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Item 8. Financial Statements and Supplementary Data

2025-12-29 compared with 2024-12-31 · 399 added, 286 removed, 188 unchanged (78% of the section changed)

Financial Statements and Supplementary Data

Daily Journal Corporation

Index to Consolidated Financial Statements

Audited Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To The Board of Directors and Shareholders of Daily Journal Corporation

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, 2024 and 2023, the related consolidated statements of comprehensive income, shareholders’ 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").

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.

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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 Distinct Performance Obligations in Software Revenue Contracts

As discussed in Note 2 to the consolidated financial statements, Journal Technologies 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.

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.

We identified the Company's determination of distinct performance obligations in its Journal Technologies contracts and their effect on revenue recognition as a critical audit matter.

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:

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

Evaluating whether good and 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.

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.

That is, considering the utility, integration, or interdependence of the products and services, we evaluated whether the multiple promised products and services that were delivered to the customer were outputs or inputs to a combined item.

Testing a sample of Journal Technologies 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.

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

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CONSOLIDATED BALANCE SHEETS

(In thousands except share amounts)

September 30, 2025

September 30, 2024

Current assets:

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Non-qualified deferred compensation plan – trust account asset value

Marketable securities at fair value -- common stocks

Accounts receivable, less allowance for doubtful accounts of $ 250,000 at September 30, 2024 and 2023

Marketable securities at fair value

Accounts receivable, net

Prepaid expenses and other current assets

Income tax receivable

Total current assets

Property, plant and equipment, at cost

Land, buildings and improvements

Furniture, office equipment and computer software

Machinery and equipment

Less accumulated depreciation

Operating lease right-of-use assets

LIABILITIES AND SHAREHOLDERS' EQUITY

Property and equipment, net

LIABILITIES AND STOCKHOLDERS ’ EQUITY

Current liabilities:

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Accrued liabilities

Income tax payable

Note payable collateralized by real estate

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Total current liabilities

Long term liabilities

Investment margin account borrowings

Note payable collateralized by real estate

Deferred maintenance agreements

Accrued liabilities

Long-term note payable collateralized by real estate

Long-term deferred maintenance agreements

Long-term accrued liabilities

Accrued non-qualified deferred compensation

Deferred income taxes

Total long-term liabilities

Commitments and contingencies (Notes 4 and 5)

Shareholders' equity

Preferred stock, $ .01 par value, 5,000,000 shares authorized and no shares issued

Total liabilities

Commitments and contingencies (Note 10)

Stockholders’ Equity

Common stock, $ .01 par value, 5,000,000 shares authorized;

1,805,053 shares issued, including 427,627 and 428,027 treasury shares, at September 30, 2024, and 2023, respectively

1,805,053 shares issued and outstanding, and 427,627 treasury shares, as of September 30, 2025, and 2024, respectively

Additional paid-in capital

Retained earnings

Total shareholders' equity

Total liabilities and shareholders’ equity

See accompanying Notes to Consolidated Financial Statements

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (000 except for Share)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except share and per share amounts)

September 30, 2025

September 30, 2024

Advertising service fees and other

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Total revenues

Costs and expenses

Operating expenses:

Salaries and employee benefits

Stock-based compensation

Decrease to the long-term supplemental compensation accrual

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

Agency commissions

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Newsprint and printing expenses

Depreciation and amortization

Equipment maintenance and software

Credit card merchant discount fees

Rent expenses

Accounting and legal fees

Other general and administrative expenses

Total costs and expenses

Total operating expenses

Income from operations

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Dividends and interest income

Net realized and unrealized gains on investments

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

Interest expense on note payable collateralized by real estate

Interest expense on margin loans and others

Gains on sale of capital assets

Net realized and unrealized gains on marketable securities

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

Interest expense

Income before taxes

Provision for income taxes

Weighted average number of common shares outstanding – basic and diluted

Basic and diluted net income per share

Comprehensive income

See accompanying Notes to Consolidated Financial Statements

Income tax provision

Net income and comprehensive income

Weighted average number of common shares outstanding – basic

Basic net income per share

Weighted average number of common shares outstanding – diluted

Diluted net income per share

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

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’ EQUITY (000 except for Share)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

Treasury Stock

Shareholders'

Balance at September 30, 2022

Balance at September 30, 2023

Total Stockholders’

