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 December 31, 2017

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)

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

Yes: X             No:

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes: X             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: X
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: X

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

Class	Outstanding at January 31, 2018
Common Stock, par value $ .01 per share	1,380,746 shares

1

DAILY JOURNAL CORPORATION

INDEX

	Page Nos.
PART I Financial Information
Item 1.   Financial Statements
Consolidated Balance Sheets -
December 31, 2017 and September 30, 2017	3
Consolidated Statements of Comprehensive Income -
Three months ended December 31, 2017 and 2016	4
Consolidated Statements of Cash Flows -
Three months ended December 31, 2017 and 2016	5
Notes to Consolidated Financial Statements	6
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.   Quantitative and Qualitative Disclosures about Market Risk	20
Item 4.   Controls and Procedures	20
Part II Other Information
Item 6.   Exhibits	21

2

PART I

Item 1. FINANCIAL STATEMENTS

DAILY JOURNAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	December 31			September 30
	2017			2017
ASSETS
Current assets
Cash and cash equivalents	$	2,508,000		$	3,384,000
Marketable securities at fair value, including common stocks of $236,387,000 and bonds of $8,547,000 at December 31, 2017 and common stocks of $220,973,000 and bonds of $8,292,000 at September 30, 2017		244,934,000			229,265,000
Accounts receivable, less allowance for doubtful accounts of $200,000 at December 31, 2017 and September 30, 2017		4,192,000			5,358,000
Inventories		40,000			40,000
Prepaid expenses and other current assets		641,000			798,000
Income tax receivable		987,000			909,000
Total current assets		253,302,000			239,754,000
Property, plant and equipment, at cost
Land, buildings and improvements		16,396,000			16,396,000
Furniture, office equipment and computer software		2,724,000			2,724,000
Machinery and equipment		1,818,000			1,799,000
		20,938,000			20,919,000
Less accumulated depreciation		(9,433,000	)		(9,292,000	)
		11,505,000			11,627,000
Intangibles, net		1,996,000			3,058,000
Goodwill		13,400,000			13,400,000
Deferred income taxes - Federal		7,436,000			10,652,000
Deferred income taxes - States		2,251,000			2,217,000
	$	289,890,000		$	280,708,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	2,951,000		$	3,049,000
Accrued liabilities		2,411,000			3,112,000
Note payable collateralized by real estate		117,000			115,000
Deferred subscriptions		3,135,000			3,284,000
Deferred installation contracts		4,364,000			5,072,000
Deferred maintenance agreements and others		10,040,000			9,442,000
Total current liabilities		23,018,000			24,074,000
Long term liabilities
Investment margin account borrowings		29,493,000			29,493,000
Note payable collateralized by real estate		1,926,000			1,956,000
Deferred maintenance agreements		580,000			759,000
Accrued liabilities		135,000			135,000
Deferred income taxes, net		48,140,000			64,550,000
Total long term liabilities		80,274,000			96,893,000
Commitments and contingencies (Notes 10 and 11)		---			---
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 December 31, 2017 and September 30, 2017		14,000			14,000
Additional paid-in capital		1,755,000			1,755,000
Retained earnings		71,889,000			57,150,000
Accumulated other comprehensive income		112,940,000			100,822,000
Total shareholders' equity		186,598,000			159,741,000
	$	289,890,000		$	280,708,000

See accompanying Notes to Consolidated Financial Statements

3

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three months ended December 31
	2017			2016
Revenues
Advertising	$	2,116,000		$	2,310,000
Circulation		1,363,000			1,449,000
Advertising service fees and other		602,000			638,000
Licensing and maintenance fees		4,350,000			3,966,000
Consulting fees		995,000			848,000
Other public service fees		826,000			779,000
		10,252,000			9,990,000
Costs and expenses
Salaries and employee benefits		8,197,000			7,641,000
Outside services		1,039,000			980,000
Postage and delivery expenses		217,000			278,000
Newsprint and printing expenses		212,000			209,000
Depreciation and amortization		1,218,000			1,392,000
Other general and administrative expenses		2,814,000			2,343,000
		13,697,000			12,843,000
Loss from operations		(3,445,000	)		(2,853,000	)
Other income (expense)
Dividends and interest income		1,483,000			1,171,000
Gain on sale of capital asset		2,000			-
Other income		9,000			15,000
Interest expense on note payable collateralized by real estate		(24,000	)		(26,000	)
Interest expense on margin loans		(136,000	)		(79,000	)
Interest accrual for uncertain and unrecognized tax benefits		-			(9,000	)
Loss before income taxes		(2,111,000	)		(1,781,000	)
Benefit from income taxes		16,850,000			310,000
Net income (loss)	$	14,739,000		$	(1,471,000	)
Weighted average number of common shares outstanding - basic and diluted		1,380,746			1,380,746
Basic and diluted net income (loss) per share	$	10.67		$	(1.07	)
Comprehensive income
Net income (loss)	$	14,739,000		$	(1,471,000	)
Net increase in unrealized appreciation of marketable securities (net of taxes)		12,118,000			15,019,000
	$	26,857,000		$	13,548,000

See accompanying Notes to Consolidated Financial Statements.

4

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three months ended December 31
	2017			2016
Cash flows from operating activities
Net income (loss)	$	14,739,000		$	(1,471,000	)
Adjustments to reconcile net income (loss) to net cash used in operations
Depreciation and amortization		1,218,000			1,392,000
Deferred income taxes		(16,778,000	)		(917,000	)
Discounts earned on bonds		(1,000	)		(1,000	)
Changes in operating assets and liabilities
(Increase) decrease in current assets
Accounts receivable, net		1,166,000			(891,000	)
Inventories		---			(9,000	)
Prepaid expenses and other assets		157,000			5,000
Income tax receivable		(78,000	)		645,000
Increase (decrease) in liabilities
Accounts payable		(98,000	)		18,000
Accrued liabilities		(701,000	)		(373,000	)
Income taxes		---			(68,000	)
Deferred subscriptions		(149,000	)		(106,000	)
Deferred maintenance agreements and others		419,000			678,000
Deferred installation contracts		(708,000	)		(213,000	)
Net cash used in operating activities		(814,000	)		(1,311,000	)
Cash flows from investing activities
Purchases of marketable securities		---			(5,013,000	)
Purchases of property, plant and equipment		(34,000	)		(187,000	)
Net cash used in investing activities		(34,000	)		(5,200,000	)
Cash flows from financing activities
Payment of real estate loan principal		(28,000	)		(27,000	)
Net cash used in financing activities		(28,000	)		(27,000	)
Decrease in cash and cash equivalents		(876,000	)		(6,538,000	)
Cash and cash equivalents
Beginning of period		3,384,000			11,411,000
End of period	$	2,508,000		$	4,873,000
Interest paid during period	$	169,000		$	111,000
Net income taxes paid during period	$	6,000		$	3,000

See accompanying Notes to Consolidated Financial Statements.

5

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.

Journal Technologies, Inc. (“Journal Technologies”), a wholly-owned subsidiary, 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 online, and bar members. These products are licensed to more than 500 organizations in 42 states and internationally.

Essentially all of the Company’s operations are based in California, Arizona, Colorado and Utah.

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 December 31, 2017, its results of operations and cash flows for the three-month periods ended December 31, 2017 and 2016. The results of operations for the three months ended December 31, 2017 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, 2017.

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

Note 3 -Accounting Standards Adopted in Fiscal 2018 and Recent Accounting Pronouncements

Accounting Standards Adopted in Fiscal 2018

In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. This update requires deferred tax liabilities and assets to be classified as noncurrent in the consolidated balance sheet. The Company has adopted this guidance effective October 1, 2017 and concluded that it has no significant impact on the Company’s financial condition, results of operations or disclosures because it is simply a reclassification of current deferred taxes to non-current deferred taxes with an itemization of federal and state deferred taxes.

6

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606) which requires that revenues be recognized in an amount reflecting the consideration an entity expects to receive in exchange for those goods or services when a customer obtains control of promised goods or services. The Company elected to adopt early the ASC Topic 606 effective October 1, 2017 using the modified retrospective method.

The Company has concluded that the adoption of the ASC Topic 606 in fiscal 2018 has no significant impact on the Company’s financial condition or results of operations. The Company’s traditional publishing business revenue recognition related to advertising, circulation, and public fees remains unchanged. For the software business, the Company previously utilized the completed performance method of accounting, pursuant to which the Company did not recognize revenues for implementation services or licenses, maintenance, support and hosting services until after the services were performed and accepted by the customer (go-live), due to the fact that the customer’s acceptance was typically unpredictable and reliable estimates of the progress towards completion could not be made. Thus, the Company’s past revenue recognition policy was already in conformity with ASU Topic 606, which calls for revenue recognition at the point of delivery when a performance obligation is fulfilled. Consequently, the Company believes there are no required material retrospective or accumulated catch-up adjustments with respect to prior years’ financial figures, as revenues have been recognized consistently in the same manner throughout the comparative reporting periods.

