10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

or

☐ 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	(I.R.S. Employer
incorporation or organization)	Identification No.)
915 East First Street
Los Angeles, California	90012-4050
(Address of principal executive offices)	(Zip code)

 (213) 229-5300

(Registrant's telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	DJCO	The Nasdaq Stock Market

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

Yes: ☑                 No: ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes: ☑                 No: ☐

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

Large Accelerated Filer: ☐	Accelerated Filer: ☑
Non-accelerated Filer: ☐	Smaller Reporting Company: ☐
	Emerging Growth Company: ☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes: ☐                 No: ☑

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: 1,380,746 shares outstanding at July 31, 2020

1

DAILY JOURNAL CORPORATION

INDEX

	Page Nos.
PART I   Financial Information
Item 1.   Financial Statements
Consolidated Balance Sheets - June 30, 2020 and September 30, 2019	3
Consolidated Statements of Comprehensive Income - Three months ended June 30, 2020 and 2019	4
Consolidated Statements of Comprehensive Loss - Nine months ended June 30, 2020 and 2019	5
Consolidated Statements of Shareholders’ Equity - Nine months ended June 30, 2020 and 2019	6
Consolidated Statements of Cash Flows - Nine months ended June 30, 2020 and 2019	7
Notes to Consolidated Financial Statements	8
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.   Quantitative and Qualitative Disclosures about Market Risk	24
Item 4.   Controls and Procedures	24
Part II    Other Information
Item 1A.   Risk Factors	25
Item 6.   Exhibits	25

2

PART I

Item 1. FINANCIAL STATEMENTS

DAILY JOURNAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30			September 30
	2020			2019
ASSETS
Current assets
Cash and cash equivalents	$	9,867,000		$	10,630,000
Marketable securities at fair value -- common stocks of $153,390,000 at June 30 2020 and $194,581,000 at September 30, 2019		153,390,000			194,581,000
Accounts receivable, less allowance for doubtful accounts of $250,000 at June 30, 2020 and $200,000 at September 30, 2019		9,352,000			7,036,000
Inventories		51,000			40,000
Prepaid expenses and other current assets		700,000			508,000
Income tax receivable		812,000			153,000
Total current assets		174,172,000			212,948,000
Property, plant and equipment, at cost
Land, buildings and improvements		16,599,000			16,499,000
Furniture, office equipment and computer software		2,188,000			2,119,000
Machinery and equipment		1,749,000			1,750,000
		20,536,000			20,368,000
Less accumulated depreciation		(9,956,000	)		(9,572,000	)
		10,580,000			10,796,000
Operating lease right-of-use assets		244,000			---
Deferred income taxes - Federal		11,592,000			12,596,000
Deferred income taxes - State		1,376,000			1,036,000
	$	197,964,000		$	237,376,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	3,458,000		$	4,520,000
Accrued liabilities		5,730,000			5,173,000
Note payable collateralized by real estate		131,000			126,000
Deferred subscriptions		3,014,000			3,195,000
Deferred installation contracts		483,000			1,932,000
Deferred maintenance agreements and others		16,421,000			15,722,000
Total current liabilities		29,237,000			30,668,000
Long term liabilities
Investment margin account borrowings		30,493,000			29,493,000
Note payable collateralized by real estate		1,610,000			1,709,000
Deferred maintenance agreements		562,000			335,000
Accrued liabilities		318,000			230,000
Deferred income taxes		25,886,000			37,241,000
Total long term liabilities		58,869,000			69,008,000
Commitments and contingencies (Notes 8 and 9)		---			---
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; 1,805,053 shares issued, including 424,307 treasury shares, at June 30, 2020 and September 30, 2019		14,000			14,000
Additional paid-in capital		1,755,000			1,755,000
Retained earnings		108,089,000			135,931,000
Total shareholders' equity		109,858,000			137,700,000
	$	197,964,000		$	237,376,000

See accompanying Notes to Consolidated Financial Statements

3

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three months ended June 30
	2020			2019
Revenues
Advertising	$	1,297,000		$	2,453,000
Circulation		1,259,000			1,319,000
Advertising service fees and other		575,000			735,000
Licensing and maintenance fees		5,531,000			5,814,000
Consulting fees		3,147,000			2,627,000
Other public service fees		1,065,000			1,570,000
		12,874,000			14,518,000
Costs and expenses
Salaries and employee benefits		9,662,000			8,715,000
Outside services		586,000			444,000
Postage and delivery expenses		151,000			218,000
Newsprint and printing expenses		157,000			186,000
Depreciation and amortization		128,000			141,000
Equipment maintenance and software		276,000			380,000
Credit card merchant discount fees		244,000			367,000
Rent expenses		158,000			216,000
Accounting and legal fees		272,000			499,000
Other general and administrative expenses		647,000			2,228,000
		12,281,000			13,394,000
Income from operations		593,000			1,124,000
Other income (expense)
Dividends and interest income		1,596,000			1,368,000
Other income		---			10,000
Net unrealized gains on investments		16,489,000			3,214,000
Interest expense on note payable collateralized by real estate		(20,000	)		(22,000	)
Interest expense on margin loans and others		(64,000	)		(251,000	)
Income before income taxes		18,594,000			5,443,000
Provision for income taxes		(4,320,000	)		(1,620,000	)
Net income	$	14,274,000		$	3,823,000
Weighted average number of common shares outstanding - basic and diluted		1,380,746			1,380,746
Basic and diluted net income per share	$	10.34		$	2.77
Comprehensive income	$	14,274,000		$	3,823,000

See accompanying Notes to Consolidated Financial Statements.

4

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Nine months ended June 30
	2020			2019
Revenues
Advertising	$	5,415,000		$	6,753,000
Circulation		3,857,000			3,930,000
Advertising service fees and other		1,923,000			2,028,000
Licensing and maintenance fees		16,246,000			15,244,000
Consulting fees		5,065,000			3,567,000
Other public service fees		4,401,000			4,136,000
		36,907,000			35,658,000
Costs and expenses
Salaries and employee benefits		28,227,000			26,161,000
Outside services		2,600,000			2,846,000
Postage and delivery expenses		552,000			627,000
Newsprint and printing expenses		528,000			548,000
Depreciation and amortization		384,000			444,000
Equipment maintenance and software		1,102,000			1,133,000
Credit card merchant discount fees		1,014,000			1,012,000
Rent expenses		500,000			731,000
Accounting and legal fees		730,000			1,298,000
Other general and administrative expenses		3,293,000			4,926,000
		38,930,000			39,726,000
Loss from operations		(2,023,000	)		(4,068,000	)
Other income (expense)
Dividends and interest income		4,573,000			4,039,000
Other income		3,000			29,000
Net unrealized losses on investments		(41,191,000	)		(16,929,000	)
Interest expense on note payable collateralized by real estate		(63,000	)		(67,000	)
Interest expense on margin loans and others		(401,000	)		(676,000	)
Loss before income taxes		(39,102,000	)		(17,672,000	)
Benefit from income taxes		11,260,000			4,980,000
Net loss	$	(27,842,000	)	$	(12,692,000	)
Weighted average number of common shares outstanding - basic and diluted		1,380,746			1,380,746
Basic and diluted loss per share	$	(20.16	)	$	(9.19	)
Comprehensive loss	$	(27,842,000	)	$	(12,692,000	)

See accompanying Notes to Consolidated Financial Statements.

5

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

																Accumulated
											Additional					Other			Total
	Common Stock				Treasury Stock						Paid-in		Retained			Comprehensive			Shareholders'
	Share		Amount		Share			Amount			Capital		Earnings			Income			Equity
Balance at September 30, 2018		1,805,053	$	18,000		(424,307	)	$	(4,000	)	$	1,755,000	$	45,361,000		$	115,786,000		$	162,916,000
Adoption of new accounting pronouncement		---		---		---			---			---		115,786,000			(115,786,000	)		---
Net loss		---		---		---			---			---		(21,533,000	)		---			(21,533,000	)
Balance at December 31, 2018		1,805,053		18,000		(424,307	)		(4,000	)		1,755,000		139,614,000			---			141,383,000
Net income		---		---		---			---			---		5,018,000			---			5,018,000
Balance at March 31, 2019		1,805,053		18,000		(424,307	)		(4,000	)		1,755,000		144,632,000			---			146,401,000
Net income		---		---		---			---			---		3,823,000			---			3,823,000
Balance at June 30, 2019		1,805,053	$	18,000		(424,307	)	$	(4,000	)	$	1,755,000	$	148,455,000		$	---		$	150,224,000
Balance at September 30, 2019		1,805,053	$	18,000		(424,307	)	$	(4,000	)	$	1,755,000	$	135,931,000		$	---		$	137,700,000
Net income		---		---		---			---			---		14,210,000			---			14,210,000
Balance at December 31, 2019		1,805,053		18,000		(424,307	)		(4,000	)		1,755,000		150,141,000			---			151,910,000
Net loss		---		---		---			---			---		(56,326,000	)		---			(56,326,000	)
Balance at March 31, 2020		1,805,053		18,000		(424,307	)		(4,000	)		1,755,000		93,815,000			---			95,584,000
Net income		---		---		---			---			---		14,274,000			---			14,274,000
Balance at June 30, 2020		1,805,053	$	18,000		(424,307	)	$	(4,000	)	$	1,755,000	$	108,089,000		$	---		$	109,858,000

See accompanying Notes to Consolidated Financial Statements

6

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine months ended June 30
	2020			2019
Cash flows from operating activities
Net loss	$	(27,842,000	)	$	(12,692,000	)
Adjustments to reconcile net loss to net cash used in operations
Depreciation and amortization		384,000			444,000
Increase in bad debt allowance		50,000			---
Net unrealized losses on investments		41,191,000			16,929,000
Deferred income taxes		(10,691,000	)		(5,087,000	)
Changes in operating assets and liabilities
(Increase) decrease in current assets
Accounts receivable, net		(2,366,000	)		(3,741,000	)
Inventories		(11,000	)		5,000
Prepaid expenses and other assets		(192,000	)		278,000
Income tax receivable		(659,000	)		134,000
Increase (decrease) in liabilities
Accounts payable		(1,062,000	)		1,481,000
Accrued liabilities		401,000			621,000
Deferred subscriptions		(181,000	)		81,000
Deferred maintenance agreements and others		926,000			1,685,000
Deferred installation contracts		(1,449,000	)		(744,000	)
Net cash used in operating activities		(1,501,000	)		(606,000	)
Cash flows from investing activities
Purchases of property, plant and equipment		(168,000	)		(97,000	)
Net cash used in investing activities		(168,000	)		(97,000	)
Cash flows from financing activities
Proceeds from margin loan borrowing		1,000,000			---
Payment of real estate loan principal		(94,000	)		(90,000	)
Net cash provided by (used in) financing activities		906,000			(90,000	)
Decrease in cash and cash equivalents		(763,000	)		(793,000	)
Cash and cash equivalents
Beginning of period		10,630,000			9,301,000
End of period	$	9,867,000		$	8,508,000
Interest paid during period	$	460,000		$	760,000
Net income taxes paid (refunded)	$	5,000		$	(118,000	)

See accompanying Notes to Consolidated Financial Statements.

7

DAILY JOURNAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 - The Corporation and Operations

Daily Journal Corporation (the “Company”) publishes newspapers and web sites 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”.

Journal Technologies, Inc. (“Journal Technologies”), a wholly-owned subsidiary of Daily Journal, supplies case management software systems and related products to courts, prosecutor and public defender offices, probation departments and other justice agencies, including administrative law organizations, city and county governments and bar associations. These organizations use the Journal Technologies family of products to help manage cases and information electronically, to interface with other critical justice partners and to extend electronic services to the public, including efiling and a website to pay traffic citations and fees online, and bar members. These products are licensed to more than 500 organizations in 42 states and internationally.

       Essentially all of the Company’s U.S. operations are based in California, Arizona, Colorado and Utah. The Company also has a presence in Australia where Journal Technologies is working on two software installation projects.

Note 2 - Basis of Presentation

        In the opinion of the Company, the accompanying interim unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of its financial position as of June 30, 2020, its results of operations for the three- and nine-months periods ended June 30, 2020 and 2019, its consolidated statements of shareholders’ equity for the nine months ended June 30, 2020 and 2019 and cash flows for the nine months ended June 30, 2020 and 2019. The results of operations for the nine months ended June 30, 2020 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, 2019.