Paid-in Capital

Balance as of September 30, 2023

Issuance of treasury stock

Balance at September 30, 2024

See accompanying Notes to Consolidated Financial Statements

Balance as of September 30, 2024

Stock-based compensation

Balance as of September 30, 2025

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

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

September 30, 2025

September 30, 2024

Cash flows from operating activities

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Gains on sales of capital assets

N et realized and U nrealized gains on marketable securities

Stock dividends

Net realized and unrealized gains on marketable securities

Deferred income taxes

Changes in assets and liabilities

(Increase) decrease in current assets

Changes in operating assets and liabilities;

Accounts receivable, net

Prepaid expenses and other assets

Income tax receivable

Increase (decrease) in liabilities

Accounts payable

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Deferred maintenance agreements and others

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Cash flows from investing activities

Sales of marketable securities

Purchases of marketable securities

Gains on sales of capital assets

Proceeds from sales of marketable securities

Proceeds on sales of capital assets

Purchases of property, plant and equipment, net

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities

Proceeds from margin loan borrowing

Payment to margin loan borrowing

Payment of real estate loan principal

Payments to margin loan borrowing

Payments of real estate loan principal

Net cash used in financing activities

(Decrease) increase in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash

Beginning of year

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

Cash and cash equivalents and restricted cash at beginning of period

Cash and cash equivalents

Restricted cash

Non-qualified deferred compensation plan – trust account asset value

Cash and cash equivalents at end of period

Interest paid during year

Income taxes paid during year

See accompanying Notes to Consolidated Financial Statements

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

DAILY JOURNAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

THE COMPANY AND OPERATIONS

Daily Journal Corporation (“Daily Journal” or “the Company”) 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.

This is sometimes referred to as the Company’s “Traditional Business”.

(In thousands, except share data)

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.

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Essentially all of the Company’s U.S.

operations are based in California, Arizona and Utah.

The Company also has a presence in Australia where Journal Technologies is working on three software installation projects and in British Columbia, Canada, where the Company established a wholly-owned subsidiary, Journal Technologies (Canada) Inc., since August 2022.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company.

The consolidated financial statements include the accounts of Daily Journal and its wholly owned subsidiaries.

All intercompany transactions have been eliminated in consolidation.

Certain reclassifications of previously reported amounts have been made to conform to the current year’s presentation.

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.

Accounts receivable, net

The Company extends unsecured credit to most of its advertising customers.

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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):

Accounts receivable, net

Balance as of September 30, 2023

Increase (decrease), net

Balance as of September 30, 2024

Increase (decrease), net

Balance as of September 30, 2025

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.

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 $ 2,191,000 and $ 2,100,000 at September 30, 2024 and 2023, respectively, represents cash held to secure two letters of credit issued by a bank for a software installation contract in Australia.

Fair Value of Financial Instruments:

The carrying amounts of cash, accounts receivable and accounts payable approximate fair value because of their short maturities.

In addition, the Company has investments in marketable securities, all categorized as “available-for-sale” and stated at fair market value.

In fiscal 2019, the Company adopted Accounting Standards Update (“ASU”) No.

2016-01, Financial Instruments – Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities .

This ASU requires an entity that holds financial assets or owes financial liabilities to, among other things, measure equity investments at fair value and recognize unrealized gains through net income.

Accordingly, the Company’s net income of $ 78,113,000 for fiscal 2024, included net realized and unrealized gains on marketable securities of $ 96,142,000 .

In fiscal 2023, the Company’s net income of 21,452,000 included net realized and unrealized gains on marketable securities of $ 17,446,000 .

The Company uses quoted prices in active markets for identical assets (consistent with the Level 1 definition in the fair value hierarchy) to measure the fair value of its marketable securities on a recurring basis pursuant to Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement and Disclosures .

At September 30, 2024, the aggregate fair market value of the Company’s marketable securities was $ 358,691,000 .

These marketable securities had approximately $ 219,597,000 of net unrealized gains before taxes of $ 57,100,000 .

Most of the unrealized net gains were in the common stocks of three U.S.

financial institutions and one foreign manufacturer.

At September 30, 2023, the Company had marketable securities at fair market value of approximately $ 303,128,000 , including approximately $ 137,716,000 of unrealized net gains before taxes of $ 36,260,000 .

Investment in Financial Instruments (000)

September 30, 2024

September 30, 2023

Marketable securities

Common stocks

All marketable securities are classified as “Current assets” because they are available for sale at any time.