The adoption of ASC 606 also requires the capitalization of certain costs of obtaining contracts, specifically sales commissions which are to be amortized over the expected term of the contracts. The Company incurs an immaterial amount of sales commission costs for its software contracts 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.

Other Recent Accounting Pronouncements

The Company will continue to evaluate the other new accounting pronouncements as detailed in its Annual Report on Form 10-K for the year ended September 30, 2017.

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).

For the Company’s traditional publishing 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 and (ii) subscription license, maintenance, including updates and upgrades, and support fees, and third-party hosting fees when used. Revenues for consulting are recognized at point of delivery (go-live) upon completion of services and customer acceptance, and subscription fees are recognized ratably (using the output method based on time-elapsed) after the go-live. These contracts include assurance warranty provisions for limited periods and do not include financing terms. For some contracts, the Company acts as a principal with respect to certain services, such as data conversion, interfaces and hosting that are provided by third-parties, and recognizes such revenues on a gross basis. For legacy contracts with perpetual license arrangements, licenses and consulting services are recognized at point of delivery (go-live), and maintenance revenues are recognized ratably after the go-live. (See Note 12 for additional disclosures related to ASC Topic 606 adoption.)

7

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.

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 fees (i.e. 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.

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

Investments in marketable securities categorized as “available-for-sale” 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 December 31, 2017 and September 30, 2017, unrealized gains of $181,540,000 and $165,872,000, respectively, were recorded before taxes of $48,140,000 and $64,550,000, respectively, in “Accumulated other comprehensive income” in the accompanying Consolidated Balance Sheets. Most of the unrealized gains were in the common stocks of three U.S. financial institutions and one foreign manufacturer.

Investments in equity securities and securities with fixed maturity as of December 31, 2017 and September 30, 2017 are summarized below.

	December 31, 2017						September 30, 2017
	Aggregate fair value		(Unaudited) Amortized/ Adjusted cost basis		Pretax unrealized gains		Aggregate fair value		Amortized/ Adjusted cost basis		Pretax unrealized gains
Marketable securities
Common stocks	$	236,387,000	$	58,449,000	$	177,938,000	$	220,973,000	$	58,449,000	$	162,524,000
Bonds		8,547,000		4,945,000		3,602,000		8,292,000		4,944,000		3,348,000
	$	244,934,000	$	63,394,000	$	181,540,000	$	229,265,000	$	63,393,000	$	165,872,000

All investments are classified as “Current assets” because they are available for sale at any time. The bonds mature in 2039.

8

As of December 31, 2017, the Company performed an evaluation for an equity security with a fair value below cost to determine if the unrealized loss was other-than-temporary. This evaluation considers a number of factors including, but not limited to, the length of time and extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer and the Company’s ability and intent to hold the security until fair value recovers. The assessment of the ability and intent to hold this security to recovery focuses on liquidity needs, asset/liability management objectives and security portfolio objectives. Based on the result of the evaluation, the Company concluded that as of December 31, 2017, the unrealized loss related to an equity security it owns was temporary.

Note 7 - Intangible Assets

Intangible Assets
	December 31, 2017									September 30, 2017
	Customer Relationships			Developed Technology			Total			Customer Relationships			Developed Technology			Total
Gross intangibles	$	21,950,000		$	2,525,000		$	24,475,000		$	21,950,000		$	2,525,000		$	24,475,000
Accumulated amortization		(20,130,000	)		(2,349,000	)		(22,479,000	)		(19,174,000	)		(2,243,000	)		(21,417,000	)
	$	1,820,000		$	176,000		$	1,996,000		$	2,776,000		$	282,000		$	3,058,000

These intangible assets are being amortized over five years for financial statement purposes due to the short life cycle of technology on which customer relationships depend and over 15 years on a straight-line basis for tax purposes. The intangible amortization expenses were $1,062,000 for the three-month period ended December 31, 2017, as compared with $1,224,000 in the prior year period, primarily because the intangibles of one of the two acquisitions in fiscal 2013 were fully amortized during this quarter.

Note 8 – Goodwill

The Company accounts for goodwill in accordance with Accounting Standards Codification (ASC) 350, Intangibles — Goodwill and Other. Goodwill, which is not amortized for financial statement purposes, is amortized over a 15-year period for tax purposes, but evaluated for impairment annually, or whenever events or changes in circumstances indicate that the value may not be recoverable. Considered factors for potential goodwill impairment evaluation with respect to Journal Technologies include, among other things, the current year’s business profitability before intangible amortization, fluctuations of revenues, changes in the marketplace, the status of deferred installation contracts and new business.

In addition, ASU 2011-08, Intangible – Goodwill and Others -- Testing Goodwill for Impairment, allows for the option of performing a qualitative assessment before calculating the fair value of a reporting unit. If it is determined based on qualitative factors that there is no impairment to goodwill, then the fair value of a reporting unit is not needed. If a quantitative analysis is required and the unit’s carrying amount exceeds its fair value, then the second step is performed to measure the amount of potential impairment. The Company’s annual goodwill impairment analysis in fiscal 2017 did not result in an impairment charge based on the qualitative assessment. There was no indicator of impairment during the three-month periods ended December 31, 2017 and 2016.

9

Note 9 - Income Taxes

The December 2017 Tax Cuts and Jobs Act (“Tax Act”) reduced the maximum corporate tax rate from 35% to 21% effective January 1, 2018.  The Company has completed its review of the Tax Act.  The impact to its financial statements is as follows:  (i) current income tax expense or benefit is calculated on a blended rate of 24.28% pursuant to IRC Section 15, (ii) deferred tax expense includes a discrete net tax benefit of approximately $16 million resulting from a revaluation of deferred tax assets and liabilities to the expected tax rate that will be applied when temporary differences are expected to reverse, (iii) items that are expected to reverse during fiscal 2018 are valued at the blended rate of 24.28% while temporary differences that will reverse after fiscal 2018 are valued at 21%, and (iv) approximately $20 million of the revaluation of deferred taxes relates to items that were initially recorded as accumulated other comprehensive income (“AOCI”).  This revaluation is recorded as a component of income tax expense or benefit in continuing operations. 

For the three months ended December 31, 2017, the Company recorded an income tax benefit of $16,850,000 on pretax loss of $2,111,000.  The income tax benefit was the result of applying the effective tax rate anticipated for fiscal 2018 to pretax loss for the three-month period ended December 31, 2017.   The effective tax rate (before the discrete item discussed above) was greater than the statutory rate primarily due to the dividends received deduction which increases the loss for tax purposes.  On pretax loss of $1,781,000 for the three months ended December 31, 2016, the Company recorded an income tax benefit of $310,000 which was the net result of applying the effective tax rate anticipated for fiscal 2017 to pretax loss for the three months ended December 31, 2016.  The effective tax rate was greater than the statutory rate mainly resulting from the dividends received deduction.  The Company’s effective tax rate was 798% and 17% for the three months ended December 31, 2017 and 2016, respectively. 

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 2015 with regard to federal income taxes and fiscal 2013 for state income taxes. 

Note 10 - 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. 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 December 31, 2017 was 2%. These investment margin account borrowings do not mature.

In fiscal 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 $2.04 million as of December 31, 2017.

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 2021. During fiscal 2014, the Company renewed its office lease for its San Francisco office for five years (expiring in October 2019) with a current monthly rent of approximately $25,000 for about 6,200 square feet. In fiscal 2017, the Company leased approximately 9,800 square feet of office space (expiring in August 2020) in Englewood, Colorado.

10

The Company is responsible for a portion of maintenance, insurance and property tax expenses relating to the leased properties. Rental expenses were $237,000 for the three-month period ended December 31, 2017, as compared with $174,000 in the prior year period.

Note 11 - 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 12 - 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
Three months ended December 31, 2017
Revenues
Advertising	$	2,116,000		$	---		$	---		$	2,116,000
Circulation		1,363,000			---			---			1,363,000
Advertising service fees and other		602,000			---			---			602,000
Licensing and maintenance fees		---			4,350,000			---			4,350,000
Consulting fees		---			995,000			---			995,000
Other public service fees		---			826,000			---			826,000
Operating expenses		4,314,000			9,383,000			---			13,697,000
Loss from operations		(233,000	)		(3,212,000	)		---			(3,445,000	)
Dividends and interest income		---			---			1,483,000			1,483,000
Gain on sale of capital asset		---			---			2,000			2,000
Other income		---			---			9,000			9,000
Interest expenses on note payable collateralized by real estate		(24,000	)		---			---			(24,000	)
Interest expenses on margin loans		---			---			(136,000	)		(136,000	)
Pretax (loss) income		(257,000	)		(3,212,000	)		1,358,000			(2,111,000	)
Income tax benefit (expense)		(680,000	)		(2,185,000	)		19,715,000			16,850,000
Net income (loss)		(937,000	)		(5,397,000	)		21,073,000			14,739,000
Total assets		18,188,000			26,768,000			244,934,000			289,890,000
Capital expenditures		34,000			---			---			34,000
Amortization of intangible assets		---			1,062,000			---			1,062,000

