株探米国株
英語
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(MARK ONE)

 

☒          ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

for the fiscal year ended September 30, 2025

OR

 

☐          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 0-14665

DAILY JOURNAL CORPORATION

(Exact name of registrant as specified in its charter)

 

South Carolina

(State or other jurisdiction of

incorporation or organization)

95-4133299

(IRS Employer

Identification No.)
   

915 East First Street

  

Los Angeles, California

(Address of principal executive offices)

90012

(Zip Code)

 

Registrant's telephone number, including area code: (213) 229-5300

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

DJCO

The Nasdaq Stock Market

 

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ☐  No  ☑

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ☐  No  ☑

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  ☑  No  ☐

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes  ☑  No  ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

(Check one):

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☑

Smaller reporting company  ☑

Emerging growth company ☐

  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):  Yes  ☐  No  ☑

 

As of March 31, 2025, the aggregate market value of Daily Journal Corporation's voting stock held by non-affiliates was approximately $547,802,320.

 

As of December 16, 2025, there were outstanding 1,377,722 shares of Common Stock.

 

1
 

  

DOCUMENTS INCORPORATED BY REFERENCE

 

Portions of the Registrant’s definitive proxy statement relating to its 2026 annual meeting of shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The Registrant’s definitive proxy statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.

 

2
 

  

 

Table of Contents

 

   

Page

PART I

    

Item 1.

Business

5

Item 1A.

Risk Factors

10

Item 1B.

Unresolved Staff Comments

14

Item 1C.

Cybersecurity

14

Item 2.

Properties

16

Item 3.

Legal Proceedings

16

Item 4.

Mine Safety Disclosures

16
     

PART II

    

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

17

Item 6.

Reserved

17

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 8.

Financial Statements and Supplementary Data

25

Item 9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

46

Item 9A.

Controls and Procedures

46

Item 9B.

Other Information

47

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

47
     

PART III

    

Item 10.

Directors, Executive Officers and Corporate Governance

48

Item 11.

Executive Compensation

48

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

48

Item 13.

Certain Relationships and Related Transactions, and Director Independence

48

Item 14.

Principal Accountant Fees and Services

48
     

PART IV

    

Item 15.

Exhibits and Financial Statement Schedules

49

Item 16

Form 10-K Summary

49

 

3
 

  

 

Disclosure Regarding Forward-Looking Statements

 

This Annual Report on Form 10-K includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain statements contained in this document, including but not limited to those in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are “forward-looking” statements that involve risks and uncertainties that may cause actual future events or results to differ materially from those described in the forward-looking statements. Words such as “expects,” “intends,” “anticipates,” “should,” “believes,” “will,” “plans,” “estimates,” “may,” variations of such words and similar expressions are intended to identify such forward-looking statements. We disclaim any intention or obligation to revise any forward-looking statements whether as a result of new information, future developments, or otherwise. There are many factors that could cause actual results to differ materially from those contained in the forward-looking statements. These factors include, among others: risks associated with software development and implementation efforts, and disruptive new technologies like artificial intelligence; Journal Technologies’ reliance on professional services engagements with justice agencies; material changes in the costs of postage and paper; additional possible changes in the law, particularly changes limiting or eliminating the requirements for public notice advertising; possible loss of the adjudicated status of the Company’s newspapers and their legal authority to publish public notice advertising; a decline in subscriber revenues; possible security breaches of the Company’s software or websites; changes in accounting guidance; material weaknesses in the Company’s internal control over financial reporting; and declines in the market prices of the securities owned by the Company. In addition, such statements could be affected by general industry and market conditions, general economic conditions (particularly in California) and other factors.  Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in this Form 10-K, including in conjunction with the forward-looking statements themselves. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in documents filed by the Company with the Securities and Exchange Commission.

 

4
 

 

PART I

Item 1. Business

 

Daily Journal Corporation (“Daily Journal” or “the Company”) publishes newspapers and websites covering California and Arizona news and produces several specialized information publications. It also serves as a newspaper representative specializing in public notice advertising. This is sometimes referred to as the Company’s “Traditional Business”.

 

Journal Technologies, Inc. (“Journal Technologies”), a wholly-owned subsidiary of the Company, supplies case management software systems and related products to courts, prosecutor and public defender offices, probation departments and other justice agencies, including administrative law organizations, city and county governments and bar associations. These organizations use the Journal Technologies family of products to help manage cases and information electronically, to interface with other critical justice partners and to extend electronic services to the public, including e-filing and a website to pay traffic citations and fees online. These products are licensed or subscribed to in approximately 37 states, and internationally.

 

Essentially all of the Company’s U.S. operations are based in California and Utah. The Company also has a presence in Australia where Journal Technologies is working on four software installation projects and in British Columbia, Canada, where the Company has operated a wholly-owned subsidiary, Journal Technologies (Canada), Inc. since August 2022. Financial information of the Company, including information about each of the Company’s reportable segments, is set forth in Item 8 (“Financial Statements and Supplementary Data”).

 

Products and Services

 

Traditional Business

 

Newspapers and related online publications. The Company publishes 10 newspapers of general circulation. Each newspaper, in addition to news of interest to the general public, has a particular area of in-depth focus for its news coverage, attracting readers interested in obtaining specific information through a newspaper format.

 

The publications are based in the following cities:

 

 

Newspaper publications

Base of publication
 

Los Angeles Daily Journal

Los Angeles, California
 

San Francisco Daily Journal

San Francisco, California
 

Daily Commerce

Los Angeles, California
 

The Daily Recorder

Sacramento, California
 

The Inter-City Express

Oakland, California
 

San Jose Post-Record

San Jose, California
 

Orange County Reporter

Santa Ana, California
 

The Daily Transcript

San Diego, California
 

Business Journal

Riverside, California
 

The Record Reporter

Phoenix, Arizona

 

The Daily Journals. The Los Angeles Daily Journal and the San Francisco Daily Journal (together, “The Daily Journals”) are each published every weekday except certain holidays and were established in 1888 and 1893, respectively. In addition to covering state and local news of general interest, these newspapers focus on law and its impact on society. Generally, The Daily Journals seek to be of special use to lawyers and judges.

 

The Los Angeles Daily Journal is the largest newspaper published by the Company, both in terms of revenues and circulation. As of September 30, 2025, the Los Angeles Daily Journal had approximately 3,636 paid subscribers and the San Francisco Daily Journal had approximately 2,045 paid subscribers as compared to total paid subscriptions for both of The Daily Journals of 5,687 as of September 30, 2024.  The Daily Journals carry commercial advertising (display and classified) and public notice advertising required or permitted by law to be published in a newspaper of general circulation. The main source of commercial advertising revenue has been law firms and businesses wishing to reach the legal professional community. 

 

5
 

 

The Daily Journals include the Daily Appellate Report, providing full text and case summaries of all opinions certified for publication by the California Supreme Court, the California Courts of Appeal, the U.S. Supreme Court, the U.S. Court of Appeals for the Ninth Circuit and the U.S. Bankruptcy Appellate Panel for the Ninth Circuit. The Daily Journals also include a monthly court directory in booklet form. This directory includes a comprehensive list of sitting judges in all California courts as well as courtroom assignments, phone numbers and courthouse addresses, plus a list of judicial appointments, elevations, confirmations, resignations, retirements and deaths.

 

The Daily Journals are distributed by mail and hand delivery. The regular yearly subscription rate for each of The Daily Journals is $895 plus tax.

 

Most of the information published in The Daily Journals is available to subscribers online at www.dailyjournal.com.

 

Daily Commerce. Published since 1917, the Daily Commerce is based in Los Angeles and covers news of general interest, columns of interest to real estate investors and brokers, and information on distressed properties in Los Angeles County. The nature of the news coverage enhances the effectiveness of public notice advertising by distributing information about foreclosures to potential buyers. Features include default listings and probate sale notices. The Daily Commerce carries both public notice and commercial advertising. It is published each business day. A subscription includes online access to the Los Angeles and Ventura County foreclosure listings and public record database.

 

The Daily Recorder. The Daily Recorder, based in Sacramento, began operations in 1911. It is published each business day. In addition to general news items, it includes legal news and columns of interest to the Sacramento legal and real estate communities. It includes the Daily Appellate Report and carries commercial and public notice advertising. A subscription includes online access to Sacramento, Placer and El Dorado county foreclosure listings and public record database.

 

The Inter-City Express. The Inter-City Express (the “Express”) has been published since 1909. It covers general news of local interest and focuses its coverage on news about the real estate and legal communities in the Oakland/San Francisco area. The Express carries public notice advertising and is published each business day. A subscription includes online access to the Alameda, Contra Costa, Stanislaus, and San Francisco county foreclosure listing and public record database.

 

San Jose Post-Record. The San Jose Post-Record (the “Post-Record”) has been published since 1910. In addition to general news of local interest, the Post-Record focuses on legal and real estate news. It is published every business day and carries public notice advertising. A subscription includes online access to the Santa Clara and San Francisco county foreclosure listing and public record database.

 

Orange County Reporter. The Orange County Reporter (“Reporter”) has been an adjudicated newspaper of general circulation since 1922 in Orange County, California. In addition to general news of local interest, the Reporter publishes local and state legal, business and real estate news, and carries public notice advertising. The Reporter is published three days a week. A subscription includes online access to the Orange County foreclosure listings and public record database.

 

The Daily Transcript. The Daily Transcript is based in San Diego and published each business day. It reports general news items and San Diego commercial real estate, business and construction news. It has been an adjudicated newspaper of general circulation since 1909. It carries commercial and public notice advertising. A subscription includes online access to the San Diego County foreclosure listings and public record database.

 

Business Journal. The Business Journal, established in 1991, publishes news of general interest and provides coverage of the business and professional communities in Riverside County. It also carries public notice advertising and is published each business day. The subscription includes online access to the Riverside and San Bernardino County foreclosure listings and public record database.

 

The Record Reporter (Arizona). The Record Reporter has been in existence since 1914. In addition to general news of local interest, The Record Reporter, which is published three days a week, focuses on legal news and public record information and carries primarily public notice advertising. The subscription includes online access to the Maricopa and Pinal County public record database.

 

Information Services. The specialized information services offered by the Company have grown out of its newspaper operations or have evolved in response to requests of its newspaper subscribers.

 

The Company has several court rules services, including multi-volume, loose-leaf sets for state and federal courts in California. The Company updates these court rules on a monthly basis. In addition, the Company publishes single-volume rules for Los Angeles and San Diego counties.

 

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The Judicial Profiles service contains information concerning nearly all active judges in California. The Judicial Profiles include an interview-based article previously published in The Daily Journals and biographical data. Subscribers may purchase the ten-volume set for Southern California, the eight-volume set for Northern California or individual profiles online.

 

Other revenues are attributable to fees from attorneys taking continuing legal education tests published in The Daily Journals and online, and other miscellaneous fees including reprint services of articles published in The Daily Journals.

 

Journal Technologies

 

Journal Technologies provides case management software and related services to courts and other justice agencies.  Its operations constituted approximately 80% and 76% of the Company’s total revenues in fiscal years 2025 and 2024, respectively.  Journal Technologies earns revenues from license, maintenance and support fees paid by customers to use its software products; hosting services; consulting fees paid by customers for installation, implementation and training services; and fees generated by the use of secure websites through which the general public can pay traffic citations and e-file cases.  Journal Technologies has the following product solutions based on the Company’s core eSeries Framework™ technology:

 

eCourt®, eProsecutor™, eDefender™ and eSupervision™ (formerly eProbation™) ― browser-based case processing systems that can be used by courts and other justice agencies for all case types because the screens, data elements, business rules, work queues, searches and alerts are highly configurable. 

 

Journal Technologies offers other, complementary products including:

 

eFile-it™ ― a browser-based interface that allows attorneys and the general public to electronically file documents with the court.

 

ePay-it™ ― a service primarily for the online payment of traffic citations.  Users can pay traffic citations by credit card and get information on traffic school.

 

In addition, Journal Technologies also provides hosting services through AWS GovCloud for customers who choose to have it.

 

Almost all of Journal Technologies’ customers are government agencies, and most new software installation and licensing projects are subject to competitive bidding procedures. Accordingly, the ability of Journal Technologies to secure new customers is highly unpredictable. In addition, budget constraints, especially during stressful economic times, could force governmental agencies to defer or forgo consulting services or even to stop paying their annual software maintenance fees.

 

The Company’s revenues from Journal Technologies’ foreign customers were approximately $11.9 million in fiscal year 2025 and $6.2 million in fiscal year 2024.

 

Marketing

 

The Company actively promotes its individual newspapers and its multiple newspaper network as well as its other publications. The specialization of each publication creates both target subscribers and target advertisers. Subscribers are likely to be attracted because of the nature of the information carried by the particular publication, and likely advertisers are those interested in reaching such consumer groups. In marketing products, the Company also focuses on its ancillary products which can be of service to subscribers, such as its specialized information services.

 

The Company receives, on a non-exclusive basis, public notice advertising from a number of service providers. Such agencies ordinarily receive a commission of 15% to 25% on their sales of advertising in Company and other publications. Commercial advertising agencies also place advertising in Company publications and receive commissions for advertising sales.

 

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Journal Technologies’ staff includes employees who are focused on marketing with the intention of growing market share over time, via additional consulting projects and licensing of products. Most of Journal Technologies’ new projects come from a competitive bidding process, but it is nonetheless important to communicate the Company’s offerings to potential customers at trade shows and other channels; understanding what is possible can inform requirements and build confidence over the buying process.

 

Competition

 

Competition for readers and advertisers is very competitive, both from established publications and new entries into the market.  The Daily Journals face aggressive competition in Los Angeles and San Francisco.  All of the Company’s publications and products face strong competition from other publications and service companies.  Readers of specialized newspapers focus on the amount and quality of general and specialized news, amount and type of advertising, timely delivery and price. The Company designs its newspapers to fill niches in the news marketplace that are not covered as well by major metropolitan dailies. The in-depth news coverage which the Company's newspapers provide, along with general news coverage, attracts readers who, for personal or professional reasons, desire to keep abreast of topics to which a major newspaper cannot devote significant news space. Other newspapers do provide some of the same subject coverage, but the Company believes its coverage, particularly that of The Daily Journals, is more comprehensive. The Company believes that The Daily Journals are the most important newspapers serving California lawyers on a daily basis.

 

The Company's court rules publications face competition from case management systems and the courts themselves. Subscriptions to the single and multi-volume court rules continued to decline during fiscal year 2024 and 2025. The Company's Judicial Profile services have indirect competition because some of the same information is available through other sources, including the courts.

 

The newspaper industry continues to experience significant secular decline.  The Company believes the subscriptions to the Company’s publications and the amount of advertising will decline over the long term, and those trends will adversely impact the Company’s future revenues.

 

In attracting commercial advertisers, the Company competes with other newspapers and magazines, television, radio and other media, including electronic and online systems for employment-related classified advertising. Factors which may affect competition for advertisers are the cost for such advertising compared with other media, and the size and characteristics of the readership of the Company’s publications. Internet sites devoted to personnel recruitment have become significant competitors of our newspapers and websites for classified advertising.

 

In addition, there has been a steady consolidation of companies serving the legal marketplace, resulting in an ever-smaller group of companies placing display advertising. Consequently, retaining advertising revenues remains a challenge. To reduce costs, the Company has contracted with an outside advertising agency to conduct sales of its display advertising.

 

The Company competes with at least one significant competitor for public notice advertising revenue in each of its markets. Large metropolitan general interest newspapers typically do not carry a significant amount of legal advertising, although recently they too have solicited certain types of public notice advertising.

 

Remaining competitive requires periodic investment in technology to ensure modern patterns are followed; Journal Technologies has begun developing next-generation development patterns and practices to address technical debts that exist within current generation offerings.

 

As artificial intelligence (AI) is gaining widespread adoption, many of our competitors are rapidly incorporating AI capabilities into their offerings to maintain a technological advantage. We have already introduced AI features in some of our products, and to continue delivering value to our customers and outpacing the competition, we must further invest in these cutting-edge technologies.

 

Journal Technologies faces significant competition in the markets for case management software and related services for courts, prosecutors, and other justice agencies. These markets are characterized by a limited number of vendors competing for a finite number of large procurements. Customers frequently select vendors through formal competitive bidding processes and may impose mandatory requirements or strong preferences for certain capabilities, architectures, implementation approaches, prior experience, or vendor qualifications. If we are unable to compete successfully for new business, renewals, or expansions, our revenues, operating results, and growth prospects could be materially adversely affected.

 

In the court market, certain competitors have substantially greater scale, longer operating histories, and deeper penetration in particular jurisdictions and customer segments. Some competitors have long-standing experience with statewide implementations, while statewide deployments are a more recent strategic focus for us. Even where our technology and implementation approach are well-suited to complex deployments, prospective customers may perceive established vendors as a lower-risk choice based on historical presence or perceived execution “safety.” If we are unable to win and then deliver larger statewide projects on competitive terms and timelines, our future revenues, operating results, and long-term growth could be materially adversely affected.

 

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In the prosecutor market, we compete with small and mid-sized vendors that focus on higher volumes of smaller, more price-sensitive agencies. While our platform is well-established for larger prosecuting agencies and more complex operational environments, smaller offices may prefer lower-cost offerings even when those offerings provide fewer features or less configurability. If we are not successful in developing, pricing, and marketing simpler hosted solutions that can be deployed more quickly while meeting the needs of smaller agencies, we may be less able to win new customers and retain or expand within that segment, which could materially adversely affect our revenues and results of operations.

 

We also compete with specialized vendors in adjacent or niche justice verticals that may offer highly focused, turnkey solutions or adopt new technologies (including artificial intelligence-enabled capabilities) more quickly than we do. In addition, because we have finite development capacity and must prioritize among competing product and customer demands, we may be slower than competitors—particularly startups focused on a single problem area—to develop, integrate, and commercialize certain add-on capabilities, modules, or integrations that could otherwise represent incremental revenue opportunities. If competitors deliver such capabilities earlier, more effectively, or at lower cost, we may experience reduced win rates, lower expansion revenue, increased pricing pressure, or higher customer attrition, any of which could materially adversely affect our operating results.

 

Geopolitical developments, changes in trade policy, or related uncertainty may also affect procurement behavior in international markets. In certain jurisdictions, prospective customers may prefer local vendors or exhibit reluctance to contract with United States-based companies. If such preferences materially limit our ability to compete for international opportunities, our international growth strategy and future operating results could be adversely affected.

 

Employees

 

The Company had approximately 415 full-time employees and contractors and approximately 9 part-time employees as of September 30, 2025. The Company is not a party to any collective bargaining agreements. Certain benefits, including medical insurance, are provided to all full-time employees. Management considers its employee relations to be good.

 

Working Capital

 

The Company owns marketable securities that provide the Company with working capital in addition to its cash flow from operations, subject to the normal risks associated with owning securities. To a considerable extent, the Company also benefits from the fact that subscriptions and some licenses, maintenance and customer support are paid in advance.

 

In fiscal year 2024, the Company sold a portion of its marketable securities for approximately $40.6 million and used these proceeds and excess cash from operations to pay down the margin loan balance to $27.5 million as of September 30, 2024. In fiscal year 2025, no marketable securities were sold, but the margin loan principal balance was paid down by $5.5 million to $22.0 million as of September 30, 2025, using excess cash from operations.

 

The Company believes it has sufficient cash and marketable securities to support its operations for the foreseeable future.  If the Company’s overall cash needs exceed cash flow and its current working capital, the Company may still have the ability to borrow against its marketable securities on favorable terms, or it may attempt to secure additional financing, which may or may not be available on acceptable terms.

