SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2003
	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______________ to _____________________

Commission File Number 0-14665

DAILY JOURNAL CORPORATION
(Exact name of registrant as specified in its charter)
South Carolina	95-4133299
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
915 East First Street Los Angeles, California	90012-4050
(Address of principal executive office)	(Zip code)
Registrant’s telephone number, including area code:	(213) 229-5300

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes:   x No:   o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)

Yes:   o No:   x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Class	Outstanding at July 31, 2003
Common Stock, par value $.01 per share	1,516,803 shares

DAILY JOURNAL CORPORATION

INDEX

	Page Nos.
PART I   Financial Information
Item 1.   Financial statements
Consolidated Balance Sheets - June 30, 2003 and September 30, 2002	3
Consolidated Statements of Income - Three months ended June 30, 2003 and 2002	4
Consolidated Statements of Income - Nine months ended June 30, 2003 and 2002	5
Consolidated Statements of Cash Flows - Nine months ended June 30, 2003 and 2002	6
Notes to Consolidated Financial Statements	7
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.   Qualitative and Quantitative Disclosures about Market Risk	13
Item 4.   Controls and Procedures	13
Part II   Other Information
Item 6.   Exhibits and Reports on Form 8-K	14

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PART I
Item 1. FINANCIAL STATEMENTS
DAILY JOURNAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)

	June 30 2003			September 30 2002
ASSETS
Current assets
Cash and cash equivalents	$	774,000		$	513,000
U.S. Treasury Bills, at cost plus discount earned		5,286,000			4,286,000
Accounts receivable, less allowance for doubtful account of $500,000 at June 30, 2003 and September 30, 2002		6,145,000			5,953,000
Inventories		10,000			18,000
Prepaid expenses and other assets		216,000			141,000
Deferred income taxes		969,000			901,000
Total current assets		13,400,000			11,812,000
Property, plant and equipment, at cost
Land, buildings and improvements		10,177,000			8,538,000
Furniture, office equipment and computer software		6,113,000			6,118,000
Machinery and equipment		1,468,000			1,351,000
		17,758,000			16,007,000
Less accumulated depreciation		(7,945,000	)		(7,024,000	)
		9,813,000			8,983,000
Capitalized software, net		181,000			634,000
Deferred income taxes		26,000			4,000
	$	23,420,000		$	21,433,000
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	5,531,000		$	5,086,000
Accrued liabilities		2,565,000			2,371,000
Notes payable – current portion		87,000			92,000
Deferred subscription revenue and other revenues		7,113,000			7,225,000
Total current liabilities		15,296,000			14,774,000
Notes payable – long-term		1,735,000			1,791,000
Commitments and contingencies (Note 7)
Minority interest (7%)		—			—
Shareholders’ equity
Preferred stock, $.01 par value, 5,000,000 shares authorized and no shares issued		—			—
Common stock, $.01 par value, 5,000,000 shares authorized; 1,518,803 and 1,525,618 shares, respectively, outstanding		15,000			15,000
Other paid-in capital		1,931,000			1,939,000
Retained earnings		5,313,000			3,784,000
Less 46,271 treasury shares, at cost		(870,000	)		(870,000	)
Total shareholders’ equity		6,389,000			4,868,000
	$	23,420,000		$	21,433,000

See accompanying notes to consolidated financial statements.

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DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	Three months ended June 30
	2003			2002
Revenues
Advertising	$	4,457,000		$	4,717,000
Circulation		2,612,000			2,807,000
Information systems and services		985,000			720,000
Advertising service fees and other		834,000			776,000
		8,888,000			9,020,000
Costs and expenses
Salaries and employee benefits		4,272,000			4,186,000
Commissions and other outside services		1,480,000			1,478,000
Newsprint and printing expenses		459,000			484,000
Postage and delivery expenses		485,000			492,000
Depreciation and amortization		557,000			679,000
Other general and administrative expenses		894,000			1,027,000
		8,147,000			8,346,000
Income from operations		741,000			674,000
Other income and (expense)
Interest income		36,000			11,000
Interest expense		(37,000	)		(39,000	)
Income before taxes		740,000			646,000
Benefit from income taxes		—			—
Income before minority interest in net loss of subsidiary		740,000			646,000
Minority interest in net loss of subsidiary (7%)		—			—
Net income	$	740,000		$	646,000
Weighted average number of common shares outstanding - basic and diluted		1,473,402			1,489,597
Basic and diluted net income per share	$	.50		$	.43

See accompanying notes to consolidated financial statements.