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Three months ended December 31, 2016
Revenues
Advertising	$	2,310,000		$	---		$	---		$	2,310,000
Circulation		1,449,000			---			---			1,449,000
Advertising service fees and other		638,000			---			---			638,000
Licensing and maintenance fees		---			3,966,000			---			3,966,000
Consulting fees		---			848,000			---			848,000
Other public service fees		---			779,000			---			779,000
Operating expenses		4,400,000			8,443,000			---			12,843,000
Loss from operations		(3,000	)		(2,850,000	)		---			(2,853,000	)
Dividends and interest income		---			---			1,171,000			1,171,000
Other income		15,000			---			---			15,000
Interest expenses on note payable collateralized by real estate		(26,000	)		---			---			(26,000	)
Interest expenses on margin loans		---			---			(79,000	)		(79,000	)
Interest expense accrued for uncertain and unrecognized tax benefits		---			(9,000	)		---			(9,000	)
Pretax income (loss)		(14,000	)		(2,859,000	)		1,092,000			(1,781,000	)
Income tax (expense) benefit		---			775,000			(465,000	)		310,000
Net income (loss)		(14,000	)		(2,084,000	)		627,000			(1,471,000	)
Total assets		14,294,000			37,981,000			196,486,000			248,761,000
Capital expenditures		160,000			27,000			---			187,000
Amortization of intangible assets		---			1,224,000			---			1,224,000

12

During the three months ended December 31, 2017, the Traditional Business had total revenues of $4,081,000 of which $2,718,000 were recognized after services were provided and $1,363,000 were recognized ratably over the subscription terms. Total revenues for the Company’s software business were $6,171,000 of which $2,064,000 were recognized upon completion of services with customer acceptance while $4,107,000 were recognized ratably over the subscription periods.

Approximately 60% of the Company’s revenues during the three-month periods ended December 31, 2017 were derived from Journal Technologies, as compared with 56% in the prior year period. In addition, the Company’s revenues have been primarily from the United States with approximately 1% from foreign countries. Journal Technologies’ revenues are all from governmental agencies.

The following table sets forth certain deferred obligations from October 1, 2017 through December 31, 2017:

	Beginning Balance		Addition		Recognized			Ending Balance
Deferred subscriptions	$	3,284,000	$	1,214,000	$	(1,363,000	)	$	3,135,000
Deferred installation contracts		5,072,000		530,000		(1,238,000	)		4,364,000
Deferred maintenance agreements and others		9,442,000		4,705,000		(4,107,000	)		10,040,000

Note 13 - 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 or cash flows.

13

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 online, and bar members. These products are licensed to more than 500 organizations in 42 states and internationally.

Comprehensive Income

Comprehensive income includes net income (loss) and unrealized net gains on investments, net of taxes, as summarized below:

Comprehensive Income
	Three months ended December 31
	2017		2016
Net income (loss)	$	14,739,000	$	(1,471,000	)
Net increase in unrealized appreciation of marketable securities (net of taxes)		12,118,000		15,019,000
	$	26,857,000	$	13,548,000

Comparable three-month periods ended December 31, 2017 and 2016

Consolidated revenues were $10,252,000 and $9,990,000 for the three months ended December 31, 2017 and 2016, respectively. This increase of $262,000 was primarily from increased Journal Technologies’ license and maintenance fees of $384,000, consulting fees of $147,000 and public service fees of $47,000, partially offset by the reduction in The Traditional Business’s trustee sale notice and its related service fee revenues of $57,000, commercial advertising revenues of $64,000, and circulation revenues of $86,000. The Company’s revenues derived from Journal Technologies’ operations constituted about 60% and 56% of the Company’s total revenues for the three months ended December 31, 2017 and 2016, respectively.

Consolidated operating expenses increased by $854,000 (7%) to $13,697,000 from $12,843,000, primarily resulting from additional personnel costs and services for Journal Technologies. Total personnel costs increased by $556,000 (7%) to $8,197,000 from $7,641,000. Outside services increased by $59,000 (6%) to $1,039,000 from $980,000 mainly because of increased contractor’s costs for Journal Technologies. Depreciation and amortization costs, which included primarily the amortization of Journal Technologies’ intangible assets, decreased by $174,000 to $1,218,000 from $1,392,000. Other general and administrative expenses increased by $471,000 (20%) to $2,814,000 from $2,343,000 mainly because of increased accounting and legal fees and office equipment and software maintenance fees for Journal Technologies.

14

The Company’s non-operating income, net of expenses, increased by $262,000 (24%) to $1,334,000 from $1,072,000 primarily because of more dividend income, partially offset by increases in the interest rate on the two acquisition margin loans.

During the three months ended December 31, 2017, consolidated pretax loss was $2,111,000, as compared with $1,781,000 in the prior year period. There was a consolidated net income of $14,739,000 ($10.67 per share) after tax benefits, primarily due to tax cuts, for the three months ended December 31, 2017, as compared with net loss of $1,471,000 (-$1.07 per share) in the prior year period. (See Taxes.)

At December 31, 2017, the aggregate fair market value of the Company’s marketable securities was $244,934,000. These securities had approximately $181,540,000 of unrealized gains before taxes of $48,140,000 and generated approximately $1,483,000 in dividends and interest income during the three months ended December 31, 2017, 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.

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

Overall Financial Results (000)

For the three months ended December 31

	Reportable Segments
	Traditional Business						Journal Technologies						Corporate income and expenses						Total
	2017			2016			2017			2016			2017			2016			2017			2016
Revenues
Advertising	$	2,116		$	2,310		$	---		$	---		$	---		$	---		$	2,116		$	2,310
Circulation		1,363			1,449			---			---			---			---			1,363			1,449
Advertising service fees and other		602			638			---			---			---			---			602			638
Licensing and maintenance fees		---			---			4,350			3,966			---			---			4,350			3,966
Consulting fees		---			---			995			848			---			---			995			848
Other public service fees		---			---			826			779			---			---			826			779
Total revenues		4,081			4,397			6,171			5,593			---			---			10,252			9,990
Operating expenses
Salaries and employee benefits		2,568			2,565			5,629			5,076			---			---			8,197			7,641
Amortization of intangible assets		---			---			1,062			1,224			---			---			1,062			1,224
Others		1,746			1,835			2,692			2,143			---			---			4,438			3,978
Total operating expenses		4,314			4,400			9,383			8,443			---			---			13,697			12,843
Loss from operations		(233	)		(3	)		(3,212	)		(2,850	)		---			---			(3,445	)		(2,853	)
Dividends and interest income		---			---			---			---			1,483			1,171			1,483			1,171
Gain on sale of capital asset		---			---			---			---			2			---			2			---
Other income (net)		---			15			---			---			9			---			9			15
Interest expenses on note payable collateralized by real estate		(24	)		(26	)		---			---			---			---			(24	)		(26	)
Interest expenses on margin loans		---			---			---			---			(136	)		(79	)		(136	)		(79	)
Interest expenses accrual for uncertain and unrecognized tax benefits		---			---			---			(9	)		---			---			---			(9	)
Pretax (loss) income	$	(257	)	$	(14	)	$	(3,212	)	$	(2,859	)	$	1,358		$	1,092		$	(2,111	)	$	(1,781	)

15

The Traditional Business segment’s pretax loss increased by $243,000 to $257,000 from $14,000.

Advertising revenues decreased by $194,000 to $2,116,000 from $2,310,000, primarily resulting from the declines in trustee sale notice advertising and its related service fee revenues of $57,000 and commercial advertising revenues of $64,000.

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 15% during the three months ended December 31, 2017 as compared to the prior year period. Because this slowing is expected to continue, the Company expects there will be fewer foreclosure notice and other public notice advertisements and declining revenues in fiscal 2018, and the Company’s print-based earnings will also likely decline significantly because it will be impractical for the Company to offset all revenue losses by expense reduction. The Company’s smaller newspapers, those other than the Los Angeles and San Francisco Daily Journals (“The Daily Journals”), accounted for about 88% of the total public notice advertising revenues in the three months ended December 31, 2017. Public notice advertising revenues and related advertising and other service fees constituted about 20% and 22% of the Company’s total revenues for the three months ended December 31 2017 and 2016, 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 had been recently implemented in Arizona for one notice type. 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 89% of The Traditional Business’ total circulation revenues, which declined by $86,000 to $1,363,000 from $1,449,000. The court rule and judicial profile services generated about 8% 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 $86,000 (2%) to $4,314,000 from $4,400,000, primarily due to decreased delivery service costs.

Journal Technologies

Journal Technologies’ business segment pretax loss increased by $353,000 (12%) to $3,212,000 from $2,859,000, after the amortization costs of intangible assets of $1,062,000 and $1,224,000 for the three months ended December 31, 2017 and 2016, respectively.

Revenues increased by $578,000 (10%) to $6,171,000 from $5,593,000 in the prior year period. Licensing and maintenance fees increased by $384,000 (10%) to $4,350,000 from $3,966,000. Consulting fees also increased by $147,000 (17%) to $995,000 from $848,000. Other public service fees increased by $47,000 (6%) to $826,000 from $779,000 primarily due to an increase in the number of traffic tickets processed online for the public to pay traffic citations.