8

Note 3 - Accounting Standards Adopted in Fiscal 2020

      In February 2016, the Financial Accounting Standard Board issued Accounting Standards Update (“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. During the first quarter of fiscal 2020, the Company adopted this standard using the modified retrospective method, which does not require an adjustment to comparative period financial statements. At June 30, 2020, the Company recorded a right-of-use (ROU) asset and lease liability of approximately $244,000 for its operating office leases. As allowed by the guidance, the Company has elected not to recognize ROU assets and lease liabilities for short-term (less than one year) leases of any class of underlying asset. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent its obligation to make rental payments from the leases. ROU assets and liabilities are required to be recognized based on the present value of lease payments over the lease term. At June 30, 2020, the Company had office lease obligations of approximately $18,000 beyond one year; it is deemed immaterial for the present value difference. Operating office leases are included in operating lease ROU assets, current accrued liabilities and long-term accrued liabilities in the Company’s accompanying Consolidated Balance Sheets. The Company’s adoption of this new standard had no significant impact on the Company’s financial condition, results of operations or disclosures.

Note 4 – Revenue Recognition

      The Company recognizes revenues in accordance with the provisions of ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606), which it adopted effective October 1, 2017, using the modified retrospective method.

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

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

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

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. Also, as a practical expedient, the Company has elected not to include its evaluation of variable consideration of certain usage-based public service fees that are included in some contracts. 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.

9

Note 5 - Basic and Diluted Income Per Share

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

Note 6 - Investments in Marketable Securities

All investments are classified as “Current assets” because they are available for sale at any time. These “available-for-sale” marketable securities are stated at fair value. 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 investments on a recurring basis pursuant to ASC 820, Fair Value Measurement. As of June 30, 2020 and September 30, 2019, there were net accumulated unrealized gains of $99,501,000 and $140,692,000, respectively, recorded in the accompanying Consolidated Balance Sheets. Most of the accumulated unrealized gains were in the common stocks of three U.S. financial institutions and one foreign manufacturer.

The Company adopted ASU No. 2016-01, Subtopic 825-10 in the prior fiscal year. For the three- and nine-months ended June 30, 2020, the Company recorded and included in its net income (loss) the net unrealized gains on investments of $16,489,000 and net unrealized losses on investments of $41,191,000 as compared with net unrealized gains on investments of $3,214,000 and net unrealized losses on investments of $16,929,000, respectively, in the prior year periods.

Investments in marketable securities as of June 30, 2020 and September 30, 2019 are summarized below.

 Investments in Marketable Securities

	June 30, 2020						September 30, 2019
	Aggregate fair value		Adjusted cost basis		Pretax net unrealized gains		Aggregate fair value		Amortized/ Adjusted cost basis		Pretax unrealized gains
Marketable securities
Common stocks	$	153,390,000	$	53,889,000	$	99,501,000	$	194,581,000	$	53,889,000	$	140,692,000

Note 7 - Income Taxes

For the nine months ended June 30, 2020, the Company recorded an income tax benefit of $11,260,000 on a pretax loss of $39,102,000.   This was the net result of applying the effective tax rate anticipated for fiscal 2020 to the pretax loss, before the unrealized losses on investments, for the nine months ended June 30, 2020.  The effective tax rate was more than the statutory rate primarily due to the dividends received deduction, which increased the taxable loss, and state tax benefits.   In addition, the Company recorded tax benefits of (i) $187,000 resulting from the Coronavirus Aid, Relief and Economic Security (“CARES”) Act (see below) and (ii) $11,166,000 for the unrealized losses on investments during the nine months ended June 30, 2020.  The effective tax rate for the nine months ended June 30, 2020 was 29%, after including the tax benefits from the CARES Act and the unrealized losses on investments.

The CARES Act, which was signed into law on March 27, 2020, contains two federal tax provisions beneficial to the Company.  One provision provides that net operating losses arising in tax years beginning in 2018, that were previously only available to be carried forward, can now be carried back to the five previous years.  In addition, any alternative minimum tax credits carried forward from prior years can be claimed as a refund in years beginning in 2018.  Consequently, the Company recorded a tax benefit resulting from carrying back a portion of the net operating loss generated in fiscal 2019 to fiscal 2014.  The Company anticipates receiving a refund for all taxes and alternative minimum taxes paid in fiscal 2014.  The resulting tax benefit from carrying back the net operating loss is primarily attributable to the difference in the federal tax rates of 34% in fiscal 2014 and 21% in fiscal 2019.

10

 

For the nine months ended June 30, 2019, the Company recorded an income tax benefit of $4,980,000 on a pretax loss of $17,672,000.   This was the net result of applying the effective tax rate anticipated for fiscal 2019 to the pretax loss for the nine months ended June 30, 2019. The effective tax rate was greater than the statutory rate primarily due to the dividends received deduction and state tax benefits. 

The Company’s effective tax rate was 29% for the nine months ended June 30, 2020 as compared with 28% in the prior year period. 

The Company files consolidated federal income tax returns in the United States and with various state jurisdictions and is no longer subject to examinations for fiscal years before fiscal 2016 with regard to federal income taxes and fiscal 2015 for state income taxes. 

Note 8 - Debt 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. During this quarter, the Company borrowed an additional $1 million from this investment margin account bringing the total up to $30.5 million as of June 30, 2020. (This additional $1 million was subsequently repaid in July 2020.) 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 June 30, 2020 was 0.75%. These investment margin account borrowings do not mature.

In 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 by Journal Technologies. The Company paid $1.24 million and financed the balance with a real estate bank loan of $2.26 million which bears a fixed interest rate of 4.66% and is repayable in equal monthly installments of about $17,600 through 2030. This loan is secured by the Logan facility and can be paid off at any time without prepayment penalty. This real estate loan had a balance of approximately $1.74 million as of June 30, 2020.

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 fiscal 2022.

Note 9 - Contingencies

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

11

Note 10 - Operating Segments

The Company’s reportable segments are: (i) the Traditional Business and (ii) Journal Technologies. All inter-segment transactions were eliminated. Summarized financial information regarding the Company’s reportable segments is shown in the following table:

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Nine months ended June 30, 2020
Revenues
Advertising	$	5,415,000		$	---		$	---		$	5,415,000
Circulation		3,857,000			---			---			3,857,000
Advertising service fees and other		1,923,000			---			---			1,923,000
Licensing and maintenance fees		---			16,246,000			---			16,246,000
Consulting fees		---			5,065,000			---			5,065,000
Other public service fees		---			4,401,000			---			4,401,000
Operating expenses		11,766,000			27,164,000			---			38,930,000
Loss from operations		(571,000	)		(1,452,000	)		---			(2,023,000	)
Dividends and interest income		---			---			4,573,000			4,573,000
Other income		---			---			3,000			3,000
Net unrealized losses on investments		---			---			(41,191,000	)		(41,191,000	)
Interest expenses on note payable collateralized by real estate		(63,000	)		---			---			(63,000	)
Interest expenses on margin loans and others		---			---			(401,000	)		(401,000	)
Pretax loss		(634,000	)		(1,452,000	)		(37,016,000	)		(39,102,000	)
Income tax benefit		185,000			380,000			10,695,000			11,260,000
Net income (loss)		(449,000	)		(1,072,000	)		(26,321,000	)		(27,842,000	)
Total assets		17,752,000			24,667,000			155,545,000			197,964,000
Capital expenditures		99,000			69,000			---			168,000

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Nine months ended June 30, 2019
Revenues
Advertising	$	6,753,000		$	---		$	---		$	6,753,000
Circulation		3,930,000			---			---			3,930,000
Advertising service fees and other		2,028,000			---			---			2,028,000
Licensing and maintenance fees		---			15,244,000			---			15,244,000
Consulting fees		---			3,567,000			---			3,567,000
Other public service fees		---			4,136,000			---			4,136,000
Operating expenses		12,485,000			27,241,000			---			39,726,000
Income (loss) from operations		226,000			(4,294,000	)		---			(4,068,000	)
Dividends and interest income		---			---			4,039,000			4,039,000
Other income		---			---			29,000			29,000
Net unrealized losses on investments		---			---			(16,929,000	)		(16,929,000	)
Interest expenses on note payable collateralized by real estate		(67,000	)		---			---			(67,000	)
Interest expenses on margin loans		---			---			(676,000	)		(676,000	)
Pretax income (loss)		159,000			(4,294,000	)		(13,537,000	)		(17,672,000	)
Income tax (expense) benefit		(110,000	)		1,155,000			3,935,000			4,980,000
Net income (loss)		49,000			(3,139,000	)		(9,602,000	)		(12,692,000	)
Total assets		18,276,000			33,903,000			197,576,000			249,755,000
Capital expenditures		63,000			34,000			---			97,000

12

 

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Three months ended June 30, 2020
Revenues
Advertising	$	1,297,000		$	---		$	---		$	1,297,000
Circulation		1,259,000			---			---			1,259,000
Advertising service fees and other		575,000			---			---			575,000
Licensing and maintenance fees		---			5,531,000			---			5,531,000
Consulting fees		---			3,147,000			---			3,147,000
Other public service fees		---			1,065,000			---			1,065,000
Operating expenses		3,860,000			8,421,000			---			12,281,000
Income (loss) from operations		(729,000	)		1,322,000			---			593,000
Dividends and interest income		---			---			1,596,000			1,596,000
Net unrealized losses on investments		---			---			16,489,000			16,489,000
Interest expenses on note payable collateralized by real estate		(20,000	)		---			---			(20,000	)
Interest expenses on margin loans and others		---			---			(64,000	)		(64,000	)
Pretax income (loss)		(749,000	)		1,322,000			18,021,000			18,594,000
Income tax benefit (expense)		215,000			(545,000	)		(3,990,000	)		(4,320,000	)
Net (loss) income		(534,000	)		777,000			14,031,000			14,274,000
Total assets		17,752,000			24,667,000			155,545,000			197,964,000
Capital expenditures		---			---			---			---

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Three months ended June 30, 2019
Revenues
Advertising	$	2,453,000		$	---		$	---		$	2,453,000
Circulation		1,319,000			---			---			1,319,000
Advertising service fees and other		735,000			---			---			735,000
Licensing and maintenance fees		---			5,814,000			---			5,814,000
Consulting fees		---			2,627,000			---			2,627,000
Other public service fees		---			1,570,000			---			1,570,000
Operating expenses		4,137,000			9,257,000			---			13,394,000
Income from operations		370,000			754,000			---			1,124,000
Dividends and interest income		---			---			1,368,000			1,368,000
Other income		---			---			10,000			10,000
Net unrealized gains on investments		---			---			3,214,000			3,214,000
Interest expenses on note payable collateralized by real estate		(22,000	)		---			---			(22,000	)
Interest expenses on margin loans		---			---			(251,000	)		(251,000	)
Pretax income		348,000			754,000			4,341,000			5,443,000
Income tax expense		(225,000	)		(145,000	)		(1,250,000	)		(1,620,000	)
Net income		123,000			609,000			3,091,000			3,823,000
Total assets		18,276,000			33,903,000			197,576,000			249,755,000
Capital expenditures		13,000			---			---			13,000

During the nine months ended June 30, 2020 and 2019, the Traditional Business had total revenues of $11,195,000 and $12,711,000 of which $7,338,000 and $8,781,000, respectively, were recognized, at a point of time, after services were provided, and $3,857,000 and $3,930,000, respectively, were recognized ratably over the subscription terms. Total revenues for the Journal Technologies’ software business were $25,712,000 and $22,947,000 of which $9,889,000 and $8,611,000, respectively, were recognized upon completion of services with customer acceptance, while $15,823,000 and $14,336,000, respectively, were recognized ratably over the license and maintenance periods.

13

 

During the three months ended June 30, 2020 and 2019, the Traditional Business had total revenues of $3,131,000 and $4,507,000 of which $1,872,000 and $3,188,000, respectively, were recognized, at a point of time, after services were provided, and $1,259,000 and $1,319,000, respectively, were recognized ratably over the subscription terms. Total revenues for the Journal Technologies’ software business were $9,743,000 and $10,011,000 of which $4,258,000 and $4,576,000, respectively, were recognized upon completion of services with customer acceptance, while $5,485,000 and $5,435,000, respectively, were recognized ratably over the license and maintenance periods.

Approximately 76% and 70% of the Company’s revenues during the three- and nine-month periods ended June 30, 2020 were derived from Journal Technologies, as compared with 69% and 64% in the prior year periods. In addition, the Company’s revenues have been primarily from the United States with approximately 1% from foreign countries. Journal Technologies’ revenues are primarily from governmental agencies.