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DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	Nine months ended June 30
	2003			2002
Revenues
Advertising	$	12,713,000		$	13,147,000
Circulation		7,897,000			8,348,000
Information systems and services		2,763,000			1,756,000
Advertising service fees and other		2,258,000			2,357,000
		25,631,000			25,608,000
Costs and expenses
Salaries and employee benefits		12,483,000			12,878,000
Commissions and other outside services		4,279,000			4,070,000
Newsprint and printing expenses		1,252,000			1,598,000
Postage and delivery expenses		1,510,000			1,484,000
Depreciation and amortization		1,654,000			1,857,000
Other general and administrative expenses		2,744,000			3,010,000
		23,922,000			24,897,000
Income from operations		1,709,000			711,000
Other income and (expense)
Interest income		85,000			43,000
Interest expense		(113,000	)		(118,000	)
Income (loss) before taxes		1,681,000			636,000
Benefit from income taxes		—			180,000
Income before minority interest in net loss of subsidiary		1,681,000			816,000
Minority interest in net loss of subsidiary (7%)		—			—
Net income	$	1,681,000		$	816,000
Weighted average number of common shares outstanding - basic and diluted		1,476,630			1,490,025
Basic and diluted net income per share	$	1.14		$	.55

See accompanying notes to consolidated financial statements.

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DAILY JOURNAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine months ended June 30
	2003			2002
Cash flows from operating activities
Net income	$	1,681,000		$	816,000
Adjustments to reconcile net income to net cash provided by operations
Depreciation and amortization		1,654,000			1,857,000
Deferred income taxes		(90,000	)		(5,000	)
Discount earned on U.S. Treasury Bills		(10,000	)		(8,000	)
Changes in assets and liabilities
(Increase) decrease in current assets
Accounts receivable, net		(192,000	)		311,000
Inventories		8,000			7,000
Prepaid expenses and other assets		(75,000	)		31,000
Increase (decrease) in current liabilities
Accounts payable		445,000			(250,000	)
Accrued liabilities		194,000			(271,000	)
Deferred subscription and other revenues		(112,000	)		(307,000	)
Cash provided by operating activities		3,503,000			2,181,000
Cash flows from investing activities
Net purchases in U.S. Treasury Bills		(990,000	)		(3,471,000	)
Purchases of property, plant and equipment, net		(2,031,000	)		(1,080,000	)
Net cash used for investing activities		(3,021,000	)		(4,551,000	)
Cash flows from financing activities
Payment of loan principle		(61,000	)		(57,000	)
Purchase of common stock		(160,000	)		(72,000	)
Cash used for financing activities		(221,000	)		(129,000	)
Increase (decrease) in cash and cash equivalents		261,000			(2,499,000	)
Cash and cash equivalents
Beginning of period		513,000			2,901,000
End of period	$	774,000		$	402,000
Interest paid during period	$	113,000		$	118,000

See accompanying notes to consolidated financial statements.    

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DAILY JOURNAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1 - The Corporation and Operations

    The Daily Journal Corporation (the “Company”) publishes newspapers and web sites covering California, Arizona and Nevada, as well as the California Lawyer magazine, and produces several specialized information services. SUSTAIN Technologies, Inc. (“Sustain”), now a 93% owned subsidiary as of June 30, 2003, has been consolidated since it was acquired in January 1999. Sustain supplies case management software systems and related products to courts and other justice agencies, including district attorney offices and administrative law organizations.  These courts and agencies use the Sustain family of products to help manage cases and information electronically and to interface with other critical justice partners.  Sustain’s products are designed to help users manage electronic case files from inception to disposition, including all aspects of calendaring and accounting, report and notice generation, the implementation of standards and business rules and other corollary functions. Essentially all of the Company’s operations are based in California, Arizona, Colorado, Nevada and Virginia.

