DAILY JOURNAL CORP 10-K

Item 9A. Controls and Procedures   An evaluation was performed under the supervision and with the participation of the Company’s management, including Gerald L. Salzman, its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of September 30, 2021.  Based on that evaluation, management concluded that its disclosure controls and procedures were not effective as of September 30, 2021. There exist material weaknesses in its internal control over financial reporting because the Company does not segregate duties to the extent it could if it had more people and the Company does not have sufficient controls to support an effective management assessment of internal control over financial reporting.   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, as such term is defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting 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. All internal controls, no matter how well designed, have inherent limitations, and sometimes they can have one or more material weaknesses. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, 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.   Each year, management is required by SEC rules to evaluate the effectiveness of the Company’s internal control over financial reporting. If management identifies any material weaknesses in the course of the evaluation, the rules do not allow us to conclude that our internal control over financial reporting is effective. That evaluation is conducted under the supervision and with the participation of Mr. Salzman, and is based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Based on the evaluation under that framework and applicable SEC rules, management has identified the following deficiencies that constitute material weaknesses in the Company’s internal control over financial reporting:   Segregation of duties: As a small company, we have one long-time knowledgeable manager overseeing both our advertising and subscription departments, eight experienced employees in the accounting department and three in the IT department. Accordingly, we are not able to segregate duties to the extent we could if we had more people. Although the Company has remediated some of the issues associated with administrative access to specific systems, these steps have not fully remediated the control issue.   42     Ineffective management assessment of internal control over financial reporting: The Company does not have an internal audit group due to the small size of its accounting department, and we have not sufficiently designed controls that support an effective assessment of our internal controls relating to the prevention of fraud and possible management override of controls. Hiring an outside firm would certainly help complete the documentation of the internal control assessment to the level required by the COSO framework, but the Company questions whether that would be a wise use of shareholders’ money.   Recognizing our deficiencies, we use mitigating controls, including a variety of internal procedures to check and double-check the areas where one person is responsible for multiple duties. Among other things, the Company’s monitoring activities include monthly review and comparative analysis of financial, production and public information with prior periods by the Company’s department supervisors, the CEO/CFO and the Board of Directors. We will continue to review our compensating controls and procedures in our efforts to mitigate or remediate the above mentioned material weaknesses.   In addition, we believe our most important internal control is our hiring and retention of honest and capable people, whom we trust to do their jobs well. Accordingly, we believe our overall internal control environment is sufficient for a company of our size.   In the context of the COSO 2013 Framework, however, we believe that the above-mentioned control deficiencies constitute material weaknesses, and therefore we must conclude that our internal control over financial reporting was not effective as of September 30, 2021.   43     Changes in Internal Control over Financial Reporting   Except as described above under Management’s Report on Internal Control over Financial Reporting, there were no other changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.   Item 9B. Other Information   None.   44     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 2022 (the “Proxy Statement”), which Proxy Statement will be filed with the SEC within 120 days after September 30, 2021, 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, Chief Financial Officer and Controller. The Company’s Code of Ethics was filed as Exhibit 14 to the fiscal 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.   45     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   Consolidated Balance Sheets at September 30, 2021 and 2020   Consolidated Statements of Comprehensive Income for the years ended September 30, 2021 and 2020   Consolidated Statements of Shareholders’ Equity for the years ended September 30, 2021 and 2020   Consolidated Statements of Cash Flows for the years ended September 30, 2021 and 2020   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 (~) (‡) 14 Daily Journal Corporation Code of Ethics (*) 21 Daily Journal Corporation’s List of Subsidiaries 31 Certification by Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32 Certification by Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance 101.SCH Inline XBRL Taxonomy Extension Schema 101.CAL Inline XBRL Taxonomy Extension Calculation 101.DEF Inline XBRL Taxonomy Extension Definition 101.LAB Inline XBRL Taxonomy Extension Labels 101.PRE Inline XBRL Taxonomy Extension Presentation 104 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, field with the Securities and Exchange Commission on December 17, 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   None.                                      46     SIGNATURES   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.       DAILY JOURNAL CORPORATION               /s/ Gerald L. Salzman       By                                                          Gerald L. Salzman       President     Date:        December 17, 2021     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/ Charles T. Munger     Chairman of the Board December 17, 2021 Charles T. Munger       /s/ Gerald L. Salzman     President, Chief Executive Officer, Chief Financial Officer, Treasurer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) December 17, 2021   Gerald L. Salzman       /s/ Peter Kaufman     Director December 17, 2021 Peter Kaufman       /s/ Mary Conlin     Director December 17, 2021 Mary Conlin         47