Operating expenses increased by $940,000 (11%) to $9,383,000 from $8,443,000, primarily due to increased personnel costs and computer services for Journal Technologies.

16

Intangible assets, including customer relationships and developed technology, are being amortized on a straight-line basis over five years for financial statement purposes, due to the short life cycle of technology on which customer relationships depend and over 15 years for tax purposes. Goodwill, which is not amortized for financial statement purposes, is amortized over 15 years for tax purposes. Goodwill represents the expected synergies in expanding the Company’s software business. Goodwill is evaluated for impairment annually, or whenever events or changes in circumstances indicate that the value may not be recoverable. Considered factors for potential goodwill impairment evaluation include the current year’s operating financial results before intangible amortization, fluctuations of revenues, changes in the market place, the status of installation contracts and new business, among other things. There was no indicator of impairment during the three-month periods ended December 31, 2017 and 2016. Journal Technologies is continuing to update and upgrade its software products. These costs are expensed as incurred and will impact earnings at least through the foreseeable future.

Taxes

The December 2017 Tax Cuts and Jobs Act (“Tax Act”) reduced the maximum corporate tax rate from 35% to 21% effective January 1, 2018.  The Company has completed its review of the Tax Act.  The impact to its financial statements is as follows:  (i) current income tax expense or benefit is calculated on a blended rate of 24.28% pursuant to IRC Section 15, (ii) deferred tax expense includes a discrete net tax benefit of approximately $16 million resulting from a revaluation of deferred tax assets and liabilities to the expected tax rate that will be applied when temporary differences are expected to reverse, (iii) items that are expected to reverse during fiscal 2018 are valued at the blended rate of 24.28% while temporary differences that will reverse after fiscal 2018 are valued at 21%, and (iv) approximately $20 million of the revaluation of deferred taxes relates to items that were initially recorded as accumulated other comprehensive income (“AOCI”).  This revaluation is recorded as a component of income tax expense or benefit in continuing operations. 

For the three months ended December 31, 2017, the Company recorded an income tax benefit of $16,850,000 on pretax loss of $2,111,000.  The income tax benefit was the result of applying the effective tax rate anticipated for fiscal 2018 to pretax loss for the three-month period ended December 31, 2017.   The effective tax rate (before the discrete item discussed above) was greater than the statutory rate primarily due to the dividends received deduction which increases the loss for tax purposes.  On pretax loss of $1,781,000 for the three months ended December 31, 2016, the Company recorded an income tax benefit of $310,000 which was the net result of applying the effective tax rate anticipated for fiscal 2017 to pretax loss for the three months ended December 31, 2016.  The effective tax rate was greater than the statutory rate mainly resulting from the dividends received deduction.  The Company’s effective tax rate was 798% and 17% for the three months ended December 31, 2017 and 2016, respectively. 

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 2015 with regard to federal income taxes and fiscal 2013 for state income taxes. 

Liquidity and Capital Resources

During the three months ended December 31, 2017, the Company’s cash and cash equivalents and marketable security positions increased by $14,793,000 to $247,442,000. Cash and cash equivalents were used for the purchase of capital assets of $34,000 and operating activities of $814,000 which included net decreases of $797,000 in deferred subscriptions, deferred installation contracts and deferred maintenance agreements and others.

17

The investments in marketable securities, which had an adjusted cost basis of approximately $63,394,000 and a market value of about $244,934,000 at December 31, 2017, generated approximately $1,483,000 in dividends and interest income.

Cash flows from operating activities increased by $497,000 during the three months ended December 31, 2017 as compared to the prior year period, primarily resulting from increases in net income of $16,210,000, partially offset by increases in deferred income taxes of $15,861,000, mainly because of the discrete tax items mentioned above.

As of December 31, 2017, the Company had working capital of $230,284,000, including the liabilities for deferred subscriptions, deferred installation and maintenance agreements and others of $17,539,000.

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. The Company may or may not have the ability to borrow against its marketable securities. The Company also may entertain additional business acquisition opportunities. Any excess cash flows could be used to reduce the investment margin account liability or note payable collateralized by real estate or invested as management and the Board of Directors deem appropriate at the time.

Such investments may include additional securities of the companies in which the Company has already invested, securities of other companies, government securities (including U.S. Treasury Notes and Bills) or other instruments. The decision as to particular investments will be driven by the Company’s belief about the risk/reward profile of the various investment choices at the time, and it may utilize government securities as a default if attractive opportunities for a better return are not available. The Company’s Chairman of the Board, Charles Munger, is also the vice chairman of Berkshire Hathaway Inc., which maintains a substantial investment portfolio. The Company’s Board of Directors has utilized his judgment and suggestions, as well as those of J.P. Guerin, the Company’s vice chairman, when selecting investments, and both of them will continue to play an important role in monitoring existing investments and selecting any future investments.

As of December 31, 2017, the investments were concentrated in just seven 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, under certain circumstances, in the recognition of impairment losses in the Company’s income statement.

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), accounting for business combinations, testing for goodwill impairment and income taxes are critical accounting policies and estimates.

18

The Company’s critical accounting policies are detailed in its Annual Report on Form 10-K for the year ended September 30, 2017. 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, including California courts, for a substantial portion of its revenues; 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; 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; 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, 2017.

19

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, 2017. There have been no material changes to the Company’s market risk exposures since September 30, 2017.

Item 4. CONTROLS AND PROCEDURES

Changes in Internal Control over Financial Reporting

During this quarter, the Company adopted ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606) effective October 2017 which management believes remediated the previously identified material weakness on revenue recognition mentioned in its Form 10-K for the fiscal year ended September 30, 2017. (See accompanying Notes 3 and 4 to Consolidated Financial Statements.) In addition, management has improved certain internal controls over its Information Technology (IT) function such as maintaining sufficient documentations and records to evidence its review of IT controls, better monitoring IT activities and system change requests, etc. Management believes this addressed certain aspects of this material weakness previously identified. Management will continue to assess the effectiveness of its remediation efforts in connection with management's future evaluations of internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

Based on the evaluation performed under the supervision and with the participation of the Company’s management, including Gerald L. Salzman, its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2017, Mr. Salzman concluded that the Company’s disclosure controls and procedures were effective.

20

PART II

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**	XBRL Instance
101.SCH**	XBRL Taxonomy Extension Schema
101.CAL**	XBRL Taxonomy Extension Calculation
101.DEF**	XBRL Taxonomy Extension Definition
101.LAB**	XBRL Taxonomy Extension Labels
101.PRE**	XBRL Taxonomy Extension Presentation
** XBRL	information is furnished and not filed as a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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: February 8, 2018

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 the 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: February 8, 2018

/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 December 31, 2017 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

February 8, 2018

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	3 Months Ended
	Dec. 31, 2017	Jan. 31, 2018
Document Information [Line Items]
Entity Registrant Name	DAILY JOURNAL CORPORATION
Entity Central Index Key	0000783412
Trading Symbol	djco
Current Fiscal Year End Date	--09-30
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		1,380,746
Document Type	10-Q
Document Period End Date	Dec. 31, 2017
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Dec. 31, 2017	Sep. 30, 2017
Current assets
Cash and cash equivalents	$ 2,508,000	$ 3,384,000
Marketable securities at fair value, including common stocks of $236,387,000 and bonds of $8,547,000 at December 31, 2017 and common stocks of $220,973,000 and bonds of $8,292,000 at September 30, 2017	244,934,000	229,265,000
Accounts receivable, less allowance for doubtful accounts of $200,000 at December 31, 2017 and September 30, 2017	4,192,000	5,358,000
Inventories	40,000	40,000
Prepaid expenses and other current assets	641,000	798,000
Income tax receivable	987,000	909,000
Total current assets	253,302,000	239,754,000
Property, plant and equipment, at cost
Land, buildings and improvements	16,396,000	16,396,000
Furniture, office equipment and computer software	2,724,000	2,724,000
Machinery and equipment	1,818,000	1,799,000
	20,938,000	20,919,000
Less accumulated depreciation	(9,433,000)	(9,292,000)
	11,505,000	11,627,000
Intangibles, net	1,996,000	3,058,000
Goodwill	13,400,000	13,400,000
Deferred income taxes - Federal	7,436,000	10,652,000
Deferred income taxes - States	2,251,000	2,217,000
	289,890,000	280,708,000
Current liabilities
Accounts payable	2,951,000	3,049,000
Accrued liabilities	2,411,000	3,112,000
Note payable collateralized by real estate	117,000	115,000
Total current liabilities	23,018,000	24,074,000
Long term liabilities
Investment margin account borrowings	29,493,000	29,493,000
Note payable collateralized by real estate	1,926,000	1,956,000
Deferred maintenance agreements	580,000	759,000
Accrued liabilities	135,000	135,000
Deferred income taxes, net	48,140,000	64,550,000
Total long term liabilities	80,274,000	96,893,000
Commitments and contingencies (Notes 10 and 11)
Shareholders' equity
Preferred stock, $.01 par value, 5,000,000 shares authorized and no shares issued	0	0
Common stock, $.01 par value, 5,000,000 shares authorized; 1,805,053 shares issued, including 424,307 treasury shares, at December 31, 2017 and September 30, 2017	14,000	14,000
Additional paid-in capital	1,755,000	1,755,000
Retained earnings	71,889,000	57,150,000
Accumulated other comprehensive income	112,940,000	100,822,000
Total shareholders' equity	186,598,000	159,741,000
	289,890,000	280,708,000
Subscription Arrangement [Member]
Current liabilities
Deferred revenue	3,135,000	3,284,000
Deferred Installation Contracts [Member]
Current liabilities
Deferred revenue	4,364,000	5,072,000
Software Service, Support and Maintenance Arrangement [Member]
Current liabilities
Deferred revenue	$ 10,040,000	$ 9,442,000