Note 2 - Basis of Presentation

    In the opinion of the Company, the accompanying interim unaudited consolidated financial statements contain all adjustments necessary for a fair statement of its financial position as of June 30, 2003, the results of operations for the three- and nine-month periods ended June 30, 2003 and 2002 and its cash flows for the nine months ended June 30, 2003 and 2002. The results of operations for the three- and nine-months ended June 30, 2003 and 2002 are not necessarily indicative of the results to be expected for the full year.

    The consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2002.

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

Note 3 - Basic and Diluted Income Per Share

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

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Note 4 - Operating Segments

    Summarized financial information concerning the Company’s reportable segments is shown in the following table:

	Reportable Segments						Total Results for both Segments
	Traditional Business			Sustain
Nine months ended June 30, 2003
Revenues	$	22,868,000		$	2,763,000		$	25,631,000
Profit (loss) before taxes, net of minority interest		3,521,000			(1,840,000	)		1,681,000
Total assets		20,247,000			3,173,000			23,420,000
Capital expenditures		1,992,000			39,000			2,031,000
Depreciation and amortization		1,024,000			630,000			1,654,000
Income tax benefits (expenses)		(1,400,000	)		1,400,000			—
Total after-tax income (loss)		2,121,000			(440,000	)		1,681,000
Nine months ended June 30, 2002
Revenues	$	23,852,000		$	1,756,000		$	25,608,000
Profit (loss) before taxes, net of minority interest		3,598,000			(2,962,000	)		636,000
Total assets		18,390,000			2,636,000			21,026,000
Capital expenditures		984,000			96,000			1,080,000
Depreciation and amortization		1,241,000			616,000			1,857,000
Income tax benefits (expenses)		(1,420,000	)		1,600,000			180,000
Total after-tax income (loss)		2,178,000			(1,362,000	)		816,000
Three months ended June 30, 2003
Revenues	$	7,903,000		$	985,000		$	8,888,000
Profit (loss) before taxes, net of minority interest		1,367,000			(627,000	)		740,000
Total assets		20,247,000			3,173,000			23,420,000
Capital expenditures		1,052,000			4,000			1,056,000
Depreciation and amortization		346,000			211,000			557,000
Income tax benefits (expenses)		(500,000	)		500,000			—
Total after-tax income (loss)		867,000			(127,000	)		740,000
Three months ended June 30, 2002
Revenues	$	8,300,000		$	720,000		$	9,020,000
Profit (loss) before taxes, net of minority interest		1,580,000			(934,000	)		646,000
Total assets		18,390,000			2,636,000			21,026,000
Capital expenditures		324,000			43,000			367,000
Depreciation and amortization		469,000			210,000			679,000
Income tax benefits (expenses)		(620,000	)		620,000			—
Total after-tax income (loss)		960,000			(314,000	)		646,000

Note 5 - Capitalized Software, net

    The Company’s expenditures in support of the Sustain software are highly significant.  The capitalized Sustain software costs consist of purchased software upon the acquisition of Sustain of $3,023,000, less accumulated amortization of $2,842,000 and $2,389,000 as of June 30, 2003 and

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September 30, 2002, respectively. The remaining capitalized software, net, represents software costs accounted for pursuant to Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.   This software is being amortized over five years.  The amortization expense for capitalized software was $453,000 for both comparative periods ended June 30, 2003 and 2002.  Costs related to the research and development of new Sustain software products are expensed as incurred until technological feasibility of the product has been established, at which time such costs are capitalized, subject to expected recoverability.

    The Company is continuing its internal Sustain software development efforts and has teamed with other service providers to seek new business opportunities. If these development and marketing efforts are not successful, there will be a significant and adverse impact on the Company’s ability to maximize its existing investment in the Sustain software, to service its existing customers, and to compete for new opportunities in the case management software business. These Sustain software development costs ($865,000 and $1,188,000 for the nine months ended June 30, 2003 and 2002, respectively), which are primarily incremental costs, are being expensed as incurred and accordingly will materially impact earnings at least through fiscal 2003, and very likely much longer.