In March 2024, the Company sold part of its marketable securities for approximately $ 40,579,000 , realizing net gains of $ 14,261,000 .

The Company used these proceeds and excess cash from operations to pay down the margin loan balance to $ 27,500,000 from $ 75,000,000 , aggregating a paydown of approximately $ 47,500,000 during the twelve months ended September 30, 2024.

During fiscal 2023, the Company sold part of its marketable securities for approximately $ 2,826,000 , realizing a total net gain of approximately $ 422,000 , and simultaneously bought some additional marketable securities for an aggregated cost of approximately $ 10,001,000 with additional borrowings of $ 6,011,000 from the margin loan account.

The Company subsequently repaid $ 6,011,000 reducing the balance of the margin loan to $ 75,000,000 .

In addition, the Company received stock dividends in March 2023 worth approximately $ 2,978,000 from one of the companies in which it holds marketable securities.

Comparative pretax realized and unrealized gains on investments are as follows:

Total Pretax Gains

Marketable securities

Common stocks

Inventories, comprised of newsprint and paper, are stated at cost, on a first-in, first-out basis, which does not exceed current net realizable value.

Property, plant and equipment:

Property, plant and equipment are carried on the basis of cost or fair value for assets acquired in business combinations.

Depreciation of assets is provided in amounts sufficient to depreciate the cost of related assets over their estimated useful lives ranging from 3 – 39 years.

At September 30, 2024, the estimated useful lives were (i) 5 – 39 years for building and improvements, (ii) 3 – 5 years for furniture, office equipment and software, and (iii) 3 – 10 years for machinery and equipment.

Leasehold improvements are amortized over the term of the related leases or the useful life of the assets, whichever is shorter.

Assets are depreciated using the straight-line method for financial statements and accelerated method for tax purposes.

Depreciation and amortization expenses were $ 267,000 and $ 279,000 for fiscal 2024 and 2023, respectively.

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

Allowance for Credit Losses (in thousands)

Beginning of Year

charged to Costs

Accounts charged

Balance at End

Allowance for credit losses

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:

Useful life (years)

Buildings and improvements

Furniture, office equipment and computer software

Machinery and equipment

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.

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Impairment of Long-Lived Assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

There were no such impairments identified during fiscal 2024 and 2023.

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

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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.

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.

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.

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.

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 ASU No.

2014-09, Revenue from Contracts with Customers (ASC Topic 606) .

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 and advertising service fees and other revenues are recognized when advertisements are published.

Advertising service fees and other revenues primarily represent commissions earned by the Company for sourcing the advertisements from its customers on behalf of third-party publications and are recorded on a net basis.

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.

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.

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 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 and related costs on a gross basis.

The Company considers several factors to determine if it controls the good or service and therefore is the principal.

These factors include (1) if we have primary responsibility for fulfilling the promise;

and (2) if we have discretion in establishing price for the specified good or service.

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 Traditional Business and Journal Technologies issue invoices that have payment terms which require payment within 30 days.

Contracts do not have a significant financing component and do not have variable consideration.

Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether transfer of control to customers has occurred.

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 completion of services, and unearned consulting fee proceeds are recognized within deferred consulting fees 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.

The adoption of 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.

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 of 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 e-file cases or pay traffic citations.

Furthermore, there are no fulfillment costs to be capitalized for the software contracts because these costs do not generate or enhance resources that will be used in satisfying future performance obligations.

Approximately 76 % of the Company’s revenues in fiscal 2024 and 2023 were derived from sales of software licenses, annual software licenses, maintenance and support agreements and consulting services that typically include implementation and training.

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

Changes in total deferred revenues (000)

Recognition from Deferral

Total deferred revenues

The change in allowance for doubtful accounts is as follows:

Allowance for Doubtful Accounts (000)

Additions charged to

Allowance for doubtful accounts

Advertising :

The Company’s policy is to expense advertising expenses as incurred, if any.

There were no advertising expenses during both fiscal 2024 and 2023 as the Company advertises itself via its own newspapers and websites.

Stock-based compensation :

In fiscal 2024, the Company implemented an Equity Incentive Plan, a share-based award plan that provides for the grant of incentive stock options, non-qualified stock options, restricted stock units, and other equity-based awards to key employees.

As of September 30, 2024, there were 3,320 shares available for future grants from the 3,720 shares authorized for grant under the Equity Incentive Plan.

Restricted stock unit grants generally vest ratably over two years of continuous services from the date of grant.