 

The Company extends unsecured credit to most of its advertising customers and some government agencies. The Company maintains a reserve account for estimated losses resulting from the inability of these customers to make required payments, but if the financial conditions of these customers were to deteriorate or the Company’s judgments about their abilities to pay are incorrect, additional allowances might be required, and the Company’s cash flows and results of operations could be materially affected.

 

Inflation

 

The Company has experienced the effects of inflation primarily through increases in costs of personnel. These costs have generally been offset by increased license, maintenance and support fees, which often contain a periodic cost-of-living adjustment.

 

The Company’s investment margin account has an interest rate that fluctuates based on the Federal Funds Rate plus 50 basis points with interest only payable monthly.  The interest rate as of September 30, 2025 was 4.75%. The Company’s interest expense on the margin account has decreased primarily due to the reduction to the investment margin account borrowings during fiscal year 2025.

 

Access to Our Information

 

The Company files annual, quarterly and current reports, proxy statements, and other information with the Securities and Exchange Commission (“SEC”). These filings are available on the SEC’s website at www.sec.gov. In addition, our SEC filings, as well as our Code of Ethics and other investor materials, are available free of charge through the Investor Relations section of our website at https://ir.dailyjournal.com/.

 

We will also provide copies of these filings, without charge, in electronic or paper form upon request to our Secretary at our principal executive offices. Information contained on, or accessible through, our websites is not incorporated by reference into this Annual Report unless expressly stated otherwise.

 

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Item 1A.  Risk Factors

 

The foregoing business discussion and the other information included in this Form 10-K should be read in conjunction with the following risks, trends and uncertainties, any of which, either individually or in the aggregate, could materially and adversely affect our business, operating results or financial condition.

 

Risks Associated with the Maturation of Artificial Intelligence (AI) Technologies

 

The Company’s business may be materially affected--either positively or negatively--by the emergence of disruptive new technologies or approaches enabled by the rapid pace of innovation unfolding in the artificial intelligence space.

 

Worthwhile new technologies capitalize on eliminating old inefficiencies. Just as the emergence and maturation of the Internet and smartphone technologies had profound implications across many industries, AI has the potential to significantly change key factors related to the Traditional Business, Journal Technologies, and companies in the Company’s holdings of marketable securities.

 

For the Traditional Business, there may be new and additional opportunities to automate or reduce the cost of content creation and doing business, or allow monetization of existing and/or historic content in new ways. Likewise, AI may negatively impact the business in ways that will prove difficult to circumvent.

 

For Journal Technologies, use of AI may fundamentally alter or automate key customer workflows over time, obviating the need for its technology. AI will likely also create new and better ways for customers to achieve their mandates, of which the Company is positioning to play a valuable role. The Company is allocating resources to pursue these opportunities, through in-house engineering, and may also do so through partnerships, or mergers and acquisitions. Whether it will be successful is uncertain.

 

The process and approach to engineering software itself may change in notable ways, and this could impact the underlying business model of Journal Technologies. Monitoring potential impacts of AI on companies in the marketable securities portfolio will also require ongoing attention.

 

Mitigating risk and capitalizing on potential opportunity requires active engagement. The Company’s challenge is to find and exploit opportunities to ensure change precipitated by AI provides tailwinds and not headwinds, and to do so in a way that is neither too slow, nor premature.

 

Risks Associated with the Traditional Business

 

Changes in the legal requirement to publish public notice advertising or in the legal ability of our newspapers to publish those notices would have a significant adverse impact on the Traditional Business.

 

From time to time, the legislatures in California and Arizona (and elsewhere) have considered and/or implemented various proposals that would result in the elimination or reduction of the amount of public notice advertising in printed newspapers required by statute. These proposals typically focus on the availability of alternative means of providing public notices, such as via the Internet. Some proposals also question the need for public notices at all. As noted above, some of these proposals have already become law. To the extent more of these proposals are adopted, particularly in California and Arizona, they could materially adversely affect the revenues of the Traditional Business.

 

In September 2023, the California legislature passed a bill (AB542) effective January 1, 2024 that set in motion a decline in legal advertising revenue of approximately $14,000 during fiscal year 2024 by reducing the number of required publication days in a newspaper for self-service storage facility lien sales.  Another bill (AB721) relative to school budget hearing notices was also passed in September 2023. Effective January 1, 2027, these notices are to be moved to posting on the school district’s website in lieu of being published in a newspaper.

 

In addition, if the adjudication, which is what gives publishers the legal ability to publish public notice advertising, of one or more of the Company’s newspapers were challenged and revoked, those newspapers would no longer be eligible to publish public notice advertising, and it could materially affect the revenues of the Traditional Business.

 

The Traditional Business faces strong competition in each of its markets.

 

Competition for readers and advertisers is very competitive, both from established publications and from new entrants into the market.  The Daily Journals face aggressive competition.  The Company’s court rules publications face competition in both Northern and Southern California from document management programs, online court rules services, and the courts themselves. 

 

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The Traditional Business also competes with serious competitors for public notice advertising in all of its markets. As the amount of this advertising has decreased due to the reduction in the number of foreclosures and other things discussed above, the competition to publish the remaining public notices has intensified and may result in a further decline in the Traditional Business’ public notice advertising revenues.

 

The Traditional Business continues to experience challenges in maintaining its commercial advertising and circulation revenues, particularly due to the growth of Internet sites.

 

         Internet sites devoted to recruitment have become significant competitors of our newspapers and websites for classified advertising. In addition, there has been a steady consolidation of companies serving the legal marketplace, resulting in an ever-smaller group of companies placing display advertising. Furthermore, newspapers like ours have been struggling to compete for display advertising generally, given the many other forums (including Internet sites) that compete for advertising dollars. These trends are expected to continue and adversely affect the Traditional Business.

 

During fiscal year 2025, the Company reported an overall decrease of $0.2 million (4%) in circulation revenue. This reduction was mainly driven by a $0.3 million decline in paper circulation revenue, while digital circulation revenue saw a partial offset with a $0.1 million increase. The decline is largely attributed to lower revenue per subscriber, a result of implementing alternative pricing strategies to support subscriber retention. This development further reflects the ongoing challenges within the media industry.

 

The Traditional Business is exposed to risks associated with fluctuations in postage and paper costs.

 

After personnel costs, postage and paper costs are typically the Traditional Business next two largest expenses.  An adequate supply of newsprint and other paper is important to the operations of the Traditional Business.  The Company currently does not have a contract with any paper supplier, and in the past, shortages of newsprint sometimes resulted in higher prices.  Recently, there have been consolidations of newsprint suppliers, and paper prices may fluctuate substantially in the future or otherwise be affected by tariffs and/or changes to trade agreements.

 

The Traditional Business uses the U.S. Postal Service for distribution of a majority of its newspapers and products. Postal rates are dependent on the operating efficiency of the U.S. Postal Service and on legislative mandates imposed upon the U.S. Postal Service. During the past several years, postal rates have increased. Postal rates and fees may increase more in the future. Further, we may not be able to pass on increases in paper and postage costs to our customers.

 

We expect the Traditional Business to continue to suffer from significant secular decline.

 

The newspaper industry continues to experience significant secular decline. The Company believes the long-term trend will be in the direction of fewer subscriptions to the Daily Journals and court rule publications, and that trend will certainly impact the Company’s future revenues.

 

Risks Associated with Journal Technologies

 

The success of Journal Technologies depends in large part on the technological update and upgrade of its software products.

 

Journal Technologies’ success depends on the continued improvement of its products, and the costs to update and upgrade those products consistently represent a large portion of Journal Technologies’ expenses. There are many uncertainties in the process of courts and other justice agencies migrating to newer case management systems, including whether Journal Technologies’ versions of these systems will find general acceptance and whether the modification of such systems can be done in a cost-effective manner. Under the relevant accounting guidance, the costs to update and upgrade Journal Technologies’ products are generally expensed as incurred and will impact earnings at least through the foreseeable future. The Company continues to invest in the development of new and next-generation technology as part of its broader product strategy. Likewise, investment is required to improve existing technology to simplify the process of configuring, managing and updating systems (and related obligations including documentation, user experience improvements, and more). These investments are being made to both improve win rates and maximize the efficiency of building and deploying customer systems. The intention is to improve profitability, but if foundational development is not done effectively, it may not yield the expected competitive advantages or intended efficiencies.

 

Journal Technologies faces significant competition from other case management software vendors.

 

There is significant competition among a limited number of companies to provide services and software to courts and other justice agencies, and some of these companies are much larger and have greater access to capital and other resources than Journal Technologies. Normally, the vendor is selected through a bidding process, and often the customers will express a specific preference for, or effectively require, larger vendors having completed similar types of projects. An inability to successfully compete in this difficult market could materially affect the earnings of Journal Technologies. Likewise, specialized vendors in specific vertical markets may develop or continue to enhance specific solutions for certain customer types that are sufficiently focused and turnkey, or leverage disruptive new approaches, that Journal Technologies will struggle to compete with them.  

 

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The customers of Journal Technologies are public sector entities, thus creating unique issues and risks.

 

Almost all of the customers of Journal Technologies are courts, justice agencies, and other government entities. Accordingly, we face unique risks associated with governmental budget constraints, especially during challenging economic times, which could force government entities to defer or forego consulting services or even stop paying their annual software license and maintenance fees. In addition, economic conditions could affect our ability to win new customers as a result of heightened competition for new business following a decrease in new initiatives available for bidding. We encounter risks related to a longer and more complicated sales cycle than exists for commercial customers, political issues related to resource allocation, administration turnover and preferences for internal case management solutions or for a particular vendor, complicated bidding procedures, and fluctuations in the demand for information technology products and services. Project success frequently involves dependencies on customers or third-party vendors/partners completing their responsibilities in an organized, workmanlike, and timely fashion.

 

Journal Technologies generally recognizes revenues for software installations only upon completion of the applicable services and customer acceptance of the software system.

 

Although the company has transitioned to a milestone-based system in recent years, installation fees have traditionally been payable only when the customer confirms satisfaction with the installed system and it is operational, or upon achievement of designated milestones.

 

Accordingly, for these projects we do not recognize revenues for such installation services or for most other consulting services until after the services have been performed and accepted. There are significant risks associated with our ability to complete our services to the satisfaction of our customers and to fulfill the requirements that entitle us to be paid. An inability to realize payment for services performed could materially affect the earnings of Journal Technologies. Additional costs may not be recoverable for historic projects with flexible scopes or scopes that are subject to interpretation, or projects that require adjustments due to technology changes that occur due to the passage of time.

 

The end-of-life process for legacy products and customer transitions to new products must be handled effectively.

 

Disruptions that affect long-standing customer relationships can have negative reputational implications for Journal Technologies and can affect its earnings.

 

Risks Associated with Our Holdings of Marketable Securities

 

A large portion of the Company’s assets are held in publicly traded securities, and the prices of those securities may decline.

 

As of September 30, 2025, the Company held marketable securities worth approximately $493.0 million, with a cumulative unrealized gain of $353.9 million for financial statement purposes.  While this portfolio has enabled the Company to borrow on favorable terms for acquisitions and to better compete for case management software opportunities that are usually limited to “large” firms, it is unusual for a public company to invest a significant amount of its available cash in the marketable securities of other public companies.  The value of these securities could decline, which would adversely affect net income and shareholders’ equity.

 

As of September 30, 2025, the Company’s holdings of marketable securities were concentrated in just six companies. Accordingly, a significant decline in the market value of one or more of the Company’s holdings may not be offset by hypothetically better performance of other holdings. This concentration of risk may result in a pronounced effect on net income and shareholders’ equity.

 

The irreplaceable manager of our marketable securities portfolio passed away in November 2023.

 

Charles T. Munger, the legendary investor of Berkshire Hathaway fame, was a director of the Company for many decades, and long managed the Company’s holdings of marketable securities. Mr. Munger passed away on November 28, 2023. Although the Board has been working to ensure that the portfolio remains well-managed, it’s impossible to ever replace Mr. Munger. Given the loss of Mr. Munger, the Company does not expect the future financial performance of its marketable securities portfolio to rival its past performance. Henceforth, the Company expects to manage and harvest its marketable securities portfolio primarily to support the further development of Journal Technologies and its business. The Company does not anticipate initiating new investments in public common stocks unrelated to its core businesses.

 

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The Company may be subject to fluctuations in foreign currency rates for marketable securities that are not denominated in the United States Dollar.

 

At times, the Company may hold marketable securities denominated in currencies other than the United States Dollar.  When it does, the Company may be at risk for significant fluctuations in the applicable foreign currency exchange rates, which would affect the profitability of such marketable securities.

 

General Corporate Risks

 

Changes in accounting guidance could have a significant effect on the Company’s reported financial results.

 

Preparing consolidated financial statements requires the Company’s management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses. These estimates and assumptions are affected by management’s application of accounting policies and the prevailing accounting guidance. The Company considers fair value measurement and disclosures, revenue recognition, accounting for software costs and income taxes to be critical accounting policies and estimates. A change in the accounting guidance with respect to one or more of these areas could materially affect the Company’s reported financial results.

 

As noted above, beginning in fiscal year 2019, changes in unrealized gains (losses) on marketable securities are included in the Company’s net income (loss) and thus may have a significant impact on the Company’s reported results depending on the fluctuations of the prices of the marketable securities owned by the Company.

 

A third party has initiated a campaign against the Company that may include a proxy contest and litigation, which could be expensive and further divert the attention of management and the Board from the Company’s operations.

 

In the summer of 2025, a third-party investment adviser sent a series of letters to the Company alleging—incorrectly—that we should be capitalizing rather than expensing Journal Technologies’ software development costs. This third party resurfaced with even more letters in December 2025 and has threatened, among other things, to initiate a proxy contest to replace members of the Board unless we engage with him and enter into a “cooperation agreement.”  Responding to third parties like this can be costly and time-consuming, may divert the attention of management and our Board from executing on our strategy, and could require us to incur significant legal, advisory, and other professional fees. A public fight could also create uncertainty among our employees and customers, harm our reputation, disrupt our operations, and increase volatility in our stock price. Any of these factors could materially adversely affect our business and financial results, even if the underlying accounting allegations have no merit.

 

We cannot be sure that customer information and systems are fully protected against security breaches. 

 

Journal Technologies’ software processes and stores customer information in the conduct of its business, including in some cases by utilizing cloud-based systems supplied by third-party vendors.  Despite our efforts to maintain up-to-date security controls, it is possible that our system could be improperly used to access or misappropriate customer systems or information, including personally identifiable or other confidential information.  A material security breach of this nature could harm our reputation, cause us to lose current and potential customers, require us to allocate more resources to information security, or subject us or our customers to liability, resulting in increased costs, loss of revenue, or both.  The Traditional Business also operates certain websites that process and, in certain cases, store customer information.  Our insurance may not cover all of the costs that we may incur as a result of a material security breach.    

 

Risks Related to Our Internal Control Over Financial Reporting

 

The Company has identified a material weakness in its internal control over financial reporting related primarily to segregation of duties and access controls that originated in prior periods. The Company’s internal control over financial reporting is designed to provide management and the Board of Directors with reasonable assurance regarding the preparation and fair presentation of the Company’s consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). Although management has implemented significant improvements and enhanced controls during fiscal year 2025, including increased finance personnel, enhanced review procedures, and continued enterprise resource planning modernization efforts, the Company has not yet been able to fully remediate this material weakness as of September 30, 2025. Certain controls were newly implemented or significantly enhanced during fiscal year 2025 and, as a result, have not operated for a sufficient period of time to allow management to conclude that the material weakness has been fully remediated.

 

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The existence of a material weakness means that there is a reasonable possibility that a material misstatement of the Company’s financial statements will not be prevented or detected on a timely basis. If the Company is unable to remediate this material weakness or any future deficiencies in internal control over financial reporting in a timely manner, the Company’s ability to record, process, summarize, and report financial information accurately and within the time periods specified in the SEC’s rules and forms could be adversely affected. This could negatively impact investor confidence in the Company’s reported financial information, the market price and trading liquidity of the Company’s common stock, and could subject the Company to increased scrutiny by regulators, litigation, or other adverse consequences, which could materially and adversely affect the Company’s business, financial condition, and results of operations.

 

At the request of the Board of Directors, the Company engaged an independent third-party advisory firm, to assist management in evaluating and enhancing the Company’s internal control over financial reporting. Management believes that substantial progress has been made in addressing the underlying causes of the material weakness and intends to continue remediation efforts and the assessment of operating effectiveness during fiscal year 2026. However, there can be no assurance that these efforts will be sufficient to fully remediate the material weakness or that additional deficiencies will not be identified in the future.

 

Item 1B.  Unresolved Staff Comments

 

None.

 

 

Item 1C.  Cybersecurity

 

The Company is committed to safeguarding its information systems and data against evolving cybersecurity threats. With operations spanning traditional publishing and the technology-driven Journal Technologies segment, the Company prioritizes robust cybersecurity measures to protect its operations, customers, and stakeholders. The Company employs a comprehensive cybersecurity risk management framework to identify, assess, and address risks that could impact business operations, sensitive client data, and the Company’s portfolio of marketable securities. This framework incorporates:

 

1.

Technology Solutions: Prioritizing the security of Journal Technologies' court and justice software systems, which manage critical data and workflows.

2.

Traditional Business: Protecting the systems and data supporting the Company’s publishing and printing operations.

3.

Financial Portfolio: Securing systems and processes related to the management of the Company’s substantial marketable securities portfolio.
 

Governance and Oversight

 

The Company’s Board of Directors as a whole supervises the Company’s cybersecurity strategy and regularly reviews cybersecurity risks, incident reports, and risk mitigation initiatives.

 

Journal Technologies has a Chief Information Security Office (CISO) made up of internal cybersecurity practitioners who evaluate, identify, and mitigate significant risks posed by cybersecurity threats, with a focus on safeguarding the Company’s technology, data, and intellectual property.

 

In August 2024, Journal Technologies hired a Director of Security Operations to lead the CISO team. With extensive IT leadership experience and a Certified Information Systems Security Professional (CISSP) credential, the Director oversees security strategies, incident response plans, and risk assessments. Reporting directly to senior management, the Director works closely with internal teams and external experts to align Journal Technologies’ practices with industry standards.

 

The Company has also established a dedicated Cybersecurity Working Group, with members from both the Traditional Business and Journal Technologies, to collaborate on threat intelligence, incident response strategies, policy alignment, and security technology advancements. This partnership ensures both entities remain proactive in addressing evolving threats and benefit from shared expertise to implement coordinated security measures. The Company’s senior management works closely with the CISO and the Cybersecurity Working Group to identify matters requiring the attention of the Board of Directors.

 

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Cybersecurity Practices and Safeguards

 

The Company uses a multi-layered approach to cybersecurity, including:

 

 

●

Threat Detection and Response: The Company employs enterprise security systems as the backbone of a defense in depth (DiD) strategy, such as patch management, intrusion detection, and network segmentation. A managed detection and response (MDR) solution from a world-class security company unifies our antivirus/malware (NGAV), endpoint detection and response (EDR), cyber threat intelligence, managed threat hunting capabilities, and security hygiene.

 

 

●

Employee Training and Awareness: The Company provides regular cybersecurity training for employees to enhance awareness of common threats, such as phishing and ransomware. All Journal Technologies employees undergo annual CJIS training and certification.

 

 

●

Risk Register: The Company maintains a central Risk Register as part of its cybersecurity risk management framework. This Risk Register identifies risks and their potential impacts, mitigation strategies, and ongoing monitoring efforts.

 

 

●

Third-Party Risk Management: The Company evaluates third-party vendors prior to onboarding to ensure they have industry standard best practices in place and, when applicable, verified by an external audit firm. The Company monitors third-party providers for breaches or other cybersecurity events and annually review each vendor’s SOC 2 audit reports.