Note 6 - Income Tax Accounting (See Note 5)

    At June 30, 2003, the Company has a deferred tax asset of $3,543,000 primarily related to fiscal 2001’s net operating loss and research and development credit carry-forwards which expire in years 2015 through 2021.  Due to the uncertainty surrounding the timing of realizing the benefits of its tax attributes in future tax returns, the Company has provided a valuation allowance against the asset of $2,548,000, resulting in a net deferred tax asset of $995,000.  The reduction in the valuation allowance for the current fiscal year was $1,068,000 primarily due to utilization of net operating loss carry-forwards.  In future years, there may be substantial additional tax benefits, for financial statement purposes, from past Sustain-segment losses.

Note 7  - Debt and Other Commitments

    As of June 30, 2003, the Company has a real estate loan of $1,822,000, which bears interest at approximately 8% and is repayable in equal monthly installments of about $19,000 through 2016.  The real estate loan is secured by the Company’s existing office and printing facilities in Los Angeles.

    The Company owns its facilities in Los Angeles and leases space for its other offices under operating leases which expire at various dates through 2006.  The Company is responsible for a portion of maintenance, insurance and property tax expenses relating to certain leased property.

    In conjunction with the acquisition of Sustain in January 1999, Sustain entered into five-year employment agreements with each of the three Sustain principals.   Sustain pays an aggregate of $65,000 per month pursuant to the three employment agreements, each of which expires in January 2004.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

    Revenues were $25,631,000 and $25,608,000 for the nine months ended June 30, 2003 and 2002, respectively.  This increase of $23,000 was primarily attributable to the increased consulting fees of Sustain, partially offset by the declines in advertising and subscription revenues.  (Revenues were $8,888,000 and $9,020,000 for the three months ended June 30, 2003 and 2002, respectively.)

    Display advertising and conference revenues decreased by $98,000, and classified advertising revenues decreased by $394,000. Public notice advertising revenues increased by $58,000. The Company’s smaller newspapers, those other than the Los Angeles and San Francisco Daily Journals (“The Daily Journals”), accounted for about 91% of the total public notice advertising revenues.  Public notice advertising revenues and related advertising and other service fees constituted about 29% of the Company’s total revenues. Circulation revenues decreased an aggregate of $451,000 primarily because the Company discontinued several small publications and because the court rule revenues declined as some courts are now providing their rules online. The Daily Journals accounted for about 71% of the Company’s total circulation revenues, and their circulation levels decreased slightly. The court rule and judicial profile services generated about 17% of the total circulation revenues, with the other newspapers and services accounting for the balance. Information system and service revenues increased by $1,007,000 primarily because of increased consulting revenues of Sustain for the installation of Sustain software in several California counties. The Company’s revenues derived from Sustain’s operations constituted about 11% and 7% of the Company’s total revenues for the nine months ended June 30, 2003 and 2002, respectively. 

    Costs and expenses decreased by $975,000 (4%), to $23,922,000 from $24,897,000. Total personnel costs were $12,483,000, representing a decrease of $395,000 (3%), primarily because of the closing of several small publications and the consolidation of several activities.  Commissions and other outside services increased by $209,000 (5%) primarily because of the additional implementation consulting expenses for Sustain. Newsprint and printing expenses decreased by $346,000 (22%) primarily because of the reduction in newsprint usage and the discontinuance of several publications.  Depreciation and amortization expenses decreased by $203,000 (11%) primarily due to more fully depreciated assets. Other general and administrative expenses decreased by $266,000 (9%) mainly resulting from reduced general operating expenses. (Costs and expenses were $8,147,000 and $8,346,000 for the three months ended June 30, 2003 and 2002, respectively.)

    The Company’s expenditures for the development of new Sustain software products are highly significant and will materially impact overall results at least through fiscal 2003, and very likely much longer. These Sustain internal development costs, primarily incremental costs, aggregated $865,000 and $1,188,000 for the nine months ended June 30, 2003 and 2002, respectively. If these development programs are not successful, they will significantly and adversely impact the Company’s ability to maximize its existing investment in the Sustain software, to service its existing customers, and to compete for new opportunities in the case management software business.

