uses, including drinking water and traditional practices, there is less water available for private commercial irrigation.

In 2024 and 2025, MLP, as the developer of Kapalua and member of the Kapalua Resort Association ("KRA"), annexed lands into Kapalua pursuant to the established procedure in the governing declaration. According to KRA's records, the annexed lands are part of Kapalua.

On September 25, 2025, the owner of two golf courses and a subassociation of KRA that are also plaintiffs in the above lawsuit filed a second lawsuit in the Circuit Court of the Second Circuit, State of Hawai‘i, against certain directors of the KRA and the Company as declarant of the KRA, alleging that the annexations and related voting rights are invalid. The owner of the two golf courses and the subassociation have used their dispute regarding the annexations and related voting rights to delay the annual meeting of the KRA, which is required to be held by statute.

On October 10, 2025, the Company, as a member of the KRA and developer of Kapalua, petitioned the Second Circuit Court, State of Hawai‘i, to set the statutorily required annual meeting.

At the time of filing of both KRA-related proceedings, the financial impact to the Company, if any, cannot be determined or estimated. KRA is responsible for the defense of the directors named in the claim. The Company will fully defend against and prosecute the allegations.

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 and ordinary 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.