 

 

●

Incident Response Planning: The Company maintains a formalized incident response (IR) plan to address and remediate cybersecurity incidents. The plan defines roles and responsibilities and includes runbooks for likely scenarios. The Company performs testing of the IR plan at least annually with the results reported to senior management.

 

 

●

Certifications: Several of the Company’s security personnel on the CISO team have and maintain CISSP, GCIH (GIAC Certified Incident Handler) and OSCP (Offensive Security Certified Professional) certifications.

 

 

●

Business Continuity: The Traditional Business and Journal Technologies have each implemented a Business Continuity Plan and Disaster Recovery (BCP/DR) with procedures aimed at minimizing downtime and facilitating recovery of both internal and customer assets in the event of a service disruption. The plan includes clearly defined roles, step-by-step recovery processes, and prioritized action plans to address various scenarios, such as natural disasters, cyber incidents, and hardware failures. We regularly test and update our BCP/DRs.

 

 

●

Other Measures: The Company uses other measures to protect the Company and its employees from cyberattacks including:
 

○

Enforcing multi-factor authentication (MFA) for all systems
 

○

Deploying anti-phishing solutions to detect and block suspicious emails
 

○

Using single sign-on (SSO) solutions integrated with secure identity providers
 

○

Simulating phishing attacks to measure awareness and improve training programs
 

○

Implementing Security Information and Event Management (SIEM) systems for continuous monitoring and logging.

 

15
 

 

Incident Reporting and Disclosure

 

The Company adheres to strict protocols for evaluating and reporting cybersecurity incidents. Any incidents determined to have a material impact—assessed based on financial, operational, or reputational factors—are raised with the Board of Directors and, if necessary, disclosed in accordance with regulatory requirements.

 

Item 2.  Properties

 

The main Los Angeles property is comprised of a two-story, 34,000 square foot building constructed in 1990, which is occupied by the Company. Approximately 75% of the building is devoted to office space and the remainder to printing and production equipment and facilities. In 2003, the Company finished building an adjacent 37,000 square foot building and parking facilities on properties it acquired in 1996 and 1998. This building provides additional office, production and storage space. Since so many Journal Technologies employees are working remotely from home post-COVID or at clients’ sites, the Company prefers to consolidate the two offices into one and will continue to seek to either sell or lease out the adjacent building.

 

In November 2015, the Company purchased a 30,700 square foot office building constructed in 1998 on approximately 3.6 acres in Logan, Utah that had been previously leased for Journal Technologies. This office is also currently underutilized and, therefore, a lease to a third party or other approach may be considered at some point in the future.

 

Item 3.  Legal Proceedings

 

From time to time, the Company is subject to litigation arising in the normal course of its business. While it is not possible to predict the results of such litigation, management does not believe the ultimate outcome of these types of matters will have a material adverse effect on the Company’s financial position or results of operations or cash flows.

 

Item 4.  Mine Safety Disclosures

 

Not applicable.

 

16
 

 

Part II

 

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

Market Information

 

Our common stock is listed on the NASDAQ Capital Market under the trading symbol “DJCO”.         

 

The following table sets forth the sales prices of the Company’s common stock for the periods indicated. Quotations are as reported by the NASDAQ Capital Market.

 

   

High

    

Low

  

Fiscal year 2025

                

Quarter ended December 31, 2024

   $ 602.00     $ 463.00  

Quarter ended March 31, 2025

     596.60       370.00  

Quarter ended June 30, 2025

     447.02       359.34  

Quarter ended September 30, 2025

     502.30       384.02  
                 

Fiscal year 2024

                

Quarter ended December 31, 2023

   $ 357.34     $ 286.05  

Quarter ended March 31, 2024

     402.95       309.22  

Quarter ended June 30, 2024

     394.50       333.29  

Quarter ended September 30, 2024

     512.49       387.00  

 

Stockholders         

 

As of December 16, 2025, there were approximately 266 holders of record of the Company’s common stock, and the last trade was at $519.51 per share.

 

Additional information called for by this item is incorporated herein by reference to the following sections of this Report: Note 7 “Stock-Based Compensation” of the Notes to Consolidated Financial Statements included in Item 8; and Item 12 “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

 

Dividend Policy          

 

The Company did not declare or pay any dividends during fiscal years 2025 or 2024. A determination by the Company whether or not to pay dividends in the future will depend on numerous factors, including the Company’s earnings, cash flow, financial condition, capital requirements, future prospects, acquisition opportunities, and other relevant factors. The Board of Directors does not expect that the Company will pay any dividends or other distributions to shareholders in the foreseeable future.

 

Sales of Unregistered Securities

 

None.

 

Issuer Purchases of Equity Securities

 

From time to time, the Company has repurchased shares of its common stock and may do so in the future. The Company maintains a common stock repurchase program that was implemented in 1987 in combination with the Company’s Management Incentive Plan. See Note 2 of Notes to Consolidated Financial Statements for more information. The Company’s stock repurchase program remains in effect, but the Company did not repurchase any shares during fiscal years 2025 and 2024.

 

Item 6.  [Reserved]

 

17
 

 

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Results of Operations

 

The Company continues to operate as two different businesses: (1) The Traditional Business, being the business of newspaper publishing and related services that the Company had before 1999 when it purchased a software development company, and (2) Journal Technologies, Inc. (“Journal Technologies”), a wholly-owned subsidiary which supplies case management software systems and related products to courts, prosecutor and public defender offices, probation departments and other justice agencies, including administrative law organizations, city and county governments and bar associations. These organizations use the Journal Technologies family of products to help manage cases and information electronically, to interface with other critical justice partners and to extend electronic services to the public, including e-filing and a website to pay traffic citations and fees online. These products are licensed or subscribed to in approximately 37 states and internationally.

 

Reportable Segments

 

The Company’s Traditional Business is one reportable segment and the other is Journal Technologies which includes Journal Technologies, Inc. and Journal Technologies (Canada) Inc. All inter-segment transactions were eliminated. Additional details about each of the reportable segments and the Company’s corporate income and expenses are set forth below:

 

Overall Financial Results (in thousands)

                                                          

For the twelve months ended September 30

                                                          
   

Reportable Segments

                                  
   

Traditional Business

    

Journal Technologies

    

Corporate

    

Total

  
   

2025

    

2024

    

2025

    

2024

    

2025

    

2024

    

2025

    

2024

  

Revenues

                                                                

Advertising

   $ 10,081     $ 9,325     $ —     $ —     $ —     $ —     $ 10,081     $ 9,325  

Circulation

     4,269       4,462       —       —       —       —       4,269       4,462  

Advertising service fees and other

     3,412       3,039       —       —       —       —       3,412       3,039  

Licensing and maintenance fees

     —       —       31,720       28,265       —       —       31,720       28,265  

Consulting fees

     —       —       22,735       15,086       —       —       22,735       15,086  

Other public service fees

     —       —       15,483       9,754       —       —       15,483       9,754  

Total operating revenues

     17,762       16,826       69,938       53,105       —       —       87,700       69,931  

Operating expenses

                                                                

Personnel

     10,467       9,492       44,032       36,998       2,967       395       57,466       46,885  

Other segment items*

     7,460       5,360       13,246       13,616       —       —       20,706       18,976  

Total operating expenses

     17,927       14,852       57,278       50,614       2,967       395       78,172       65,861  

Income from operations

     (165 )     1,974       12,660       2,491       (2,967 )     —       9,528       4,070  

Dividends and interest income

     —       —       —       —       7,459       7,102       7,459       7,102  

Interest expense

     —       —       —       —       (1,381 )     (3,087 )     (1,381 )     (3,087 )

Net realized and unrealized gains on marketable securities

     —       —       —       —       134,304       96,142       134,304       96,142  

Other

     —       —       —       —       177       51       177       51  

Pretax income

     (165 )     1,974       12,660       2,491       137,592       100,208       150,087       104,278  

Income tax benefit (expense)

     180       (395 )     (3,665 )     (735 )     (34,465 )     (25,035 )     (37,950 )     (26,165 )

Net income

   $ 15     $ 1,579     $ 8,995     $ 1,756     $ 103,127     $ 75,173     $ 112,137     $ 78,113  

 

* Other segment items within net income include rental income, net unrealized gains on non-qualified compensation plan, interest expense on note payable collateralized by real estate, decrease in fair value of derivative asset, agency commissions, outside services, postage and delivery expenses, newsprint and printing expenses, depreciation and amortization, equipment maintenance and software, credit card merchant discount fees, rent expenses, accounting and legal fees, and other general and administrative expenses.

 

18
 

 

Comparison of the fiscal year ended September 30, 2025 to the fiscal year ended September 30, 2024

 

Consolidated Financials Comparison

 

Consolidated revenues were $87.7 million and $69.9 million for fiscal years 2025 and 2024, respectively. This increase of $17.8 million (25%) was primarily from increases in (i) Journal Technologies’ consulting fees of $7.6 million, other public service fees of $5.7 million, and license and maintenance fees of $3.5 million, and (ii) the Traditional Business’ advertising revenues of $0.7 million.

 

Approximately 80% of our revenues during fiscal years 2025 and 2024 were derived from Journal Technologies.  In addition, our revenues during fiscal year 2025 were primarily from the United States, with approximately $10.0 million (11%) from foreign countries.  Almost all of Journal Technologies’ revenues are from governmental agencies.  

 

Consolidated operating expenses increased by $12.3 million (19%) to $78.1 million from $65.9 million. Total salaries and employee benefits increased by $3.4 million (7%) to $50.6 million from $47.2 million primarily due to annual salary adjustments and the hiring of additional staff members to strengthen operational efficiencies, conduct product development and address technical debt, and bolster teams working on our installation projects. Outside services increased by $0.9 million (13%) to $8.1 million from $7.2 million mainly because of additional contractor services and increased third-party hosting fees which were billed to clients. Accounting and legal fees increased by $0.4 million (36%) to $1.4 million from $1.0 million primarily resulting from increased accounting advisory and legal fees primarily associated with the remediation of material weaknesses in our internal controls.

 

Our other income, net of expenses, rose by $40.4 million (40%) to $140.6 million from $100.2 million in the previous fiscal year. This increase was primarily driven by unrealized gains on marketable securities, totaling $134.3 million compared to $96.1 million, which included realized gains of $14.3 million, as well as a reduction in interest expense by $1.7 million (55%) to $1.4 million from $3.1 million, after our repayment of $5.5 million against the outstanding balance during the fiscal year ended September 30, 2025.  

 

During fiscal year 2025, our consolidated pretax income was $150.1 million, as compared to $104.3 million in the prior fiscal year.  Consolidated net income was $112.1 million ($81.41 per both basic and diluted shares, respectively) for fiscal year 2025, as compared with $78.1 million ($56.73 per share) in the prior fiscal year.

 

As of September 30, 2025, the aggregate fair market value of the Company’s marketable securities was $493.0 million. These securities had approximately $353.9 million of cumulative unrealized gains before taxes of $91.4 million.  Most of the unrealized gains were in the common stocks of three U.S. financial institutions and one foreign manufacturer.

 

Taxes

         

During fiscal year 2025, the Company recorded an income tax provision of $38.0 million on pretax income of $150.1 million. The income tax provision consisted of tax expense of $34.3 million on unrealized gains on marketable securities, and $4.2 million on operating income, partially offset by a tax benefit of $0.5 million for the dividends received deduction and other permanent differences.  Consequently, the overall effective tax rate for fiscal year 2025 was 25.3%, after including the taxes on the unrealized gains on marketable securities.

 

During fiscal year 2024, the Company recorded an income tax provision of $26.2 million on pretax income of $104.3 million.   The income tax provision consisted of tax expense of $24.5 million on the realized and unrealized gains on marketable securities, and $2.2 million on operating income, partially offset by a tax benefit of $0.5 million for the dividends received deduction and other permanent differences.  Consequently, the overall effective tax rate for fiscal year 2024 was 25.1%, after including the taxes on the realized and unrealized gains on marketable securities.

 

The Company files consolidated federal income tax returns, with its domestic subsidiary, in the United States and with various state jurisdictions and is no longer subject to examinations for fiscal years before fiscal year 2020 with regard to federal income taxes and fiscal year 2019 for state income taxes.  The Canadian subsidiary files a federal and provincial tax return in Canada.

 

Journal Technologies

 

During fiscal year 2025, Journal Technologies’ business segment pretax income increased by $10.2 million (408%) to $12.7 million from $2.5 million in the prior fiscal year primarily resulting from increased revenue of $16.8 million, which were partially offset by increased operating expenses of $6.7 million.

 

19
 

 

Revenues increased by $16.8 million (32%) to $69.9 million from $53.1 million in the prior fiscal year. Licensing and maintenance fees increased by $3.5 million (12%) to $31.7 million from $28.3 million. Consulting fees increased by $7.6 million (51%) to $22.7 million from $15.1 million mainly due to timing of deferred revenue recognition and more project go-lives.  Other public service fees increased by $5.7 million (59%) to $15.5 million from $9.8 million primarily because of increased e-filing fee revenues. 

 

Deferred consulting fees primarily represent advances from customers of Journal Technologies for installation services and are recognized upon final project go-lives. Deferred revenues on license and maintenance contracts represent prepayments of annual license and maintenance fees and are recognized ratably over the maintenance periods.

 

Operating expenses increased by $6.7 million (13%) to $57.3 million from $50.6 million primarily due to: (i) increased personnel costs because of annual salary adjustments, (ii) additional contractor services and the hiring of additional staff members to strengthen operational efficiencies, conduct product development and address technical debt, and bolster teams working on the Company’s installation projects, and (iii) increased third-party hosting fees which were billed to clients.

 

Traditional Business

 

The Traditional Business’ pretax income decreased by $2.1 million (108%) to a pretax loss of $0.2 million from pretax income of $2.0 million in the prior fiscal year. This decrease was primarily resulting from an increase in long-term supplemental compensation accrual, increased personnel costs, additional merchant discount fees, and promotional expenses.

 

During fiscal year 2025, the Traditional Business had total revenues of $17.8 million, up from $16.8 million in the prior fiscal year. Advertising revenues increased by $0.8 million (8%) to $10.1 million from $9.3 million, primarily resulting from increased commercial advertising revenues of $0.5 million, legal notice advertising revenues of $0.2 million, and trustee sale notice advertising revenues of $0.1 million.

 

Trustee sale notices are very much dependent on the number of California and Arizona foreclosures for which public notice advertising is required by law. The number of foreclosure notices published by the Company during fiscal year 2025 remained consistent as compared to the prior fiscal year. The Company’s smaller newspapers, those other than the Los Angeles and San Francisco Daily Journals (“The Daily Journals”), accounted for approximately 84% of the total public notice advertising revenues during fiscal year 2025.

 

The Daily Journals accounted for approximately 94% of the Traditional Business’ total circulation revenues, which decreased by $0.2 million (4%) to $4.3 million from $4.5 million. The court rule and judicial profile services generated approximately 4% of the total circulation revenues, with the other newspapers and services accounting for the balance. Advertising service fees and other are Traditional Business segment revenues, which include primarily (i) agency commissions received from outside newspapers in which the advertising is placed, and (ii) fees generated when filing notices with government agencies.

 

The Traditional Business segment operating expenses increased by $3.0 million (21%) to $17.9 million from $14.9 million, primarily resulting from increased personnel costs, merchant discount fees, additional promotional expenses, and accounting advisory fees primarily associated with the remediation of material weaknesses in our internal controls.

 

Liquidity and Capital Resources

 

During fiscal year 2025, the Company's cash and cash equivalents, restricted cash, and marketable securities increased by $142.0 million, reflecting net pretax unrealized gains on marketable securities of $134.3 million. The investments in marketable securities, which had an adjusted cost basis of approximately $139.1 million and a market value of approximately $493.0 million as of September 30, 2025, generated approximately $7.4 million in dividends and interest income during fiscal year 2025. These securities had approximately $353.9 million of cumulative unrealized gains before estimated taxes of $91.4 million which will become due only when we sell securities in which there is unrealized appreciation.

 

No marketable securities were sold during fiscal year 2025. The margin loan principal balance was paid down by $5.5 million using excess cash from operations. In fiscal year 2024, marketable securities totaling approximately $40.6 million were sold to pay down the margin loan balance by $47.5 million. The loan balance was $22 million and $27.5 million as of September 30, 2025, and 2024, respectively.

 

As of September 30, 2025, we had working capital of $500.4 million, including the liabilities for deferred subscriptions, deferred consulting fees and deferred maintenance agreements and others of $18.7 million.

 

20
 

 

We believe that we will be able to fund our operations for the foreseeable future through our cash flows from operations and our current working capital, and we expect that any such cash flows will be invested in our businesses. We may or may not have the ability to borrow additional amounts against our marketable securities and, among other possibilities, we may be required to consider selling securities to generate cash if needed to fund ongoing operations. The amount available for borrowing is based on the market value of our investment portfolio and fluctuates depending on the value of the underlying securities. In addition, we could be subject to margin calls should the value of the investments decrease significantly.

 

Cash Flows

 

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below (in thousands):

 

   

September 30, 2025

    

September 30, 2024

    

Change

  

Net cash provided by (used in):

                        

Operating activities

   $ 13,333     $ (89 )   $ 13,422  

Investing activities

     (8 )     40,534       (40,542 )

Financing activities

     (5,664 )     (47,658 )     41,994  

Net increase (decrease) in cash and cash equivalents

   $ 7,661     $ (7,213 )   $ 14,874  

 

Operating Activities

 

In fiscal year 2025, net cash provided by operating activities consisted of net income of $112.1 million, less non-cash items of $99.2 million and cash used for working capital of $0.4 million. Adjustments for non-cash items consist primarily of $134.3 million in unrealized gains on our marketable securities, $34.7 million change in our deferred tax provision, $0.3 million of depreciation and amortization expense, and $0.1 million of stock-based compensation expense. The decrease in cash from changes in working capital is primarily due to a $1.8 million increase in accounts receivable, a $0.2 million increase in prepaid expenses and other assets, a $0.9 million increase in income tax payable, and a $5.4 million decrease in deferred revenue, including deferred subscription, consulting fees, and maintenance agreements, partially offset by a $1.0 million increase in accounts payable and a $5.9 million increase in accrued liabilities, including non-qualified deferred compensation.

 

In fiscal year 2024, net cash used in operating activities totaled $0.1 million, consisting of net income of $78.1 million, less non-cash items of $73.6 million and cash used for working capital of $4.6 million. Adjustments for non-cash items consist primarily of $96.1 million in net realized and unrealized gains on our marketable securities, a $22.0 million change in our deferred tax provision, $0.3 million of depreciation and amortization expense, and a $0.2 million of stock-based compensation expense. The decrease in cash from changes in working capital is primarily due to a $0.5 million increase in accounts receivable, a $0.2 million increase in prepaid expenses and other assets, a $0.6 million decrease in accounts payable, a $0.2 million decrease in accrued liabilities, a $1.1 million decrease in income tax payable, and a $2.0 million decrease in deferred revenue, including deferred subscription, consulting fees, and maintenance agreements.

 

Investing Activities

 

In fiscal year 2025, net cash used for investing activities was negligible.

 

In fiscal year 2024, net cash provided by investing activities was $40.5 million, primarily related to $40.6 million in proceeds from sales of marketable securities, partially offset by $0.1 million in purchases of property and equipment purchases and capital asset sales.

 

Financing Activities

 

During fiscal year 2025, net cash used in financing activities totaled $5.7 million, which primarily consisted of a $5.5 million repayment on the outstanding principal of the investment margin loan and a $0.2 million principal payment on the real estate loan.