The following table sets forth certain deferred obligations from October 1, 2019 through June 30, 2020:

	Beginning Balance Oct. 1, 2019		Addition		Recognized			Ending Balance June 30, 2020
Deferred subscriptions	$	3,195,000	$	3,676,000	$	(3,857,000	)	$	3,014,000
Deferred installation contracts		1,932,000		4,039,000		(5,488,000	)		483,000
Deferred maintenance agreements and others		16,057,000		16,749,000		(15,823,000	)		16,983,000

Note 11 - Subsequent Events

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

14

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

Results of Operations

The Company continues to operate as two different businesses: (1) The Traditional Business, being the business of newspaper publishing and related services that the Company had before 1999 when it purchased a software development company, and (2) Journal Technologies, Inc. (“Journal Technologies”), a wholly-owned subsidiary which supplies case management software systems and related products to courts, prosecutor and public defender offices, probation departments and other justice agencies, including administrative law organizations, city and county governments and bar associations. These organizations use the Journal Technologies family of products to help manage cases and information electronically, to interface with other critical justice partners and to extend electronic services to the public, including efiling and a website to pay traffic citations and fees online, and bar members. These products are licensed to more than 500 organizations in 42 states and internationally.

Impact of the Coronavirus (COVID-19) Pandemic

On March 13, 2020, the United States declared the outbreak of COVID-19 to be a national emergency, and several states and municipalities also declared public health emergencies. Unprecedented actions were taken by public health and governmental authorities to contain and combat the spread of COVID-19, including “stay-at-home” orders and similar mandates that restricted the daily activities of individuals and limited the operation of businesses that were deemed “non-essential.” In addition, most of Journal Technologies’ customers, which are primarily courts and governmental agencies in the United States and Canada and Australia, were either closed or significantly scaled back their activities. Similarly, many law firms and companies from which the Traditional Business derives advertising and subscription revenues also curtailed their operations and spending.

In light of this extraordinary situation, on April 30, 2020, the Company made a difficult decision to reorganize its part-time and full-time workforce at both the Traditional Business and Journal Technologies, which included some layoffs and temporary furloughs. 

Management believes that the COVID-19 pandemic has had, and will continue to have, a significant impact on the Company’s business operations. That impact started in March and continued on through the quarter ended June 30, 2020. Management believes it will continue to be reflected in subsequent quarterly financial results and cash flows for the foreseeable future. This might include a substantial decrease in the value of the Company’s marketable securities portfolio or at least a fair degree of volatility. It might also include the unprecedented continued closure or scaling back of operations of courts and other governmental agencies that are the customers of Journal Technologies, and fundamental changes in the way the advertisers and subscribers of the Traditional Business conduct operations. Even if courts, governmental agencies and other businesses return to more normal operations, there are likely to be changes in those operations and personal behaviors going forward, including limitations on travel and more working from home, that will adversely affect the Company, its financial results and cash flows.

15

For the three months ended June 30, 2020, the Company experienced a material negative impact on its Traditional Business’ revenues which decreased substantially by $1,376,000 (31%) to $3,131,000 from $4,507,000 due to the closures and scaling back of operations of courts and other governmental agencies. This is important to note because the Company’s quarterly pretax income of $18,594,000, which increased from $5,443,000 in the prior year period, is due primarily to the recording of unrealized gains on investments of $16,489,000 for the Company’s marketable securities portfolio, as the stock market recovered some of the ground it lost from its plunge in March 2020. This is only “income” in the sense that accountants are now required to call it that. (Beginning in fiscal 2019, changes in unrealized gains (losses) on investments are now included in the Company’s net income (loss) and thus have a significant impact depending on the fluctuations of the market prices of the securities in the portfolio.) This “income” did not generate cash for the Company. Furthermore, the Company’s portfolio is concentrated in the common stocks of three U.S. financial institutions, which have not performed as well as the market as a whole. In the future, dividends income from the Company’s portfolio is expected to decrease as some banks reduce their dividends.

In recent years, the newspaper industry, including our Traditional Business, has declined, and we expect this to continue at an accelerated pace due to the impacts of COVID-19 and its aftermath, as advertising and subscription revenues decrease.

For Journal Technologies, there have been several delays or cancellations in government procurement processes. Also, although we have been able to complete some existing projects remotely, we have been unable to finish certain implementations and trainings because we cannot work with clients in-person. Given that we are typically paid for implementation services upon “go-live” of a system, receipt of those revenues is being delayed. In addition, there has been a reduction in efiling revenues and delayed client payments as many courts and other justice agencies remained closed during the quarter.

Due to the uncertainties associated with the duration and severity of the COVID-19 pandemic, the efforts to contain it, and the changes in business operations and personal behaviors that are likely to follow from it, management cannot at this point estimate the magnitude of its impact on the Company’s business operations. For risk factors associated with the Company’s businesses, please see “Item 1A – Risk Factors” of the Company’s annual report on Form 10-K for the fiscal year ended September 30, 2019, as well as the information contained in “Item 1A – Risk Factors” on page 25 of this Form 10-Q.

16

Comparable nine-month periods ended June 30, 2020 and 2019

The Company’s reportable segments, and its corporate income and expenses, for the nine months ended June 30, 2020, is set forth below:

Overall Financial Results (000)

For the nine months ended June 30

	Reportable Segments
	Traditional Business						Journal Technologies						Corporate income and expenses						Total
	2020			2019			2020			2019			2020			2019			2020			2019
Revenues
Advertising	$	5,415		$	6,753		$	---		$	---		$	---		$	---		$	5,415		$	6,753
Circulation		3,857			3,930			---			---			---			---			3,857			3,930
Advertising service fees and other		1,923			2,028			---			---			---			---			1,923			2,028
Licensing and maintenance fees		---			---			16,246			15,244			---			---			16,246			15,244
Consulting fees		---			---			5,065			3,567			---			---			5,065			3,567
Other public service fees		---			---			4,401			4,136			---			---			4,401			4,136
Total revenues		11,195			12,711			25,712			22,947			---			---			36,907			35,658
Operating expenses
Salaries and employee benefits		7,778			7,833			20,449			18,328			---			---			28,227			26,161
Others		3,988			4,652			6,715			8,913			---			---			10,703			13,565
Total operating expenses		11,766			12,485			27,164			27,241			---			---			38,930			39,726
(Loss) income from operations		(571	)		226			(1,452	)		(4,294	)		---			---			(2,023	)		(4,068	)
Dividends and interest income		---			---			---			---			4,573			4,039			4,573			4,039
Other income		---			---			---			---			3			29			3			29
Net unrealized losses on investments		---			---			---			---			(41,191	)		(16,929	)		(41,191	)		(16,929	)
Interest expenses on note payable collateralized by real estate		(63	)		(67	)		---			---			---			---			(63	)		(67	)
Interest expenses on margin loans and others		---			---			---			---			(401	)		(676	)		(401	)		(676	)
Pretax (loss) income	$	(634	)	$	159		$	(1,452	)	$	(4,294	)	$	(37,016	)	$	(13,537	)	$	(39,102	)	$	(17,672	)

Consolidated revenues were $36,907,000 and $35,658,000 for the nine months ended June 30, 2020 and 2019, respectively. This increase of $1,249,000 (4%) was primarily from increased Journal Technologies’ license and maintenance fees of $1,002,000, consulting fees of $1,498,000 and public service fees of $265,000, partially offset by a reduction in the Traditional Business’ display advertising (including conferences which were discontinued) net revenues of $679,000, classified advertising net revenues of $153,000, trustee sale notice advertising net revenues of $149,000, legal notice advertising net revenues of $330,000 and circulation revenues of $73,000. The Company’s revenues derived from Journal Technologies’ operations constituted about 70% and 64% of the Company’s total revenues for the nine months ended June 30, 2020 and 2019, respectively.

Consolidated operating expenses decreased by $796,000 (2%) to $38,930,000 from $39,726,000. Total salaries and employee benefits increased by $2,066,000 (8%) to $28,227,000 from $26,161,000 primarily resulting from additional personnel costs for Journal Technologies as independent contractors were transferred to employee status. Outside services decreased by $246,000 (9%) to $2,600,000 from $2,846,000 mainly because of decreased contractor costs for Journal Technologies. Depreciation and amortization costs decreased by $60,000 (14%) to $384,000 from $444,000 because of more fully-depreciated assets. Rent expenses decreased by $231,000 (32%) to $500,000 from $731,000 because of the closure of both the San Francisco and Modesto offices in October 2019. Accounting and legal fees decreased by $568,000 (44%) to $730,000 from $1,298,000 primarily because of decreased legal fees to review and negotiate Journal Technologies’ contracts with customers. Other general and administrative expenses decreased by $1,633,000 (33%) to $3,293,000 from $4,926,000 mainly resulting from reduced business travel expenses and miscellaneous office equipment purchases.

17

The Company’s non-operating income, net of expenses, decreased by $23,475,000 to a loss of $37,079,000 from $13,604,000 primarily because of the recording of net unrealized losses on investments of $41,191,000 during the nine months ended June 30, 2020, as compared with $16,929,000 during the prior year period.

During the nine months ended June 30, 2020, the consolidated pretax loss was $39,102,000, as compared with $17,672,000 in the prior year period. There was a consolidated net loss of $27,842,000 (-$20.16 per share) after tax benefits for the nine months ended June 30, 2020, as compared with $12,692,000 (-$9.19 per share) in the prior year period.

At June 30, 2020, the aggregate fair market value of the Company’s marketable securities was $153,390,000. These securities had approximately $99,501,000 of net unrealized gains before taxes of $25,886,000, and generated approximately $4,573,000 in dividends income during the nine months ended June 30, 2020, which lowers the Company’s effective income tax rate because of the dividends received deduction. Most of the unrealized gains were in the common stocks of three U.S. financial institutions and one foreign manufacturer.

Taxes

For the nine months ended June 30, 2020, the Company recorded an income tax benefit of $11,260,000 on a pretax loss of $39,102,000.   This was the net result of applying the effective tax rate anticipated for fiscal 2020 to the pretax loss, before the unrealized losses on investments, for the nine months ended June 30, 2020.  The effective tax rate was more than the statutory rate primarily due to the dividends received deduction, which increased the taxable loss, and state tax benefits.   In addition, the Company recorded tax benefits of (i) $187,000 resulting from the Coronavirus Aid, Relief and Economic Security (“CARES”) Act (see below) and (ii) $11,166,000 for the unrealized losses on investments during the nine months ended June 30, 2020.  The effective tax rate for the nine months ended June 30, 2020 was 29%, after including the tax benefits from the CARES Act and the unrealized losses on investments.

The CARES Act, which was signed into law on March 27, 2020, contains two federal tax provisions beneficial to the Company.  One provision provides that net operating losses arising in tax years beginning in 2018, that were previously only available to be carried forward, can now be carried back to the five previous years.  In addition, any alternative minimum tax credits carried forward from prior years can be claimed as a refund in years beginning in 2018.  Consequently, the Company recorded a tax benefit resulting from carrying back a portion of the net operating loss generated in fiscal 2019 to fiscal 2014.  The Company anticipates receiving a refund for all taxes and alternative minimum taxes paid in fiscal 2014.  The resulting tax benefit from carrying back the net operating loss is primarily attributable to the difference in the federal tax rates of 34% in fiscal 2014 and 21% in fiscal 2019.

For the nine months ended June 30, 2019, the Company recorded an income tax benefit of $4,980,000 on a pretax loss of $17,672,000.   This was the net result of applying the effective tax rate anticipated for fiscal 2019 to the pretax loss for the nine months ended June 30, 2019. The effective tax rate was greater than the statutory rate primarily due to the dividends received deduction and state tax benefits. 

The Company’s effective tax rate was 29% for the nine months ended June 30, 2020 as compared with 28% in the prior year period. 

18

The Company files consolidated federal income tax returns in the United States and with various state jurisdictions and is no longer subject to examinations for fiscal years before fiscal 2016 with regard to federal income taxes and fiscal 2015 for state income taxes. 

The Traditional Business

The Traditional Business had a pretax loss of $634,000, representing a $793,000 decrease in income from pretax income of $159,000 in the prior year period.

Advertising revenues decreased by $1,338,000 (20%) to $5,415,000 from $6,753,000, primarily because of decreased display advertising (including conferences which were discontinued) net revenues of $679,000, classified advertising net revenues of $153,000, trustee sale notice advertising net revenues of $149,000, legal notice advertising net revenues of $330,000 and government notice advertising net revenues of $27,000.