    The Company’s traditional business segment pretax profit decreased by $77,000 (2%) to $3,521,000 from $3,598,000, primarily due to the declines in advertising and subscription revenues, partially offset by reduced expenses resulting from the decrease in newsprint and printing expenses and personnel costs because of the closing of several small publications and the consolidation of several activities. Sustain’s

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business segment pretax loss decreased by $1,122,000 (38%) to $1,840,000 from $2,962,000, primarily due to increased consulting revenues. The consolidated net income was $1,681,000 for the nine months ended June 30, 2003 compared to $816,000 in the comparable prior year period.  (Consolidated net income was $740,000 for the three months ended June 30, 2003 compared to $646,000 in the comparable prior year period.)  Tax provisions were not recorded for the nine months ended June 30, 2003 because the Company was able to utilize net operating loss carry-forwards to offset taxes which otherwise would have been payable.  (The Company recorded income tax benefits of $180,000 in the prior comparative period ended June 30, 2002 primarily because of the tax law change for the carry-back of net operating losses.)  Net income per share increased to $1.14 from $.55.

Liquidity and Capital Resources

    During the nine months ended June 30, 2003, the Company’s cash and cash equivalents and U.S. Treasury Bill positions increased by $1,261,000.  Cash and cash equivalents were used for the net purchase of capital assets of $2,031,000, including $1,620,000 for the new building now under construction in Los Angeles. The cash provided by operating activities of $3,503,000 included a net decrease in prepayments for subscriptions and others of $112,000, primarily related to the discontinuance of several small publications.  Proceeds from the sale of subscriptions from newspapers, court rule books and other publications and for software maintenance and other services are recorded as deferred revenue and are included in earned revenue only when the services are rendered.  Cash flows from operating activities increased by $1,322,000 for the nine months ended June 30, 2003 as compared to the prior comparable period primarily due to increased net income. As of June 30, 2003 the Company had working capital of $5,217,000 before deducting the liability for deferred subscription revenues and other revenues of $7,113,000 which will be earned within one year.

    During fiscal 2003, and very likely much longer, the Company expects its total expenditures in support of the development of the Sustain software to continue to be very significant.  In addition, there has never been a resolution of the issues between Sustain and the outside software development service provider which was terminated in April 2001. The terminated outside service provider filed for bankruptcy in December 2001 and stated in its filings with the U.S. Bankruptcy Court that it was considering bringing a collection action against Sustain.  If it ever does, Sustain will assert counter-claims that completely offset the terminated outside provider’s claims. Sustain will vigorously defend any litigation or action brought by the terminated outside service provider, although no assurances can be made as to the ultimate outcome of the dispute.  It is the opinion of management that adequate provision has been made for any amounts that may become due as a result of the dispute. Nonetheless, the pendency of these issues could have an impact on Sustain’s ability to attract new customers or work with its existing customers.

    As discussed in Item 5 of Part II of the Company’s quarterly report on Form 10-Q filed on May 15, 2003, Sustain received a letter on April 2, 2003 from counsel to the Ontario, Canada Ministry of the Solicitor General, Ministry of Public Safety and Security and Ministry of the Attorney General (collectively, the “Ministries”).  The Ministries had entered into a contract with Sustain, dated as of April 22, 1999 (the “Contract”), pursuant to which the Ministries sought to license the software product that was to be developed by the outside service provider referred to above.  The Contract was formally terminated on June 7, 2002.  The letter from counsel purported to invoke the dispute resolution process set forth in the Contract and claimed damages in the amount of $20 million.  Counsel for Sustain and counsel for the Ministries engaged in preliminary discussions with respect to this matter, and the parties so far have not utilized the dispute resolution process set forth in the Contract.  Counsel for Sustain last communicated with counsel for the Ministries by a letter sent on April 15, 2003.  At this point,

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management is unable to determine whether this matter will have a material adverse effect on Sustain and the Company.

    The Company has a real estate loan of $1,822,000 secured by its existing Los Angeles facilities. The Company is constructing a new building and parking facilities in Los Angeles estimated to cost approximately $2.5 million, and a bank has expressed interest in lending the Company up to an additional $2 million when the new building is completed.

    If the Company requires additional funds, it may, among other things, change Sustain’s development strategy or attempt to secure additional financing, which may or may not be available to the Company on acceptable terms. 