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Dec. 31, 2017	Sep. 30, 2017
Market securities, common stock	$ 236,387,000	$ 220,973,000
Market securities, bonds	8,547,000	8,292,000
Accounts receivable, allowance for doubtful accounts	$ 200,000	$ 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

XML

Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Revenues
Advertising	$ 2,116,000	$ 2,310,000
Circulation	1,363,000	1,449,000
Advertising service fees and other	602,000	638,000
Licensing and maintenance fees	4,350,000	3,966,000
Consulting fees	995,000	848,000
Other public service fees	826,000	779,000
	10,252,000	9,990,000
Costs and expenses
Salaries and employee benefits	8,197,000	7,641,000
Outside services	1,039,000	980,000
Postage and delivery expenses	217,000	278,000
Newsprint and printing expenses	212,000	209,000
Depreciation and amortization	1,218,000	1,392,000
Other general and administrative expenses	2,814,000	2,343,000
	13,697,000	12,843,000
Loss from operations	(3,445,000)	(2,853,000)
Other income (expense)
Dividends and interest income	1,483,000	1,171,000
Gain on sale of capital asset	2,000
Other income	9,000	15,000
Interest accrual for uncertain and unrecognized tax benefits		(9,000)
Loss before income taxes	(2,111,000)	(1,781,000)
Benefit from income taxes	16,850,000	310,000
Net income (loss)	$ 14,739,000	$ (1,471,000)
Weighted average number of common shares outstanding - basic and diluted (in shares)	1,380,746	1,380,746
Basic and diluted net income (loss) per share (in dollars per share)	$ 10.67	$ (1.07)
Comprehensive income
Net income (loss)	$ 14,739,000	$ (1,471,000)
Net increase in unrealized appreciation of marketable securities (net of taxes)	12,118,000	15,019,000
	26,857,000	13,548,000
Real Estate Bank Loan Secured by Logan Office [Member]
Other income (expense)
Interest expense on debt	(24,000)	(26,000)
Margin Account [Member]
Other income (expense)
Interest expense on debt	$ (136,000)	$ (79,000)

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Cash flows from operating activities
Net income (loss)	$ 14,739,000	$ (1,471,000)
Adjustments to reconcile net income (loss) to net cash used in operations
Depreciation and amortization	1,218,000	1,392,000
Deferred income taxes	(16,778,000)	(917,000)
Discounts earned on bonds	(1,000)	(1,000)
(Increase) decrease in current assets
Accounts receivable, net	1,166,000	(891,000)
Inventories		(9,000)
Prepaid expenses and other assets	157,000	5,000
Income tax receivable	(78,000)	645,000
Increase (decrease) in liabilities
Accounts payable	(98,000)	18,000
Accrued liabilities	(701,000)	(373,000)
Income taxes		(68,000)
Net cash used in operating activities	(814,000)	(1,311,000)
Cash flows from investing activities
Purchases of marketable securities		(5,013,000)
Purchases of property, plant and equipment	(34,000)	(187,000)
Net cash used in investing activities	(34,000)	(5,200,000)
Cash flows from financing activities
Payment of real estate loan principal	(28,000)	(27,000)
Net cash used in financing activities	(28,000)	(27,000)
Decrease in cash and cash equivalents	(876,000)	(6,538,000)
Cash and cash equivalents
Beginning of period	3,384,000	11,411,000
End of period	2,508,000	4,873,000
Interest paid during period	169,000	111,000
Net income taxes paid during period	6,000	3,000
Subscription Arrangement [Member]
Increase (decrease) in liabilities
Deferred revenue arrangements	(149,000)	(106,000)
Deferred Maintenance Agreement [Member]
Increase (decrease) in liabilities
Deferred revenue arrangements	419,000	678,000
Deferred Installation Contracts [Member]
Increase (decrease) in liabilities
Deferred revenue arrangements	$ (708,000)	$ (213,000)

XML

Note 1 - The Corporation and Operations

3 Months Ended

Dec. 31, 2017

Notes to Financial Statements

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

Note

1

- The Corporation and Operations

Da

ily 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.

Journ

al Technologies, Inc. (“Journal Technologies”), a wholly-owned subsidiary, 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 online, and bar members. These products are licensed to more than

500

organizations in

42

states and internationally.

Essentially all of the Company

’s operations are based in California, Arizona, Colorado and Utah.

XML

Note 2 - Basis of Presentation

3 Months Ended

Dec. 31, 2017

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 recurr

ing accruals) considered necessary for a fair presentation of its financial position as of

December 31, 2017,

its results of operations and cash flows for the

three

-month periods ended

December 31, 2017

and

2016.

The results of operations for the

three

months ended

December 31, 2017

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 Securi

ties 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, 2017.

Certain reclassifications of previously reported amounts have been made to conform to the current year

’s presentation.

XML

Note 3 - Accounting Standards Adopted in Fiscal 2018 and Recent Accounting Pronouncements

3 Months Ended

Dec. 31, 2017

Notes to Financial Statements

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

Note

3

-

Accounting Standards Adopted in Fiscal

2018

and Recent Accounting Pronouncements

Accounting Standards Adopted in Fiscal

201

8

In

November 2015,

the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)

No.

2015

-

17,

Income Taxes (Topic

740

): Balance Sheet Classification of Deferred Taxes

. This update requires deferred tax liabilities and assets to be classified as noncurrent in the consolidated balance sheet. The Company has adopted this guidance effective

October 1, 2017

and concluded that it has

no

significant impact on the Company’s financial condition, results of operations or disclosures because it is simply a reclassification of current deferred taxes to non-current deferred taxes with an itemization of federal and state deferred taxes.

In

May 2014,

the FASB issued ASU

No.

2014

-

09,

Revenue from Contracts with Customers (ASC Topic

606

)

which requires that revenues be recognized in an amount reflecting the consideration an entity expects to receive in exchange for those goods or services when a customer obtains control of promised goods or services. The Company elected to adopt early the ASC Topic

606

effective

October 1, 2017

using the modified retrospective method.

The Company

has concluded that the adoption of the ASC Topic

606

in fiscal

2018

has

no

significant impact on the Company’s financial condition or results of operations

. The Company’s traditional publishing business revenue recognition related to advertising, circulation, and public fees remains unchanged. For the software business, the Company previously utilized the completed performance method of accounting, pursuant to which the Company did

not

recognize revenues for implementation services or licenses, maintenance, support and hosting services until after the services were performed and accepted by the customer (go-live), due to the fact that the customer’s acceptance was typically unpredictable and reliable estimates of the progress towards completion could

not

be made. Thus, the Company’s past revenue recognition policy was already in conformity with ASU Topic

606,

which calls for revenue recognition at the point of delivery when a performance obligation is fulfilled. Consequently, the Company believes there are

no

required material retrospective or accumulated catch-up adjustments with respect to prior years’ financial figures, as revenues have been recognized consistently in the same manner throughout the comparative reporting periods.

T

he adoption of ASC

606

also requires the capitalization of certain costs of obtaining contracts

, specifically sales commissions which are to be amortized over the expected term of the contracts. The Company incurs an immaterial amount of sales commission costs for its software contracts 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.

Other Recent Accounting Pronouncements

The Company will continue to evaluate the other new accounting pronouncements as detailed in its Annual Report on Form

10

-K for the year ended

September 30, 2017.

XML

Note 4 - Revenue Recognition

3 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Deferred Revenue Disclosure [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

)

.

For the Company’s traditional publishing 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 and (ii) subscription license, maintenance, including updates and upgrades, and support fees, and

third

-party hosting fees when used. Revenues for consulting are recognized at point of delivery (go-live) upon completion of services and customer acceptance, and subscription fees are recognized ratably (using the output method based on time-elapsed) after the go-live. These contracts include assurance warranty provisions for limited periods and do

not

include financing terms. For some contracts, the Company acts as a principal with respect to certain services, such as data conversion, interfaces and hosting that are provided by

third

-parties, and recognizes such revenues on a gross basis. For legacy contracts with perpetual license arrangements, licenses and consulting services are recognized at point of delivery (go-live), and maintenance revenues are recognized ratably after the go-live. (See Note

12

for additional disclosures related to ASC Topic

606

adoption.)

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

.