 

During fiscal year 2024, net cash used in financing activities totaled $47.7 million, which primarily consisted of a $47.5 million repayment on the outstanding principal of the investment margin loan and a $0.2 million principal payment on the real estate loan.

 

21
 

 

Critical Accounting Policies and Estimates

 

The Company’s financial statements and accompanying notes are prepared in accordance with U.S. generally accepted accounting principles. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Management believes that revenue recognition, accounting for software costs, fair value and income taxes are critical accounting policies. Critical accounting estimates include fair value measurements and the long-term supplemental compensation accrual.

 

The Company recognizes revenues in accordance with the provisions of ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606).

 

For the Traditional Business, proceeds from the sale of subscriptions for newspapers, court rule books and other publications and other services are recorded as deferred revenue and are included in earned revenue only when the services are provided, generally over the subscription term. Advertising revenues are recognized when advertisements are published.

 

Journal Technologies’ contracts may include several products and services, which are generally distinct and include separate transaction pricing and performance obligations. Most are one-transaction contracts. These current subscription-type contract revenues include (i) implementation consulting fees to configure the system to go-live, (ii) subscription software license, maintenance (including updates and upgrades) and support fees, and (iii) third-party hosting fees when used. Revenues for consulting are generally recognized at point of delivery upon completion of services. These contracts include assurance warranty provisions for limited periods and do not include financing terms. For some contracts, the Company acts as a principal with respect to certain services, such as data conversion, interfaces and hosting that are provided by third-parties, and recognizes such revenues on a gross basis. For legacy contracts with perpetual license arrangements, licenses and consulting services are recognized at point of delivery (go-live), and maintenance revenues are recognized ratably after the go-live. Other public service fees are earned and recognized as revenues when the Company processes credit card payments on behalf of the courts via its websites through which the public can e-file cases and pay traffic citations and other fees.

 

ASC 985-20, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed, provides that costs related to the research and development of a new software product are to be expensed as incurred until the technological feasibility of the product is established, subject to expected recoverability. In general, “technological feasibility” is achieved when the developer has established the necessary skills, hardware and technology to produce a product and a detailed program design has been (i) completed, (ii) traced to the product specifications and (iii) reviewed for high-risk development issues. If there is no program design completed, technological feasibility is reached upon the completion of a working model.  Capitalization of software development costs ceases and amortization of capitalized software development costs (if any) commences when the products are available for general release. The Company believes its process for developing software is essentially completed concurrent with the establishment of technological feasibility, and accordingly, no software development costs have been capitalized to date.

 

ASC 820, Fair Value Measurement and Disclosures, requires the Company to (i) disclose the amounts of transfers in and out of Level 1 and Level 2 fair value measurements and the reasons for the transfers and (ii) present separately information about purchases, sales, issuances and settlements in the reconciliation of Level 3 measurements. This guidance also provides clarification of existing disclosures requiring the Company to determine each class of its investments based on risk and to disclose the valuation techniques and inputs used to measure fair value for both Level 2 and Level 3 measurements. The Company made no transfers in and out of Level 1 and Level 2 measurements in fiscal years 2025 and 2024. During that time, all of the Company’s investments have been quoted on public markets and, therefore, all fair value calculations have been based on Level 1 measurements.

 

ASC 710, Compensation—General, requires the Company to recognize compensation cost for its Management Incentive Plan over the requisite service period based on the estimated obligation attributable to services rendered to date. The estimated future commitment under the Incentive Plan is calculated using management’s best estimates, which include assumptions related to future pretax earnings before certain items, based on an average of the prior fiscal year and the current year. The resulting estimated obligation is discounted to present value at a rate of 6%, reflecting the time value of money, as each granted Management Incentive Plan award may remain outstanding over a remaining life of up to 10 years. Changes in estimates of the expected payout or timing of payments are recognized prospectively as adjustments to compensation expense in the period of change.

 

ASC 740, Income Taxes, establishes financial accounting and reporting standards for the effect of income taxes. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and the deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or tax returns. This accounting guidance also prescribes recognition thresholds and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Judgment is required in assessing the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences could materially impact the Company’s financial position or its results of operations and its deferred tax liabilities related to the unrealized net gains on investments. See Note 6 of Notes to Consolidated Financial Statements for further discussion.

 

ASC 280-10, Segment Reporting, defines an operating segment as a component of a public entity that has discrete financial information that is evaluated regularly by the Company’s Chief Executive Officer to decide how to allocate resources and to assess performance. In accordance with ASC 280-10, the Company has two reportable business segments which are: (i) the Traditional Business and (ii) Journal Technologies and Journal Technologies (Canada).

 

The above discussion and analysis should be read in conjunction with the consolidated financial statements and the notes thereto included in this report.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are not required to provide the information required under this item.

 

22
 

 

 

Item 8.  Financial Statements and Supplementary Data

 

 

Daily Journal Corporation

Index to Consolidated Financial Statements

 

 

Audited Consolidated Financial Statements

Page
   

Report of Independent Registered Public Accounting Firm (PCAOB ID: 23)

26

Consolidated Balance Sheets

28

Consolidated Statements of Operations and Comprehensive Loss

29

Consolidated Statements of Stockholders’ Equity

30

Consolidated Statements of Cash Flows

31

Notes to Consolidated Financial Statements

32

 

23
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

 

To the shareholders and the board of directors of Daily Journal Corporation:

 

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Daily Journal Corporation (the “Company”) as of September 30, 2025 and 2024, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years then ended, and the related notes to the consolidated financial statements (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2025 and 2024, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These 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 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 Matter

 

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the 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 financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

 

DETERMINATION OF PERFORMANCE OBLIGATIONS AND REVENUE RECOGNITION IN SOFTWARE REVENUE CONTRACTS

 

Critical Audit Matter Description

 

As discussed in Note 2 to the consolidated financial statements, the Journal Technologies segment generates revenues from contracts related to the sale of products and services including subscription software licenses, maintenance and support, implementation consulting services, and hosting services. The Company recognizes revenues for these services when or as the performance obligations are satisfied.

 

24
 

 

We identified the Company’s determination of distinct performance obligations in software revenue contracts and their effect on revenue recognition as a critical audit matter. Auditing the Company’s determination of distinct performance obligations related to its subscription software license products, maintenance and support services, implementation consulting services, and hosting services involved complex auditor judgment. In particular, significant judgment was required when assessing whether the promised products and services are separate performance obligations or inputs to a combined performance obligation, due to the evaluation of the interdependency or interrelation of the promised products and services within each contract.

 

How We Addressed the Matter in Our Audit

 

The primary procedures we performed to address this critical audit matter included:

 

 

●

Obtaining an understanding of the Company’s revenue recognition policy and evaluated for appropriateness.
 

●

Evaluating the design and implementation of internal controls related to the Company’s revenue recognition process.
 

●

Evaluating whether services promised by the Company meet the criteria to be identified as separate or combined performance obligations, through a review of contracts, discussions with management, and inquiries of personnel outside the accounting function to corroborate our understanding of certain terms and conditions present in the contracts. More specifically, we evaluated the Company’s determination of whether the contract was to deliver (1) multiple promised products or services that constitute separate performance obligations or (2) a single performance obligation that is comprised of the combined products or services.
 

●

Testing a sample of software revenue contracts for proper revenue recognition by inspecting the underlying customer agreements and supporting documentation, and evaluating for consistency with the Company’s revenue recognition policies.

 

/s/ Baker Tilly US, LLP

 

 

We have served as the Company’s auditor since 2016.

 

Irvine, California

 

December 29, 2025       

 

25
 

  

 

DAILY JOURNAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands except share amounts)

 

   

September 30, 2025

    

September 30, 2024

  

ASSETS

                

Current assets:

                

Cash and cash equivalents

   $ 20,569     $ 12,986  

Restricted cash

     2,269       2,191  

Non-qualified deferred compensation plan – trust account asset value

     1,385       748  

Marketable securities at fair value

     492,995       358,691  

Accounts receivable, net

     21,011       19,219  

Prepaid expenses and other current assets

     959       660  

Total current assets

     539,188       394,495  

Property and equipment, net

     8,930       9,268  

Total assets

   $ 548,118     $ 403,763  
                 

LIABILITIES AND STOCKHOLDERS’ EQUITY

                

Current liabilities:

                

Accounts payable

   $ 7,071     $ 6,049  

Accrued liabilities

     12,518       8,517  

Note payable collateralized by real estate

     169       164  

Income taxes

     879       —  

Deferred subscriptions

     2,474       2,558  

Deferred consulting fees

     1,747       2,031  

Deferred maintenance agreements and others

     13,948       19,124  

Total current liabilities

     38,806       38,443  

Investment margin account borrowings

     22,000       27,500  

Long-term note payable collateralized by real estate

     787       956  

Long-term deferred maintenance agreements

     994       883  

Long-term accrued liabilities

     5,547       3,772  

Accrued non-qualified deferred compensation

     1,590       784  

Deferred income taxes

     87,333       52,641  

Total liabilities

     157,057       124,979  

Commitments and contingencies (Note 10)

                

Stockholders’ Equity

                

Common stock, $.01 par value, 5,000,000 shares authorized; 1,805,053 shares issued and outstanding, and 427,627 treasury shares, as of September 30, 2025, and 2024, respectively

     14       14  

Additional paid-in capital

     2,097       1,957  

Retained earnings

     388,950       276,813  

Total stockholders’ equity

     391,061       278,784  

Total liabilities and stockholders’ equity

   $ 548,118     $ 403,763  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

26
 
 

 

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except share and per share amounts)

 

   

September 30, 2025

    

September 30, 2024

  

Revenues

                

Advertising

   $ 10,081     $ 9,325  

Circulation

     4,269       4,462  

Advertising service fees and other

     3,412       3,039  

Licensing and maintenance fees

     31,720       28,265  

Consulting fees

     22,735       15,086  

Other public service fees

     15,483       9,754  

Total revenues

     87,700       69,931  

Operating expenses:

                

Salaries and employee benefits

     55,551       47,178  

Stock-based compensation

     140       202  

Increase (decrease) to the long-term supplemental compensation accrual

     1,775       (495 )

Agency commissions

     1,277       1,146  

Outside services

     8,087       7,151  

Postage and delivery expenses

     774       752  

Newsprint and printing expenses

     639       669  

Equipment maintenance and software

     1,542       1,574  

Credit card merchant discount fees

     2,308       2,237  

Accounting and legal fees

     1,392       1,026  

Other general and administrative expenses

     4,687       4,421  

Total operating expenses

     78,172       65,861  

Income from operations

     9,528       4,070  

Other income (expenses)

                

Dividends and interest income

     7,459       7,102  

Net realized and unrealized gains on marketable securities

     134,304       96,142  

Net unrealized (losses) gains on non-qualified compensation plan

     64       47  

Interest expense

     (1,381 )     (3,087 )
Other income     113       4  

Income before taxes

     150,087       104,278  

Income tax provision

     (37,950 )     (26,165 )

Net income and comprehensive income

   $ 112,137     $ 78,113  
                 

Weighted average number of common shares outstanding – basic

     1,377,426       1,377,026  

Basic net income per share

   $ 81.41     $ 56.73  
                 

Weighted average number of common shares outstanding – diluted

     1,377,503       1,377,026  

Diluted net income per share

   $ 81.41     $ 56.73  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

27
 
 

 

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

 

   

Common Stock

    

Treasury Stock

    

Additional

    

Retained

    

Total Stockholders’

  
   

Share

    

Amount

    

Share

    

Amount

    

Paid-in Capital

    

Earnings

    

Equity

  

Balance as of September 30, 2023

     1,805,053     $ 18     $ (428,027 )   $ (4 )   $ 1,755     $ 198,700     $ 200,469  

Issuance of treasury stock

     —       —       400       —       202       —       202  

Net income

     —       —       —       —       —       78,113       78,113  

Balance as of September 30, 2024

     1,805,053       18       (427,627 )     (4 )     1,957       276,813       278,784  

Stock-based compensation

     —       —       —       —       140       —       140  

Net income

     —       —       —       —       —       112,137       112,137  

Balance as of September 30, 2025

     1,805,053     $ 18     $ (427,627 )   $ (4 )   $ 2,097     $ 388,950     $ 391,061  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

28
 
 

 

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

      September 30, 2025       September 30, 2024  

Cash flows from operating activities

                

Net income

   $ 112,137     $ 78,113  

Adjustments to reconcile net income to net cash provided by (used in) operating activities

                

Stock-based compensation

     140       202  

Depreciation and amortization

     257       267  

Gains on sales of capital assets

     —       (4 )

Net realized and unrealized gains on marketable securities

     (134,304 )     (96,142 )

Deferred income taxes

     34,692       22,042  

Changes in operating assets and liabilities;

                

Accounts receivable, net

     (1,792 )     (532 )

Prepaid expenses and other assets

     (210 )     (239 )

Accounts payable

     1,022       (594 )

Accrued liabilities, including non-qualified deferred compensation

     5,945       (190 )

Income tax payable

     879       (1,069 )

Deferred subscriptions

     (84 )     (120 )

Deferred consulting fees

     (284 )     (3,797 )

Deferred maintenance agreements and others

     (5,065 )     1,974  

Net cash provided by (used in) operating activities

     13,333       (89 )
                 

Cash flows from investing activities

                

Proceeds from sales of marketable securities

     —       40,579  

Proceeds on sales of capital assets

     —       4  

Purchases of property, plant and equipment, net

     (8 )     (49 )

Net cash (used in) provided by investing activities

     (8 )     40,534  
                 

Cash flows from financing activities

                

Payments to margin loan borrowing

     (5,500 )     (47,500 )

Payments of real estate loan principal

     (164 )     (158 )

Net cash used in financing activities

     (5,664 )     (47,658 )
                 

Net increase (decrease) in cash and cash equivalents and restricted cash

     7,661       (7,213 )
                 

Cash and cash equivalents and restricted cash at beginning of period

                

Cash and cash equivalents

     12,986       20,844  
Restricted cash     2,191       2,294  

Cash and cash equivalents at end of period

   $ 22,838     $ 15,731  
                 

Interest paid during year

   $ 1,381     $ 3,050  

Income taxes paid during year

  

2,253

     $ 5,128  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

29
 

 

DAILY JOURNAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

 

 

Note 1. The Corporation and Operations

 

Daily Journal Corporation publishes newspapers and websites covering California and Arizona and produces several specialized information services. It also serves as a newspaper representative specializing in public notice advertising (the “Traditional Business”). The Daily Journal Corporation, along with its wholly owned subsidiaries, are referred to as the “Company” or “Daily Journal”.

 

Journal Technologies, Inc. (“Journal Technologies”), a wholly owned subsidiary of Daily Journal, supplies case management software systems and related products to courts, prosecutor and public defender offices, probation departments and other justice agencies, including administrative law organizations, city and county governments and bar associations. These organizations use the Journal Technologies family of products to help manage cases and information electronically, to interface with other critical justice partners and to extend electronic services to the public, including e-filing and a website to pay traffic citations and fees online. These products are licensed or subscribed to in approximately 37 states and internationally.

 

Essentially all of the Company’s U.S. operations are based in California and Utah. The Company also has a presence in Australia where Journal Technologies is working on four software installation projects and in British Columbia, Canada, where the Company has operated a wholly-owned subsidiary, Journal Technologies (Canada), Inc. since August 2022.

 

Note 2. Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements include the accounts of Daily Journal and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.

 

Concentrations of Credit Risk

 

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents, restricted cash, marketable securities and accounts receivable. The Company’s cash, cash equivalents and restricted cash are held at financial institutions where account balances may at times exceed federally insured limits. The Company limits its exposure by primarily placing its cash in interest-bearing deposit accounts with high credit quality financial institutions and marketable securities. Management believes the Company is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash, cash equivalents and restricted cash held. The Company has no financial instruments with off-balance sheet risk of loss.

 

Use of Estimates

 

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates and assumptions made by management include, but are not limited to, the estimated fair values of marketable securities, management incentive plans, equity awards, and the accounting for income taxes. Actual results could differ materially from those estimates.

 

Cash Equivalents

 

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

 

Restricted Cash

 

The Company considers cash to be restricted when withdrawal or general use is legally restricted. Restricted cash of $2.3 million and $2.2 million as of September 30, 2025 and 2024, respectively, represents cash held to secure two letters of credit issued by a bank for a software installation contract in Australia.

 

30
 

 

Accounts receivable, net

 

The Company extends unsecured credit to most of its advertising customers. The Company recognizes that extending credit and setting appropriate reserves for receivables is largely a subjective decision based on knowledge of the customer and the industry. Credit limits, setting and maintaining credit standards, and managing the overall quality of the credit portfolio is largely centralized. The level of credit is influenced by the customer’s credit and payment history which the Company monitors when establishing a reserve.

 

The change in accounts receivable, net, is as follows (in thousands):

 

Description

  

Accounts receivable, net

  

Balance as of September 30, 2023

   $ 18,687  

Increase (decrease), net

     532  

Balance as of September 30, 2024

     19,219  

Increase (decrease), net

     1,792  

Balance as of September 30, 2025

   $ 21,011  

 

The Company maintains the reserve account for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of its customers were to deteriorate or its judgments about their abilities to pay are incorrect, additional allowances might be required and its results of operations could be materially affected.

 

The change in allowance for expected credit losses is as follows:

 

 

 

Allowance for Credit Losses (in thousands)

Description

  

Balance at

Beginning of Year

    

Additions

charged to Costs

and Expenses

    

Accounts charged

off less

Recoveries

    

Balance at End

of Year

  

Fiscal 2025

                                

Allowance for credit losses

   $ 250     $ 14     $ (14 )   $ 250  

Fiscal 2024

                                

Allowance for credit losses

   $ 250     $ 5     $ (5 )   $ 250  

 

Property, plant and equipment, net

 

Property, plant and equipment are carried on the cost basis, and depreciated using the straight-line method for financial statements and accelerated method for tax purposes. The useful lives of property, plant and equipment are as follows:

 

Assets

Useful life (years)

  

Land

Indefinite

  

Buildings and improvements

 5 - 39  

Furniture, office equipment and computer software

 3 - 5  

Machinery and equipment

 3 - 10  

Leasehold improvements

Shorter of estimated life or lease term

  

 

Depreciation and amortization expenses were $0.3 million and $0.3 million for fiscal years 2025 and 2024, respectively.

 

Significant expenditures which extend the useful lives of existing assets are capitalized. Maintenance and repair costs are expensed as incurred. Gains or losses on dispositions of assets are reflected in current earnings.

 

Impairment of Long-Lived Assets

 

The Company reviews its depreciable long-lived assets, such as property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss may be recognized when the undiscounted cash flows expected to be generated by a long-lived asset (or asset group) are less than its carrying value. Any required impairment loss would be measured as the amount by which the asset’s (or asset group’s) carrying value exceeds its fair value and would be recorded as a reduction in the carrying value of the related asset and reflected in the consolidated statements of comprehensive income. No impairment charges were recorded on any long-lived assets during the years ended September 30, 2025 and 2024.

 

Journal Technologies’ Software Development Costs

 

Development costs related to software products for sale or licensing are expensed as incurred until the technological feasibility of the product has been established. Thereafter, until the product is released for sale, software development costs are capitalized and reported at the lower of unamortized cost or net realizable value of the related product. The establishment of technological feasibility and the ongoing assessment of recoverability of costs require considerable judgment by the Company with respect to certain internal and external factors, including, but not limited to, anticipated future product revenue, estimated economic life and changes in hardware and software technology.

