Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Dollars in Thousands)

The accompanying unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements, and therefore, should be read in conjunction with the Company's Annual Report on Form 10-K (File No. 0- 50273) for the year ended December 31, 2007. Capitalized terms used but not defined in this quarterly report have the same meanings as the Company's 2007 Annual Report on Form 10-K.

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF ACCOUNTING

Kaanapali Land, LLC ("Kaanapali Land"), a Delaware limited liability company, is the reorganized entity resulting from the Joint Plan of Reorganization of Amfac Hawaii, LLC (now known as KLC Land Company, LLC ("KLC Land")), certain of its subsidiaries (together with KLC Land, the "KLC Debtors") and FHT Corporation ("FHTC" and, together with the KLC Debtors, the "Debtors") under Chapter 11 of the Bankruptcy Code, dated June 11, 2002 (as amended, the "Plan").

The Company's continuing operations are in two business segments - Agriculture and Property. The Agriculture segment grows seed corn and soybeans under contract and leases or provides harvesting rights to a third party on certain lands currently cultivated in or used for the processing of coffee, while maintaining additional coffee acreage for possible future use. The Property segment primarily develops land for sale and negotiates bulk sales of undeveloped land. The Golf segment, which is responsible for the management and operation of the Waikele Golf Course has been reported as held for sale, and therefore, reported as discontinued operations. The assets and operations of the golf course represent all of the golf segment for purposes of business segment information. The Property and Agriculture segments operate exclusively in the State of Hawaii.

PROPERTY

The Company's principal property holdings are on the island of Maui. The Company has determined, based on its current projections for the development and/or disposition of its property holdings on the island of Maui, that these property holdings are not currently recorded in an amount in excess of proceeds that the Company expects that it will ultimately obtain from the disposition thereof.

On April 8, 2008, the Company executed a contract (as subsequently amended) to sell its Waikele Golf Course for a purchase price of $23,150 (less commissions and closing costs). The sale is currently scheduled to close on September 8, 2008, as extended. As of August 8, 2008, the buyer has made nonrefundable deposits pursuant to the contract of $2,200. However, there can be no assurance the sale will be consummated under the current terms of such contract or under any terms. The Company reclassified the Waikele Golf Course as held for sale as of April 8, 2008. The Company recorded a $3,900 asset impairment charge (before taxes) related to its write-down of the carrying value of the Waikele Golf Course during the second quarter ending June 30, 2008. Following the guidance in

SFAS No. 144, the carrying value of the Waikele Golf Course was written down to its estimated fair value. As the Waikele Golf Course is deemed held for sale, the operations including the impairment charge have been classified on the statement of operations as discontinued operations for all periods presented. Depreciation on these assets ceased upon classifi- cation as held for sale.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

In the opinion of management, all adjustments necessary for a fair presentation of the statement of financial position and results of operations for the interim periods presented have been included in these financial statements and are of a normal and recurring nature.

Operating results for the three and six months ended June 30, 2008 are not necessarily indicative of the results that may be achieved in future periods.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The Company adopted the provisions of FIN 48 on January 1, 2007. FIN 48 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. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the adoption, the Company recorded a cumulative effect adjustment of approximately $700 through a reduction in January 1, 2007 accumulated earnings.

The Company's gross unrecognized tax benefits total approximately $2,800 at June 30, 2008. The Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2004. The Company's continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. The Company had approximately $160 accrued for interest and no accrual for penalties at June 30, 2008.

The Company adopted SFAS No. 158 effective January 1, 2007. This statement requires an employer to recognize the over funded or under funded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. As a result of the adoption, the Company has recorded accumulated other comprehensive income of approximately $1,650 and $1,759 at December 31, 2007 and June 30, 2008, respectively, and increased prepaid pension cost to the funded status of the Plan.

On September 15, 2006, the FASB issued SFAS No. 157 which defines fair value, establishes guidelines for measuring fair value, and expands disclosures regarding fair value measurements. SFAS No. 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. The Company adopted SFAS No. 157 effective January 1, 2008. The adoption of SFAS 157 did not have a material effect on the Company's results of operations and financial position. As of June 30, 2008, there were no material financial assets or liabilities recognized or measured at fair value on a recurring basis.

