DAILY JOURNAL CORP

(In thousands except share amounts)

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

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, except share and per share amounts)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’** EQUITY**

(in thousands, except share amounts)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share data)

Note 1. The Corporation and Operations

Daily Journal Corporation publishes newspapers and websites covering California and Arizona and produces several specialized information services. It also serves as a newspaper representative specializing in public notice advertising (the “Traditional Business”). Daily Journal Corporation, along with its wholly owned subsidiaries, are referred to as the “Company” or “Daily Journal”.

Journal Technologies, Inc. (“Journal Technologies”), a wholly owned subsidiary of Daily Journal, supplies case management software systems and related products to courts, prosecutor and public defender offices, probation departments and other justice agencies, including administrative law organizations, city and county governments and bar associations. These organizations use the Journal Technologies family of products to help manage cases and information electronically, to interface with other critical justice partners and to extend electronic services to the public, including e-filing and a website to pay traffic citations and fees online. These products are licensed or subscribed to in approximately 37 states and internationally.

Essentially all of the Company’s U.S. operations are based in California and Utah. The Company also has a presence in Australia where Journal Technologies is working on four software installation projects and in British Columbia, Canada, where the Company has operated a wholly-owned subsidiary, Journal Technologies (Canada), Inc, since August 2022.

Note 2. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned and controlled subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the Company’s financial position as of December 31, 2025, and the results of operations and stockholders’ equity for the three months ended December 31, 2025. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the full fiscal year ending September 30, 2026 or for any other interim period.

The condensed consolidated balance sheet as of December 31, 2025 has been derived from the audited consolidated financial statements as of and for the fiscal year ended September 30, 2025 included in the Company’s Annual Report on Form 10-K. These interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in that Annual Report.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents, restricted cash, marketable securities and accounts receivable. The Company’s cash, cash equivalents and restricted cash are held at financial institutions where account balances may at times exceed federally insured limits. The Company limits its exposure by primarily placing its cash in interest-bearing deposit accounts with high credit quality financial institutions and marketable securities. Management believes the Company is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash, cash equivalents and restricted cash are held. The Company has no financial instruments with off-balance sheet risk of loss.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates and assumptions made by management include, but are not limited to, the estimated fair values of marketable securities, management incentive plans, equity awards, and the accounting for income taxes. Actual results could differ materially from those estimates.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Restricted Cash

The Company considers cash to be restricted when withdrawal or general use is legally restricted. Restricted cash of $2.3 million, as of both December 31, 2025 and September 30, 2025, represents cash held to secure two letters of credit issued by a bank for a software installation contract in Australia.

Accounts Receivable, net

The Company extends unsecured credit to most of its advertising customers. The Company recognizes that extending credit and setting appropriate reserves for receivables is largely a subjective decision based on knowledge of the customer and the industry. Credit limits, setting and maintaining credit standards, and managing the overall quality of the credit portfolio is largely centralized. The level of credit is influenced by the customer’s credit and payment history which the Company monitors when establishing a reserve.

The change in accounts receivable, net, is as follows (in thousands):

The Company maintains the reserve account for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of its customers were to deteriorate or its judgments about their abilities to pay were incorrect, additional allowances might be required and its results of operations could be materially affected.

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

Allowance for Credit Losses (in thousands)

Journal Technologies’* Software Development Costs*

Development costs related to software products for sale or licensing are expensed as incurred until the technological feasibility of the product has been established. Thereafter, until the product is released for sale, software development costs are capitalized and reported at the lower of unamortized cost or net realizable value of the related product. The establishment of technological feasibility and the ongoing assessment of recoverability of costs require considerable judgment by the Company with respect to certain internal and external factors, including, but not limited to, anticipated future product revenue, estimated economic life and changes in hardware and software technology.

If there is no program design completed, technological feasibility is reached upon the completion of a working model. Capitalization of software development costs ceases, and amortization of capitalized software development costs (if any) commences when the products are available for general release. Under the Company’s software development life cycle policy and agile development methodology, technological feasibility is generally established when a working model has been completed and approved through internal quality assurance, which typically occurs late in the development cycle and near the time the software is ready for customer testing and release. As a result, the period between technological feasibility and general release is generally insignificant, and no software development costs have been capitalized to date. Research and development expenses related to software development were $0.9 million and $0.5 million for the three months ended December 31, 2025 and 2024, and are included under salaries and employee benefits on the condensed consolidated statements of comprehensive income (loss).

Assets and Liabilities Held for Sale

The Company classifies long‑lived assets (or disposal groups) as held for sale in the period in which all required criteria are met. Upon designation as held for sale, the assets of the disposal group are presented separately in the consolidated balance sheets as assets held for sale. As of December 31, 2025 and 2024, the Company had no assets classified as held for sale.