Critical Accounting Policies

    The Company’s financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles.  Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates and assumptions are affected by management’s application of accounting policies. Management believes that both accounting for capitalized software costs and income tax accounting are critical accounting policies.

    Pursuant to Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed, costs related to the research and development of a new software product are to be expensed as incurred until the technological feasibility of the product is established.  Accordingly, costs related to the development of new Sustain software products are expensed as incurred until technological feasibility has been established, at which time such costs are capitalized, subject to expected recoverability. In general, “technological feasibility” is achieved when the developer has established the necessary skills, hardware and technology to produce a product and a detailed program design has been (a) completed, (b) traced to the product specifications and (c) reviewed for high-risk development issues.  For a period of time prior to the second quarter of fiscal 2001, the Company believed that technological feasibility had been established for Sustain software being developed by the outside service provider referred to above.  Upon determining that a significant development issue had arisen, the entire amount of the previously capitalized costs associated with the software project were written off and expensed.  Those events had no effect on the financial information presented in this quarterly report.

    Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, establishes financial accounting and reporting standards for the effect of income taxes.  The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and the deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or tax returns.  Judgment is required in assessing the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns.  Fluctuations in the actual outcome of these future tax consequences could materially impact the Company’s financial position or its results of operations.  In future years, there may be substantial additional tax benefits, for financial statement purposes, from past Sustain-segment losses.

    The above discussion and analysis for the nine months ended June 30, 2003 and 2002 should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in this report.  (See Note 7 for debt and other commitments.)

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Disclosure Regarding Forward-Looking Statements

    This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain statements contained in this document, including but not limited to those in Items 1 and 2, are “forward-looking” statements that involve risks and uncertainties that may cause actual future events or results to differ materially from those described in the forward-looking statements.  Words such as “expects,” “intends,” “anticipates,” “should,” “believes,” “will,” “plans,” “estimates,” “may,” variations of such words and similar expressions are intended to identify such forward-looking statements.  We disclaim any intention or obligation to revise any forward-looking statements whether as a result of new information, future developments, or otherwise.  There are many factors that could cause actual results to differ materially from those contained in the forward-looking statements.  These factors include, among others: risks associated with the functionality and resources required for new and existing case management software projects; the success or failure of Sustain’s internal software development efforts; the ultimate resolution, if any, of the disputes with the Ontario, Canada Ministries and Sustain’s terminated outside service provider; material changes in the costs of materials; a potential decline in subscriber revenue; an inability to continue borrowing on current terms; possible changes in tax laws; collectibility of accounts receivable; potential increases in employee and consultant costs; attraction, training and retention of employees; changes in accounting guidance; and competitive factors in both the case management software business and the publishing business.  In addition, such statements could be affected by general industry and market conditions and growth rates, general economic conditions (particularly in California) and other factors. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from those in the forward-looking statements are disclosed in this Form 10-Q, including without limitation in conjunction with the forward-looking statements themselves. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in documents filed by the Company with the Securities and Exchange Commission.

Item 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

    The Company does not use derivative financial instruments.  The Company does maintain a portfolio of cash equivalents maturing in three months or less as of the date of purchase and of U.S. Treasury Bills maturing within one year.  Given the short-term nature of the investments and borrowings, and the fact that the Company had no outstanding borrowing except for the real estate loan which bears a fixed interest rate, the Company was not subject to significant interest rate risk.  The real estate loan of $1,822,000 bears interest at approximately 8% and is repayable in equal monthly installments of about $19,000 through 2016.  The real estate loan is secured by the Company’s existing facilities in Los Angeles.

Item 4.  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 June 30, 2003.  Based on that evaluation, Mr. Salzman concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in

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reports it files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported as specified in the rules and forms of the Securities Exchange Commission  There have been no material changes in the Company’s internal controls over financial reporting or in other factors reasonably likely to affect the internal controls over financial reporting during the quarter ended June 30, 2003.

PART II

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)	Exhibits:
	31	Certifications 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.
(b)	Reports on Form 8-K:
	None.

SIGNATURE

Pursuant to the requirements 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

(Registrant)

/s/ GERALD  L. SALZMAN

Gerald L. Salzman

Chief Executive Officer
President

Chief Financial Officer

Treasurer

DATE:  August 14, 2003

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