(2) LAND DEVELOPMENT

During the first quarter of 2006, the Company received final subdivision approval on an approximate 336 acre parcel in the region "mauka" (toward the mountains) from the main Kaanapali 2020 area. This project, called Kaanapali Coffee Farms, consists of 58 agricultural lots, 50 of which are currently being offered to individual buyers. It is anticipated that the land improvements will be completed later in 2008. In conjunction with the final approval, the Company was required to obtain two subdivision bonds in the amounts of approximately $18,600 and $4,700 and was required to secure those bonds with a cash deposit of $8,300 into an interest bearing collateral account. During the first quarter 2007, one of the bonds was reduced from $18,600 to $11,300 and the collateral was reduced to $5,900, which is reported in Other Assets in the consolidated balance sheet. During February 2008, the $11,300 bond was released and the collateral account was further reduced to $1,700. During July and early August 2006 the Company closed on the sale of three lots at Kaanapali Coffee Farms. The Company closed on the sale of three additional lots in 2007, one each in January, August and October. In conjunction with the sales of the lots that closed in August and October 2007, in addition to cash proceeds, the Company received promissory notes for $737 and $692, respectively. The promissory notes are due July 2009 and October 2009.

(3) MORTGAGE AND OTHER NOTES PAYABLE

A subsidiary of Kaanapali Land ("Holder") holds a mortgage note secured by Waikele Golf Course. The mortgage loan was amended March 31, 2006 upon which the accrued interest was added to principal and the Holder agreed to make future advances under the note in an amount not to exceed $3,000 for purposes of funding the golf course improvements. Interest on the principal balance accrues at an adjustable rate of prime plus 1%. The principal and accrued interest, which are prepayable, are due March 1, 2015. As of June 30, 2008, the note had an outstanding principal and accrued interest balance of $9,773. The note has been eliminated in the consolidated financial statements because the obligor and maker are consolidated subsidiaries of Kaanapali Land.

Certain subsidiaries of Kaanapali Land are jointly indebted to Kaanapali Land pursuant to a certain Secured Promissory Note in the principal amount of $70,000 dated November 14, 2002. Such note matures on October 31, 2011, had an outstanding balance of principal and accrued interest as of June 30, 2008 of approximately $78,000 and carries an interest rate of 3.04% compounded semi-annually. The note, which is prepayable, is secured by substantially all of the remaining real property owned by such subsidiaries, pursuant to a certain Mortgage, Security Agreement and Financing Statement, dated as of November 14, 2002 and placed on record in December 2002. The note has been eliminated in the consolidated financial statements because the obligors are consolidated subsidiaries of Kaanapali Land.

(4) EMPLOYEE BENEFIT PLANS

(a) PENSION PLANS

The Company participates in a defined benefit pension plan that covers substantially all its eligible employees. The Plan is sponsored and maintained by Kaanapali Land in conjunction with other plans providing benefits to employees of Kaanapali Land and its affiliates.

The components of the net periodic pension benefit (credit), included in selling, general and administrative in the consolidated statements of operations for the three and six months ended June 30, 2008 and 2007 are as follows:

                           THREE MONTHS ENDED      SIX MONTHS ENDED
                                 JUNE 30,              JUNE 30,
                           -------------------   -------------------
                             2008       2007       2008       2007
                           --------   --------   --------   --------

Service cost. . . . . . .  $      5          5         10         10
Interest cost . . . . . .       632        650      1,264      1,300
Expected return on
  plan assets . . . . . .    (1,258)    (1,215)    (2,516)    (2,430)
Recognized net
  actuarial (gain) loss .       121        160        242        320
                           --------   --------   --------   --------
Net periodic
  pension credit. . . . .  $   (500)      (400)    (1,000)      (800)
                           ========   ========   ========   ========

(b) RETIREE HEALTH AND LIFE INSURANCE BENEFITS

In addition to providing pension benefits, a subsidiary of KLC Land currently provides certain healthcare and life insurance benefits to certain eligible retired employees. The postretirement healthcare plan is contributory and contains cost-sharing features such as deductibles and copayments. The postretirement life insurance plan is non-contributory.