 

31
 

 

If there is no program design completed, technological feasibility is reached upon the completion of a working model. Capitalization of software development costs ceases and amortization of capitalized software development costs (if any) commences when the products are available for general release. Under the Company’s software development life cycle policy and agile development methodology, technological feasibility is generally established when a working model has been completed and approved through internal quality assurance, which typically occurs late in the development cycle and near the time the software is ready for customer testing and release. As a result, the period between technological feasibility and general release is generally insignificant, and no software development costs have been capitalized to date. Research and development expenses related to software development were $2.5 million and $1.4 million for the years ended September 30, 2025 and 2024, and are included under Salaries and employee benefits on the consolidated statements of comprehensive income. 

 

Stock-based compensation

 

The Company expenses the estimated fair value of employee restricted stock units. The compensation cost is based on the grant-date fair value of those awards and is recognized over the service period that the awards are expected to vest. The tax effects related to share-based payments are made through net earnings. See Note 7 for further discussion and related disclosures regarding stock-based compensation.

 

Earnings per share

 

Basic earnings per share is calculated using the Company’s weighted-average outstanding common shares. Diluted earnings per share is calculated using the Company’s weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method.

 

Income taxes

 

The Company accounts for income taxes using an asset and liability approach which requires the recognition of deferred tax liabilities and assets for the expected future consequences of temporary differences between the carrying amounts for financial reporting purposes and the tax basis of the assets and liabilities. The Company accounts for uncertainty in income taxes under ASC 740-10 which prescribes a recognition threshold and measurement methodology to recognize and measure an income tax position taken, or expected to be taken, in a tax return. The evaluation of a tax position is based on a two-step approach. The first step requires an entity to evaluate whether the tax position would “more likely than not” be sustained upon examination by the appropriate taxing authority. The second step requires the tax position be measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. In addition, previously recognized benefits from tax positions that no longer meet the new criteria would be derecognized.

 

Leases

 

The Company elected a practical expedient related to lease and non-lease components, as an accounting policy election for all asset classes, which allows a lessee to not separate non-lease from lease components and instead account for consideration paid in a contract as a single lease component. As such, base rent along with any additional fixed costs paid to the landlord are capitalized as part of the right of use (“ROU”) asset.

 

The Company determines if an arrangement is a lease at inception. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date of the lease in determining the present value of future payments.

 

The Company has made an accounting policy election not to recognize ROU assets and lease obligations for its short-term leases, which are defined as leases with an initial term of 12 months or less. However, the Company will recognize these lease payments in the consolidated statements of comprehensive income on a straight-line basis over the lease term and variable lease payments in the period in which the obligation is incurred. Lease payments for month-to-month leases are recognized as incurred. See Note 9 for further discussion and related disclosures regarding Leases.

 

Revenue Recognition

 

The Company recognizes revenues in accordance with the provisions of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (ASC Topic 606). See note 3 for further discussion and related disclosures regarding revenue recognition.

 

For the Traditional Business, proceeds from the sale of subscriptions for newspapers, court rule books and other publications and other services are recorded as deferred revenue and are included in earned revenue only when the services are provided, generally over the subscription term. Advertising service fees and other revenues, which represent primarily agency commissions received from outside newspapers in which the advertising is placed, are recognized when advertisements are published and are recorded on a net basis.

 

32
 

 

Journal Technologies contracts may include several products and services, which are generally distinct and include separate transaction pricing and performance obligations. These revenue contracts include (i) implementation consulting fees to configure the system to go-live, (ii) subscription software license, maintenance (including updates and upgrades) and support fees, and (iii) third-party hosting fees when used. For contracts containing multiple performance obligations, the Company allocates the transaction price on the basis of the relative standalone selling price of each distinct good or service, and utilizes the residual approach to estimate the standalone selling price of implementation consulting fees, whereby the standalone selling price is estimated by reference to the total transaction price less the sum of the observable standalone selling prices of its subscription software licenses, maintenance and support fees, and third-party hosting fees. These contracts include assurance-type warranty provisions for limited periods and do not include financing terms. For most contracts, the Company acts as a principal with respect to certain services, such as data conversion and interfaces. Hosting services are provided with support by third parties, and the company recognizes such revenues and related costs on a gross basis. The Company considers several factors to determine if it controls the good or service before it is transferred to the client and therefore is the principal. These factors include (1) if the Company has primary responsibility for fulfilling the promise and (2) if the Company has discretion in establishing price for the specified good or service. For legacy contracts with perpetual license arrangements, licenses and consulting services are recognized at point of delivery, and maintenance revenues are recognized ratably after the go-live.

 

The Company issues invoices that have payment terms which require payment within 30 days. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the required performance services have been completed. Proceeds from subscription-type revenues, including circulation revenue, license, maintenance and support services, and hosting services, are deferred at the time of sale and are recognized on a pro-rata basis over the terms of the subscriptions or service period, and unearned proceeds are recognized within deferred subscriptions and deferred maintenance agreements and others in the consolidated balance sheets. Proceeds from consulting fees are recognized at point of delivery upon service completion, and unearned consulting fee proceeds are recorded under deferred consulting fees on the consolidated balance sheets. Other public service fees are earned and recognized as revenues when the Company processes credit card payments on behalf of the courts via its websites through which the public can e-file cases and pay traffic citations and other fees.

 

ASC 606 also requires the capitalization of certain costs of obtaining contracts, specifically sales commissions which are to be amortized over the expected term of the contracts. For its software contracts, the Company incurs an immaterial amount of sales commission costs which have no significant impact on the Company’s financial condition and results of operations. In addition, the Company’s implementation and fulfillment costs do not meet all criteria required for capitalization. As a result, there are no fulfillment costs that are capitalized for the software contracts.

 

Since the Company recognizes revenues when it can invoice the customer pursuant to the contract for the value of completed performance, as a practical expedient and because reliable estimates cannot be made, it has elected not to include the transaction price allocated to unsatisfied performance obligations. These unallocated prices primarily relate to the eFile-it™ and ePay-it™ transactions for which service fees are collected and recognized when the Company processes credit card payments on behalf of the courts via its websites through which the public can e-file cases or pay traffic citations.

 

Recent Accounting Pronouncements

 

Accounting Pronouncements Not Yet Adopted

 

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, or the Company’s fiscal year 2026, and subsequent interim periods, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is also permitted. The Company is currently in the process of reviewing the guidance and evaluating its impact on its consolidated financial statements.

 

In March 2024, the FASB issued ASU 2024-01, Scope Application of Profits Interest and Similar Awards (“ASU 2024-01”). ASU 2024-01 clarifies how an entity determines whether a profits interest or similar award is (1) within the scope of ASC 718 or (2) not a share-based payment arrangement and therefore within the scope of other guidance. The guidance in ASU 2024-01 applies to all entities that issue profits interest or similar awards as compensation to employees or nonemployees in exchange for goods or services. The guidance is effective for public business entities for fiscal years beginning after December 15, 2024, or the Company’s fiscal year 2026. Early adoption is permitted and can be applied (1) retrospectively to all prior periods presented in the financial statements or (2) prospectively to profits interest and similar award. The Company is evaluating the disclosure requirements related to the new standard.

 

In November 2024, FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – expense disaggregation Disclosures (Topic 220): disaggregation of Income Statement expenses, which requires additional disclosure of certain amounts included in the expense captions presented on the statement of operations, as well as disclosures about selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, or the Company’s fiscal year 2028, and subsequent interim periods, with early adoption permitted.  Early adoption is permitted for annual financial statements that have not yet been issued. The Company is evaluating the disclosure requirements related to the new standard.

 

In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40), which modernizes the accounting guidance for internal-use software costs by eliminating the requirement to assess software development stages and introduces a new capitalization threshold. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, or the Company’s fiscal year 2029, and subsequent interim periods, with early adoption permitted.  Early adoption is permitted for annual financial statements that have not yet been issued. The Company is currently in the process of reviewing the guidance and evaluating its impact on its consolidated financial statements.

 

33
 

 

New Accounting Pronouncements Adopted

 

During November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on an annual and interim basis. The amendments are intended to enable investors to develop more decision-useful financial analyses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company has adopted the new annual disclosures as required for fiscal year 2025, see Note 11 for the disclosures required by this ASU.

 

 

Note 3.  Revenue Recognition

 

The change in total deferred revenues, including the long-term portion, is as follows (in thousands):

 

Description  

Deferred Revenue

(Current)

    

Deferred Revenue

(Non-current)

  

Balance as of September 30, 2023

   $ 25,539     $ 1,000  

(Decrease) increase, net

     (1,826 )     (117 )

Balance as of September 30, 2024

     23,713       883  

(Decrease) increase, net

     (5,054 )     111  

Balance as of September 30, 2025

   $ 18,659     $ 994  

 

The decreases in deferred revenue during the years ended September 30, 2025 and 2024 were primarily driven by the recognition of revenue associated with performance obligations satisfied during the period, partially offset by amounts billed in advance for new and renewal contracts.

 

During the years ending September 30, 2025 and 2024, $21.7 million and $18.8 million in revenue, respectively, were recognized from deferred revenue at the start of each year.

 

Note 4.  Fair value of Financial Instruments

 

The Company’s financial instruments include marketable securities, cash equivalents are measured at fair value on a recurring basis.

 

As of September 30, 2025, the Company’s holdings of marketable securities were concentrated in just six companies. These marketable securities consist solely of investments in publicly traded equity securities and do not include any debt securities.

 

Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

 

 

●

Level 1 — defined as observable inputs based on unadjusted quoted prices for identical instruments in active markets;
 

●

Level 2 — defined as inputs other than Level 1 that are either directly or indirectly observable in the marketplace for identical or similar instruments in markets that are not active; and
 

●

Level 3 — defined as unobservable inputs in which little or no market data exists where valuations are derived from techniques in which one or more significant inputs are unobservable.

 

The Company determines the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities at each reporting period end.

 

The carrying amounts of cash, restricted cash, accounts receivable, accrued liabilities and accounts payable approximate fair value because of the short maturity and high liquidity of these instruments. Marketable securities and cash equivalents, which consist of money market funds, are measured and recorded at fair value on the Company’s consolidated balance sheet using Level 1 inputs. The Company determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments. There were no transfers between Level 1 and Level 2 or transfers in or out of Level 3 during fiscal years 2025 and 2024.

 

34
 

 

The following table summarizes the fair value hierarchy of the Company’s financial assets measured at fair value as of September 30, 2025 (in thousands):

 

   

Level 1

    

Level 2

    

Level 3

    

Total

  

Assets:

                                

Money market funds (cash equivalent)

   $ 3,335     $ —     $ —     $ 3,335  

Marketable securities

     492,995       —       —       492,995  

Total Assets at fair value

   $ 496,330     $ —     $ —     $ 496,330  

 

 

The following table summarizes the fair value hierarchy of financial assets measured at fair value as of September 30, 2024 (in thousands):

 

   

Level 1

    

Level 2

    

Level 3

    

Total

  

Money market funds (cash equivalent)

   $ 3,945     $ —     $ —     $ 3,945  

Marketable securities

     358,691       —       —       358,691  

Total Assets at fair value

   $ 362,636     $ —     $ —     $ 362,636  

 

Marketable securities

 

As of September 30, 2025 and 2024, there were accumulated pretax unrealized gains of marketable securities of $353.9 million and $219.6 million, respectively, recorded in the accompanying consolidated balance sheets. 

 

During the years ended September 30, 2025 and 2024 the Company recorded and included in its net income the net unrealized and realized gains on marketable securities of $134.3 million and $96.1 million, respectively. There were no purchases or sales of marketable securities during the fiscal year ending September 30, 2025. In fiscal year 2024, the Company sold part of its marketable securities for approximately $40.6 million, realizing net gains of $14.3 million.

 

Investments in marketable securities as of September 30, 2025 and September 30, 2024 are summarized below (in thousands).

 

   

September 30, 2025

    

September 30, 2024

  
   

Aggregate
fair value

    

Amortized/
Adjusted
cost basis

    

Pretax
unrealized
gains

   

Aggregate
fair value

    

Amortized/
Adjusted
cost basis

    

Pretax
unrealized
gains

 

Marketable securities:

                                                

Common stocks

   $ 492,995     $ 139,094     $ 353,901     $ 358,691     $ 139,094     $ 219,597  

 

35
 

 

 

 

Note 5.  Property and Equipment, net

 

The components of property and equipment, net are as follows (in thousands):

 

   

September 30, 2025

    

September 30, 2024

  

Land, buildings and improvements

     16,418       16,418  

Furniture, office equipment and computer software

     1,625       1,723  

Machinery and equipment

     1,521       1,521  
Operating lease right-of-use assets     37       126  

Total cost

     19,601       19,788  

Less accumulated depreciation

     (10,671 )     (10,520 )

Property and equipment, net

   $ 8,930     $ 9,268  

 

Depreciation expense related to property and equipment was $0.3 million and $0.3 million for the years ended September 30, 2025 and 2024, respectively.

 

 

Note 6.  Income Taxes

 

The provision from income taxes consists of the following (in thousands):

 

   

2025

    

2024

  

Current:

                

Federal

   $ 2,337     $ 3,000  

State

     878       1,053  

Foreign

     45       70  
Total current expense     3,260       4,123  

Deferred:

                

Federal

     26,918       17,005  

State

     7,772       5,037  

Foreign

     -       -  
Total deferred expense     34,690       22,042  
Total income tax provision   $ 37,950     $ 26,165  

 

36
 

 

          The difference between the statutory federal income tax rate and the Company’s effective rate is summarized below:

 

   

2025

    

2024

  

Statutory federal income tax rate

     21.0 %     21.0 %

State franchise taxes (net of federal tax benefit)

     4.8       5.0  

Effect of state rate change on beginning balance of deferred tax liabilities

     (0.3 )     (0.4 )

Dividends received deduction

     (0.3 )     (0.5 )

Others

     0.1       —  

Effective tax rate

     25.3 %     25.1 %

 

The Company’s deferred income tax assets and liabilities (in thousands) were comprised of the following:

 

   

2025

    

2024

  

Deferred tax assets attributable to:

                

Accrued liabilities, including supplemental compensation and vacation pay accrual

   $ 2,422     $ 1,903  

Impairment losses on marketable securities

     (277 )     (280 )

Bad debt reserves not yet deductible

     55       55  

Depreciation and amortization

     1,283       1,730  

Deferred revenues

     184       517  

Goodwill

     190       265  

Net operating losses

     160       166  

Credits and other

     —       103  

Total deferred tax assets

     4,017       4,459  
                 

Deferred tax liabilities attributable to:

                

Unrealized gains on marketable securities

     (91,350 )     (57,100 )
Total deferred tax liabilities                

Net deferred income taxes

   $ (87,333 )   $ (52,641 )

 

During fiscal year 2025, the Company recorded an income tax provision of $38.0 million on pretax income of $150.1 million. The income tax provision consisted of tax expense of $34.3 million on unrealized gains on marketable securities, and $4.2 million on operating income, partially offset by a tax benefit of $0.5 million for the dividends received deduction and other permanent differences.  Consequently, the overall effective tax rate for fiscal year 2025 was 25.3%, after including the taxes on the unrealized gains on marketable securities.

 

 During fiscal year 2024, the Company recorded an income tax provision of $26.2 million on pretax income of $104.3 million.   The income tax provision consisted of tax expense of $24.5 million on the realized and unrealized gains on marketable securities, and $2.2 million on operating income, partially offset by a tax benefit of $0.5 million for the dividends received deduction and other permanent differences.  Consequently, the overall effective tax rate for fiscal year 2024 was 25.1%, after including the taxes on the realized and unrealized gains on marketable securities.

 

The Company files consolidated federal income tax returns, with its domestic subsidiary, in the United States and with various state jurisdictions and is no longer subject to examinations for fiscal years before fiscal year 2021 with regard to federal income taxes and fiscal year 2020 for state income taxes.  The Canadian subsidiary files a federal and provincial tax return in Canada.

 

During fiscal year 2021, the Company utilized all of its federal and certain state net operating losses (NOL). During fiscal year 2024, the Company utilized the remaining $1.3 million of California NOLs. The Company also has NOLs in other states, expiring as follows:

 

Fiscal Year ended (in million)

  

Other State NOLs

  

September 30, 2029 through

        

September 30, 2036

   $ 0.2  

September 30, 2037

     0.1  

September 30, 2038

     0.2  

September 30, 2039

     0.1  

No expiration

     2  
Total   $ 2.6  

 

37
 

  

 

Note 7.  Stock-Based Compensation

 

The Company has implemented two equity incentive plans, one for key employees and one for non-employee directors, each providing for the grant of incentive stock options, non-qualified stock options, restricted stock units, and other equity-based awards.  As of both September 30, 2025, and 2024, there were 2,920 shares available for future grants under the key employee’s equity incentive plan, which authorizes the issuance of up to 3,720 shares. Under the non-employee director plan, which was approved in February 2025 and authorizes issuance of 2,000 shares, there were 1,805 available for grants as of September 30, 2025. Restricted stock units generally vest ratably over two years of continuous service from the grant date and, upon vesting, are issued from the Company’s treasury shares.  The Company accounts for share-based compensation utilizing the fair value recognition requirement pursuant to ASC 718.

 

For restricted stock units, the Company uses the closed market price on the date of grant as the fair market value of the stock. The Company has not historically paid any cash dividends on its common stock and as a result does not reduce the grant-date fair value per share by the present value of dividends expected to be paid during the requisite service period for restricted stock units. Share based compensation awards are expensed on a straight-line basis over the requisite service periods, which are generally the vesting periods.

 

The Company will recognize the effect of awards for which the requisite service period is not rendered when the award is forfeited. That is, the Company recognizes the effect of forfeitures in compensation cost when they occur. Previously recognized compensation cost for an award is reversed in the period the award is forfeited.

 

The following table summarizes stock unit activity during the periods presented:

 

   

Number of RSUs

outstanding

    

Weighted Average

Grant Date Fair

Value per Share

  

Unvested as of September 30, 2023

     —       —  

Granted

     800     $ 463.64  

Vested

     (400 )     463.64  

Forfeited

     —       —  

Unvested as of September 30, 2024

     400       463.64  

Granted

     195       508.20  

Vested

     (230 )     453.93  

Forfeited

     —       —  

Unvested as of September 30, 2025

     365     $ 494.43  

 

As of September 30, 2025 and 2024, total fair value of shares vested during the year was $0.1 million and $0.2 million, respectively. For fiscal year 2025 and 2024, the Company recognized a total of compensation cost of $0.1 million and $0.2 million, respectively. For fiscal year 2025 and 2024, the Company had total unrecognized compensation cost of approximately $0.1 million and $0.2 million, respectively, related to unvested restricted stock units which is expected to be amortized over a weighted average amortization period of approximately 0.87 years.

 

Note 8.  Accrued Liabilities

 

Current accrued liabilities consist of (in thousands):

 

   

September 30,

  
   

2025

    

2024

  

Accrued vacation

   $ 3,115     $ 3,425  

Accrued supplemental compensation

     6,668       2,248  

Accrued payroll

     1,508       1,354  

Accrued other

     1,227       1,490  

Total current accrued liabilities

   $ 12,518     $ 8,517  

 

Long term accrued liabilities consist primarily of the Management Incentive Plan, which was $5.5 million and $3.8 million as of September 30, 2025 and 2024, respectively.

 

38
 

  

 

Note 9.  Commitments and Contingencies

 

From time to time, the Company is subject to litigation arising in the normal course of its business. While it is not possible to predict the results of such litigation, management does not believe the ultimate outcome of these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

 

 The following table represents the Company’s future obligations (in thousands):

 

   

2026

    

2027

    

2028

    

2029

    

2030 and after

    

Total

  

Long-term accrued liabilities*

   $ 1,707     $ 1,379     $ 1,106     $ 772     $ 583     $ 5,547  

Non-qualified deferred compensation 409(A) plan

     1,590       —       —       —       —       1,590  

Real estate loan

     169       175       181       187       244       956  

Lease

     37       —       —       —       —       37  
    $ 1,796     $ 3,041     $ 1,201     $ 880     $ 685     $ 7,603  

* The long-term accrued liabilities for the Management Incentive Plan are discounted to the present value using a discount rate of 6%.