Trustee sale notices are very much dependent on the number of California and Arizona foreclosures for which public notice advertising is required by law. The number of foreclosure notices published by the Company decreased by 24% during the nine months ended June 30, 2020 as compared to the prior year period. Unless the economic impact of the efforts to contain COVID-19 result in significant additional foreclosures in California and Arizona, management expects there will be fewer foreclosure notice and other public notice advertisements and declining revenues for all of fiscal 2020. The Company’s smaller newspapers, those other than the Los Angeles and San Francisco Daily Journals (“The Daily Journals”), accounted for about 87% of the total public notice advertising revenues in the nine months ended June 30, 2020. Public notice advertising revenues and related advertising and other service fees constituted about 16% and 18% of the Company’s total revenues for the nine months ended June 30, 2020 and 2019, respectively. Because of this concentration, the Company’s revenues would be significantly adversely affected if California and Arizona eliminated the legal requirement to publish public notices in adjudicated newspapers of general circulation, as was implemented in Arizona in 2017 for one notice type that had represented approximately $500,000 in annual revenues for the Company. Also, if the adjudication of one or more of the Company’s newspapers was challenged and revoked, those newspapers would no longer be eligible to publish public notice advertising, and it could have a material adverse effect on the Company’s revenues.

The Daily Journals accounted for about 91% of the Traditional Business’ total circulation revenues, which declined by $73,000 (2%) to $3,857,000 from $3,930,000. The court rule and judicial profile services generated about 7% of the total circulation revenues, with the other newspapers and services accounting for the balance. Advertising service fees and other are Traditional Business segment revenues, which include primarily (i) agency commissions received from outside newspapers in which the advertising is placed, and (ii) fees generated when filing notices with government agencies.

The Traditional Business segment operating expenses decreased by $719,000 (6%) to $11,766,000 from $12,485,000, primarily due to decreased personnel costs and outside contract printing and distributing costs.

19

Journal Technologies

Journal Technologies’ business segment pretax loss decreased by $2,842,000 (66%) to $1,452,000 from $4,294,000 for the nine months ended June 30, 2020 and 2019, respectively.

Revenues increased by $2,765,000 (12%) to $25,712,000 from $22,947,000 in the prior year period. Licensing and maintenance fees increased by $1,002,000 (7%) to $16,246,000 from $15,244,000. Consulting fees increased by $1,498,000 (42%) to $5,065,000 from $3,567,000 due to more go-lives.

Deferred revenues on installation contracts primarily represent the fair value of advances from customers of Journal Technologies for installation services and are recognized upon final project go-lives. Deferred revenues on license and maintenance contracts represent prepayments of annual license and maintenance fees and are recognized ratably over the maintenance period. Other public service fees increased by $265,000 (6%) to $4,401,000 from $4,136,000 primarily due to additional efiling fee revenues.

Operating expenses decreased by $77,000 to $27,164,000 from $27,241,000, primarily because of decreased business travel expenses and legal fees to review and negotiate Journal Technologies’ contracts with customers. This was partially offset by increases in personnel costs as independent contractors were transferred to employee status.

Comparable three-month periods ended June 30, 2020 and 2019

The Company’s reportable segments, and its corporate income and expenses, for the three months ended June 30, 2020, is set forth below:

Overall Financial Results (000)

For the three months ended June 30

	Reportable Segments
	Traditional Business						Journal Technologies				Corporate income and expenses						Total
	2020			2019			2020		2019		2020			2019			2020			2019
Revenues
Advertising	$	1,297		$	2,453		$	---	$	---	$	---		$	---		$	1,297		$	2,453
Circulation		1,259			1,319			---		---		---			---			1,259			1,319
Advertising service fees and other		575			735			---		---		---			---			575			735
Licensing and maintenance fees		---			---			5,531		5,814		---			---			5,531			5,814
Consulting fees		---			---			3,147		2,627		---			---			3,147			2,627
Other public service fees		---			---			1,065		1,570		---			---			1,065			1,570
Total revenues		3,131			4,507			9,743		10,011		---			---			12,874			14,518
Operating expenses
Salaries and employee benefits		2,614			2,630			7,048		6,085		---			---			9,662			8,715
Others		1,246			1,507			1,373		3,172		---			---			2,619			4,679
Total operating expenses		3,860			4,137			8,421		9,257		---			---			12,281			13,394
(Loss) income from operations		(729	)		370			1,322		754		---			---			593			1,124
Dividends and interest income		---			---			---		---		1,596			1,368			1,596			1,368
Other income		---			---			---		---		---			10			---			10
Net unrealized gains on investments		---			---			---		---		16,489			3,214			16,489			3,214
Interest expenses on note payable collateralized by real estate		(20	)		(22	)		---		---		---			---			(20	)		(22	)
Interest expenses on margin loans and others		---			---			---		---		(64	)		(251	)		(64	)		(251	)
Pretax (loss) income	$	(749	)	$	348		$	1,322	$	754	$	18,021		$	4,341		$	18,594		$	5,443

20

Consolidated revenues were $12,874,000 and $14,518,000 for the three months ended June 30, 2020 and 2019, respectively. This decrease of $1,644,000 (11%) was primarily from (i) a reduction in the Traditional Business’ display advertising (including conferences which were discontinued) net revenues of $427,000, classified advertising net revenues of $113,000, trustee sale notice advertising net revenues of $92,000 and legal notice advertising net revenues of $482,000, and (ii) Journal Technologies’ license and maintenance fees of $283,000 and public service fees of $505,000, partially offset by increased Journal Technologies’ consulting fees of $520,000. The Company’s revenues derived from Journal Technologies’ operations constituted about 76% and 69% of the Company’s total revenues for the three months ended June 30, 2020 and 2019, respectively.

Consolidated operating expenses decreased by $1,113,000 (8%) to $12,281,000 from $13,394,000. Total salaries and employee benefits increased by $947,000 (11%) to $9,662,000 from $8,715,000 primarily resulting from additional personnel costs for Journal Technologies as independent contractors were transferred to employee status. Outside services increased by $142,000 (32%) to $586,000 from $444,000 mainly because of increased outside hosting services fees for Journal Technologies. Depreciation and amortization costs decreased by $13,000 to $128,000 from $141,000 because of more fully-depreciated assets. Credit card merchant discount fees, which represent fees paid to credit card service providers to process payments for the public service fee revenues, decreased by $123,000 (34%) to $244,000 from $367,000 mainly resulting from decreased efilings as courts and other justice agencies were temporarily closed. Rent expenses decreased by $58,000 (27%) to $158,000 from $216,000 because of the closure of both the San Francisco and Modesto offices in October 2019. Accounting and legal fees decreased by $227,000 (45%) to $272,000 from $499,000 primarily because of decreased legal fees to review and negotiate Journal Technologies’ contracts with customers. Other general and administrative expenses decreased by $1,581,000 (71%) to $647,000 from $2,228,000 mainly resulting from reduced business travel expenses.

The Company’s non-operating income, net of expenses, increased by $13,682,000 to an income of $18,001,000 from $4,319,000 primarily because of the recording of net unrealized gains on investments of $16,489,000 during the three months ended June 30, 2020, as compared with $3,214,000 during the prior year period.

During the three months ended June 30, 2020, consolidated pretax income was $18,594,000, as compared with $5,443,000 in the prior year period. There was consolidated net income of $14,274,000 ($10.34 per share) after tax expenses for the three months ended June 30, 2020, as compared with $3,823,000 ($2.77 per share) in the prior year period.

The Traditional Business (comparable three-month periods ended June 30, 2020 and 2019)

The Traditional Business had a pretax loss of $749,000, representing a $1,097,000 decrease in income from pretax income of $348,000 in the prior year period.

Advertising revenues decreased by $1,156,000 (47%) to $1,297,000 from $2,453,000, primarily because of decreased display advertising (including conferences which were discontinued) net revenues of $427,000, classified advertising net revenues of $113,000, trustee sale notice advertising net revenues of $92,000 and legal notice advertising net revenues of $482,000 and government notice advertising net revenues of $42,000.

The Traditional Business segment operating expenses decreased by $277,000 (7%) to $3,860,000 from $4,137,000, primarily due to decreased outside contract printing and distributing costs.

21

Journal Technologies (comparable three-month periods ended June 30, 2020 and 2019)

Journal Technologies’ business segment pretax income increased by $568,000 (75%) to $1,322,000 from $754,000 for the three months ended June 30, 2020 and 2019, respectively.

Revenues decreased by $268,000 (3%) to $9,743,000 from $10,011,000 in the prior year period. Licensing and maintenance fees decreased by $283,000 (5%) to $5,531,000 from $5,814,000. Consulting fees increased by $520,000 (20%) to $3,147,000 from $2,627,000.

Other public service fees decreased by $505,000 (32%) to $1,065,000 from $1,570,000 primarily due to reduced efilings as courts and other justice agencies were temporarily closed.

Operating expenses decreased by $836,000 to $8,421,000 from $9,257,000, primarily because of decreased business travel expenses and legal fees to review and negotiate Journal Technologies’ contracts with customers. This was partially offset by increases in personnel costs as independent contractors were transferred to employee status.   

Liquidity and Capital Resources

During the nine months ended June 30, 2020, the Company’s cash and cash equivalents and marketable security positions decreased by $41,954,000, including unrealized losses on investments of $41,191,000. Cash and cash equivalents were used for the purchase of capital assets of $168,000 and operating activities of $1,501,000 which included net decreases of $704,000 in deferred subscriptions, deferred installation contracts and deferred maintenance agreements and others.

The investments in marketable securities, which had an adjusted cost basis of approximately $53,889,000 and a market value of about $153,390,000 at June 30, 2020, generated approximately $4,573,000 in dividends income during the nine months ended June 30, 2020. These securities had approximately $99,501,000 of net unrealized gains before estimated taxes of $25,886,000 which will become due only when we sell securities in which there is unrealized appreciation. Beginning in fiscal 2019, changes in unrealized gains (losses) on investments are now included in the Company’s net income (loss) and thus may have a significant impact depending on the fluctuations of the market prices of the invested securities.

Cash flows from operating activities decreased by $895,000 during the nine months ended June 30, 2020 as compared to the prior year period, primarily due to (i) decreases in accounts payable and accrued liabilities of $2,763,000 because of the timing difference in remitting efiling fees to the courts and (ii) decreases in net deferred subscriptions, deferred maintenance agreements and others and deferred installation contracts of $1,726,000, partially offset by decreases in accounts receivable of $1,375,000 resulting from more payment collections.

As of June 30, 2020, the Company had working capital of $144,935,000, including the liabilities for deferred subscriptions, deferred installation and maintenance agreements and others of $19,918,000.

The Company believes that it will be able to fund its operations for the foreseeable future through its cash flows from operations and its current working capital and expects that any such cash flows will be invested in its businesses. COVID-19 and the efforts to contain it, however, have significantly impacted the Company’s cash flows from operations and the value of its marketable securities portfolio. The Company may or may not have the ability to borrow additional amounts against its marketable securities and, among other possibilities, it may be required to consider selling some of those securities to generate cash if needed to fund ongoing operations.

22

As of June 30, 2020, the investments were concentrated in just six companies. Accordingly, a significant decline in the market value of one or more of the Company’s investments may not be offset by the hypothetically better performance of other investments, and that could result in a large decrease in the Company’s shareholders’ equity and net income.

Critical Accounting Policies and Estimates

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

The Company’s critical accounting policies are detailed in its Annual Report on Form 10-K for the year ended September 30, 2019. The above discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in this report.

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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are “forward-looking” statements that involve risks and uncertainties that may cause actual future events or results to differ materially from those described in the forward-looking statements. Words such as “expects,” “intends,” “anticipates,” “should,” “believes,” “will,” “plans,” “estimates,” “may,” variations of such words and similar expressions are intended to identify such forward-looking statements. We disclaim any intention or obligation to revise any forward-looking statements whether as a result of new information, future developments, or otherwise. There are many factors that could cause actual results to differ materially from those contained in the forward-looking statements. These factors include, among others: risks associated with software development and implementation efforts; Journal Technologies’ reliance on professional services engagements with justice agencies; material changes in the costs of postage and paper; possible changes in the law, particularly changes limiting or eliminating the requirements for public notice advertising; possible loss of the adjudicated status of the Company’s newspapers and their legal authority to publish public notice advertising; the impacts of COVID-19 and the efforts to contain it on the Company’s customers, advertisers and subscribers, particularly the closure or scaling back of operations of courts, justice agencies and other businesses; a further decline in public notice advertising revenues because of fewer foreclosures; a further decline in subscriber and commercial advertising revenues; possible security breaches of the Company’s software or websites; the Company’s reliance on its president and chief executive officer, who has reduced his work schedule due to a health issue; changes in accounting guidance; material weaknesses in the Company’s internal control over financial reporting; and declines in the market prices of the securities owned by the Company. In addition, such statements could be affected by general industry and market conditions, general economic conditions (particularly in California) and other factors.  Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in this Form 10-Q, including in conjunction with the forward-looking statements themselves. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in documents filed by the Company with the Securities and Exchange Commission, including in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019.