Net periodic postretirement benefit cost for the three and six months ended June 30, 2008 and 2007 includes the following components:

                           THREE MONTHS ENDED      SIX MONTHS ENDED
                                 JUNE 30,              JUNE 30,
                           -------------------   -------------------
                             2008       2007       2008       2007
                           --------   --------   --------   --------

Interest cost . . . . . .  $     29         31         58         62
Amortization of
  net gain. . . . . . . .        (3)        (2)        (6)        (4)
                           --------   --------   --------   --------
Net periodic postretire-
  ment benefit cost . . .  $     26         29         52         58
                           ========   ========   ========   ========

The calculation of the accumulated postretirement benefit cost or the net periodic postretirement benefit cost does not reflect the effects of the Medicare Prescription Drug Improvement and Modernization Act of 2003 (the "Act").

The Company maintains a nonqualified deferred compensation arrangement (the "Rabbi Trust") which provides certain former directors of Amfac and their spouses with pension benefits. The Rabbi Trust invests in marketable securities and cash equivalents. The deferred compensation liability represented in the Rabbi Trust and assets funding such deferred compensation liability are consolidated in the Company's balance sheet.

(5) STOCK-BASED COMPENSATION

On April 15, 2008, the Company entered into an agreement with Stephen Lovelette ("Lovelette"), an executive vice president of the Company in charge of the Company's development activities, whereby the Company agreed to issue up to 52,000 shares of a new class of common shares (the "Class C Shares") in consideration for his services to the Company. The Class C Shares have the same rights as the Shares except that the Class C Shares will not participate in any distributions until the holders of the Shares have received aggregate distributions equal to $19 per Share, subject to customary antidilution adjustments. The Class C Shares became 50% vested on April 15, 2008, an additional 25% will vest on December 31, 2008 if Lovelette remains employed by the Company through that date the remaining 25% will vest on December 31, 2009 if Lovelette remains employed by the Company through that date. The Company recognized compensation expense of approximately $63 for stock based compensation for the three and six months ended June 30, 2008.

(6) INCOME TAXES

Federal tax return examinations have been completed for all years through 2002. In January 2008, the Company received notice from the IRS that their 2005 tax return has been selected for audit. The audit is in process. The statutes of limitations with respect to the Company's taxes for 2004 and subsequent years remain open. The Company believes adequate provisions for income tax have been recorded for all years, although there can be no assurance that such provisions will be adequate. To the extent that there is a shortfall, any such shortfall for which the Company could be liable could be material.

Tax benefits in 2008 result from the potential sale of the Waikele Golf Course due to expected taxable income that would allow the realization of certain previously reserved net operating loss carryforwards.

(7) COMMITMENTS AND CONTINGENCIES

As security for performance of certain development obligations, the Company is contingently liable under two subdivision bonds for approximately $5,000.

At June 30, 2008, the Company's principal contractual obligations are approximately $1,500 for the completion of land improvements in conjunction with Phase I of the Kaanapali Coffee Farms project.

Material legal proceedings of the Company are described below. Unless otherwise noted, the parties adverse to the Company in the legal proceedings described below have not made a claim for damages in a liquidated amount and/or the Company believes that it would be speculative to attempt to determine the Company's exposure relative thereto, and as a consequence believes that an estimate of the range of potential loss cannot be made.

On or about July 19, 2007, at the request of the Hawaii Department of Health and as a result of a report of vandalism and spilled transformer fluid at a former transformer site, an inspection of various former transformer sites on Maui was conducted. As a result of the inspection, oil was tested for possible contaminants, drained from various transformers, and disposed of in accordance with requirements of law. At one site, there was spillage of transformer fluid that required remediation. The Company is in the process of remediating the spilled transformer fluid and is undertaking steps to complete the remediation in accordance with law.