We account for share-based compensation utilizing the fair value recognition pursuant to ASC 718.

For restricted stock units, we use the closed market price on the date of grant as the fair market value of these stocks.

We have not historically paid any cash dividends on our common stock and as a result do 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.

We amortize the fair value of all awards on a straight-line basis over the requisite service periods, which are generally the vesting periods.

We will recognize the effect of awards for which the requisite service period is not rendered when the award is forfeited.

That is, we recognize 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 summarized stock unit activity during the periods presented:

Number of Shares

Average Grant

Date Fair Value

Unvested at September 30, 2023

Unvested at September 30, 2024

As of September 30, 2024, we had total unrecognized compensation cost of approximately $ 169,000 related to unvested restricted stock units which is expected to be amortized over a weighted average amortization period of approximately 1.82 years.

The following table summarizes stock-based compensation expense related to share-based awards which is recorded in the consolidated statements of comprehensive income:

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.

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.

Revenue Recognition

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

Deferred Revenue

(Non-current)

Balance as of September 30, 2023

(Decrease) increase, net

Balance as of September 30, 2024

(Decrease) increase, net

Balance as of September 30, 2025

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.

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;

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.

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):

Money market funds (cash equivalent)

Marketable securities

Total Assets at fair value

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

Money market funds (cash equivalent)

Marketable securities

Total Assets at fair value

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

Stock-based compensation

Total stock-based compensation expense

Total tax benefit

Net decrease in net income

Management Incentive Plan :

In fiscal 1987, the Company implemented a Management Incentive Plan (the “Incentive Plan”) that entitles a participant to participate in pretax earnings before adjustment for certain items of the Company for ten years.

Because this plan was expanded in February 2022 to include the participation of all Journal Technologies employees, management subsequently realized in 2023 there would be an inadvertent future diluting effect on the shareholders’ interest when additional staff is hired as the Company grows.

Therefore, the Company decided to put a pause on any new grants under the Incentive Plan in fiscal 2023 after making grants to about 14 new Journal Technologies employees (net of terminations and expirations of outstanding Certificates after 10 years).

Management intends to propose and implement a replacement plan in fiscal 2025 based on a model where adding additional employees are dilutive relative to a specific percentage of profits allocated to the program.

Certificate interests entitled participants to receive 4.38 % and 4.71 % (amounting to $ 418,700 and $ 388,450 , respectively) of Daily Journal non-consolidated income before taxes, workers’ compensation, supplemental compensation and certain other items, 20.2 % and 22.2 % (amounting to $ 702,960 and $ 1,491,840 , respectively) for Journal Technologies and 8.12 % and 8.86 % (amounting to $ 1,059,195 and $ 1,260,800 , respectively) for Daily Journal consolidated in fiscal 2024 and 2023, respectively.

The Company accrued $ 3,735,000 and $ 4,230,000 as of September 30, 2024 and 2023, respectively, for the Incentive Plan’s future commitment for those who will still have Certificates at the age of 65.

This future commitment included a decrease in the accrual in fiscal 2024 of $ 495,000 (or -$ .36 per outstanding share on a pretax basis), primarily due to no new grants of Certificates or replacement of expired Certificates under this Incentive Plan because of the pause mentioned above, as compared with a decrease in fiscal 2023 of $ 295,000 (or -$ .21 per outstanding share).

The estimated Incentive Plan’s future commitment is calculated using level 3 inputs based on an average of the past year and the current year pretax earnings before certain items, discounted to the present value at 6 % because each granted Certificate will expire over its remaining life term of up to 10 years.

In projecting the Incentive Plan’s future commitment, the significant input is the average of the past year and the current year pretax earnings before certain items.

Significant increases or decreases in this input would result in a significantly lower or higher fair value measurement.

In addition, the use of a different discount rate to discount cash flows to their present value would also result in a higher or lower fair value measurement.

Income taxes:

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.

Treasury stock and net income per common share:

In June 2022, the Company received from Charles T.

Munger 3,720 shares of Daily Journal common stock as his gracious personal gift (worth approximately $ 1 million on the date of the gift) for the purpose of establishing a new senior management equity incentive plan, which is still under consideration and has yet to be established.

These donated shares were considered treasury stock, and the Company accounted for them using the par method which resulted in an immaterial effected amount on Treasury Stock and Additional Paid-in Capital.

In addition, the number of outstanding shares of the Company was reduced by these 3,720 shares to reflect the actual number of outstanding shares of 1,377,026 at September 30, 2022.