23

Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     For information regarding the Company’s market risk, refer to Item 7A – Quantitative and Qualitative Disclosures about Market Risk in the Company’s Form 10-K for the fiscal year ended September 30, 2019. There have been no material changes to the Company’s market risk exposures since September 30, 2019.

Item 4.   CONTROLS AND PROCEDURES

     In light of the material weaknesses in the Company’s internal control over financial reporting discussed in the Company’s Form 10-K for the fiscal year ended September 30, 2019, management concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 2020.  There were no material changes in the Company’s internal control over financial reporting or in other factors reasonably likely to affect its internal control over financial reporting during the quarter ended June 30, 2020.

24

PART II

Item 1A.   Risk Factors

Except as set forth below, as of the date of this report, there have been no material changes to the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended September 30, 2019.

The Company’s business is likely to be materially and adversely affected by an epidemic or pandemic such as COVID-19, or by a similar event or the fear of such an event, and the measures that governmental authorities implement to address it.

As COVID-19 began to spread in March and April 2020, governmental authorities and health officials implemented numerous unprecedented measures to contain the virus, including “stay at home” orders for non-essential workers, travel restrictions, quarantines and business shutdowns. Most of Journal Technologies’ customers, which are primarily courts and governmental agencies in the United States and Canada and Australia, either closed or significantly scaled back their activities. Similarly, many law firms and companies from which the Traditional Business derives advertising and subscription revenues also curtailed their operations and spending.

The impact on economic activity of these actions or similar actions in the future are likely to significantly impact the Traditional Business’ advertising and subscription revenues. The trend of working from home and using on-line services is also likely to put additional pressure on the newspaper business by impacting circulation numbers that may not be replaced by on-line revenues. Actions restricting travel, requiring non-essential workers to “stay at home” or causing courts and justice agencies to close or cut back operations can impact the ability of Journal Technologies to complete certain projects that are typically done in-person (and for which payment is usually received upon completion), reduce efiling revenues, affect procurement processes and result in overall payment delays. In addition, the Company relies on its portfolio of marketable securities for dividend income and balance sheet support, and the value of the portfolio can be materially affected by declines in stock prices, particularly among the common stocks of the three U.S. financial institutions that make up a substantial portion of the portfolio.

Due to the uncertainties associated with the duration and severity of an event like COVID-19, the efforts to contain it, and the changes in business operations and personal behaviors that are likely to follow from it, it is difficult to estimate the magnitude of its impact on the Company’s business in future periods, but it could materially affect the Company’s operations, staffing levels, financial condition, liquidity and cash flows going forward.

Item 6.   Exhibits

31	Certification by Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification by Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance
101.SCH	Inline XBRL Taxonomy Extension Schema

25

101.CAL	Inline XBRL Taxonomy Extension Calculation
101.DEF	Inline XBRL Taxonomy Extension Definition
101.LAB	Inline XBRL Taxonomy Extension Labels
101.PRE	Inline XBRL Taxonomy Extension Presentation
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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

Chief Executive Officer

President

Chief Financial Officer

Treasurer

(Principal Executive Officer,

Principal Financial Officer and

Principal Accounting Officer)

DATE: August 7, 2020

26

EX-31

Exhibit 31

CERTIFICATIONS BY CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gerald L. Salzman, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Daily Journal Corporation;

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

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

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

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

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

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

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

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

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

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

Date: August 7, 2020

 /s/ Gerald L. Salzman

Gerald L. Salzman

Chief Executive Officer, President,

Chief Financial Officer and Treasurer

EX-32

Exhibit 32

CERTIFICATION BY CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 

     In connection with the Quarterly Report on Form 10-Q of Daily Journal Corporation (the "Company") for the period ended June 30, 2020 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gerald L. Salzman, President, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

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

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

/s/ Gerald L. Salzman

Gerald L. Salzman

Chief Executive Officer, President,

Chief Financial Officer and Treasurer

August 7, 2020

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

XML

Document And Entity Information - shares	9 Months Ended
	Jun. 30, 2020	Jul. 31, 2020
Document Information [Line Items]
Entity Central Index Key	0000783412
Entity Registrant Name	DAILY JOURNAL CORPORATION
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2020
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2020
Document Transition Report	false
Entity File Number	0-14665
Entity Incorporation, State or Country Code	SC
Entity Tax Identification Number	95-4133299
Entity Address, Address Line One	915 East First Street
Entity Address, City or Town	Los Angeles
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	90012-4050
City Area Code	213
Local Phone Number	229-5300
Title of 12(b) Security	Common Stock
Trading Symbol	DJCO
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		1,380,746

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Jun. 30, 2020	Sep. 30, 2019
Current assets
Cash and cash equivalents	$ 9,867,000	$ 10,630,000
Marketable securities at fair value -- common stocks of $153,390,000 at June 30 2020 and $194,581,000 at September 30, 2019	153,390,000	194,581,000
Accounts receivable, less allowance for doubtful accounts of $250,000 at June 30, 2020 and $200,000 at September 30, 2019	9,352,000	7,036,000
Inventories	51,000	40,000
Prepaid expenses and other current assets	700,000	508,000
Income tax receivable	812,000	153,000
Total current assets	174,172,000	212,948,000
Property, plant and equipment, at cost
Land, buildings and improvements	16,599,000	16,499,000
Furniture, office equipment and computer software	2,188,000	2,119,000
Machinery and equipment	1,749,000	1,750,000
Property, Plant and Equipment, Gross, Ending Balance	20,536,000	20,368,000
Less accumulated depreciation	(9,956,000)	(9,572,000)
Property, Plant and Equipment, Net, Ending Balance	10,580,000	10,796,000
Operating lease right-of-use assets	244,000
Deferred income taxes - Federal	11,592,000	12,596,000
Deferred income taxes - State	1,376,000	1,036,000
Total Assets	197,964,000	237,376,000
Current liabilities
Accounts payable	3,458,000	4,520,000
Accrued liabilities	5,730,000	5,173,000
Note payable collateralized by real estate	131,000	126,000
Total current liabilities	29,237,000	30,668,000
Long term liabilities
Investment margin account borrowings	30,493,000	29,493,000
Note payable collateralized by real estate	1,610,000	1,709,000
Deferred maintenance agreements	562,000	335,000
Accrued liabilities	318,000	230,000
Deferred income taxes	25,886,000	37,241,000
Total long term liabilities	58,869,000	69,008,000
Shareholders' equity
Common stock, $.01 par value, 5,000,000 shares authorized; 1,805,053 shares issued, including 424,307 treasury shares, at June 30, 2020 and September 30, 2019	14,000	14,000
Additional paid-in capital	1,755,000	1,755,000
Retained earnings	108,089,000	135,931,000
Total shareholders' equity	109,858,000	137,700,000
Liabilities and Equity, Total	197,964,000	237,376,000
Subscription and Circulation [Member]
Current liabilities
Deferred revenue	3,014,000	3,195,000
Installation Contracts [Member]
Current liabilities
Deferred revenue	483,000	1,932,000
License and Maintenance [Member]
Current liabilities
Deferred revenue	$ 16,421,000	$ 15,722,000

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Jun. 30, 2020	Sep. 30, 2019
Marketable securities	$ 153,390,000	$ 194,581,000
Accounts receivable, allowance for doubtful accounts	$ 250,000	$ 200,000
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	5,000,000	5,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	5,000,000	5,000,000
Common stock, shares issued (in shares)	1,805,053	1,805,053
Common stock, treasury shares (in shares)	424,307	424,307
Common Stock [Member]
Marketable securities	$ 153,390,000	$ 194,581,000

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenue
Revenues	$ 12,874,000	$ 14,518,000	$ 36,907,000	$ 35,658,000
Costs and expenses
Salaries and employee benefits	9,662,000	8,715,000	28,227,000	26,161,000
Outside services	586,000	444,000	2,600,000	2,846,000
Postage and delivery expenses	151,000	218,000	552,000	627,000
Newsprint and printing expenses	157,000	186,000	528,000	548,000
Depreciation and amortization	128,000	141,000	384,000	444,000
Equipment maintenance and software	276,000	380,000	1,102,000	1,133,000
Credit card merchant discount fees	244,000	367,000	1,014,000	1,012,000
Rent expenses	158,000	216,000	500,000	731,000
Accounting and legal fees	272,000	499,000	730,000	1,298,000
Other general and administrative expenses	647,000	2,228,000	3,293,000	4,926,000
Operating Expenses, Total	12,281,000	13,394,000	38,930,000	39,726,000
Income (loss) from operations	593,000	1,124,000	(2,023,000)	(4,068,000)
Other income (expense)
Dividends and interest income	1,596,000	1,368,000	4,573,000	4,039,000
Other income		10,000	3,000	29,000
Net unrealized (losses) gains on investments	16,489,000	3,214,000	(41,191,000)	(16,929,000)
(Loss) income before income taxes	18,594,000	5,443,000	(39,102,000)	(17,672,000)
(Provision) benefit for income taxes	(4,320,000)	(1,620,000)	11,260,000	4,980,000
Net (loss) income	$ 14,274,000	$ 3,823,000	$ (27,842,000)	$ (12,692,000)
Weighted average number of common shares outstanding - basic and diluted (in shares)	1,380,746	1,380,746	1,380,746	1,380,746
Basic and diluted net income per share (in dollars per share)	$ 10.34	$ 2.77	$ (20.16)	$ (9.19)
Comprehensive income	$ 14,274,000	$ 3,823,000	$ (27,842,000)	$ (12,692,000)
Real Estate Bank Loan Secured by Logan Office [Member]
Other income (expense)
Interest expense on debt	(20,000)	(22,000)	(63,000)	(67,000)
Margin Account [Member]
Other income (expense)
Interest expense on debt	(64,000)	(251,000)	(401,000)	(676,000)
Advertising [Member]
Revenue
Revenues	1,297,000	2,453,000	5,415,000	6,753,000
Subscription and Circulation [Member]
Revenue
Revenues	1,259,000	1,319,000	3,857,000	3,930,000
Advertising Service Fees and Other [Member]
Revenue
Revenues	575,000	735,000	1,923,000	2,028,000
License and Maintenance [Member]
Revenue
Revenues	5,531,000	5,814,000	16,246,000	15,244,000
Consulting Fees [Member]
Revenue
Revenues	3,147,000	2,627,000	5,065,000	3,567,000
Service, Other [Member]
Revenue
Revenues	$ 1,065,000	$ 1,570,000	$ 4,401,000	$ 4,136,000