As a result of an administrative order issued to Oahu Sugar by the HDOH, Order No. CH 98-001, dated January 27, 1998, Oahu Sugar engaged in environmental site assessment of lands it leased from the U.S. Navy and located on the Waipio Peninsula. Oahu Sugar submitted a Remedial Investigation Report to the HDOH. The HDOH provided comments that indicated that additional testing may be required. Oahu Sugar responded to these comments with additional information. On January 9, 2004, EPA issued a request to Oahu Sugar seeking information related to the actual or threatened release of hazardous substances, pollutants and contaminants at the Waipio Peninsula portion of the Pearl Harbor Naval Complex National Priorities List Superfund Site. The request sought, among other things, information relating to the ability of Oahu Sugar to pay for or perform a clean up of the land formerly occupied by Oahu Sugar. Oahu Sugar responded to the information requests and notified both the Navy and the EPA that while it had some modest remaining cash that it could contribute to further investigation and remediation efforts in connection with an overall settlement of the outstanding claims, Oahu Sugar was substantially without assets and would be unable to make a significant contribution to such an effort. Attempts at negotiating such a settlement were fruitless and Oahu Sugar received an order from EPA in March 2005 that purported to require certain testing and remediation of the site. As Oahu Sugar was substantially without assets, the pursuit of any action, informational, enforcement, or otherwise, would have had a material adverse effect on the financial condition of Oahu Sugar.

Therefore, as a result of the pursuit of further action by the HDOH and EPA as described above and the immediate material adverse effect that the actions had on the financial condition of Oahu Sugar, Oahu Sugar filed with the United States Bankruptcy Court, Northern District of Illinois, Eastern Division its voluntary petition for liquidation under Chapter 7 of Title 11, United States Bankruptcy Code. Such filing was not expected to have a material adverse effect on the Company as Oahu Sugar was substantially without assets at the time of the filing. While it is not believed that any other affiliates have any responsibility for the debts of Oahu Sugar, the EPA has indicated that it intends to make a claim against Kaanapali Land as further described below, and therefore, there can be no assurance that the Company will not incur significant costs in connection with such claim.

The deadline for filing proofs of claim against Oahu Sugar with the bankruptcy court passed in April 2006. Prior to the deadline, Kaanapali Land, on behalf of itself and certain subsidiaries, filed claims that aggregated approximately $224,000, primarily relating to unpaid guarantee obligations made by Oahu Sugar that were assigned to Kaanapali Land pursuant to the Plan on the Plan Effective Date. In addition, the EPA and the U.S. Navy filed a joint proof of claim that seeks to recover certain environmental response costs relative to the Waipio Peninsula site discussed above. The proof of claim contained a demand for previously spent costs in the amount of approximately $260, and additional anticipated response costs of between approximately $2,760 and $11,450. No specific justification of these costs, or what they are purported to represent, was included in the EPA/Navy proof of claim. Due to the insignificant amount of assets remaining in the debtor's estate, it is unclear whether the United States Trustee who has taken control of Oahu Sugar will take any action to contest the EPA/Navy claim, or how it will reconcile such claim for the purpose of distributing any remaining assets of Oahu Sugar.

EPA has sent three requests for information to Kaanapali Land regarding, among other things, Kaanapali Land's organization and relationship, if any, to entities that may have, historically, operated on the site and with respect to operations conducted on the site. Kaanapali Land responded to these requests for information. By letter dated February 7, 2007, pursuant to an allegation that Kaanapali Land is a successor to Oahu Sugar Company, Limited, a company that operated at the site prior to 1961 ("Old Oahu"), EPA advised Kaanapali that it believes it is authorized by CERCLA to amend the existing Unilateral Administrative Order against Oahu Sugar Company, LLC, for the clean up of the site to include Kaanapali Land as an additional respondent. The purported basis for the EPA's position is that Kaanapali Land, by virtue of certain corporate actions, is jointly and severally responsible for the performance of the response actions, including, without limitation, clean-up at the site. No such amendment has taken place as of the date hereof. Instead, the EPA's letter invited Kaanapali Land to engage in settlement discussions with the EPA to attempt to resolve Kaanapali Land's alleged liability. While Kaanapali Land believes that it has defenses to the EPA's position, Kaanapali Land is nevertheless continuing to engage in settlement discussions with EPA to determine if the matter can be resolved on reasonable terms. Even if Kaanapali Land were found to be the successor to Old Oahu, Kaanapali Land believes that its liabilities, if any, should relate solely to a portion of the period of operation of Old Oahu at the site. Moreover, Kaanapali Land believes that any settlement should involve substantial participation of the U.S. Navy, which has owned the site throughout the entire relevant period, both as landlord under its various leases with Oahu Sugar and Old Oahu and by operating and intensively utilizing the site directly during a period when no lease was in force. Discussions with the Navy have also commenced. There can be no assurances that the matter can be resolved on terms acceptable to Kaanapali Land or that this matter will not ultimately have a material adverse effect on the Company.