 

Margin Loan

 

During fiscal year 2013, the Company borrowed from its investment margin account the aggregate purchase price of $29.5 million for two acquisitions, in each case pledging its marketable securities as collateral. In addition, there were subsequent borrowings of $45.5 million to purchase additional marketable securities bringing the margin loan balance up to $75 million during fiscal year 2023. In March 2024, the Company sold a portion of its marketable securities for approximately $40.6 million and used these proceeds and excess cash from operations to pay down the margin loan balance to $27.5 million at last year-end. During the year ended September 30, 2025, the Company was able to use excess cash from operations to pay down an additional $5.5 million of this margin loan. As of September 30, 2025, the margin loan balance was $22.0 million.

 

The interest rate for these investment margin account borrowings fluctuates based on the Federal Funds Rate plus 50 basis points with interest only payable monthly. The interest rate as of September 30, 2025 was 4.75%. These investment margin account borrowings do not mature.

 

Management Incentive Plan/New Profit-Sharing Incentive Program

 

In fiscal 1987, the Company implemented a Management Incentive Plan (the “Legacy Incentive Plan”) that entitles a participant to participate in pretax earnings before adjustment for certain items of the Company for ten years. It was later expanded as a separate program for selected staff of Journal Technologies, based on the subsidiary’s results. This latter plan was expanded under previous leadership in February 2022 to include virtually all Journal Technologies employees. In 2023, management paused the program recognizing there would be an inadvertent future diluting effect on the shareholders’ interest when additional staff are hired as Journal Technologies grows. More generally, in order to reevaluate and ensure a sustainable long-term program and incentive model, the Company decided to suspend new grants under all Legacy Incentive Plans associated with the traditional business, Journal Technologies, and so-called consolidated units (based on employees driving corporate-wide results). The remaining Legacy Incentive Plan liability is included in the Company’s current and non-current accrued liabilities within the consolidated balance sheets (see Note 8).

 

39
 

 

Following a consultative and highly sensitive internal process at Journal Technologies, management successfully migrated all Journal Technologies employees to a new, replacement plan (the “New Plan”) effective May 9, 2025, whereby additional employees added to the program are dilutive relative to a specific percentage of profits allocated to the program, rather than being added to the program in an accretive way. This new discretionary profit-sharing incentive program still provides all eligible Journal Technologies employees with units as non-transferable, non-negotiable incentive units issued through certificates. The units do not represent equity or any ownership interest in the Company or Daily Journal Corporation. Under the New Plan, the Company is expected to approve a program percentage for the coming year at the outset of each new fiscal year. The amount available for distribution, if any, is based on this designated portion of the Company’s annual pretax profits adjusted for certain items, and amounts are allocated among eligible participants based primarily on the number of incentive units allocated to them on a prescriptive basis (predominately level of responsibility, but length of employment is also a factor). Key to enabling a transition of pre-existing entitlements, employee expectations are for an allocation of 20%, to provide approximate parity with the old program entitlements. However, to enable a roughly lateral transition for some senior employees, certain legacy units from the Legacy Incentive Plan needed to be converted into additional units under the New Plan; these converted legacy units generally retain their original expiration terms and are funded from a separate temporary allocation.

 

The estimated Legacy Incentive Plan’s future commitment for certain Journal Technologies is based on inputs of an average of the past year and the current year pretax earnings before certain items, discounted to the present value at 6% as each granted Certificate will expire over its remaining life term of up to 10 years. As of September 30, 2025, there were 644,000 remaining units with a weighted average remaining life of 2.53 years. Significant increases or decreases in these inputs would result in a significantly lower or higher fair value measurement.

 

Real Estate Loan         

 

In November 2015, the Company purchased a 30,700 square foot office building constructed in 1998 on approximately 3.6 acres in Logan, Utah that had been previously leased for Journal Technologies. The Company paid $1.24 million and financed the balance with a real estate bank loan of $2.26 million which had a fixed interest rate of 4.66%. This loan is secured by the Logan facility and can be paid off at any time without prepayment penalty. In October 2020, the Company executed an amendment to lower the interest rate of this loan to a fixed rate of 3.33% for the remaining 10 years. This real estate loan had a balance of approximately $0.8 million as of September 30, 2025.

 

Defined Contribution Plan

 

Effective January 1, 2023, the Company began sponsoring a 401(k) retirement plan and a non-qualified deferred compensation plan for its employees. The 401(k) retirement plan is a defined contribution plan available to employees meeting minimum service requirements. Eligible employees can contribute up to 100% of their current compensation to the plan subject to certain statutory limitations. The Company matches 50% of the 401(k) contribution up to 4% of total compensation. Employer contributions to the retirement plan were $0.5 million and $0.6 million for fiscal years 2025 and 2024, respectively. As of September 30, 2025, there were deferred compensation liabilities of approximately $1.6 million of which $1.4 million were held under a trust account for the non-qualified deferred compensation plan. As of September 30, 2024, there were deferred compensation liabilities of approximately $0.8 million of which all were held under a trust account for the 409(A) plan.

 

Leases

 

 As of September 30, 2025, the Company had a right-of-use (“ROU”) asset and lease liability of approximately $37 thousand for its operating office and equipment leases. As of September 30, 2024, the Company had an ROU asset and lease liability of approximately $126 thousand for its operating office and equipment leases. Operating office and equipment leases are included in operating lease ROU assets, current accrued liabilities and long-term accrued liabilities in the Company’s accompanying Consolidated Balance Sheets.

 

 

40
 

  

 

Note 10. Net Income Per Share

 

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed using the treasury stock method by dividing net income by the weighted average number of dilutive common shares outstanding during the period. Diluted shares outstanding is calculated by adding to the weighted average shares outstanding any potential dilutive securities outstanding for the period. Potential dilutive securities for the Company include only unvested restricted stock units.

 

The Company’s basic and diluted net income per share was as follows (in thousands, except share and per share amounts):

 

   

Years Ended September 30,

  
   

2025

    

2024

  

Numerator:

                

Net income

   $ 112,137     $ 78,113  

Denominator:

                

Basic weighted-average common shares outstanding

     1,377,426       1,377,026  

Effect of dilutive securities

     77       -  

Diluted weighted-average common shares outstanding

     1,377,503       1,377,026  
                 

Basic EPS

   $ 81.41     $ 56.73  

Diluted EPS

   $ 81.41     $ 56.73  

 

 

Note 11.  Segments Information

 

The key factors used to identify the reportable segments are the organization of the Company’s businesses and alignment of its internal operations. Operating segments are defined as components of an enterprise for which discrete financial information is available and is evaluated regularly by the Chief Operating Decision Maker (“CODM”), in deciding how to allocate resources and assess performance.

 

The Company’s Chief Executive Officer, serving as the CODM, reviews consolidated financial data to allocate resources and assess performance. The CODM focuses on consolidated net income (loss) from the statements of operations, comparing results with prior periods, forecasts, and relevant expenditure categories for each segment.

 

41
 

 

The Company identifies its reportable segments based on the nature of the products and services provided and the manner in which the CODM manages the business and allocates resources between (i) the Traditional Business, which consists of newspaper publishing, advertising, circulation, and related information services, and (ii) Journal Technologies, which provides case management software and related services to courts and other justice agencies. Accordingly, Traditional Business revenues are comprised of advertising, circulation, and advertising service fees and other, while Journal Technologies revenues are comprised of licensing and maintenance fees, consulting fees, and other public service fees. All inter-segment transactions were eliminated. Corporate is presented below as a non-operating segment to reconcile segment results to the Company’s consolidated financial statement line-item totals. Additional details about each of the reportable segments and its income and expenses are set forth below:

 

Overall Financial Results (in thousands)

                                                  

For the twelve months ended September 30

                                                  
   

Reportable Segments

                                  
   

Traditional Business

    

Journal Technologies

    

Corporate  

    

Total

  
   

2025

    

2024

    

2025

    

2024

    

2025

    

2024

    

2025

    

2024

  

Revenues

                                                                

Advertising

   $ 10,081     $ 9,325     $ —     $ —     $ —     $ —     $ 10,081     $ 9,325  

Circulation

     4,269       4,462       —       —       —       —       4,269       4,462  

Advertising service fees and other

     3,412       3,039       —       —       —       —       3,412       3,039  

Licensing and maintenance fees

     —       —       31,720       28,265       —       —       31,720       28,265  

Consulting fees

     —       —       22,735       15,086       —       —       22,735       15,086  

Other public service fees

     —       —       15,483       9,754       —       —       15,483       9,754  

Total operating revenues

     17,762       16,826       69,938       53,105       —       —       87,700       69,931  

Operating expenses

                                                                

Personnel

     10,467       9,492       44,032       36,998       2,967       395       57,466       46,885  

Other segment items*

     7,460       5,360       13,246       13,616       —       —       20,706       18,976  

Total operating expenses

     17,927       14,852       57,278       50,614       2,967       395       78,172       65,861  

Income from operations

     (165 )     1,974       12,660       2,491       (2,967 )     —       9,528       4,070  

Dividends and interest income

     —       —       —       —       7,459       7,102       7,459       7,102  

Interest expense

     —       —       —       —       (1,381 )     (3,087 )     (1,381 )     (3,087 )

Net realized and unrealized gains on marketable securities

     —       —       —       —       134,304       96,142       134,304       96,142  

Other

     —       —       —       —       177       51       177       51  

Pretax income

     (165 )     1,974       12,660       2,491       137,592       100,208       150,087       104,278  

Income tax benefit (expense)

     180       (395 )     (3,665 )     (735 )     (34,465 )     (25,035 )     (37,950 )     (26,165 )

Net income

   $ 15     $ 1,579     $ 8,995     $ 1,756     $ 103,127     $ 75,173     $ 112,137     $ 78,113  

 

* Other segment items within net income (loss) include rental income, net unrealized gains on non-qualified compensation plan, interest expense on note payable collateralized by real estate, decrease in fair value of derivative asset, agency commissions, outside services, postage and delivery expenses, newsprint and printing expenses, depreciation and amortization, equipment maintenance and software, credit card merchant discount fees, rent expenses, accounting and legal fees, and other general and administrative expenses.

 

42
 

 

During fiscal 2025, the Company’s revenues were primarily generated in the United States. Revenues from foreign countries and U.S. territories were approximately $11.9 million, or 13.5% (approximately 14%) of total revenues, and were attributable to the Journal Technologies segment. The following table presents revenues by country and territory (in thousands):

 

Country/ Territory

  

Revenue

    

As a % of total revenue

  

Australia

   $ 10,067       11.5 %

Canada

     686       0.8  

Guam

     674       0.8  

Commonwealth of the Northern Mariana Islands

     428       0.5  

Total

   $ 11,855       13.5 %

 

The measure of segment assets reviewed by the CODM is the consolidated total assets, as reported on the consolidated balance sheet. The following table presents the measure of segment assets regularly provided to the CODM (in thousands):

 

   

Traditional Business

    

Journal Technologies

    

Corporate

    

Total

  
   

2025

    

2024

    

2025

    

2024

    

2025

    

2024

    

2025

    

2024

  

Total assets

   $ 22,701     $ 14,486     $ 32,422     $ 29,838     $ 492,995     $ 359,439     $ 548,118     $ 403,763  

 

 The Company’s long-lived assets, which consist primarily of property, plant and equipment, net, and operating lease right-of-use assets, are primarily located in the United States. As of September 30, 2025 and 2024, no individual country other than the U.S. accounted for 10% or more of these assets.

 

Note 12. Subsequent Events

 

On October 27, 2025, the Company’ announced that Tu To, the Company’s Chief Financial Officer and Principal Financial Officer, would retire effective January 15, 2026, following a planned transition period. In connection with her retirement, the Company entered into a separation agreement with Ms. To providing for certain post-employment compensation and benefits. Ms. To was expected to step down as the Company’s principal financial officer on December 31, 2025, or earlier in connection with the transition.

 

On December 12, 2025, the Company appointed Erik Nakamura as Chief Financial Officer and Principal Financial Officer, effective immediately. Mr. Nakamura previously served as Chief Financial Officer of the Company’s Journal Technologies subsidiary.

 

Management has evaluated these events and determined that they did not have a material impact on the Company’s consolidated financial statements as of and for the year ended September 30, 2025.

 

43
 

  

 

Item 9.  Changes in and Disagreements with Accountants on Accounting, and Financial Disclosure

 

None.

 

Item 9A.  Controls and Procedures

 

An evaluation was performed under the supervision and with the participation of the Company’s management, including Steven Myhill-Jones, its Chief Executive Officer (“CEO”), and Erik Nakamura, its Chief Financial Officer (“CFO”), of the effectiveness of the Company’s disclosure controls and procedures as of September 30, 2025. Based on that evaluation, management concluded that the Company’s disclosure controls and procedures were not effective as of September 30, 2025 due primarily to the material weaknesses in internal control over financial reporting described below.

 

Management’s Report on Internal Control over Financial Reporting

 

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (“ICFR”), as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. To assess the effectiveness of these controls, management applied the criteria outlined in the Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013 framework). The Company’s ICFR has been designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of the Company’s consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”). All internal controls, no matter how well designed, have inherent limitations. Because of these inherent limitations, internal control over financial reporting may not prevent or detect misstatements. A material weakness is a deficiency, or a combination of deficiencies, in ICFR such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

 

Based on that evaluation and applicable SEC rules, management identified remaining material weaknesses in ICFR as of September 30, 2025. A previous material weakness was remediated during fiscal year 2025.

 

Segregation of duties and revenue review controls

 

The Company continues to have material weaknesses related to segregation of duties, review controls related to the design, implementation, and operation of controls over revenue recognition and associated deferred revenue process that originated and were disclosed in prior periods. While management has implemented additional controls and made meaningful progress during fiscal year 2025, the Company was not able to fully remediate the material weaknesses by September 30, 2025. Management’s remediation efforts continue, as described below, and management is confident in its ability to achieve a full remediation in fiscal year 2026.

 

Remediation Plan and Progress

 

At the request of the Board of Directors, the Company engaged an independent third-party advisory firm to support management in evaluating and strengthening the Company’s ICFR. In addition to fully remediating prior material weakness regarding insufficient accounting resources, management believes the Company made significant progress during fiscal 2025 in remediating the segregation of duties and revenue review controls weaknesses. This included implementing administrative access controls for specific systems, modernizing the finance function by clearly defining roles and responsibilities, and reassessing, redesigning, and implementing new controls specifically targeted to mitigate the previously identified material weaknesses. However, in order to conclude that a material weakness has been remediated, management must obtain evidence that the relevant controls have been properly designed and have operated effectively for a sufficient period of time. Because certain controls were newly implemented or substantially enhanced during fiscal 2025, additional time is required to evaluate the operating effectiveness of the newly designed and implemented controls before concluding that the material weaknesses have been remediated. Specifically:

 

 

●

During fiscal year 2025, the Company increased the size and experience level of its finance organization, in order to strengthen technical accounting expertise, enhance review and monitoring activities, and improve segregation of duties.
 

●

In the third quarter of fiscal year 2025, the Company implemented enterprise resource planning (“ERP”) for its subsidiary Journal Technologies. The Company is continuing its ERP modernization efforts for its Traditional Business, which management believes will further enhance system-based segregation of duties, workflow approvals, and user-access controls.

 

44
 

 

 

●

Effective December 12, 2025, Erik Nakamura was appointed as the Company’s Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer. This leadership transition is expected to further support the Company’s remediation efforts, including enhancing oversight and review procedures and strengthening segregation of duties.
 

●

Management intends to continue to work with third-party advisors during fiscal year 2026 to further enhance the Company’s ICFR and to evaluate whether any remaining material weaknesses have been fully remediated.

 

The Company will also continue to utilize certain mitigating controls, including enhanced management review procedures, analytical reviews, and Board-level oversight designed to help identify potential errors or misstatements. These monitoring activities include periodic review and comparative analysis of financial and operational information with prior periods by department supervisors, the CEO, the CFO, and the Board of Directors. The Company will continue to evaluate and refine its compensating controls as part of its remediation strategy and plans to reassess the operating effectiveness of its controls early in fiscal year 2026.

 

Although a material weakness indicates that there is a reasonable possibility that a material misstatement will not be prevented or detected on a timely basis, management is not aware of any material misstatements in the Company’s consolidated financial statements as of and for the year ended September 30, 2025.

 

Changes in Internal Control over Financial Reporting

 

There were positive changes in the Company’s internal control over financial reporting during the fiscal year ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. During fiscal year 2025, the Company fully remediated its prior material weakness related to insufficient accounting resources by enhancing technical accounting expertise, strengthening review and monitoring activities, and increasing the size and experience of its finance team. With respect to the remaining material weaknesses regarding segregation of duties and revenue review controls, please see the description of the Company’s enhanced controls, including its ERP modernization efforts and increases in finance personnel, as described above under “Remediation Plan and Progress.”

 

Item 9B. Other Information

 

(a) None.

 

(b) The Company has not adopted a Rule 10b5-1 trading arrangement, and no directors or executive officers of the Company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the fourth quarter of 2025.

 

Item 9C.  Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 

Not applicable

 

45
 

 

PART III

 

Item 10.  Directors, Executive Officers and Corporate Governance

 

The information set forth in the tables, the notes thereto, and the paragraphs under the captions “Election of Directors”, “Corporate Governance” and “Delinquent Section 16(a) Reports” in the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held in February 2026 (the “Proxy Statement”), which Proxy Statement will be filed with the SEC within 120 days after September 30, 2025, is incorporated herein by reference.

 

The Company has adopted a Code of Ethics that applies to all directors, officers and employees of the Company, including the Chief Executive Officer and Chief Financial Officer. The Company’s Code of Ethics was filed as Exhibit 14 to the fiscal year 2020 Form 10-K.

 

 

Item 11.  Executive Compensation

 

The information set forth under the captions “Executive Compensation” and “Corporate Governance” in the Proxy Statement is incorporated herein by reference.

 

 

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The information set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement is incorporated herein by reference.

 

Item 13.  Certain Relationships and Related Transactions, and Director Independence

 

The information set forth under the caption “Corporate Governance” in the Proxy Statement is incorporated herein by reference.

 

Item 14.  Principal Accounting Fees and Services

 

The information set forth under the caption “Other Matters Regarding Independent Registered Public Accounting Firm” in the Proxy Statement is incorporated herein by reference.