The net income per common share is based on the weighted average number of shares outstanding during each year.

The shares used in the calculation were 1,377,026 for both fiscal 2024 and 2023.

The Company does not have any common stock equivalents, and therefore basic and diluted net income per share is the same.

(The Board approved the grant of 400 shares to the Company’s Chief Executive Officer in July 2024, but these shares were not actually transferred to him until after September 30, 2024.)

Use of Estimates:

The presentation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Right-of-Use (ROU) Asset:

At the beginning of fiscal 2020, the Company adopted ASU 2016-02, Leases (Topic 842) which requires that all leases be recognized by lessees on the balance sheet through a right-of-use (ROU) asset and corresponding lease liability, including today’s operating leases.

There has been no significant impact on the Company’s financial condition, results of operations or disclosures.

At September 30, 2024, the Company recorded a ROU asset and lease liability of approximately $ 126,000 for its operating office and equipment leases, including approximately $ 37,000 beyond one year.

(In the prior fiscal year, there were ROU asset and lease liability of $ 95,000 with $ 44,000 beyond one year.) 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.

Accrued Liabilities:

Accrued current liabilities primarily consisted of (i) accrued vacation of $ 3,425,000 and $ 3,160,000 at September 30, 2024 and 2023, respectively, (ii) current portion of the supplemental compensation accrual of $ 2,248,000 and $ 3,240,000 at September 30, 2024 and 2023, respectively, and (iii) accrued payroll of $ 1,354,000 and $ 1,274,000 at September, 30, 2024 and 2023, respectively.

Accrued long-term liabilities primarily consist of the long-term portion of the supplemental compensation accruals of $ 3,735,000 and $ 4,230,000 at September 30, 2024 and 2023, respectively.

Accounting Pronouncement adopted in fiscal 2024:

In June 2016, the Financial Accounting Standards Board issued a new Accounting Standards Codification (“ASU”) requiring financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis.

The ASU eliminates the threshold for initial recognition in current U.S.

GAAP and reflects an entity’s current estimate of all expected credit losses.

The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets.

The ASU is effective for the Company beginning in the first quarter of fiscal 2024.

The adoption of this guidance has not had a material effect on the Company’s consolidated financial statements.

The provision (benefit) (000) from income taxes consists of the following:

September 30, 2024

Marketable securities:

Common stocks

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

Furniture, office equipment and computer software

Machinery and equipment

Operating lease right-of-use assets

Less accumulated depreciation

Property and equipment, net

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.

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

Total current expense

Total deferred expense

Total income tax provision

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

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Effective tax rate

The Company’s deferred income tax assets and liabilities (000) were comprised of the following:

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

Deferred tax assets attributable to:

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Unrealized gains on marketable securities

Total deferred tax liabilities

Net deferred income taxes

During fiscal 2024, the Company recorded an income tax provision of $ 26,165,000 on pretax income of $ 104,278,000 .

The income tax provision consisted of tax expenses of $ 24,534,000 on the realized and unrealized gains on marketable securities, and $ 2,175,000 on operating income, partially offset by a tax benefit of $ 544,000 for the dividends received deduction and other permanent differences.

Consequently, the overall effective tax rate for fiscal 2024 was 25.1 %, after including the taxes on the realized and unrealized gains on marketable securities.

During fiscal 2023, the Company recorded an income tax provision of $ 6,650,000 on pretax income of $ 28,102,000 .

The income tax provision consisted of tax provisions of $ 4,250,000 on the realized and unrealized gains on marketable securities, and $ 2,803,000 on operating income, partially offset by a tax benefit of $ 403,000 for the dividends received deduction and other permanent differences.

Consequently, the overall effective tax rate for fiscal 2023 was 23.7 %, 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 2020 with regard to federal income taxes and fiscal 2019 for state income 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 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 2021, the Company utilized all of its federal and certain state net operating losses (NOL).

California suspended the use of NOLs for fiscal years beginning in 2020 and 2021.

During fiscal 2022, the Company utilized $ 4.2 million of $ 5.5 million California NOLs and used the remaining $ 1.3 million of California NOLs in fiscal 2024.

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)

California NOLs

Other State NOLs

September 30, 2029 through September 30, 2036

September 30, 2029 through

September 30, 2036

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September 30, 2038

September 30, 2039

No expiration

DEBTS AND COMMITMENTS

During fiscal 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 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 September 30, 2024.