Federal tax return examinations have been completed for all years through 2002. In January 2008, the Company received notice from the IRS that their 2005 tax return has been selected for audit. The audit is in process. The statutes of limitations with respect to the Company's tax returns for 2004 and subsequent years remain open. The Company believes adequate provisions for income taxes have been recorded for all years, although there can be no assurance that such provisions will be adequate. To the extent that there is a shortfall, any such shortfall for which the Company could be liable could be material.

Kaanapali Land, as successor by merger to other entities, and D/C, a subsidiary of Kaanapali Land, have been named as defendants in personal injury actions allegedly based on exposure to asbestos. While there are only a few such cases that name Kaanapali Land, there are a substantial number of cases that are pending against D/C on the U.S. mainland (primarily in California). Cases against Kaanapali Land are allegedly based on its prior business operations in Hawaii and cases against D/C are allegedly based on D/C's prior distribution business operations primarily in California. Each entity defending these cases believes that it has meritorious defenses against these actions, but can give no assurances as to the ultimate outcome of these cases. The defense of these cases has had a material adverse effect on the financial condition of D/C as it has been forced to file a voluntary petition for liquidation as discussed below. Kaanapali Land does not believe that it has liability, directly or indirectly, for D/C's obligations in those cases. Kaanapali Land does not presently believe that the cases in which it is named will result in any material liability to Kaanapali Land; however, there can be no assurance in this regard.

On February 15, 2005, D/C was served with a lawsuit entitled American & Foreign Insurance Company v. D/C Distribution and Amfac Corporation, Case No. 04433669 filed in the Superior Court of the State of California for the County of San Francisco, Central Justice Center. No other purported party was served. In the eight-count complaint for declaratory relief, reimbursement and recoupment of unspecified amounts, costs and for such other relief as the court might grant, plaintiff alleged that it is an insurance company to whom D/C tendered for defense and indemnity various personal injury lawsuits allegedly based on exposure to asbestos containing products. Plaintiff alleged that because none of the parties have been able to produce a copy of the policy or policies in question, a judicial determination of the material terms of the missing policy or policies is needed. Plaintiff sought, among other things, a declaration: of the material terms, rights, and obligations of the parties under the terms of the policy or policies; that the policies were exhausted; that plaintiff was not obligated to reimburse D/C for its attorneys' fees in that the amounts of attorneys' fees incurred by D/C have been incurred unreasonably; that plaintiff was entitled to recoupment and reimbursement of some or all of the amounts it has paid for defense and/or indemnity; and that D/C breached its obligation of cooperation with plaintiff. D/C filed an answer and an amended cross-claim. D/C believed that it had meritorious defenses and positions, and intended to vigorously defend. In addition, D/C believed that it was entitled to amounts from plaintiffs for reimbursement and recoupment of amounts expended by D/C on the lawsuits previously tendered. In order to fund such action and its other ongoing obligations while such lawsuit continued, D/C entered into a Loan Agreement and Security Agreement with Kaanapali Land, in August 2006, whereby Kaanapali Land provided certain advances against a promissory note delivered by D/C in return for a security interest in any D/C insurance policy at issue in this lawsuit. In June 2007, the parties settled this lawsuit with payment by plaintiffs in the amount of $1,618. Such settlement amount was paid to Kaanapali Land in partial satisfaction of the secured indebtedness noted above.

Because D/C was substantially without assets and was unable to obtain additional sources of capital to satisfy its liabilities, D/C filed with the United States Bankruptcy Court, Northern District of Illinois, its voluntary petition for liquidation under Chapter 7 of Title 11, United States Bankruptcy Code during July 2007, Case No. 07-12776. Such filing is not expected to have a material adverse effect on the Company as D/C was substantially without assets at the time of the filing.

