Maui Land & Pineapple pany(MLP) - 2023 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Interim Financial Statements (unaudited) The company reported a net loss of $2.5 million for H1 2023, a significant downturn from $9.9 million net income in H1 2022, primarily due to the absence of real estate sales Condensed Consolidated Balance Sheets As of June 30, 2023, total assets slightly decreased to $41.5 million from $42.4 million at year-end 2022, mainly due to reduced cash and cash equivalents Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2023 (unaudited) | December 31, 2022 (audited) | | :--- | :--- | :--- | | Total current assets | $14,832 | $15,220 | | Total assets | $41,455 | $42,406 | | Total current liabilities | $2,272 | $2,307 | | Total liabilities | $8,498 | $8,634 | | Total stockholders' equity | $32,957 | $33,772 | Condensed Consolidated Statements of Operations The company shifted from profitability to a net loss of $2.5 million in H1 2023, compared to $9.9 million net income in H1 2022, primarily due to a lack of real estate revenue Q2 Financial Performance (in thousands, except per share) | Metric | Q2 2023 | Q2 2022 | Change | | :--- | :--- | :--- | :--- | | Total operating revenues | $2,473 | $13,987 | -82.3% | | Real estate revenue | $19 | $11,600 | -99.8% | | Leasing revenue | $2,241 | $2,198 | +2.0% | | Operating income (loss) | $(1,344) | $10,641 | Negative Swing | | Net income (loss) | $(1,117) | $10,525 | Negative Swing | | Net income (loss) per share | $(0.06) | $0.54 | Negative Swing | Six-Month Financial Performance (in thousands, except per share) | Metric | H1 2023 | H1 2022 | Change | | :--- | :--- | :--- | :--- | | Total operating revenues | $4,770 | $16,234 | -70.6% | | Real estate revenue | $19 | $11,600 | -99.8% | | Leasing revenue | $4,318 | $4,228 | +2.1% | | Operating income (loss) | $(2,714) | $10,139 | Negative Swing | | Net income (loss) | $(2,481) | $9,907 | Negative Swing | | Net income (loss) per share | $(0.13) | $0.51 | Negative Swing | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $0.4 million in H1 2023, a significant decrease from $11.9 million provided in H1 2022, primarily due to the absence of real estate sales Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(444) | $11,948 | | Net cash used in investing activities | $(272) | $(31) | | Net cash used in financing activities | $(547) | $(291) | | Net (decrease) increase in cash | $(1,263) | $11,626 | Notes to Condensed Consolidated Interim Financial Statements Key notes include the expiration of a $40.0 million Kapalua Central Resort sale agreement, a $15.0 million credit facility with zero balance, and the impact of Maui wildfires - The sale agreement for the 46-acre Kapalua Central Resort project for $40.0 million was allowed to expire on April 11, 2023[39][81] - The company has a $15.0 million revolving line of credit facility with First Hawaiian Bank, with a zero balance as of June 30, 2023, and was in compliance with all financial covenants[44][46][93] - The company is addressing a Notice of Violation from the Hawaii Department of Health regarding its Upcountry Maui wastewater treatment facility, with negotiations ongoing and a technical solution committed by December 31, 2023[49][50] - Subsequent Event: On August 18, 2023, Maui experienced devastating wildfires, which did not directly affect company property but severely impacted the island and caused a delay in this Form 10-Q filing[70][71][72] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the significant decline in H1 2023 financial performance to the lack of real estate sales, increased G&A, and share-based compensation costs, while maintaining adequate liquidity Results of Operations Consolidated operating revenues for H1 2023 fell to $4.8 million from $16.2 million in H1 2022, resulting in an operating loss of $2.7 million due to no real estate sales and increased G&A costs - Real Estate Segment: No real estate was sold in the first six months of 2023, contrasting with $2.0 million and $9.6 million in sales during Q2 2022[80] - Leasing Segment: Operating income remained stable at $2.5 million for H1 2023, with slight revenue increases offset by higher property insurance and water system maintenance costs[84][85] - General & Administrative and Share-Based Compensation: Costs increased significantly in H1 2023 due to one-time executive transition expenses and vesting of stock grants for resigned personnel[89] - In Q2 2023, new stock option grants totaling 728,000 shares were issued to directors, contributing to a H1 2023 share-based compensation expense of $1.8 million, up from $0.7 million in H1 2022[90][59] Liquidity and Capital Resources The company maintains a solid liquidity position with $7.2 million in cash and $15.0 million available from its credit facility, despite negative operating cash flow in H1 2023 Liquidity Position (as of June 30, 2023) | Component | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $7.2 | | Investments | $3.1 | | Available Credit Facility | $15.0 | - Net cash used in operating activities was $0.4 million for H1 2023, compared to $11.9 million provided by operations in H1 2022, primarily due to the lack of real estate sales[97] - The company believes its cash on-hand, cash from operations, and borrowing capacity will provide sufficient financial flexibility for the next twelve months and the foreseeable future[99] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company has no material exposure to interest rate or foreign currency risks but is subject to consumer behavior risks impacting travel to its vacation destination - The company has no material exposure to interest rate or foreign currency risks[102] - The company is subject to regulatory and consumer behavior risks, such as travel restrictions, due to its location in a vacation destination, which could impact rental income[103] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no significant changes to internal controls over financial reporting - Based on an evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[106] - No significant changes were made to internal controls over financial reporting during the six months ended June 30, 2023[107] PART II. OTHER INFORMATION Item 1. Legal Proceedings Information regarding legal proceedings is detailed in Note 10 of the financial statements, primarily concerning a wastewater treatment facility violation - Information regarding legal proceedings is detailed in Note 10, Commitments and Contingencies, of the financial statements[109] Item 1A. Risk Factors There were no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - During the six months ended June 30, 2023, there were no material changes to the risks and uncertainties described in the company's Annual Report[110] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including forms of stock option grants for directors and required certifications - Exhibits filed include forms for stock option grants to the Chairman and Directors, as well as Sarbanes-Oxley Act certifications (Sections 302 and 906)[111][113]