XML

Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($)	Cumulative Effect, Period of Adoption, Adjustment [Member] Retained Earnings [Member]	Cumulative Effect, Period of Adoption, Adjustment [Member] AOCI Attributable to Parent [Member]	Common Stock [Member]	Treasury Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance (in shares) at Sep. 30, 2018			1,805,053	(424,307)
Balance at Sep. 30, 2018	$ 115,786,000	$ (115,786,000)	$ 18,000	$ (4,000)	$ 1,755,000	$ 45,361,000	$ 115,786,000	$ 162,916,000
Net (loss) income						(21,533,000)		(21,533,000)
Balance (in shares) at Dec. 31, 2018			1,805,053	(424,307)
Balance at Dec. 31, 2018			$ 18,000	$ (4,000)	1,755,000	139,614,000		141,383,000
Balance (in shares) at Sep. 30, 2018			1,805,053	(424,307)
Balance at Sep. 30, 2018	$ 115,786,000	$ (115,786,000)	$ 18,000	$ (4,000)	1,755,000	45,361,000	$ 115,786,000	162,916,000
Net (loss) income								(12,692,000)
Balance (in shares) at Jun. 30, 2019			1,805,053	(424,307)
Balance at Jun. 30, 2019			$ 18,000	$ (4,000)	1,755,000	148,455,000		150,224,000
Balance (in shares) at Dec. 31, 2018			1,805,053	(424,307)
Balance at Dec. 31, 2018			$ 18,000	$ (4,000)	1,755,000	139,614,000		141,383,000
Net (loss) income						5,018,000		5,018,000
Balance (in shares) at Mar. 31, 2019			1,805,053	(424,307)
Balance at Mar. 31, 2019			$ 18,000	$ (4,000)	1,755,000	144,632,000		146,401,000
Net (loss) income						3,823,000		3,823,000
Balance (in shares) at Jun. 30, 2019			1,805,053	(424,307)
Balance at Jun. 30, 2019			$ 18,000	$ (4,000)	1,755,000	148,455,000		150,224,000
Balance (in shares) at Sep. 30, 2019			1,805,053	(424,307)
Balance at Sep. 30, 2019			$ 18,000	$ (4,000)	1,755,000	135,931,000		137,700,000
Net (loss) income						14,210,000		14,210,000
Balance (in shares) at Dec. 31, 2019			1,805,053	(424,307)
Balance at Dec. 31, 2019			$ 18,000	$ (4,000)	1,755,000	150,141,000		151,910,000
Balance (in shares) at Sep. 30, 2019			1,805,053	(424,307)
Balance at Sep. 30, 2019			$ 18,000	$ (4,000)	1,755,000	135,931,000		137,700,000
Net (loss) income								(27,842,000)
Balance (in shares) at Jun. 30, 2020			1,805,053	(424,307)
Balance at Jun. 30, 2020			$ 18,000	$ (4,000)	1,755,000	108,089,000		109,858,000
Balance (in shares) at Dec. 31, 2019			1,805,053	(424,307)
Balance at Dec. 31, 2019			$ 18,000	$ (4,000)	1,755,000	150,141,000		151,910,000
Net (loss) income						(56,326,000)		(56,326,000)
Balance (in shares) at Mar. 31, 2020			1,805,053	(424,307)
Balance at Mar. 31, 2020			$ 18,000	$ (4,000)	1,755,000	93,815,000		95,584,000
Net (loss) income						14,274,000		14,274,000
Balance (in shares) at Jun. 30, 2020			1,805,053	(424,307)
Balance at Jun. 30, 2020			$ 18,000	$ (4,000)	$ 1,755,000	$ 108,089,000		$ 109,858,000

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Cash flows from operating activities
Net (loss) income	$ (27,842,000)	$ (12,692,000)
Adjustments to reconcile net loss to net cash used in operations
Depreciation and amortization	384,000	444,000
Increase in bad debt allowance	50,000
Net unrealized losses on investments	41,191,000	16,929,000
Deferred income taxes	(10,691,000)	(5,087,000)
(Increase) decrease in current assets
Accounts receivable, net	(2,366,000)	(3,741,000)
Inventories	(11,000)	5,000
Prepaid expenses and other assets	(192,000)	278,000
Income tax receivable	(659,000)	134,000
Increase (decrease) in liabilities
Accounts payable	(1,062,000)	1,481,000
Accrued liabilities	401,000	621,000
Net cash used in operating activities	(1,501,000)	(606,000)
Cash flows from investing activities
Purchases of property, plant and equipment	(168,000)	(97,000)
Net cash used in investing activities	(168,000)	(97,000)
Cash flows from financing activities
Proceeds from margin loan borrowing	1,000,000
Payment of real estate loan principal	(94,000)	(90,000)
Net cash provided by (used in) financing activities	906,000	(90,000)
Decrease in cash and cash equivalents	(763,000)	(793,000)
Cash and cash equivalents
Beginning of period	10,630,000	9,301,000
End of period	9,867,000	8,508,000
Interest paid during period	460,000	760,000
Net income taxes paid (refunded)	5,000	(118,000)
Subscription and Circulation [Member]
Increase (decrease) in liabilities
Deferred revenue arrangements	(181,000)	81,000
License and Maintenance [Member]
Increase (decrease) in liabilities
Deferred revenue arrangements	926,000	1,685,000
Installation Contracts [Member]
Increase (decrease) in liabilities
Deferred revenue arrangements	$ (1,449,000)	$ (744,000)

XML

Note 1 - The Corporation and Operations

9 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1 - The Corporation and Operations

Daily Journal Corporation (the “Company”) publishes newspapers and web sites 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”.

Journal Technologies, Inc. (“Journal Technologies”), a wholly-owned subsidiary of Daily Journal, supplies case management software systems and related products to courts, prosecutor and public defender offices, probation departments and other justice agencies, including administrative law organizations, city and county governments and bar associations. These organizations use the Journal Technologies family of products to help manage cases and information electronically, to interface with other critical justice partners and to extend electronic services to the public, including efiling and a website to pay traffic citations and fees online, and bar members. These products are licensed to more than 500 organizations in 42 states and internationally.

       Essentially all of the Company’s U.S. operations are based in California, Arizona, Colorado and Utah. The Company also has a presence in Australia where Journal Technologies is working on two software installation projects.

XML

Note 2 - Basis of Presentation

9 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Basis of Accounting [Text Block]

Note 2 - Basis of Presentation

        In the opinion of the Company, the accompanying interim unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of its financial position as of June 30, 2020, its results of operations for the three- and nine-months periods ended June 30, 2020 and 2019, its consolidated statements of shareholders’ equity for the nine months ended June 30, 2020 and 2019 and cash flows for the nine months ended June 30, 2020 and 2019. The results of operations for the nine months ended June 30, 2020 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, 2019.

XML

Note 3 - Accounting Standards Adopted in Fiscal 2020

9 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Accounting Standards Update and Change in Accounting Principle [Text Block]

Note 3 - Accounting Standards Adopted in Fiscal 2020

      In February 2016, the Financial Accounting Standard Board issued Accounting Standards Update (“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. During the first quarter of fiscal 2020, the Company adopted this standard using the modified retrospective method, which does not require an adjustment to comparative period financial statements. At June 30, 2020, the Company recorded a right-of-use (ROU) asset and lease liability of approximately $244,000 for its operating office leases. As allowed by the guidance, the Company has elected not to recognize ROU assets and lease liabilities for short-term (less than one year) leases of any class of underlying asset. ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent its obligation to make rental payments from the leases. ROU assets and liabilities are required to be recognized based on the present value of lease payments over the lease term. At June 30, 2020, the Company had office lease obligations of approximately $18,000 beyond one year; it is deemed immaterial for the present value difference. Operating office leases are included in operating lease ROU assets, current accrued liabilities and long-term accrued liabilities in the Company’s accompanying Consolidated Balance Sheets. The Company’s adoption of this new standard had no significant impact on the Company’s financial condition, results of operations or disclosures.

XML

Note 4 - Revenue Recognition

9 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

Note 4 – Revenue Recognition

      The Company recognizes revenues in accordance with the provisions of ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606), which it adopted effective October 1, 2017, using the modified retrospective method.

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

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

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

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. Also, as a practical expedient, the Company has elected not to include its evaluation of variable consideration of certain usage-based public service fees that are included in some contracts. 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.

XML

Note 5 - Basic and Diluted Income Per Share

9 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Earnings Per Share [Text Block]

Note 5 - Basic and Diluted Income Per Share

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

XML

Note 6 - Investments in Marketable Securities

9 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

Note 6 - Investments in Marketable Securities

All investments are classified as “Current assets” because they are available for sale at any time. These “available-for-sale” marketable securities are stated at fair value. 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 investments on a recurring basis pursuant to ASC 820, Fair Value Measurement. As of June 30, 2020 and September 30, 2019, there were net accumulated unrealized gains of $99,501,000 and $140,692,000, respectively, recorded in the accompanying Consolidated Balance Sheets. Most of the accumulated unrealized gains were in the common stocks of three U.S. financial institutions and one foreign manufacturer.

The Company adopted ASU No. 2016-01, Subtopic 825-10 in the prior fiscal year. For the three- and nine-months ended June 30, 2020, the Company recorded and included in its net income (loss) the net unrealized gains on investments of $16,489,000 and net unrealized losses on investments of $41,191,000 as compared with net unrealized gains on investments of $3,214,000 and net unrealized losses on investments of $16,929,000, respectively, in the prior year periods.

Investments in marketable securities as of June 30, 2020 and September 30, 2019 are summarized below.

 Investments in Marketable Securities

	June 30, 2020						September 30, 2019
	Aggregate fair value		Adjusted cost basis		Pretax net unrealized gains		Aggregate fair value		Amortized/ Adjusted cost basis		Pretax unrealized gains
Marketable securities
Common stocks	$	153,390,000	$	53,889,000	$	99,501,000	$	194,581,000	$	53,889,000	$	140,692,000

XML

Note 7 - Income Taxes

9 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 7 - Income Taxes

For the nine months ended June 30, 2020, the Company recorded an income tax benefit of $11,260,000 on a pretax loss of $39,102,000.   This was the net result of applying the effective tax rate anticipated for fiscal 2020 to the pretax loss, before the unrealized losses on investments, for the nine months ended June 30, 2020.  The effective tax rate was more than the statutory rate primarily due to the dividends received deduction, which increased the taxable loss, and state tax benefits.   In addition, the Company recorded tax benefits of (i) $187,000 resulting from the Coronavirus Aid, Relief and Economic Security (“CARES”) Act (see below) and (ii) $11,166,000 for the unrealized losses on investments during the nine months ended June 30, 2020.  The effective tax rate for the nine months ended June 30, 2020 was 29%, after including the tax benefits from the CARES Act and the unrealized losses on investments.

The CARES Act, which was signed into law on March 27, 2020, contains two federal tax provisions beneficial to the Company.  One provision provides that net operating losses arising in tax years beginning in 2018, that were previously only available to be carried forward, can now be carried back to the five previous years.  In addition, any alternative minimum tax credits carried forward from prior years can be claimed as a refund in years beginning in 2018.  Consequently, the Company recorded a tax benefit resulting from carrying back a portion of the net operating loss generated in fiscal 2019 to fiscal 2014.  The Company anticipates receiving a refund for all taxes and alternative minimum taxes paid in fiscal 2014.  The resulting tax benefit from carrying back the net operating loss is primarily attributable to the difference in the federal tax rates of 34% in fiscal 2014 and 21% in fiscal 2019.

For the nine months ended June 30, 2019, the Company recorded an income tax benefit of $4,980,000 on a pretax loss of $17,672,000.   This was the net result of applying the effective tax rate anticipated for fiscal 2019 to the pretax loss for the nine months ended June 30, 2019. The effective tax rate was greater than the statutory rate primarily due to the dividends received deduction and state tax benefits. 

The Company’s effective tax rate was 29% for the nine months ended June 30, 2020 as compared with 28% in the prior year period. 

The Company files consolidated federal income tax returns in the United States and with various state jurisdictions and is no longer subject to examinations for fiscal years before fiscal 2016 with regard to federal income taxes and fiscal 2015 for state income taxes. 

XML

Note 8 - Debt and Commitments

9 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Commitments Disclosure [Text Block]

Note 8 - Debt 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. During this quarter, the Company borrowed an additional $1 million from this investment margin account bringing the total up to $30.5 million as of June 30, 2020. (This additional $1 million was subsequently repaid in July 2020.) 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 June 30, 2020 was 0.75%. These investment margin account borrowings do not mature.

In 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 by Journal Technologies. The Company paid $1.24 million and financed the balance with a real estate bank loan of $2.26 million which bears a fixed interest rate of 4.66% and is repayable in equal monthly installments of about $17,600 through 2030. This loan is secured by the Logan facility and can be paid off at any time without prepayment penalty. This real estate loan had a balance of approximately $1.74 million as of June 30, 2020.

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 fiscal 2022.