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

Weighted Average

Grant Date Fair

Value per Share

Unvested as of September 30, 2023

Unvested as of September 30, 2024

Unvested as of September 30, 2025

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.

Accrued Liabilities

Current accrued liabilities consist of (in thousands):

September 30,

Accrued vacation

Accrued supplemental compensation

Accrued payroll

Accrued other

Total current accrued liabilities

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.

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):

2030 and after

Long-term accrued liabilities*

Non-qualified deferred compensation 409(A) plan

Real estate loan

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

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.

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, 2024 was 5.5 % after the first cut of 50 basis points to the central bank's key interest rate by Federal Reserve since 2020.

The Federal Reserve may continue to reduce the rate in the near future.

The interest rate as of September 30, 2025 was 4.75 %.

These investment margin account borrowings do not mature.

In November 2015, the Company purchased a 30,700 square foot office building constructed in 1998 on about 3.6 acres in Logan, Utah that had been previously leased for Journal Technologies.

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).

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 %.

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This real estate loan had a balance of approximately $ 0.8 million as of September 30, 2025.

Each monthly installment payment is approximately $ 16,700 .

The Company also owns its facilities in Los Angeles and leases space for its other offices under operating leases which expire at various dates through October 2025.

The Company is responsible for a portion of maintenance, insurance and property tax expenses relating to the leased properties.

Rental expenses, inclusive of these expenses, for fiscal years 2024 and 2023 were $ 303,000 and $ 289,000 , respectively.

Effective January 1, 2023, the Company began sponsoring a 401(k) retirement plan and a 409(A) non-qualified deferred compensation plan for its employees.

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.

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The Company matches 50 % of the 401(k) contribution up to 4 % of total compensation.

Contributions to the retirement plan were $ 610,000 and $ 363,000 for fiscal 2024 and 2023, respectively.

As of September 30, 2024, there were deferred compensation liabilities of approximately $ 784,000 of which $ 748,000 were held under a trust account for the 409(A) plan.

The following table represents the Company’s future obligations:

Payments due by Fiscal Year (000)

Real estate loan

Obligations under operating leases

Non-qualified deferred compensation 409(A) plan

Long-term accrued liabilities*

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

CONTINGENCIES

From time to time, the Company is subject to litigation arising in the normal course of its business.

REPORTABLE SEGMENTS

An operating segment is defined as a component of an enterprise which 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, Segment Reporting , the Company has two segments of business.

The Company’s reportable segments are:

(i) the Traditional Business and (ii) Journal Technologies which includes Journal Technologies, Inc.

and Journal Technologies (Canada) Inc.

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.

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.

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,

Basic weighted-average common shares outstanding

Effect of dilutive securities

Diluted weighted-average common shares outstanding

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.

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.

Additional detail about each of the reportable segments and its corporate income and expenses is set forth below:

Overall Financial Results (000)

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

Advertising service fees and other

4 unchanged sentences

Operating expenses

Salaries and employee benefits

Stock-based compensation

(Decrease) increase to the long-term Supplemental compensation accrual

Other segment items*

Total operating expenses

1 unchanged sentence

Dividends and interest income

Interest expenses on note payable collateralized by real estate and other

Interest expense on margin loans

Gains on sales of capital assets

Interest expense

Net realized and unrealized gains on marketable securities

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

Pretax income

Income tax expense

Capital expenditures

During fiscal 2024 and 2023, the Traditional Business had total operating revenues of $ 16,826,000 and $ 16,253,000 of which $ 12,364,000 and $ 11,850,000 , respectively, were recognized after services were provided while $ 4,462,000 and $ 4,403,000 , respectively, were recognized ratably over the subscription terms.

Total operating revenues for the Company’s software business were $ 53,105,000 and $ 51,456,000 , of which $ 25,112,000 and $ 28,209,000 , respectively, were recognized upon completion of services while $ 27,993,000 and $ 23,247,000 , respectively, were recognized ratably over the subscription periods.

Income tax benefit (expense)

* 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.

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

As a % of total revenue

Commonwealth of the Northern Mariana Islands

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

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.

Subsequent Events

The Company has completed an evaluation of all subsequent events through the issuance date of these financial statements and concluded that no additional subsequent events occurred that required recognition in the financial statements or disclosures in the Notes to Consolidated Financial Statements.

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.

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.

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.

Changes in and Disagreements with Accountants on Accounting, and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data