The Company recognizes rev

enues 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 fees (i.e. 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

3 Months Ended

Dec. 31, 2017

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

3 Months Ended

Dec. 31, 2017

Notes to Financial Statements

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

Note

6

- Investments in Marketable Securities

Investments in marketable securities categorized as “

available-for-sale” 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

December 31, 2017

and

September 30, 2017,

unrealized gains of

$181,540,000

and

$165,872,000,

respectively, were recorded before taxes of

$48,140,000

and

$64,550,000,

respectively, in “Accumulated other comprehensive income” in the accompanying Consolidated Balance Sheets. Most of the unrealized gains were in the common stocks of

three

U.S. financial institutions and

one

foreign manufacturer

.

Investments in equity securities and securities with fixed maturity as of

December 31, 2017

and

September 30

,

2017

are summarized below.

	December 31, 2017						September 30, 2017
	Aggregate fair value		(Unaudited) Amortized/ Adjusted cost basis		Pretax unrealized gains		Aggregate fair value		Amortized/ Adjusted cost basis		Pretax unrealized gains
Marketabl e securities
Common stocks	$	236,387,000	$	58,449,000	$	177,938,000	$	220,973,000	$	58,449,000	$	162,524,000
Bonds		8,547,000		4,945,000		3,602,000		8,292,000		4,944,000		3,348,000
	$	244,934,000	$	63,394,000	$	181,540,000	$	229,265,000	$	63,393,000	$	165,872,000

All investments are classified as “Current assets” because they are available for sale at any time. The bonds mature in

2039.

As of

December 31, 2017,

the Company performed an evaluation for an equity security with a fair value below cost to determine if the unrealized loss was other-than-temporary. This evaluation considers a number of factors including, but

not

limited to, the length of time and extent to which the fair value has been less than cost, the financial condition and near term prospects of the issuer and the Company’s ability and intent to hold the security until fair value recovers. The assessment of the ability and intent to hold this security to recovery focuses on liquidity needs, asset/liability management objectives and security portfolio objectives. Based on the result of the evaluation, the Company concluded that as of

December 31, 2017,

the unrealized loss related to an equity security it owns was temporary.

XML

Note 7 - Intangible Assets

3 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

Note

7

- Intangible Assets

Intangible Assets
	December 31 , 2017									September 30, 201 7
	Customer Relationships			Developed Technology			Total			Customer Relationships			Developed Technology			Total
Gross intangibles	$	21,950,000		$	2,525,000		$	24,475,000		$	21,950,000		$	2,525,000		$	24,475,000
Accumulated amortization		(20,130,000	)		(2,349,000	)		(22,479,000	)		(19,174,000	)		(2,243,000	)		(21,417,000	)
	$	1,820,000		$	176,000		$	1,996,000		$	2,776,000		$	282,000		$	3,058,000

These intangible assets are being amortized over

five

years for financial statement purposes due to the short life cycle of technology

on which customer relationships depend and over

15

years on a straight-line basis for tax purposes. The intangible amortization expenses were

$1,062,000

for the

three

-month period ended

December 31, 2017,

as compared with

$1,224,000

in the prior year period, primarily because the intangibles of

one

of the

two

acquisitions in fiscal

2013

were fully amortized during this quarter.

XML

Note 8 - Goodwill

3 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Goodwill Disclosure [Text Block]

Note

8

– Goodwill

The Company accounts for goodwill in accordance with Accounting Standards Codification (ASC)

350,

Intangibles — Goodwill and Other

. Goodwill, which is

not

amortized for financial statement purposes, is amortized over a

15

-year period for tax purposes, but evaluated for impairment annually, or whenever events or changes in circumstances indicate that the value

may

not

be recoverable. Considered factors for potential goodwill impairment evaluation with respect to Journal Technologies include, among other things, the current year’s business profitability before intangible amortization, fluctuations of revenues, changes in the marketplace, the status of deferred installation contracts and new business.

In addition, ASU

2011

-

08,

Intangible – Goodwill and Others -- Testing Goodwill for Impairment

, allows for the option of performing a qualitative assessment before calculating the fair value of a reporting unit. If it is determined based on qualitative factors that there is

no

impairment to goodwill, then the fair value of a reporting unit is

not

needed. If a quantitative analysis is required and the unit’s carrying amount exceeds its fair value, then the

second

step is performed to measure the amount of potential impairment. The Company’s annual goodwill impairment analysis in fiscal

2017

did

not

result in an impairment charge based on the qualitative assessment. There was

no

indicator of impairment during the

three

-month periods ended

December 31, 2017

and

2016.

XML

Note 9 - Income Taxes

3 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note

9

- I

ncome Taxes

The

December 2017

Tax Cuts and Jobs Act (“Tax Act”) reduced the maximum corporate tax rate from

35%

to

21%

effective

January 1, 2018. 

The Company has completed its review of the Tax Act.  The impact to its financial statements is as follows:  (i) current income tax expense or benefit is calculated on a blended rate of

24.28%

pursuant to IRC Section

15,

(ii) deferred tax expense includes a discrete net tax benefit of approximately

$16

million resulting from a revaluation of deferred tax assets and liabilities to the expected tax rate that will be applied when temporary differences are expected to reverse, (iii) items that are expected to reverse during fiscal

2018

are valued at the blended rate of

24.28%

while temporary differences that will reverse after fiscal

2018

are valued at

21%,

and (iv) approximately

$20

million of the revaluation of deferred taxes relates to items that were initially recorded as accumulated other comprehensive income (“AOCI”).  This revaluation is recorded as a component of income tax expense or benefit in continuing operations. 

For the

three

months ended

December 31, 2017,

the Company recorded an income tax benefit of

$16,850,000

on pretax loss of

$2,111,000.

  The income tax benefit was the result of applying the effective tax rate anticipated for fiscal

2018

to pretax loss for the

three

-month period ended

December 31, 2017.  

The effective tax rate (before the discrete item discussed above) was greater than the statutory rate primarily due to the dividends received deduction which increases the loss for tax purposes.  On pretax loss of

$1,781,000

for the

three

months ended

December 31, 2016,

the Company recorded an income tax benefit of

$310,000

which was the net result of applying the effective tax rate anticipated for fiscal

2017

to pretax loss for the

three

months ended

December 31, 2016.  

The effective tax rate was greater than the statutory rate mainly resulting from the dividends received deduction.  The Company’s effective tax rate was

798%

and

17%

for the

three

months ended

December 31, 2017

and

2016,

respectively. 

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

2015

with regard to federal income taxes and fiscal

2013

for state income taxes

. 

XML

Note 10 - Debts and Commitments

3 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Commitments Disclosure [Text Block]

Note

10

- 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. 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

December 31, 2017

was

2%.

These investment margin account borrowings do

not

mature.

In

fiscal

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

$2.04

million as of

December 31, 2017.

The Company also owns its facilities in Los Angeles an

d leases space for its other offices under operating leases which expire at various dates through fiscal

2021.

During fiscal

2014,

the Company renewed its office lease for its San Francisco office for

five

years (expiring in

October 2019)

with a current monthly rent of approximately

$25,000

for about

6,200

square feet. In fiscal

2017,

the Company leased approximately

9,800

square feet of office space (expiring in

August 2020)

in Englewood, Colorado.

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

$237,000

for the

three

-month period ended

December 31, 2017,

as compared with

$174,000

in the prior year period.

XML

Note 11 - Contingencies

3 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

11

-

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 12 - Operating Segments

3 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

1

2

- 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
Three m onths ended December 31, 2017
Revenues
Advertising	$	2,116,000		$	---		$	---		$	2,116,000
Circulation		1,363,000			---			---			1,363,000
Advertising service fees and other		602,000			---			---			602,000
Licensing and maintenance fees		---			4,350,000			---			4,350,000
Consulting fees		---			995,000			---			995,000
Other public service fees		---			826,000			---			826,000
Operating expenses		4,314,000			9,383,000			---			13,697,000
Loss from operations		(233,000	)		(3,212,000	)		---			(3,445,000	)
Dividends and interest income		---			---			1,483,000			1,483,000
Gain on sale of capital asset		---			---			2,000			2,000
Other income		---			---			9,000			9,000
Interest expenses on note payable  collateralized by real estate		(24,000	)		---			---			(24,000	)
Interest expenses on margin loans		---			---			(136,000	)		(136,000	)
Pretax (loss) income		(257,000	)		(3,212,000	)		1,358,000			(2,111,000	)
Income tax benefit (expense)		(680,000	)		(2,185,000	)		19,715,000			16,850,000
Net income (loss)		(937,000	)		(5,397,000	)		21,073,000			14,739,000
Total assets		18,188,000			26,768,000			244,934,000			289,890,000
Capital expenditures		34,000			---			---			34,000
Amortization of intangible assets		---			1,062,000			---			1,062,000