XML

Note 9 - Contingencies

9 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note 9 - Contingencies

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

XML

Note 10 - Operating Segments

9 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note 10 - Operating Segments

The Company’s reportable segments are: (i) the Traditional Business and (ii) Journal Technologies. All inter-segment transactions were eliminated. Summarized financial information regarding the Company’s reportable segments is shown in the following table:

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Nine months ended June 30, 2020
Revenues
Advertising	$	5,415,000		$	---		$	---		$	5,415,000
Circulation		3,857,000			---			---			3,857,000
Advertising service fees and other		1,923,000			---			---			1,923,000
Licensing and maintenance fees		---			16,246,000			---			16,246,000
Consulting fees		---			5,065,000			---			5,065,000
Other public service fees		---			4,401,000			---			4,401,000
Operating expenses		11,766,000			27,164,000			---			38,930,000
Loss from operations		(571,000	)		(1,452,000	)		---			(2,023,000	)
Dividends and interest income		---			---			4,573,000			4,573,000
Other income		---			---			3,000			3,000
Net unrealized losses on investments		---			---			(41,191,000	)		(41,191,000	)
Interest expenses on note payable collateralized by real estate		(63,000	)		---			---			(63,000	)
Interest expenses on margin loans and others		---			---			(401,000	)		(401,000	)
Pretax loss		(634,000	)		(1,452,000	)		(37,016,000	)		(39,102,000	)
Income tax benefit		185,000			380,000			10,695,000			11,260,000
Net income (loss)		(449,000	)		(1,072,000	)		(26,321,000	)		(27,842,000	)
Total assets		17,752,000			24,667,000			155,545,000			197,964,000
Capital expenditures		99,000			69,000			---			168,000

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Nine months ended June 30, 2019
Revenues
Advertising	$	6,753,000		$	---		$	---		$	6,753,000
Circulation		3,930,000			---			---			3,930,000
Advertising service fees and other		2,028,000			---			---			2,028,000
Licensing and maintenance fees		---			15,244,000			---			15,244,000
Consulting fees		---			3,567,000			---			3,567,000
Other public service fees		---			4,136,000			---			4,136,000
Operating expenses		12,485,000			27,241,000			---			39,726,000
Income (loss) from operations		226,000			(4,294,000	)		---			(4,068,000	)
Dividends and interest income		---			---			4,039,000			4,039,000
Other income		---			---			29,000			29,000
Net unrealized losses on investments		---			---			(16,929,000	)		(16,929,000	)
Interest expenses on note payable collateralized by real estate		(67,000	)		---			---			(67,000	)
Interest expenses on margin loans		---			---			(676,000	)		(676,000	)
Pretax income (loss)		159,000			(4,294,000	)		(13,537,000	)		(17,672,000	)
Income tax (expense) benefit		(110,000	)		1,155,000			3,935,000			4,980,000
Net income (loss)		49,000			(3,139,000	)		(9,602,000	)		(12,692,000	)
Total assets		18,276,000			33,903,000			197,576,000			249,755,000
Capital expenditures		63,000			34,000			---			97,000

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Three months ended June 30, 2020
Revenues
Advertising	$	1,297,000		$	---		$	---		$	1,297,000
Circulation		1,259,000			---			---			1,259,000
Advertising service fees and other		575,000			---			---			575,000
Licensing and maintenance fees		---			5,531,000			---			5,531,000
Consulting fees		---			3,147,000			---			3,147,000
Other public service fees		---			1,065,000			---			1,065,000
Operating expenses		3,860,000			8,421,000			---			12,281,000
Income (loss) from operations		(729,000	)		1,322,000			---			593,000
Dividends and interest income		---			---			1,596,000			1,596,000
Net unrealized losses on investments		---			---			16,489,000			16,489,000
Interest expenses on note payable collateralized by real estate		(20,000	)		---			---			(20,000	)
Interest expenses on margin loans and others		---			---			(64,000	)		(64,000	)
Pretax income (loss)		(749,000	)		1,322,000			18,021,000			18,594,000
Income tax benefit (expense)		215,000			(545,000	)		(3,990,000	)		(4,320,000	)
Net (loss) income		(534,000	)		777,000			14,031,000			14,274,000
Total assets		17,752,000			24,667,000			155,545,000			197,964,000
Capital expenditures		---			---			---			---

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Three months ended June 30, 2019
Revenues
Advertising	$	2,453,000		$	---		$	---		$	2,453,000
Circulation		1,319,000			---			---			1,319,000
Advertising service fees and other		735,000			---			---			735,000
Licensing and maintenance fees		---			5,814,000			---			5,814,000
Consulting fees		---			2,627,000			---			2,627,000
Other public service fees		---			1,570,000			---			1,570,000
Operating expenses		4,137,000			9,257,000			---			13,394,000
Income from operations		370,000			754,000			---			1,124,000
Dividends and interest income		---			---			1,368,000			1,368,000
Other income		---			---			10,000			10,000
Net unrealized gains on investments		---			---			3,214,000			3,214,000
Interest expenses on note payable collateralized by real estate		(22,000	)		---			---			(22,000	)
Interest expenses on margin loans		---			---			(251,000	)		(251,000	)
Pretax income		348,000			754,000			4,341,000			5,443,000
Income tax expense		(225,000	)		(145,000	)		(1,250,000	)		(1,620,000	)
Net income		123,000			609,000			3,091,000			3,823,000
Total assets		18,276,000			33,903,000			197,576,000			249,755,000
Capital expenditures		13,000			---			---			13,000

During the nine months ended June 30, 2020 and 2019, the Traditional Business had total revenues of $11,195,000 and $12,711,000 of which $7,338,000 and $8,781,000, respectively, were recognized, at a point of time, after services were provided, and $3,857,000 and $3,930,000, respectively, were recognized ratably over the subscription terms. Total revenues for the Journal Technologies’ software business were $25,712,000 and $22,947,000 of which $9,889,000 and $8,611,000, respectively, were recognized upon completion of services with customer acceptance, while $15,823,000 and $14,336,000, respectively, were recognized ratably over the license and maintenance periods.

During the three months ended June 30, 2020 and 2019, the Traditional Business had total revenues of $3,131,000 and $4,507,000 of which $1,872,000 and $3,188,000, respectively, were recognized, at a point of time, after services were provided, and $1,259,000 and $1,319,000, respectively, were recognized ratably over the subscription terms. Total revenues for the Journal Technologies’ software business were $9,743,000 and $10,011,000 of which $4,258,000 and $4,576,000, respectively, were recognized upon completion of services with customer acceptance, while $5,485,000 and $5,435,000, respectively, were recognized ratably over the license and maintenance periods.

Approximately 76% and 70% of the Company’s revenues during the three- and nine-month periods ended June 30, 2020 were derived from Journal Technologies, as compared with 69% and 64% in the prior year periods. In addition, the Company’s revenues have been primarily from the United States with approximately 1% from foreign countries. Journal Technologies’ revenues are primarily from governmental agencies.

The following table sets forth certain deferred obligations from October 1, 2019 through June 30, 2020:

	Beginning Balance Oct. 1, 2019		Addition		Recognized			Ending Balance June 30, 2020
Deferred subscriptions	$	3,195,000	$	3,676,000	$	(3,857,000	)	$	3,014,000
Deferred installation contracts		1,932,000		4,039,000		(5,488,000	)		483,000
Deferred maintenance agreements and others		16,057,000		16,749,000		(15,823,000	)		16,983,000

XML

Note 11 - Subsequent Events

9 Months Ended

Jun. 30, 2020

Notes to Financial Statements

Subsequent Events [Text Block]

Note 11 - Subsequent Events

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

XML

Note 6 - Investments in Marketable Securities (Tables)

9 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Available-for-sale Securities Reconciliation [Table Text Block]

	June 30, 2020						September 30, 2019
	Aggregate fair value		Adjusted cost basis		Pretax net unrealized gains		Aggregate fair value		Amortized/ Adjusted cost basis		Pretax unrealized gains
Marketable securities
Common stocks	$	153,390,000	$	53,889,000	$	99,501,000	$	194,581,000	$	53,889,000	$	140,692,000

XML

Note 10 - Operating Segments (Tables)

9 Months Ended

Jun. 30, 2020

Notes Tables

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Nine months ended June 30, 2020
Revenues
Advertising	$	5,415,000		$	---		$	---		$	5,415,000
Circulation		3,857,000			---			---			3,857,000
Advertising service fees and other		1,923,000			---			---			1,923,000
Licensing and maintenance fees		---			16,246,000			---			16,246,000
Consulting fees		---			5,065,000			---			5,065,000
Other public service fees		---			4,401,000			---			4,401,000
Operating expenses		11,766,000			27,164,000			---			38,930,000
Loss from operations		(571,000	)		(1,452,000	)		---			(2,023,000	)
Dividends and interest income		---			---			4,573,000			4,573,000
Other income		---			---			3,000			3,000
Net unrealized losses on investments		---			---			(41,191,000	)		(41,191,000	)
Interest expenses on note payable collateralized by real estate		(63,000	)		---			---			(63,000	)
Interest expenses on margin loans and others		---			---			(401,000	)		(401,000	)
Pretax loss		(634,000	)		(1,452,000	)		(37,016,000	)		(39,102,000	)
Income tax benefit		185,000			380,000			10,695,000			11,260,000
Net income (loss)		(449,000	)		(1,072,000	)		(26,321,000	)		(27,842,000	)
Total assets		17,752,000			24,667,000			155,545,000			197,964,000
Capital expenditures		99,000			69,000			---			168,000

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Nine months ended June 30, 2019
Revenues
Advertising	$	6,753,000		$	---		$	---		$	6,753,000
Circulation		3,930,000			---			---			3,930,000
Advertising service fees and other		2,028,000			---			---			2,028,000
Licensing and maintenance fees		---			15,244,000			---			15,244,000
Consulting fees		---			3,567,000			---			3,567,000
Other public service fees		---			4,136,000			---			4,136,000
Operating expenses		12,485,000			27,241,000			---			39,726,000
Income (loss) from operations		226,000			(4,294,000	)		---			(4,068,000	)
Dividends and interest income		---			---			4,039,000			4,039,000
Other income		---			---			29,000			29,000
Net unrealized losses on investments		---			---			(16,929,000	)		(16,929,000	)
Interest expenses on note payable collateralized by real estate		(67,000	)		---			---			(67,000	)
Interest expenses on margin loans		---			---			(676,000	)		(676,000	)
Pretax income (loss)		159,000			(4,294,000	)		(13,537,000	)		(17,672,000	)
Income tax (expense) benefit		(110,000	)		1,155,000			3,935,000			4,980,000
Net income (loss)		49,000			(3,139,000	)		(9,602,000	)		(12,692,000	)
Total assets		18,276,000			33,903,000			197,576,000			249,755,000
Capital expenditures		63,000			34,000			---			97,000

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Three months ended June 30, 2020
Revenues
Advertising	$	1,297,000		$	---		$	---		$	1,297,000
Circulation		1,259,000			---			---			1,259,000
Advertising service fees and other		575,000			---			---			575,000
Licensing and maintenance fees		---			5,531,000			---			5,531,000
Consulting fees		---			3,147,000			---			3,147,000
Other public service fees		---			1,065,000			---			1,065,000
Operating expenses		3,860,000			8,421,000			---			12,281,000
Income (loss) from operations		(729,000	)		1,322,000			---			593,000
Dividends and interest income		---			---			1,596,000			1,596,000
Net unrealized losses on investments		---			---			16,489,000			16,489,000
Interest expenses on note payable collateralized by real estate		(20,000	)		---			---			(20,000	)
Interest expenses on margin loans and others		---			---			(64,000	)		(64,000	)
Pretax income (loss)		(749,000	)		1,322,000			18,021,000			18,594,000
Income tax benefit (expense)		215,000			(545,000	)		(3,990,000	)		(4,320,000	)
Net (loss) income		(534,000	)		777,000			14,031,000			14,274,000
Total assets		17,752,000			24,667,000			155,545,000			197,964,000
Capital expenditures		---			---			---			---

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Three months ended June 30, 2019
Revenues
Advertising	$	2,453,000		$	---		$	---		$	2,453,000
Circulation		1,319,000			---			---			1,319,000
Advertising service fees and other		735,000			---			---			735,000
Licensing and maintenance fees		---			5,814,000			---			5,814,000
Consulting fees		---			2,627,000			---			2,627,000
Other public service fees		---			1,570,000			---			1,570,000
Operating expenses		4,137,000			9,257,000			---			13,394,000
Income from operations		370,000			754,000			---			1,124,000
Dividends and interest income		---			---			1,368,000			1,368,000
Other income		---			---			10,000			10,000
Net unrealized gains on investments		---			---			3,214,000			3,214,000
Interest expenses on note payable collateralized by real estate		(22,000	)		---			---			(22,000	)
Interest expenses on margin loans		---			---			(251,000	)		(251,000	)
Pretax income		348,000			754,000			4,341,000			5,443,000
Income tax expense		(225,000	)		(145,000	)		(1,250,000	)		(1,620,000	)
Net income		123,000			609,000			3,091,000			3,823,000
Total assets		18,276,000			33,903,000			197,576,000			249,755,000
Capital expenditures		13,000			---			---			13,000

Contract with Customer, Contract Asset, Contract Liability, and Receivable [Table Text Block]