The Company received notice from the Hawaii Department of Land and Natural Resources ("DLNR") that it would inspect all significant dams and reservoirs in Hawaii, including those maintained by the Company on Maui in connection with its agricultural operations. Inspections were performed in April and October 2006 and again in March 2008. To date, the DLNR has cited certain maintenance deficiencies concerning two of the Company's reservoirs, consisting primarily of overgrowth of vegetation that makes inspection difficult and could degrade the integrity of reservoir slopes and impact drainage. The DLNR has required the vegetation clean-up as well as the Company's plan for future maintenance, inspections and emergency response. Revised versions of the required plans were submitted to DLNR in December 2006.

On October 15, 2006, a significant earthquake occurred that was felt in most parts of the state. As a consequence of such earthquake, the DLNR, in conjunction with the U.S. Army Corps of Engineers, has inspected each reservoir and identified certain minor damage. In addition, Company personnel have inspected various portions of its Maui water source and transmission assets to determine if any other damage of significance has occurred, but has so far found no material damage. While the damage to the smaller reservoir cited by the recent DLNR inspection will not require any immediate action, it is unclear at this time whether the DLNR will require any work on the larger reservoir even though the damage is located in a portion of the reservoir that is presently unused. There can be no assurance that the expense of doing such required work will not be material.

In September 2007, the Company received further correspondence from DLNR that it preliminarily intended to categorize each of the reservoirs as "high hazard" under a new statute recently passed by the State of Hawaii concerning dam and reservoir safety. This classification, which bears upon future government oversight and reporting requirements, may increase the future cost of managing and maintaining these reservoirs in a material manner. The Company does not believe that this classification is warranted for either of these reservoirs and has initiated a dialogue with DLNR in that regard. At this time, it is unknown what the final classification assigned to these reservoirs will be or to what extent such classification will impact the future use and maintenance cost of these assets. In April 2008 the Company received further correspondence from DLNR that included the assessment by their consultants of the potential losses that result from the failure of these reservoirs. The Company has commenced a review of those reports and will formulate a response.

During the second quarter of 2007, the Company commenced portions of the required remedial work on these reservoirs. Some of this work was commenced in connection with improvements made to one of the reservoirs in order to construct the new non-potable water system servicing the Kaanapali Coffee Farms development. Such work has been substantially completed, however certain portions of the remedial work that are not associated with such improvements have not been commenced. The Company expects to address the remaining portions of such work during 2008.

On April 9, 2007, the Company entered into a Plan and Agreement of Merger to merge KLLLC Mergerco, LLC ("KLLLC") with and into the Company (the "Merger Agreement"), which provided, subject to the terms and conditions of the Merger Agreement, that upon the effective time of the merger, each Class A Share would have been converted into the right to receive $43.25 in cash per share. Among the conditions to the Merger Agreement was that there would be no pending or threatened litigation that could reasonably be expected (a) to have a material adverse effect on the business, financial condition or results of operations of the Company or KLLLC or (b) to increase the costs of the merger in any material respect.

On May 10, 2007, John G. Brant, P.C. Pension Trust and John G. Brant filed a suit in the Court of Chancery in the State of Delaware against the Company, Pacific Trail Holdings, LLC, Pacific Trail Holdings, Inc., KLLLC, and certain officers and directors of the entity defendants. Among other things, the complaint alleged that the price to be paid for each Class A Share pursuant to the Merger Agreement was unfair and undervalued the Company. While neither the Company nor KLLLC believed that the plaintiffs' claims were meritorious, because the cost of defending and/or settling the lawsuit could reasonably have been expected to be material, KLLLC terminated the Merger Agreement pursuant to Article Twelfth of the Merger Agreement. As a result, the holders of Class A Shares will remain as shareholders of the Company and the Company will continue to operate under its current structure. Accordingly, the merger transaction contemplated in the Company's Schedule 13E-3 previously filed with the Securities and Exchange Commission on April 9, 2007 was terminated. On or about August 8, 2007, the plaintiff in the Brant litigation filed a petition for attorneys' fees seeking an award of attorneys' fees in the amount of $1,000 and reimbursement of costs and expenses in an amount not to exceed $50. On February 28, 2008, the Court entered an order dismissing the case with prejudice and ordering the Company to pay plaintiff $250 in fees and costs.

The payment was made.