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Three months ended December 31, 2016
Revenues
Advertising	$	2,310,000		$	---		$	---		$	2,310,000
Circulation		1,449,000			---			---			1,449,000
Advertising service fees and other		638,000			---			---			638,000
Licensing and maintenance fees		---			3,966,000			---			3,966,000
Consulting fees		---			848,000			---			848,000
Other public service fees		---			779,000			---			779,000
Operating expenses		4,400,000			8,443,000			---			12,843,000
Loss from operations		(3,000	)		(2,850,000	)		---			(2,853,000	)
Dividends and interest income		---			---			1,171,000			1,171,000
Other income		15,000			---			---			15,000
Interest e xpenses on note payable  collateralized by real estate		(26,000	)		---			---			(26,000	)
Interest expenses on margin loans		---			---			(79,000	)		(79,000	)
Interest expense accrued for uncertain and unrec ognized tax benefits		---			(9,000	)		---			(9,000	)
Pretax income (loss)		(14,000	)		(2,859,000	)		1,092,000			(1,781,000	)
Income tax (expense) benefit		---			775,000			(465,000	)		310,000
Net income (l oss)		(14,000	)		(2,084,000	)		627,000			(1,471,000	)
Total assets		14,294,000			37,981,000			196,486,000			248,761,000
Capital expenditures		160,000			27,000			---			187,000
Amortization of intangible assets		---			1,224,000			---			1,224,000

During the

three

months ended

December 31, 2017,

the Traditional Business had total revenues of

$4,081,000

of which

$2,718,000

were recognized after services were provided and

$1,363,000

were recognized ratably over the subscription terms. Total revenues for the Company’s software business were

$6,171,000

of which

$2,064,000

were recognized upon completion of services with customer acceptance while

$4,107,000

were recognized ratably over the subscription periods.

Approximately

60%

of the Company’s revenues during the

three

-month periods ended

December 31, 2017

were derived from Journal Technologies, as compared with

56%

in the prior year period. In addition, the Company’s revenues have been primarily from the United States with approximately

1%

from foreign countries. Journal Technologies’ revenues are all from governmental agencies.

The following table sets forth certain deferred obligations from

October 1, 2017

through

December 31, 2017:

	Beginning Bal ance		Addition		Recognized			Ending Balance
Deferred subscriptions	$	3,284,000	$	1,214,000	$	(1,363,000	)	$	3,135,000
Deferred installation contracts		5,072,000		530,000		(1,238,000	)		4,364,000
Deferred maintenance agreements and others		9,442,000		4,705,000		(4,107,000	)		10,040,000

XML

Note 13 - Subsequent Events

3 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Subsequent Events [Text Block]

Note

1

3

- 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 or cash flows.

XML

Note 6 - Investments in Marketable Securities (Tables)

3 Months Ended

Dec. 31, 2017

Notes Tables

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

	December 31, 2017						September 30, 2017
	Aggregate fair value		(Unaudited) Amortized/ Adjusted cost basis		Pretax unrealized gains		Aggregate fair value		Amortized/ Adjusted cost basis		Pretax unrealized gains
Marketabl e securities
Common stocks	$	236,387,000	$	58,449,000	$	177,938,000	$	220,973,000	$	58,449,000	$	162,524,000
Bonds		8,547,000		4,945,000		3,602,000		8,292,000		4,944,000		3,348,000
	$	244,934,000	$	63,394,000	$	181,540,000	$	229,265,000	$	63,393,000	$	165,872,000

XML

Note 7 - Intangible Assets (Tables)

3 Months Ended

Dec. 31, 2017

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

Intangible Assets
	December 31 , 2017									September 30, 201 7
	Customer Relationships			Developed Technology			Total			Customer Relationships			Developed Technology			Total
Gross intangibles	$	21,950,000		$	2,525,000		$	24,475,000		$	21,950,000		$	2,525,000		$	24,475,000
Accumulated amortization		(20,130,000	)		(2,349,000	)		(22,479,000	)		(19,174,000	)		(2,243,000	)		(21,417,000	)
	$	1,820,000		$	176,000		$	1,996,000		$	2,776,000		$	282,000		$	3,058,000

XML

Note 12 - Operating Segments (Tables)

3 Months Ended

Dec. 31, 2017

Notes Tables

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

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Three m onths ended December 31, 2017
Revenues
Advertising	$	2,116,000		$	---		$	---		$	2,116,000
Circulation		1,363,000			---			---			1,363,000
Advertising service fees and other		602,000			---			---			602,000
Licensing and maintenance fees		---			4,350,000			---			4,350,000
Consulting fees		---			995,000			---			995,000
Other public service fees		---			826,000			---			826,000
Operating expenses		4,314,000			9,383,000			---			13,697,000
Loss from operations		(233,000	)		(3,212,000	)		---			(3,445,000	)
Dividends and interest income		---			---			1,483,000			1,483,000
Gain on sale of capital asset		---			---			2,000			2,000
Other income		---			---			9,000			9,000
Interest expenses on note payable  collateralized by real estate		(24,000	)		---			---			(24,000	)
Interest expenses on margin loans		---			---			(136,000	)		(136,000	)
Pretax (loss) income		(257,000	)		(3,212,000	)		1,358,000			(2,111,000	)
Income tax benefit (expense)		(680,000	)		(2,185,000	)		19,715,000			16,850,000
Net income (loss)		(937,000	)		(5,397,000	)		21,073,000			14,739,000
Total assets		18,188,000			26,768,000			244,934,000			289,890,000
Capital expenditures		34,000			---			---			34,000
Amortization of intangible assets		---			1,062,000			---			1,062,000

	Reportable Segments
	Traditional Business			Journal Technologies			Corporate income and expenses			Total
Three months ended December 31, 2016
Revenues
Advertising	$	2,310,000		$	---		$	---		$	2,310,000
Circulation		1,449,000			---			---			1,449,000
Advertising service fees and other		638,000			---			---			638,000
Licensing and maintenance fees		---			3,966,000			---			3,966,000
Consulting fees		---			848,000			---			848,000
Other public service fees		---			779,000			---			779,000
Operating expenses		4,400,000			8,443,000			---			12,843,000
Loss from operations		(3,000	)		(2,850,000	)		---			(2,853,000	)
Dividends and interest income		---			---			1,171,000			1,171,000
Other income		15,000			---			---			15,000
Interest e xpenses on note payable  collateralized by real estate		(26,000	)		---			---			(26,000	)
Interest expenses on margin loans		---			---			(79,000	)		(79,000	)
Interest expense accrued for uncertain and unrec ognized tax benefits		---			(9,000	)		---			(9,000	)
Pretax income (loss)		(14,000	)		(2,859,000	)		1,092,000			(1,781,000	)
Income tax (expense) benefit		---			775,000			(465,000	)		310,000
Net income (l oss)		(14,000	)		(2,084,000	)		627,000			(1,471,000	)
Total assets		14,294,000			37,981,000			196,486,000			248,761,000
Capital expenditures		160,000			27,000			---			187,000
Amortization of intangible assets		---			1,224,000			---			1,224,000

Deferred Revenue, by Arrangement, Disclosure [Table Text Block]

	Beginning Bal ance		Addition		Recognized			Ending Balance
Deferred subscriptions	$	3,284,000	$	1,214,000	$	(1,363,000	)	$	3,135,000
Deferred installation contracts		5,072,000		530,000		(1,238,000	)		4,364,000
Deferred maintenance agreements and others		9,442,000		4,705,000		(4,107,000	)		10,040,000

XML

Note 6 - Investments in Marketable Securities (Details Textual) - USD ($)	Dec. 31, 2017	Sep. 30, 2017
Available-for-sale Securities, Accumulated Gross Unrealized Gain, before Tax	$ 181,540,000	$ 165,872,000
Deferred Tax Liabilities, Investments	$ 48,140,000	$ 64,550,000

XML

Note 6 - Investments in Marketable Securities - Summary of Investments (Details) - USD ($)	Dec. 31, 2017	Sep. 30, 2017
Aggregate fair value	$ 244,934,000	$ 229,265,000
Amortized/Adjusted cost basis	63,394,000	63,393,000
Pretax unrealized gains	181,540,000	165,872,000
Equity Securities [Member]
Aggregate fair value	236,387,000	220,973,000
Amortized/Adjusted cost basis	58,449,000	58,449,000
Pretax unrealized gains	177,938,000	162,524,000
Debt Securities [Member]
Aggregate fair value	8,547,000	8,292,000
Amortized/Adjusted cost basis	4,945,000	4,944,000
Pretax unrealized gains	$ 3,602,000	$ 3,348,000

XML

Note 7 - Intangible Assets (Details Textual) - USD ($)	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Finite-Lived Intangible Asset, Useful Life	5 years
Finite Lived Intangible Asset, Useful Life for Tax Purposes	15 years
Amortization of Intangible Assets	$ 1,062,000	$ 1,224,000

XML

Note 7 - Intangible Assets - Summary of Intangible Assets (Details) - USD ($)	Dec. 31, 2017	Sep. 30, 2017
Gross intangibles	$ 24,475,000	$ 24,475,000
Accumulated amortization	(22,479,000)	(21,417,000)
	1,996,000	3,058,000
Customer Relationships [Member]
Gross intangibles	21,950,000	21,950,000
Accumulated amortization	(20,130,000)	(19,174,000)
	1,820,000	2,776,000
Developed Technology Rights [Member]
Gross intangibles	2,525,000	2,525,000
Accumulated amortization	(2,349,000)	(2,243,000)
	$ 176,000	$ 282,000