	Beginning Balance Oct. 1, 2019		Addition		Recognized			Ending Balance June 30, 2020
Deferred subscriptions	$	3,195,000	$	3,676,000	$	(3,857,000	)	$	3,014,000
Deferred installation contracts		1,932,000		4,039,000		(5,488,000	)		483,000
Deferred maintenance agreements and others		16,057,000		16,749,000		(15,823,000	)		16,983,000

XML

Note 3 - Accounting Standards Adopted in Fiscal 2020 (Details Textual)	Jun. 30, 2020 USD ($)
Operating Lease, Right-of-Use Asset	$ 244,000
Office Lease Obligations Beyond One Year	18,000
Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset	244,000
Operating Lease, Liability, Total	$ 244,000

XML

Note 6 - Investments in Marketable Securities (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019	Sep. 30, 2019
Marketable Securities, Accumulated Unrealized Gain (Loss)	$ 99,501,000		$ 99,501,000		$ 140,692,000
Marketable Securities, Unrealized Gain (Loss), Total	$ 16,489,000	$ 3,214,000	$ (41,191,000)	$ (16,929,000)

XML

Note 6 - Investments in Marketable Securities - Summary of Investments (Details) - Common Stock [Member] - USD ($)	Jun. 30, 2020	Sep. 30, 2019
Aggregate fair value	$ 153,390,000	$ 194,581,000
Amortized/adjusted cost basis	53,889,000	53,889,000
Pretax net unrealized gains	$ 99,501,000	$ 140,692,000

XML

Note 7 - Income Taxes (Details Textual) - USD ($)	3 Months Ended		6 Months Ended	9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2020	Jun. 30, 2019
Income Tax Expense (Benefit), Total	$ 4,320,000	$ 1,620,000		$ (11,260,000)	$ (4,980,000)
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Noncontrolling Interest, Total				(39,102,000)	$ (17,672,000)
Income Tax Reconciliation, Tax Credit, CARES Act				187,000
Effective Income Tax Rate Reconciliation, Tax Credit, Investment, Amount				$ 11,166,000
Effective Income Tax Rate Reconciliation, Percent, Total				29.00%	28.00%
Domestic Tax Authority [Member]
Open Tax Year			2016 2017 2018 2019
State and Local Jurisdiction [Member]
Open Tax Year			2015 2016 2017 2018 2019

XML

Note 8 - Debt and Commitments (Details Textual)	1 Months Ended		3 Months Ended		9 Months Ended		12 Months Ended
	Jul. 31, 2020 USD ($)	Nov. 30, 2015 USD ($) ft² a	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2020 USD ($)	Jun. 30, 2019 USD ($)	Sep. 30, 2013 USD ($)	Sep. 30, 2019 USD ($)
Proceeds from Issuance of Debt					$ 1,000,000
Investment Margin Account			$ 30,493,000		30,493,000			$ 29,493,000
Payments to Acquire Property, Plant, and Equipment, Total				$ 13,000	168,000	$ 97,000
Loans Payable to Bank, Total			1,740,000		1,740,000
UTAH | Building [Member]
Area of Real Estate Property (Square Foot) | ft²		30,700
UTAH | Land [Member]
Area of Land (Acre) | a		3.6
UTAH | Land and Building [Member]
Payments to Acquire Property, Plant, and Equipment, Total		$ 1,240,000
Margin Account [Member]
Proceeds from Issuance of Debt			1,000,000				$ 29,500,000
Investment Margin Account			$ 30,500,000		$ 30,500,000
Margin Account [Member] | Fed Funds Rate [Member]
Debt Instrument, Basis Spread on Variable Rate							0.50%
Debt Instrument, Interest Rate, Effective Percentage			0.75%		0.75%
Margin Account [Member] | Subsequent Event [Member]
Repayments of Debt	$ 1,000,000
Real Estate Bank Loan Secured by Logan Office [Member]
Loans Payable to Bank, Total		$ 2,260,000
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate		4.66%
Debt Instrument, Periodic Payment, Total		$ 17,600

XML

Note 10 - Operating Segments (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenue from Contract with Customer, Including Assessed Tax	$ 12,874,000	$ 14,518,000	$ 36,907,000	$ 35,658,000
Revenue Benchmark [Member] | Product Concentration Risk [Member] | Non-US [Member]
Concentration Risk, Percentage	1.00%	1.00%	1.00%	1.00%
Traditional Business [Member]
Revenue from Contract with Customer, Including Assessed Tax	$ 3,131,000	$ 4,507,000	$ 11,195,000	$ 12,711,000
Traditional Business [Member] | Transferred at Point in Time [Member]
Revenue from Contract with Customer, Including Assessed Tax	1,872,000	3,188,000	7,338,000	8,781,000
Traditional Business [Member] | Transferred over Time [Member]
Revenue from Contract with Customer, Including Assessed Tax	1,259,000	1,319,000	3,857,000	3,930,000
Journal Technologies [Member]
Revenue from Contract with Customer, Including Assessed Tax	$ 9,743,000	$ 10,011,000	$ 25,712,000	$ 22,947,000
Journal Technologies [Member] | Revenue Benchmark [Member] | Product Concentration Risk [Member]
Concentration Risk, Percentage	76.00%	69.00%	70.00%	64.00%
Journal Technologies [Member] | Transferred at Point in Time [Member]
Revenue from Contract with Customer, Including Assessed Tax	$ 4,258,000	$ 4,576,000	$ 9,889,000	$ 8,611,000
Journal Technologies [Member] | Transferred over Time [Member]
Revenue from Contract with Customer, Including Assessed Tax	$ 5,485,000	$ 5,435,000	$ 15,823,000	$ 14,336,000

XML

Note 10 - Operating Segments - Summarized Financial Information for Reportable Segments (Details) - USD ($)	3 Months Ended						9 Months Ended
	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018	Jun. 30, 2020	Jun. 30, 2019	Sep. 30, 2019
Revenue from Contract with Customer, Including Assessed Tax	$ 12,874,000			$ 14,518,000			$ 36,907,000	$ 35,658,000
Operating expenses	12,281,000			13,394,000			38,930,000	39,726,000
Loss from operations	593,000			1,124,000			(2,023,000)	(4,068,000)
Dividends and interest income	1,596,000			1,368,000			4,573,000	4,039,000
Other income				10,000			3,000	29,000
Net unrealized losses on investments	16,489,000			3,214,000			(41,191,000)	(16,929,000)
Pretax income (loss)	18,594,000			5,443,000			(39,102,000)	(17,672,000)
Income tax (expense) benefit	(4,320,000)			(1,620,000)			11,260,000	4,980,000
Net income (loss)	14,274,000	$ (56,326,000)	$ 14,210,000	3,823,000	$ 5,018,000	$ (21,533,000)	(27,842,000)	(12,692,000)
Total assets	197,964,000			249,755,000			197,964,000	249,755,000	$ 237,376,000
Payments to Acquire Property, Plant, and Equipment, Total				13,000			168,000	97,000
Real Estate Bank Loan Secured by Logan Office [Member]
Interest expenses on debt	(20,000)			(22,000)			(63,000)	(67,000)
Margin Account [Member]
Interest expenses on debt	(64,000)			(251,000)			(401,000)	(676,000)
Advertising [Member]
Revenue from Contract with Customer, Including Assessed Tax	1,297,000			2,453,000			5,415,000	6,753,000
Subscription and Circulation [Member]
Revenue from Contract with Customer, Including Assessed Tax	1,259,000			1,319,000			3,857,000	3,930,000
Advertising Service Fees and Other [Member]
Revenue from Contract with Customer, Including Assessed Tax	575,000			735,000			1,923,000	2,028,000
License and Maintenance [Member]
Revenue from Contract with Customer, Including Assessed Tax	5,531,000			5,814,000			16,246,000	15,244,000
Consulting Fees [Member]
Revenue from Contract with Customer, Including Assessed Tax	3,147,000			2,627,000			5,065,000	3,567,000
Service, Other [Member]
Revenue from Contract with Customer, Including Assessed Tax	1,065,000			1,570,000			4,401,000	4,136,000
Traditional Business [Member]
Revenue from Contract with Customer, Including Assessed Tax	3,131,000			4,507,000			11,195,000	12,711,000
Journal Technologies [Member]
Revenue from Contract with Customer, Including Assessed Tax	9,743,000			10,011,000			25,712,000	22,947,000
Operating Segments [Member] | Traditional Business [Member]
Operating expenses	3,860,000			4,137,000			11,766,000	12,485,000
Loss from operations	(729,000)			370,000			(571,000)	226,000
Pretax income (loss)	(749,000)			348,000			(634,000)	159,000
Income tax (expense) benefit	215,000			(225,000)			185,000	(110,000)
Net income (loss)	(534,000)			123,000			(449,000)	49,000
Total assets	17,752,000			18,276,000			17,752,000	18,276,000
Payments to Acquire Property, Plant, and Equipment, Total				13,000			99,000	63,000
Operating Segments [Member] | Traditional Business [Member] | Real Estate Bank Loan Secured by Logan Office [Member]
Interest expenses on debt	(20,000)			(22,000)			(63,000)	(67,000)
Operating Segments [Member] | Traditional Business [Member] | Advertising [Member]
Revenue from Contract with Customer, Including Assessed Tax	1,297,000			2,453,000			5,415,000	6,753,000
Operating Segments [Member] | Traditional Business [Member] | Subscription and Circulation [Member]
Revenue from Contract with Customer, Including Assessed Tax	1,259,000			1,319,000			3,857,000	3,930,000
Operating Segments [Member] | Traditional Business [Member] | Advertising Service Fees and Other [Member]
Revenue from Contract with Customer, Including Assessed Tax	575,000			735,000			1,923,000	2,028,000
Operating Segments [Member] | Journal Technologies [Member]
Operating expenses	8,421,000			9,257,000			27,164,000	27,241,000
Loss from operations	1,322,000			754,000			(1,452,000)	(4,294,000)
Pretax income (loss)	1,322,000			754,000			(1,452,000)	(4,294,000)
Income tax (expense) benefit	(545,000)			(145,000)			380,000	1,155,000
Net income (loss)	777,000			609,000			(1,072,000)	(3,139,000)
Total assets	24,667,000			33,903,000			24,667,000	33,903,000
Payments to Acquire Property, Plant, and Equipment, Total							69,000	34,000
Operating Segments [Member] | Journal Technologies [Member] | License and Maintenance [Member]
Revenue from Contract with Customer, Including Assessed Tax	5,531,000			5,814,000			16,246,000	15,244,000
Operating Segments [Member] | Journal Technologies [Member] | Consulting Fees [Member]
Revenue from Contract with Customer, Including Assessed Tax	3,147,000			2,627,000			5,065,000	3,567,000
Operating Segments [Member] | Journal Technologies [Member] | Service, Other [Member]
Revenue from Contract with Customer, Including Assessed Tax	1,065,000			1,570,000			4,401,000	4,136,000
Corporate, Non-Segment [Member]
Dividends and interest income	1,596,000			1,368,000			4,573,000	4,039,000
Other income				10,000			3,000	29,000
Net unrealized losses on investments	16,489,000			3,214,000			(41,191,000)	(16,929,000)
Pretax income (loss)	18,021,000			4,341,000			(37,016,000)	(13,537,000)
Income tax (expense) benefit	(3,990,000)			(1,250,000)			10,695,000	3,935,000
Net income (loss)	14,031,000			3,091,000			(26,321,000)	(9,602,000)
Total assets	155,545,000			197,576,000			155,545,000	197,576,000
Corporate, Non-Segment [Member] | Margin Account [Member]
Interest expenses on debt	$ (64,000)			$ (251,000)			$ (401,000)	$ (676,000)

XML

Note 10 - Operating Segments - Deferred Revenue Obligations (Details)	9 Months Ended
	Jun. 30, 2020 USD ($)
Subscription and Circulation [Member]
Deferred revenue	$ 3,195,000
Deferred Revenue, Additions	3,676,000
Deferred Revenue, Revenue Recognized	(3,857,000)
Deferred revenue	3,014,000
Installation Contracts [Member]
Deferred revenue	1,932,000
Deferred Revenue, Additions	4,039,000
Deferred Revenue, Revenue Recognized	(5,488,000)
Deferred revenue	483,000
License and Maintenance [Member]
Deferred revenue	16,057,000
Deferred Revenue, Additions	16,749,000
Deferred Revenue, Revenue Recognized	(15,823,000)
Deferred revenue	$ 16,983,000