Other than as described above, the Company is not involved in any material pending legal proceedings, other than ordinary routine litigation incidental to its business. The Company and/or certain of its affiliates have been named as defendants in several pending lawsuits. While it is impossible to predict the outcome of such routine litigation that is now pending (or threatened) and for which the potential liability is not covered by insurance, the Company is of the opinion that the ultimate liability from any of this litigation will not materially adversely affect the Company's consolidated results of operations or its financial condition.

                           THREE MONTHS ENDED      SIX MONTHS ENDED
                                 JUNE 30,              JUNE 30,
                           -------------------   -------------------
                             2008       2007       2008       2007
                           --------   --------   --------   --------
                      (Amounts in thousands except per share amounts)

NUMERATOR:
Income (loss) before
  income (loss) from
  discontinued
  operations. . . . . . . $   4,963       (925)     4,206       (907)
Income (loss) from
  discontinued
  operations. . . . . . .    (3,784)       (76)    (3,875)       (67)
                           --------   --------   --------   --------
Net income (loss) . . . .  $  1,179     (1,001)       331       (974)
                           ========   ========   ========   ========

DENOMINATOR:
Number of weighted
  average shares
  outstanding - basic . .     1,815      1,793      1,804      1,793
Effect of dilutive shares:
  Number of weighted
    average Class C
    Shares. . . . . . . .        22      --            11      --
                           --------   --------   --------   --------
Number of weighted
  average shares
  outstanding - diluted .     1,837      1,793      1,815      1,793
                           ========   ========   ========   ========

Net income (loss) per
 share - basic:
  Income (loss) before
    income (loss) from
    discontinued
    operations. . . . . .  $   2.73      (0.52)      2.33      (0.50)
  Income (loss) from
    discontinued
    operations. . . . . .     (2.08)     (0.04)     (2.15)     (0.04)
                           --------   --------   --------   --------
Net income (loss) per
 share - basic. . . . . .  $   0.65      (0.56)      0.18      (0.54)
                           ========   ========   ========   ========

Net income (loss) per
 share - diluted:
  Income (loss) before
    income (loss) from
    discontinued
    operations. . . . . .  $   2.70      (0.52)      2.31      (0.50)
  Income (loss) from
    discontinued
    operations. . . . . .     (2.06)     (0.04)     (2.13)     (0.04)
                           --------   --------   --------   --------
Net income (loss) per
 share - diluted. . . . .  $   0.64      (0.56)      0.18      (0.54)
                           ========   ========   ========   ========

(9) BUSINESS SEGMENT INFORMATION

As described in Note 1, the Company operates in two business segments. As noted in Note 1, the Golf segment is now reported as discontinued operations. Total revenues and operating profit by business segment are presented in the tables below.

Total revenues by business segment includes primarily (i) sales, all of which are from unaffiliated customers and (ii) interest income that is earned from outside sources on assets which are included in the individual industry segment's identifiable assets, as well as corporate assets.

Operating income (loss) is comprised of total revenue less operating expenses. In computing operating income (loss), none of the following items have been added or deducted: general corporate revenues and expenses, interest expense and income taxes.

                           THREE MONTHS ENDED      SIX MONTHS ENDED
                                 JUNE 30,              JUNE 30,
                           -------------------   -------------------
                             2008       2007       2008       2007
                           --------   --------   --------   --------
Revenues:
  Property. . . . . . . .  $    200        558        565      2,396
  Agriculture . . . . . .       416        569      1,075      1,015
  Corporate . . . . . . .        38        129         99        283
                           --------   --------   --------   --------
                           $    654      1,256      1,739      3,694
                           ========   ========   ========   ========
Operating income (loss):
  Property. . . . . . . .  $   (427)      (240)      (649)        77
  Agriculture . . . . . .       (79)        54        (84)        63
                           --------   --------   --------   --------
Operating income (loss) .      (506)      (186)      (733)       140

Corporate . . . . . . . .      (382)    (1,195)    (1,425)    (1,360)
                           --------   --------   --------   --------
Operating income (loss)
  from continuing opera-
  tions before income
  taxes and income (loss)
  from discontinued
  operations. . . . . . .  $   (888)    (1,381)    (2,158)    (1,220)
                           ========   ========   ========   ========

PART I. FINANCIAL INFORMATION