XML

Note 8 - Goodwill (Details Textual) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Sep. 30, 2017
Goodwill, Useful Life for Tax Purposes	15 years
Goodwill, Impairment Loss	$ 0	$ 0	$ 0

XML

Note 9 - Income Taxes (Details Textual) - USD ($)			3 Months Ended		12 Months Ended
	Jan. 01, 2018	Dec. 22, 2017	Dec. 31, 2017	Dec. 31, 2016	Sep. 30, 2018
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent		35.00%
Income Tax Expense (Benefit), Continuing Operations, Adjustment of Deferred Tax (Asset) Liability			$ (16,000,000)
Income Tax Expense (Benefit), Continuing Operations, Revaluation Differences in Deferred Taxes			(20,000,000)
Income Tax Expense (Benefit)			(16,850,000)	$ (310,000)
Income (Loss) from Continuing Operations before Equity Method Investments, Income Taxes, Noncontrolling Interest			$ (2,111,000)	$ (1,781,000)
Effective Income Tax Rate Reconciliation, Percent			798.00%	17.00%
Domestic Tax Authority [Member] | Earliest Tax Year [Member]
Open Tax Year			2015
State and Local Jurisdiction [Member] | Earliest Tax Year [Member]
Open Tax Year			2013
Scenario, Forecast [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent					24.28%
Subsequent Event [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%

XML

Note 10 - Debts and Commitments (Details Textual)	3 Months Ended		12 Months Ended
	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)	Sep. 30, 2015 USD ($) ft² a	Sep. 30, 2014 USD ($) ft²	Sep. 30, 2013 USD ($)	Sep. 30, 2017 ft²
Payments to Acquire Property, Plant, and Equipment	$ 34,000	$ 187,000
Operating Leases, Rent Expense	$ 237,000	$ 174,000
San Francisco Office [Member]
Area of Real Estate Property | ft²				6,200
Lessee, Operating Lease, Renewal Term				5 years
Operating Lease, Monthly Rent				$ 25,000
Englewood, Colorado Office [member]
Area of Real Estate Property | ft²						9,800
Utah [Member] | Building [Member]
Area of Real Estate Property | ft²			30,700
Utah [Member] | Land [Member]
Area of Land | a			3.6
Utah [Member] | Land and Building [Member]
Payments to Acquire Property, Plant, and Equipment			$ 1,240,000
Margin Account [Member]
Proceeds from Issuance of Debt					$ 29,500,000
Margin Account [Member] | Fed Funds Rate [Member]
Debt Instrument, Basis Spread on Variable Rate					0.50%
Debt Instrument, Interest Rate, Effective Percentage	2.00%
Real Estate Bank Loan Secured by Logan Office [Member]
Loans Payable to Bank	$ 2,040,000		$ 2,260,000
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate			4.66%
Debt Instrument, Periodic Payment			$ 17,600

XML

Note 12 - Operating Segments (Details Textual) - USD ($)	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016
Revenues	$ 10,252,000	$ 9,990,000
Product Concentration Risk [Member] | Sales Revenue, Net [Member]
Concentration Risk, Percentage	60.00%	56.00%
Geographic Concentration Risk [Member] | Sales Revenue, Net [Member] | Non-US [Member]
Concentration Risk, Percentage	1.00%
Traditional Business [Member]
Revenues	$ 4,081,000
Revenue Recognized Upon Completion of Services	2,718,000
Deferred Revenue, Revenue Recognized	1,363,000
Journal Technologies [Member]
Revenues	6,171,000
Revenue Recognized Upon Completion of Services	2,064,000
Deferred Revenue, Revenue Recognized	$ 4,107,000

XML

Note 12 - Operating Segments - Summarized Financial Information for Reportable Segments (Details) - USD ($)	3 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Sep. 30, 2017
Advertising	$ 2,116,000	$ 2,310,000
Circulation	1,363,000	1,449,000
Advertising service fees and other	602,000	638,000
Licensing and maintenance fees	4,350,000	3,966,000
Consulting fees	995,000	848,000
Other public service fees	826,000	779,000
Operating expenses	13,697,000	12,843,000
Income (loss) from operations	(3,445,000)	(2,853,000)
Dividends and interest income	1,483,000	1,171,000
Gain on sale of capital asset	2,000
Other income	9,000	15,000
Pretax (loss) income	(2,111,000)	(1,781,000)
Income tax benefit (expense)	16,850,000	310,000
Net income (loss)	14,739,000	(1,471,000)
Total assets	289,890,000	248,761,000	$ 280,708,000
Capital expenditures	34,000	187,000
Amortization of intangible assets	1,062,000	1,224,000
Loss from operations	(3,445,000)	(2,853,000)
Interest expense accrued for uncertain and unrecognized tax benefits		(9,000)
Capital expenditures	34,000	187,000
Real Estate Bank Loan Secured by Logan Office [Member]
Interest expense on debt	(24,000)	(26,000)
Margin Account [Member]
Interest expense on debt	(136,000)	(79,000)
Operating Segments [Member] | Traditional Business [Member]
Advertising	2,116,000	2,310,000
Circulation	1,363,000	1,449,000
Advertising service fees and other	602,000	638,000
Licensing and maintenance fees
Consulting fees
Other public service fees
Operating expenses	4,314,000	4,400,000
Income (loss) from operations	(233,000)	(3,000)
Dividends and interest income
Gain on sale of capital asset
Other income		15,000
Pretax (loss) income	(257,000)	(14,000)
Income tax benefit (expense)	(680,000)
Net income (loss)	(937,000)	(14,000)
Total assets	18,188,000	14,294,000
Capital expenditures	34,000	160,000
Amortization of intangible assets
Loss from operations	(233,000)	(3,000)
Interest expense accrued for uncertain and unrecognized tax benefits
Capital expenditures	34,000	160,000
Operating Segments [Member] | Traditional Business [Member] | Real Estate Bank Loan Secured by Logan Office [Member]
Interest expense on debt	(24,000)	(26,000)
Operating Segments [Member] | Traditional Business [Member] | Margin Account [Member]
Interest expense on debt
Operating Segments [Member] | Journal Technologies [Member]
Advertising
Circulation
Advertising service fees and other
Licensing and maintenance fees	4,350,000	3,966,000
Consulting fees	995,000	848,000
Other public service fees	826,000	779,000
Operating expenses	9,383,000	8,443,000
Income (loss) from operations	(3,212,000)	(2,850,000)
Dividends and interest income
Gain on sale of capital asset
Other income
Pretax (loss) income	(3,212,000)	(2,859,000)
Income tax benefit (expense)	(2,185,000)	775,000
Net income (loss)	(5,397,000)	(2,084,000)
Total assets	26,768,000	37,981,000
Capital expenditures		27,000
Amortization of intangible assets	1,062,000	1,224,000
Loss from operations	(3,212,000)	(2,850,000)
Interest expense accrued for uncertain and unrecognized tax benefits		(9,000)
Capital expenditures		27,000
Operating Segments [Member] | Journal Technologies [Member] | Real Estate Bank Loan Secured by Logan Office [Member]
Interest expense on debt
Operating Segments [Member] | Journal Technologies [Member] | Margin Account [Member]
Interest expense on debt
Corporate, Non-Segment [Member]
Advertising
Circulation
Advertising service fees and other
Licensing and maintenance fees
Consulting fees
Other public service fees
Operating expenses
Income (loss) from operations
Dividends and interest income	1,483,000	1,171,000
Gain on sale of capital asset	2,000
Other income	9,000
Pretax (loss) income	1,358,000	1,092,000
Income tax benefit (expense)	19,715,000	(465,000)
Net income (loss)	21,073,000	627,000
Total assets	244,934,000	196,486,000
Capital expenditures
Amortization of intangible assets
Loss from operations
Interest expense accrued for uncertain and unrecognized tax benefits
Capital expenditures
Corporate, Non-Segment [Member] | Real Estate Bank Loan Secured by Logan Office [Member]
Interest expense on debt
Corporate, Non-Segment [Member] | Margin Account [Member]
Interest expense on debt	$ (136,000)	$ (79,000)

XML

Note 12 - Operating Segments - Deferred Revenue Obligations (Details)	3 Months Ended
	Dec. 31, 2017 USD ($)
Subscription Arrangement [Member]
Deferred revenue	$ 3,284,000
Deferred Revenue, Additions	1,214,000
Deferred Revenue, Revenue Recognized	(1,363,000)
Deferred revenue	3,135,000
Deferred Installation Contracts [Member]
Deferred revenue	5,072,000
Deferred Revenue, Additions	530,000
Deferred Revenue, Revenue Recognized	(1,238,000)
Deferred revenue	4,364,000
Software Service, Support and Maintenance Arrangement [Member]
Deferred revenue	9,442,000
Deferred Revenue, Additions	4,705,000
Deferred Revenue, Revenue Recognized	(4,107,000)
Deferred revenue	$ 10,040,000