 

46
 

 

PART IV

 

Item 15.    Exhibits, Financial Statement Schedules

 

The following documents are filed as part of this Report:

 

(1)

Consolidated Financial Statements:
 

Report of Independent Registered Public Accounting Firm (PCAOB ID: 23)
 

Consolidated Balance Sheets at September 30, 2025 and 2024
 

Consolidated Statements of Comprehensive Income for the years ended September 30, 2025 and 2024
 

Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2025 and 2024
 

Consolidated Statements of Cash Flows for the years ended September 30, 2025 and 2024
 

Notes to Consolidated Financial Statements

(2)

Exhibits

3.1

Articles of Incorporation of Daily Journal Corporation, as amended (*)

3.2

Amended and Restated Bylaws of Daily Journal Corporation (*)

4.1

Description of Common Stock of Daily Journal Corporation (~)

10.1

Form of Non-Negotiable Certificate Representing an Employee Participant Interest in the Daily Journal Corporation (“DJC”) Plan for Supplemental Compensation to an Employee as long as that Employee Remains Employed by DJC or one of its Subsidiaries, Based on Pre-tax Earnings of DJC and its Subsidiaries on a Consolidated Basis (~) (‡)

10.2

Daily Journal Corporation 2024 Equity Incentive Plan

10.3

Form of Restricted Stock Unit Award under the Daily Journal Corporation 2024 Equity Incentive Plan for Employees

10.4

Form of Non-Employee Director Restricted Stock Unit Award
10.5 Separation Agreement and Release by the Company and Tu To

21.1

Daily Journal Corporation's List of Subsidiaries

23.1

 Consent of Independent Registered Public Accounting Firm
31.1 Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and Rule 15d-14(a) of the Exchange Act
31.2 Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and Rule 15d-14(a) of the Exchange Act

32.1

 Certification of Principal Executive Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2

 Certification of Principal Financial Officer pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
97 Daily Journal Corporation Policy Regarding Erroneously Awarded Compensation

101.INS

Inline XBRL Instance

101.SCH

101.CAL

101.DEF

101.LAB

101.PRE

104

Inline XBRL Taxonomy Extension Schema

Inline XBRL Taxonomy Extension Calculation

Inline XBRL Taxonomy Extension Definition

Inline XBRL Taxonomy Extension Labels

Inline XBRL Taxonomy Extension Presentation

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

(*)

Filed as an Exhibit to the Company’s 2020 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on December 16, 2020

(~)

Filed as an Exhibit to the Company’s 2019 Annual Report on Form 10-K, filed with the Securities and Exchange Commission on December 12, 2019

(‡)

Management Compensatory Plan

 

 

Item 16. Form 10-K Summary Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

None

 

47
 

 

SIGNATURES

 

 

 

 

DAILY JOURNAL CORPORATION
   

Date: December 29, 2025

/s/ Steven Myhill-Jones
 

Steven Myhill-Jones

Chief Executive Officer and Chairman of the Board

(Principal Executive Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

 

Signature

  

Title

  

Date
         
         

/s/ Steven Myhill-Jones

  

Chairman of the Board and

Chief Executive Officer

  

December 29, 2025
Steven Myhill-Jones        
         
         

/s/ Erik Nakamura

  

Chief Financial Officer,

(Principal Financial Officer and

Principal Accounting Officer)

   December 29, 2025
Erik Nakamura        
         
         

/s/ Mary Conlin

  

Director

   December 29, 2025

Mary Conlin

        
         
         

/s/ John Frank

  

Director

   December 29, 2025

John Frank

        
         
         

/s/ Rasool Rayani

  

Director

   December 29, 2025

Rasool Rayani

        

 

48
EX-10.4 2 ex_902870.htm EXHIBIT 10.4 ex_902870.htm

Exhibit 10.4

NOTICE OF DIRECTOR’S RESTRICTED STOCK UNIT AWARD

 

DAILY JOURNAL CORPORATION

 

Unless otherwise defined herein, capitalized terms used in this Notice of Restricted Stock Unit Award (this “Notice of Grant”) shall have the same meanings ascribed to them in the Daily Journal Corporation (the “Company”) 2024 Equity Incentive Plan (the “Plan”). These restricted stock units (“RSUs”) are not technically awarded under the Plan, but the terms of the Plan shall apply mutatis mutandis.

 

The Participant named below has been granted an award of RSUs subject to the terms and conditions attached hereto as Annex A (the “RSU Agreement”). Each RSU represents the right to receive the value of one share of the Company’s Common Stock, or, upon approval by the Company’s stockholders, one actual share of the Company’s Common Stock (a “Share”). The RSUs shall be credited to a separate book-entry account maintained for the Participant on the books of the Company.

 

Participant Name:

 

Address:

 

Number of RSUs:

 

Board Grant Date:

 

Vesting Commencement Date:

 

Vesting: The RSUs shall become fifty percent (50%) vested on each of the first two anniversaries of the Vesting Commencement Date (each such date, a “Vesting Date”); provided that the Participant remains a director of the Company through each such Vesting Date.

 

Settlement: Except as otherwise provided herein, each vested RSU shall be settled in cash; provided, however, that upon approval of settlement in Shares by the Company’s stockholders, each vested RSU shall be settled in Shares. Either way, settlement shall occur as soon as practicable following the applicable Vesting Date, but in all cases no case later than March 15 of the calendar year following the applicable Vesting Date.

 

Termination of Service: If, prior to the final Vesting Date, the Participant ceases to be a director of the Company for any reason other than a Change in Control, then all unvested RSUs shall be cancelled immediately after such termination and the Participant shall not be entitled to receive any payments with respect thereto. Upon a Change in Control, the vesting of all unvested RSUs shall accelerate.

 

No Dividends: The Participant’s account shall not be credited with any Dividend Equivalents with respect to the RSUs.

 

Miscellaneous: By the Participant’s acceptance hereof (whether written, electronic or otherwise), the Participant agrees, to the fullest extent permitted by law, that in lieu of receiving documents in paper format, the Participant accepts the electronic delivery of any documents related to this grant whether via the Company’s intranet or its Diligent portal, or such other means of electronic delivery specified by the Company.

 

 

PARTICIPANT

  

DAILY JOURNAL CORPORATION

  

 

  

 

  
       
    By:  
Name:   Name:  
    Title:  
       
       
Date:   Date  

 

1
 

 

ANNEX A

 

DIRECTOR’S RESTRICTED STOCK UNIT AGREEMENT

 

DAILY JOURNAL CORPORATION

 

The Participant has been granted restricted stock units (“RSUs”), subject to the terms, restrictions and conditions of the Notice of Restricted Stock Unit Award (the “Notice of Grant”) and this Restricted Stock Unit Agreement, including the Country Appendix, if any (this “Agreement”). Unless otherwise defined herein, capitalized terms used in this Agreement shall have the same meanings given to them in the Company’s 2024 Equity Incentive Plan (the “Plan”). The RSUs are not technically awarded under the Plan, but the terms of the Plan shall apply to the RSUs and this Agreement mutatis mutandis.

 

1.

Taxes.

 

(a)    Responsibility for Taxes. The Participant acknowledges that, regardless of any action taken by the Company, the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to the Participant’s participation in the Plan and legally applicable or deemed applicable to the Participant (“Tax-Related Items”) is and remains the Participant’s responsibility and may exceed the amount, if any, actually withheld by the Company. The Participant further acknowledges that the Company (i) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSUs or the underlying Shares, including, but not limited to, the grant, vesting or settlement of the RSUs, the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends and/or Dividend Equivalents; and (ii) does not commit to and are under no obligation to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant is subject to Tax-Related Items in more than one jurisdiction, he or she acknowledges that the Company may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

 

Prior to any relevant taxable or tax withholding event, as applicable, the Participant agrees to make adequate arrangements satisfactory to the Company to satisfy all Tax-Related Items.

 

(b)    Tax Withholding. In this regard, the Participant authorizes the Company and its Affiliates, or their respective agents, at their discretion, to satisfy any applicable withholding obligations or rights with respect to all Tax-Related Items by one or a combination of the following:

 

(i)    withholding from the Participant’s cash compensation payable to the Participant by the Company or its Affiliates;

 

(ii)    withholding Shares that otherwise would be issued to the Participant when the Participant’s RSUs are settled;

 

(iii)    withholding from proceeds of the sale of Shares, through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization without further consent);

 

(iv)    requiring the Participant to make a payment in cash or by check;

 

(v)    any other method of withholding approved by the Company and to the extent required by Applicable Laws or the Plan, approved by the Administrator; or

 

(vi)    under such rules as may be established by the Administrator and in compliance with the Company’s code of ethics, if applicable; provided, however, that, unless otherwise determined by the Administrator, if the Participant is subject to Section 16 under the Exchange Act at the time of the withholding, then the method of withholding shall be through a withholding of Shares under (ii) above.

 

2
 

 

The Company may withhold or account for Tax-Related Items by considering minimum statutory withholding rates or other applicable withholding rates, including up to the maximum applicable rate for the Participant’s jurisdiction(s). If the maximum applicable rate for the Participant’s jurisdiction(s) is used in connection with the withholding methods described in (ii) or (iii) above, the Participant may receive a refund of any over-withheld amount in cash and will have no entitlement to the equivalent amount in Shares. If the withholding obligation for Tax-Related Items is satisfied by withholding in Shares as described in (ii) above, for tax purposes, the Participant will be deemed to have received the full number of Shares, notwithstanding that a number of the Shares are held back solely for the purpose of satisfying the Tax-Related Items.

 

The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares if the Participant fails to comply with his or her obligations in connection with the Tax-Related Items.

 

2.

Rights as a Stockholder.

 

The Participant shall not be deemed for any purpose, nor have any of the rights or privileges of, a stockholder of the Company in respect of any Shares underlying the RSUs unless, until and to the extent that (a) the Company shall have issued and delivered to the Participant the Shares underlying the vested RSUs and (b) the Participant’s name shall have been entered as a stockholder of record with respect to such Shares on the books of the Company. The Company shall cause the actions described in clauses (a) and (b) of the preceding sentence to occur promptly following settlement as contemplated by this Agreement, subject to compliance with Applicable Laws.

 

3.

Incorporation by Reference, Etc.

 

The Notice of Grant is hereby incorporated by reference, and the provisions of the Plan are hereby incorporated herein by reference mutatis mutandis. Except as otherwise expressly set forth herein or in the Notice of Grant, this Agreement and the Notice of Grant shall be construed in accordance with the terms of the Plan and any interpretations, amendments, rules and regulations promulgated by the Administrator from time to time pursuant to the terms of Plan. The Administrator shall have final authority to interpret and construe the terms of the Plan, the Notice of Grant and this Agreement and to make any and all determinations under them, and its decision shall be binding and conclusive upon the Participant and his or her legal representative in respect of any questions related to the RSUs. Without limiting the foregoing, the Participant acknowledges that the RSUs and any Shares acquired upon settlement of the RSUs are subject to the terms of the Plan under which, in certain circumstances, an adjustment may be made to the number of the RSUs and any Shares acquired upon settlement of the RSUs.

 

4.

Compliance with Applicable Laws.

 

The granting and settlement of the RSUs, and any other obligations of the Company under this Agreement, shall be subject to all Applicable Laws. The Administrator shall have the right to impose such restrictions on the RSUs as it deems reasonably necessary or advisable under applicable Federal or non-U.S. securities laws, the rules and regulations of any stock exchange or market upon which Shares are then listed or traded, and/or any blue sky, state securities or non-U.S. exchange control or other laws applicable to such Shares. It is expressly understood that the Administrator is authorized to administer, construe and make all determinations necessary or appropriate to the administration of the Plan and this Agreement, all of which shall be binding upon the Participant. The Participant agrees to take all steps the Administrator or the Company determines are reasonably necessary to comply with all Applicable Laws in exercising his or her rights under this Agreement.

 

5.

Nature of Grant.

 

By accepting the RSUs, the Participant acknowledges, understands and agrees that:

 

(a)    the grant of the RSUs is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of RSUs, or benefits in lieu of RSUs, even if RSUs have been granted in the past;

 

(b)    all decisions with respect to future RSUs or other grants, if any, will be at the sole discretion of the Company;

 

(c)    the RSUs grant shall not create a right to any service relationship with the Company;

 

(d)    unless otherwise agreed with the Company in writing, the Shares, and the income from and value of same, are not granted as consideration for, or in connection with, the service the Participant may provide as a director of a Subsidiary of the Company;

 

(e)    the future value of the underlying Shares is unknown, indeterminable and cannot be predicted with certainty; and

 

(f)    no claim or entitlement to compensation or damages shall arise from forfeiture of the RSUs resulting from the failure of the Participant to remain a director of the Company or pursuant to Section 6 of this Agreement.

 

3
 

 

6.

Clawback.

 

The RSUs and/or the Shares acquired upon settlement of the RSUs shall be subject (including on a retroactive basis) to clawback, recoupment, forfeiture or similar requirements (and such requirements shall be deemed incorporated by reference into this Agreement) to the extent required by the Company’s Clawback Policy or Applicable Laws (including, without limitation, Section 304 of the Sarbanes-Oxley Act and Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act).

 

7.

Miscellaneous.

 

Transferability. The RSUs may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered (a “Transfer”) by the Participant other than by will or by the laws of descent and distribution, pursuant to a qualified domestic relations order or as otherwise permitted under the Plan. Any attempted Transfer of the RSUs contrary to the provisions hereof, and the levy of any execution, attachment or similar process upon the RSUs, shall be null and void and without effect.

 

Amendment. The Administrator at any time, and from time to time, may amend the terms of this Agreement; provided, however, that the rights of the Participant shall not be materially adversely affected without the Participant’s written consent.

 

Waiver. Any right of the Company or its Affiliates contained in this Agreement may be waived in writing by the Administrator. No waiver of any right hereunder by any party shall operate as a waiver of any other right, or as a waiver of the same right with respect to any subsequent occasion for its exercise, or as a waiver of any right to damages. No waiver by any party of any breach of this Agreement shall be held to constitute a waiver of any other breach or a waiver of the continuation of the same breach.

 

Section 409A. The RSUs are intended to be exempt from, or compliant with, Section 409A of the Code and shall be interpreted accordingly. Notwithstanding the foregoing or any provision of the Plan or this Agreement, if any provision of the Plan or this Agreement contravenes Section 409A of the Code or could cause the Participant to incur any tax, interest or penalties under Section 409A of the Code, the Administrator may, in its sole reasonable discretion and without the Participant’s consent, modify such provision to (i) comply with, or avoid being subject to, Section 409A of the Code, or to avoid the incurrence of taxes, interest and penalties under Section 409A of the Code, and (ii) maintain, to the maximum extent practicable, the original intent and economic benefit to the Participant of the applicable provision without materially increasing the cost to the Company or contravening the provisions of Section 409A of the Code. This Section 7(d) does not create an obligation on the part of the Company to modify the Plan or this Agreement and does not guarantee that the RSUs or the Shares underlying the RSUs will not be subject to interest and penalties under Section 409A of the Code.

 

General Assets. All amounts credited in respect of the RSUs to the book-entry account under this Agreement shall continue for all purposes to be part of the general assets of the Company. The Participant’s interest in such account shall make the Participant only a general, unsecured creditor of the Company.

 

Notices. All notices, requests, consents and other communications to be given hereunder to any party shall be deemed to be sufficient if contained in a written instrument and shall be deemed to have been duly given when delivered in person, by nationally recognized overnight courier, or by first-class registered or certified mail, postage prepaid, addressed to such party at the address set forth below or such other address as may hereafter be designated in writing by the addressee to the addresser:

 

 

(i)

if to the Company, to:

 

Daily Journal Corporation
915 East First Street
Los Angeles, CA 90012

 

Attention: Chief Financial Officer

 

 

(ii)

if to the Participant, to the Participant’s home address on file with the Company.

 

All such notices, requests, consents and other communications shall be deemed to have been delivered in the case of personal delivery, on the date of such delivery, in the case of nationally recognized overnight courier, on the next business day, and in the case of mailing, on the third business day following such mailing if sent by certified mail, return receipt requested. Notices delivered to the Participant via e-mail or the Diligent portal shall be deemed to have been delivered when sent or posted, as applicable.

 

4
 

 

Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

 

No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Participant’s participation in the Plan, or his or her acquisition or sale of the underlying Shares. The Participant should consult with his or her own personal tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.

 

Imposition of Other Requirements. The Company reserves the right to impose other requirements on the Participant’s participation in the Plan, on the RSUs and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require the Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

 

Insider Trading/Market Abuse. The Participant acknowledges that, depending on the applicable jurisdictions, including the United States and the Participant’s jurisdiction, the Participant may be subject to insider trading restrictions and/or market abuse laws which may affect his or her ability to sell or otherwise dispose of Shares, rights to Shares (e.g., RSUs) or rights linked to the value of Shares (e.g., phantom awards, futures, Dividend Equivalents) during such times as the Participant is considered to have “inside information” regarding the Company as defined in the laws or regulations in the applicable jurisdictions. Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Participant placed before he or she possessed inside information. Furthermore, the Participant could be prohibited from (a) disclosing the inside information to any third party and (b) “tipping” third parties or causing them otherwise to buy or sell securities. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under the Company’s code of ethics.

 

Fractional Shares. In lieu of issuing a fraction of a Share, if applicable, the Company shall be entitled to pay to the Participant an amount equal to the Fair Market Value of such fractional share.

 

Beneficiary. To the extent permitted by the Administrator, the Participant may file with the Administrator a written designation of a beneficiary on such form as may be prescribed by the Administrator and may, from time to time, amend or revoke such designation. If no beneficiary is designated (or permitted to be designated), if the designation is ineffective, or if the beneficiary dies before the balance of the Participant’s benefit is paid, the balance shall be paid to the Participant’s estate. Notwithstanding the foregoing, however, the Participant’s beneficiary shall be determined under applicable state (or other) law if such state (or other) law does not recognize beneficiary designations under Awards of this type and is not preempted by laws which recognize the provisions of this Section 7(l).

 

Successors. The terms of this Agreement shall be binding upon and inure to the benefit of the Company or any of its Affiliates and their successors and assigns, and of the Participant and the beneficiaries, executors, administrators, heirs and successors of the Participant.

 

Limitation of Liability. The Participant agrees that any liability of the officers, the Committee, the Board and the Administrator to the Participant under this Agreement shall be limited to those actions or failure to take actions which constitute self-dealing, willful misconduct or recklessness.

 

Governing Law; Waiver of Jury Trial. This Agreement will be governed by, and construed in accordance with, the laws of the State of South Carolina, as such laws are applied to contracts entered into and performed in such State. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY, IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THE PLAN OR THIS AGREEMENT.

 

Headings. The headings of the Sections hereof are provided for convenience only and are not to serve as a basis for interpretation or construction, and shall not constitute a part, of this Agreement.

 

 

***

 

5
EX-10.5 3 ex_901467.htm EXHIBIT 10.5 ex_901467.htm

Exhibit 10.5

 

SEPARATION AGREEMENT AND RELEASE

 

This Separation Agreement and Release, dated as of the last date on the signature page hereto (this “Agreement”), is by and between Daily Journal Corporation (the “Company”) and Tu To (“you”). In connection with the end of your employment with the Company, the Company and you hereby agree as follows:

 

1.    Separation. You and the Company hereby mutually and irrevocably agree that your employment with the Company and its subsidiaries will end on January 15, 2026 (the “Separation Date”). You also agree to, and hereby do, resign from all of your officer titles at the Company and its subsidiaries effective on the Separation Date. The Company will pay to you your regular wages up through the Separation Date, and will pay out any unused paid-time-off, on the Separation Date.

 

2.    Special Milestone Bonuses. In recognition of your critical role in several upcoming projects, your retirement timeline shall be tied to the achievement of the following five milestones, with a bonus of Fifteen Thousand Dollars ($15,000) payable upon the timely completion of each milestone: (i) DJC NetSuite Implementation Go-Live; (ii) Completion of Q4 Close; (iii) October Close in NetSuite; (iv) 10-K Filing and Audit Completion; and (v) November Close in NetSuite. Accordingly, if all five milestones are achieved, you will have received a total bonus amount of Seventy-Five Thousand Dollars ($75,000). You agree to use your best efforts to actively assist in the completion of these milestones and not take any actions intended to hinder, delay, or otherwise interfere with their timely completion. Notwithstanding the foregoing, you shall not be held responsible, nor shall your eligibility for the associated bonus be adversely affected, for delays or failures to meet any milestone that arise due to circumstances beyond your reasonable control.

 

3.    Additional Compensation. In consideration of and conditioned upon your execution and performance of this Agreement, including without limitation your execution, delivery and non-revocation of the Release of Claims attached as Exhibit A on the Separation Date (the “Release”), the Company will provide you with each of the following, which you acknowledge you are not otherwise entitled to receive:

 

a.    a lump-sum amount of One Hundred Seventy-Five Thousand Dollars ($175,000.00 USD), representing a retroactive pay increase at the rate of Fifty Thousand Dollars ($50,000.00 USD) per year for 3.5 years, in recognition of your increased responsibilities as Chief Financial Officer, will be paid to you, net of withholdings, promptly following the end of the Revocation Period (as defined below); and

 

b.    each of your Daily Journal Corporation Consolidated Unit Certificates (your “Units”) will remain outstanding as if you were 65 years of age on the Separation Date, with your Units to otherwise operate and expire in accordance with their terms and schedules, and with payments, if any, to be made to you, net of withholdings, when made to other employees of the Company and its subsidiaries holding units; and

 

 

1
 

 

c.    the Company will pay for its usual portion (on a percentage basis) of your medical and dental plan COBRA premiums (individual employee only) through the end of April 2027; and

 

d. a bonus for fiscal year 2025 of $40,000.

 

4.    No Further Payments or Benefits; Retirement. You acknowledge that (a) you are not entitled to any payments, wages, bonuses, benefits, insurance coverage or other compensation from the Company except as specifically set forth above, and (b) upon payment of your wages and unused paid-time-off, you will have been paid all amounts that the Company is required to pay you. You represent and warrant that you have no unpaid reimbursement requests, and any such requests after the date hereof shall be promptly submitted to the Company’s Chief Executive Officer in advance of the Separation Date. Assuming compliance with the terms of this Agreement and the execution, delivery and non-revocation of the Release, the termination of your employment shall be characterized as a retirement.

 

5.    General Release. You hereby agree to execute and deliver the Release of Claims set forth on Exhibit A on the Separation Date, and you understand that your failure to do so, or your revocation of the Release during the Revocation Period, means the Company will have no obligations to you under Sections 3 or 4 this Agreement.

 

6.    Confidentiality and Non-Disparagement. You agree that you shall keep absolutely confidential and shall not disclose any of the information you learned during the course of your employment about the Company or its businesses, financial matters, strategies or otherwise, except for information that is in the public domain (other than as the result of unauthorized disclosure) or that you are required to disclose by law, and nothing in this Agreement prevents you from disclosing information about unlawful acts in the workplace, such as discrimination or sexual harassment, or any other conduct that you have reason to believe is unlawful. Without limiting the foregoing, you agree that you will not use any of the Company’s trade secrets or other confidential information to solicit or induce any person to cease, diminish or not commence a business relationship with the Company, its subsidiaries or their affiliates. In addition, you agree not to make any statement or representation that disparages or otherwise harms the reputation, goodwill or commercial interests of the Company or its subsidiaries, or any of their directors, employees, agents or affiliates.

 

7.    Understanding and Representation. You understand that you will continue to be bound by that certain Employee Confidentiality Agreement, [dated March 1, 2014], to the extent set forth therein (the “Employee NDA”). You hereby agree to return to the Company all of its property on or before the Separation Date, and that you will not retain any copy of any of the Company’s information, electronically or in paper form. Furthermore, you understand that a material breach of the Employee NDA or these covenants would mean that the Company will no longer be obligated to provide you with the consideration specified in Section 3 above, and that regardless of whether that consideration (or any other consideration hereunder) has already been provided, the Company may seek damages against you.

 

8.    No Admission of Obligations or Wrongdoing. The Company and you understand and agree that neither this Agreement nor anything in it shall be considered as any admission by the Company or you of any preexisting obligation or improper conduct whatsoever. Both parties deny any such obligations or improper conduct.

 

2
 

 

9.    Governing Law; Arbitration. This Agreement is governed by federal law and the laws of the State of California. You and the Company agree that any disputes between you and any of the Company Releasees (as defined in Exhibit A), whether initiated by you or a Company Releasee, will be resolved by binding arbitration. The arbitration shall be conducted in Los Angeles pursuant to the JAMS arbitration rules applicable to employment disputes. The arbitrator shall have the power to grant all of the same relief as a court and will issue a written decision. In any such arbitration, you and the Company Releasee(s) at issue shall bear each of your own costs and attorney fees, provided that the arbitrator may award fees and costs consistent with applicable law. The Company will pay the unique costs of arbitration, including without limitation the arbitrator’s fees. By agreeing to this provision, you and the Company Releasees are giving up your respective rights to a jury trial in court as well as your right to pursue claims on a class or collective basis.

 

10.    Acknowledgments; Amendment. You have read this Agreement and understand its contents. You acknowledge that you have had 21 days to consider this Agreement and the Release, and to decide whether to sign them, although you may have decided to sign this Agreement sooner. The Release may not be signed until the Separation Date, and then you have 7 days following its delivery to the Company to revoke it (the “Revocation Period”), with the Release not becoming effective or enforceable until the Revocation Period has expired. You agree that you are signing this Agreement voluntarily. You understand that this Agreement supersedes all prior discussions and agreements between you and the Company, whether oral or in writing, related to the subject matter hereof, other than the Employee NDA, which remains in effect. You have been advised, and are being advised, to consult with an attorney before executing this Agreement. You and the Company each agree that this Agreement may be amended only by a written agreement signed by each of us.

 

11.    Protected Activity. You understand that nothing in this Agreement shall in any way limit you from engaging for a lawful purpose in any Protected Activity. “Protected Activity” shall mean filing a charge or complaint with, or otherwise communicating, cooperating, or participating with any governmental agency; provided, however, you are agreeing to waive any right to economic recovery or other compensation with respect to any Protected Activity, other than “whistleblower” awards pursuant to the rules and regulations of the Securities and Exchange Commission. You understand that you are not required to obtain authorization from the Company prior to disclosing information to or communicating with such agencies, nor are you obligated to advise the Company as to any such disclosures or communications. The Company does ask, however, that you take reasonable precautions to prevent any unauthorized use or disclosure of any information that may constitute the confidential, proprietary, trade secret, or other sensitive or protected information belonging to the Company, to anyone other than the relevant government agencies. You further understand that “Protected Activity” does not include the disclosure of any Company attorney-client privileged communications.

 

[Continued on Next Page]

 

3
 

 

12.    Counterparts. This Agreement may be executed in counterparts and by the exchange of facsimile, PDF or electronic signatures (such as DocuSign).

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set forth below.

 

Dated: 10/27/2025  
tutosig.jpg
  
      Tu To  
         
         
      DAILY JOURNAL CORPORATION  
         
         
Dated: 10/27/2025  
smjsig.jpg
  
      Name: Steven Myhill-Jones  
      Title: Chairman and CEO  

 

 

4
 

 

Exhibit A

 

Release of Claims (this “Release”)

 

General Release. In consideration for the promises contained in the Separation Agreement and Release (the “Agreement”), you hereby release and discharge the Company, its subsidiaries and each of their respective directors, employees, agents, contractors, shareholders, affiliates, attorneys, insurers, successors and assigns (collectively, “Company Releasees”) from any and all claims, expenses, contracts, demands, obligations, liabilities, actions, costs, debts and causes of action of every nature whatsoever, known or unknown, which have existed or now exist whether in law or equity which you have or had or may claim to have or had by reason of any and all matters from the beginning of time through the Separation Date, to the maximum extent permitted by applicable law. These include all claims or causes of action based on, or arising out of, any alleged wrongful termination, including a release of any rights or claims you may have under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act of 1967, as amended (“ADEA”), the Older Workers Benefit Protection Act, the Americans with Disabilities Act of 1990, the Rehabilitation Act of 1973, the Family and Medical Leave Act of 1993, Section 1981 of the Civil Rights Act of 1866, Section 1985(3) of the Civil Rights Act of 1871, the Employee Retirement Income Security Act of 1974, the Fair Labor Standards Act, analogous California laws, and any other federal, state or local law, regulation or common law against discrimination or relating to employment, wages, compensation, hours, exempt or non-exempt classification, or any other terms and conditions of employment. Also included within the Release are any claims or causes of action based on or arising out of any breach of contract, breach of implied covenant of good faith and fair dealing, misrepresentation, fraud, fraudulent inducement, defamation, infliction of emotional distress, discrimination or harassment based on any prohibited basis (including but not limited to race, national origin, marital status, sex, religion, sexual orientation or disability), libel, slander, impairment of economic opportunity, sexual harassment, retaliation, assault, battery, pain and suffering, violation of duty or any other tort.

 

Acknowledgement and Revocation. You acknowledge that you are waiving and releasing rights that you may have under the ADEA and any other federal, state or local statute, regulation, common law or contract relating to employment (or termination of employment) and that this Release is voluntary. You acknowledge that the consideration given for this Release is in addition to anything of value to which you are already entitled. You acknowledge that you have had at least 21 days to consider this Release and whether to sign it, and that you will have 7 days following the date of delivery to revoke it. You may revoke the Release during such 7-day period by delivering written notice of your revocation to the Company’s Chief Executive Officer no later than 5:00 pm Pacific Time on the seventh full day following the date of your execution thereof. If you deliver a revocation of this Release during such period, the Release will not become effective or enforceable, and the Company will have no obligations to you under Sections 3 or 4 of the Agreement.

 

Release of Unknown Claims. You acknowledge and agree that you are intentionally releasing claims that you do not know that you might have and that, with hindsight, you might regret having released. Thus, for the purpose of implementing a full and complete release of the Company and the other released parties, you expressly understand and agree that your release is intended to include in its effect, without limitation, claims and causes of action which you do not know of or suspect to exist in your favor and that your release extinguishes all such claims and causes of action. In this regard, you specifically and expressly waive and release all rights under the provisions of Section 1542 of the Civil Code of California, which provides as follows:

 

A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.

 

5
 

 

No Assignment. You have not assigned or given away any of the claims you are releasing, and you agree that this Release is a bar to bringing, asserting, inducing or assisting any such released claim.

 

Surviving Claims. This release does not release (i) any claims for payment of amounts payable under the Agreement in accordance with its terms, (ii) any rights you may have to indemnification by the Company or to directors and officers liability insurance coverage, (iii) any vested rights you may have under the Company’s healthcare benefit plans as a result of actual service with the Company, nor (iv) any claims that may not be lawfully waived.

 

Governing Law. This Release shall be governed by the laws of the State of California.

 

WHEREAS, this Release has been executed by you and delivered to the Company on the date set forth below.

 

 

       
   

 

Tu To

  
       
       
    Date:    
       
ACKNOWLEDGED AND AGREED:      
       
Daily Journal Corporation      
       
By:      Name: Steven Myhill-Jones      
       
Title: Chairman and CEO      
       
Date:       

 

6
EX-21.1 4 ex_902871.htm EXHIBIT 21.1 HTML Editor

Exhibit 21.1

 

As of September 30, 2025, Journal Technologies, Inc., a Utah Corporation, was a wholly owned subsidiary of Daily Journal Corporation.

 

In addition, Journal Technologies (Canada) Inc, a British Columbia Corporation established on August 30, 2022, was also a wholly owned subsidiary of Daily Journal Corporation at September 30, 2025.

 

 
EX-23.1 5 ex_902872.htm EXHIBIT 23.1 HTML Editor

Exhibit 23.1


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the incorporation by reference in the Registration Statement Form S-8 (No. 333-287544) of Daily Journal Corp. of our report dated December 29, 2025, relating to the consolidated financial statements, which appears in this Form 10-K for the year ended September 30, 2025.
 
/s/ Baker Tilly US, LLP
 
Irvine, California
December 29, 2025

 

 
EX-31.1 6 ex_898812.htm EXHIBIT 31.1 ex_898812.htm

Exhibit 31.1

 

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Steven Myhill-Jones, certify that:

 

 

1.

I have reviewed this annual report on Form 10-K of Daily Journal Corporation for the fiscal year ended September 30, 2025;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of registrant as of, and for, the periods presented in this report;

 

 

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a.

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

 

b.

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c.

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d.

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

5.

I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

 

a.

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b.

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: December 29, 2025

/s/ Steven Myhill-Jones
 

Steven Myhill-Jones

Chief Executive Officer and Chairman of the Board

(Principal Executive Officer)

 

 
EX-31.2 7 ex_898813.htm EXHIBIT 31.2 ex_898813.htm

Exhibit 31.2

 

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Erik Nakamura, certify that:

 

 

1.

I have reviewed this annual report on Form 10-K of Daily Journal Corporation for the fiscal year ended September 30, 2025;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of registrant as of, and for, the periods presented in this report;

 

 

4.

I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

a.

designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;

 

 

b.

designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

c.

evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

d.

disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

 

5.

I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

 

a.

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

b.

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: December 29, 2025

/s/ Erik Nakamura
 

Erik Nakamura

Chief Financial Officer

(Principal Financial Officer)

 

 
EX-32.1 8 ex_898814.htm EXHIBIT 32.1 ex_898814.htm

Exhibit 32.1

 

CERTIFICATION PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)

 

In connection with the Annual Report of Daily Journal Corporation (the “Company”) on Form 10-K for the fiscal year ended September 30, 2025 as filed with the Securities and Exchange Commission on the date hereof to which this Certification is attached as Exhibit 32.1 (the “Report”), I certify, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

Date: December 29, 2025

/s/ Steven Myhill-Jones
 

Steven Myhill-Jones

Chief Executive Officer and Chairman of the Board

(Principal Executive Officer)

 

 

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350, and is not being filed as part of the Report or as a separate disclosure document.

 

 
EX-32.2 9 ex_898815.htm EXHIBIT 32.2 ex_898815.htm

Exhibit 32.2

 

CERTIFICATION PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350)

 

In connection with the Annual Report of Daily Journal Corporation (the “Company”) on Form 10-K for the fiscal year ended September 30, 2025 as filed with the Securities and Exchange Commission on the date hereof to which this Certification is attached as Exhibit 32.2 (the “Report”), I certify, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: December 29, 2025

/s/ Erik Nakamura
 

Erik Nakamura

Chief Financial Officer

(Principal Financial Officer)

 

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350, and is not being filed as part of the Report or as a separate disclosure document.

 

 
EX-97 10 ex_902873.htm EXHIBIT 97 ex_902873.htm

Exhibit 97

 

DAILY JOURNAL CORPORATION POLICY FOR THE

 

RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION

 

 

 

1.

Purpose. The purpose of this Policy is to describe the circumstances in which Executive Officers will be required to repay or return Erroneously Awarded Compensation to Daily Journal Corporation (the “Company”). Each Executive Officer shall be required to sign and return to the Company the Acknowledgement attached hereto as Exhibit A.

 

 

2.

Administration. This Policy shall be administered by the Board of Directors of the Company (the “Board”). The Board is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate, or advisable for the administration of this Policy. Any determinations made by the Board shall be final and binding on all affected individuals.

 

 

3.

Application. This Policy applies to Incentive-Based Compensation received by a person (a) after beginning services as an Executive Officer; (b) who served as an Executive Officer at any time during the performance period for such Incentive-Based Compensation; (c) while the Company had a listed class of securities on a national securities exchange; and (d) during the Clawback Period.

 

 

4.

Definitions. For purposes of this Policy, the following capitalized terms shall have the meanings set forth below.

 

(a) “Accounting Restatement” means an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial restatements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.

 

(b)      “Clawback Period” means, with respect to any Accounting Restatement, the three completed fiscal years of the Company immediately preceding the Restatement Date and any transition period (that results from a change in the Company’s fiscal year) of less than nine months within or immediately following those three completed fiscal years.

 

(c)      “Erroneously Awarded Compensation” means the amount of Incentive-Based Compensation previously received that exceeds the amount of Incentive-Based Compensation that otherwise would have been received had it been determined based on the restated amounts, computed without regard to any taxes paid; provided, however, that for Incentive-Based Compensation based on stock price or total stockholder return: (i) the amount of Erroneously Awarded Compensation must be based on a reasonable estimate of the effect of the Accounting Restatement on the stock price or total stockholder return upon which the Incentive-Based Compensation was received; and (ii) the Company must maintain documentation of the determination of that reasonable estimate and provide such documentation to The Nasdaq Stock Market (“Nasdaq”).

 

(d)      “Executive Officer” is an officer the Board designated as an executive officer under Section 16 of the Securities Exchange Act of 1934, as amended.

 

(e)      “Financial Reporting Measures” means measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and all other measures that are derived wholly or in part from such measures. Stock price and total shareholder return (and any measures that are derived wholly or in part from stock price or total shareholder return) shall for purposes of this Policy be considered Financial Reporting Measures.

 

(f)      “Incentive-Based Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of a Financial Reporting Measure. Incentive-Based Compensation is “received” for purposes of this Policy in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or grant of such Incentive-Based Compensation occurs after the end of that period.

 

1
 

 

(g)      “Restatement Date” means the earlier to occur of (i) the date the Board, a committee of the Board or the officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the issuer is required to prepare an Accounting Restatement, or (ii) the date of court, regulator or other legally authorized body directs the issuer to prepare an Accounting Restatement.

 

 

5.

Repayment of Erroneously Awarded Compensation.

 

(a)      In the event of an Accounting Restatement, the Board shall promptly determine the amount of any Erroneously Awarded Compensation for each Executive Officer in connection with such Accounting Restatement and shall promptly thereafter provide each Executive Officer with a written notice containing such amount and a demand for repayment or return, as applicable.

 

(b)      The Board shall have broad discretion to determine the appropriate means of recovery of Erroneously Awarded Compensation based on all applicable facts and circumstances and taking into account the time value of money and the cost to shareholders of delaying recovery.

 

(c)      To the extent that an Executive Officer fails to repay all Erroneously Awarded Compensation to the Company when due, the Company may take all actions reasonable and appropriate to recover such Erroneously Awarded Compensation. The applicable Executive Officer shall be required to reimburse the Company for any and all expenses reasonably incurred (including legal fees) by the Company in recovering such Erroneously Awarded Compensation.

 

(d)      Notwithstanding anything herein to the contrary, the Company shall not be required to recover the Erroneously Awarded Compensation if the following conditions are met and the Board determines that recovery would be impracticable:

 

(i)      The direct expenses paid to a third party to assist in enforcing the Policy against an Executive Officer would exceed the amount to be recovered, after the Company has made a reasonable attempt to recover the applicable Erroneously Awarded Compensation, documented such attempts and provided such documentation to Nasdaq; or

 

(ii)    Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.

 

6.       Indemnification Prohibition. The Company shall not be permitted to indemnify any Executive Officer against (i) the loss of any Erroneously Awarded Compensation that is repaid, returned or recovered pursuant to the terms of this Policy, or (ii) any claims relating to the Company’s enforcement of its rights under this Policy. Further, the Company shall not enter into any agreement that exempts any Incentive-Based Compensation from the application of this Policy or that waives the Company’s right to recovery of any Erroneously Awarded Compensation.

 

7.        Effective Date. This Policy shall be effective as of October 1, 2023 (the “Effective Date”).

 

8.        Amendment; Termination. The Board may amend this Policy from time to time in its discretion and shall amend this Policy as it deems necessary, including as and when it determines that it is legally required by any federal securities laws, SEC rule or the rules of any national securities exchange on which the Company’s securities are listed. The Board may terminate this Policy at any time.

 

9.       Other Recoupment Rights; No Additional Payments. The Board intends that this Policy will be applied to the fullest extent of the law. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that may be available to the Company under applicable law, regulation or rule or pursuant to the terms of any similar policy in any employment agreement, equity award agreement, or similar agreement and any other legal remedies available to the Company.

 

10.      Successors. This Policy shall be binding and enforceable against all Executive Officers and their beneficiaries, heirs, executors, administrators or other legal representatives.

 

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