In January 2026, the Company’s Board of Directors approved the sale of one of the Company’s buildings and the related land (the “Disposal Asset”). The approval of the plan to sell, combined with management’s commitment to actively market the Disposal Asset, satisfied the required held‑for‑sale classification criteria. At the time the Disposal Asset met the held‑for‑sale criteria, it was substantially vacant, not utilized in the Company’s operations and had a carrying value of $3.5 million. The Company expects the sale of the Disposal Asset to be completed within 12 months of meeting the held‑for‑sale criteria.

Earnings per Share

Basic earnings per share is calculated using the Company’s weighted-average outstanding common shares. Diluted earnings per share is calculated using the Company’s weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method.

Income Taxes

The Company accounts for income taxes using an asset and liability approach which requires the recognition of deferred tax liabilities and assets for the expected future consequences of temporary differences between the carrying amounts for financial reporting purposes and the tax basis of the assets and liabilities. The Company accounts for uncertainty in income taxes under Accounting Standards Codification (“ASC”) 740-10 which prescribes a recognition threshold and measurement methodology to recognize and measure an income tax position taken, or expected to be taken, in a tax return. The evaluation of a tax position is based on a two-step approach. The first step requires an entity to evaluate whether the tax position would “more likely than not” be sustained upon examination by the appropriate taxing authority. The second step requires the tax position be measured at the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. In addition, previously recognized benefits from tax positions that no longer meet the new criteria would be derecognized.

Revenue Recognition

The Company recognizes revenues in accordance with the provisions of ASU 2014-09,Revenue from Contracts with Customers (ASC Topic 606). See Note 3 for further discussion and related disclosures regarding revenue recognition.

For the Traditional Business, proceeds from the sale of subscriptions for newspapers, court rule books and other publications and other services are recorded as deferred revenue and are included in earned revenue only when the services are provided, generally over the subscription term. Advertising service fees and other revenues, which represent primarily agency commissions received from outside newspapers in which the advertising is placed, are recognized when advertisements are published and are recorded on a net basis.

Journal Technologies contracts may include several products and services, which are generally distinct and include separate transaction pricing and performance obligations. These revenue contracts include (i) implementation consulting fees to configure the system to go-live, (ii) subscription software license, maintenance (including updates and upgrades) and support fees, and (iii) third-party hosting fees when used. For contracts containing multiple performance obligations, the Company allocates the transaction price on the basis of the relative standalone selling price of each distinct good or service, and utilizes the residual approach to estimate the standalone selling price of implementation consulting fees, whereby the standalone selling price is estimated by reference to the total transaction price less the sum of the observable standalone selling prices of its subscription software licenses, maintenance and support fees, and third-party hosting fees. These contracts include assurance-type warranty provisions for limited periods and do not include financing terms. For most contracts, the Company acts as a principal with respect to certain services, such as data conversion and interfaces. Hosting services are provided with support by third parties, and the Company recognizes such revenues and related costs on a gross basis. The Company considers several factors to determine if it controls the good or service before it is transferred to the client and therefore is the principal. These factors include (1) if the Company has primary responsibility for fulfilling the promise and (2) if the Company has discretion in establishing price for the specified good or service. For legacy contracts with perpetual license arrangements, licenses and consulting services are recognized at point of delivery, and maintenance revenues are recognized ratably after the go-live.

The Company issues invoices that have payment terms which require payment within 30 days. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the required performance services have been completed. Proceeds from subscription-type revenues, including circulation revenue, license, maintenance and support services, and hosting services, are deferred at the time of sale and are recognized on a pro-rata basis over the terms of the subscriptions or service period, and unearned proceeds are recognized within deferred subscriptions and deferred maintenance agreements and others in the consolidated balance sheets. Proceeds from consulting fees are recognized at point of delivery upon service completion, and unearned consulting fee proceeds are recorded under deferred revenue on the condensed consolidated balance sheets. Other public service fees are earned and recognized as revenues when the Company processes credit card payments on behalf of the courts via its websites through which the public can e-file cases and pay traffic citations and other fees.

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

Since the Company recognizes revenues when it can invoice the customer pursuant to the contract for the value of completed performance, as a practical expedient and because reliable estimates cannot be made, it has elected not to include the transaction price allocated to unsatisfied performance obligations. These unallocated prices primarily relate to the eFile-it™ and ePay-it™ transactions for which service fees are collected and recognized when the Company processes credit card payments on behalf of the courts via its websites through which the public can e-file cases or pay traffic citations.

Recent Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The amendments inASU 2023-09 are effective for fiscal years beginning after December 15, 2024, or the Company’s fiscal year 2026, and subsequent interim periods, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is also permitted. The Company is currently in the process of reviewing the guidance and evaluating its impact on its consolidated financial statements.

In November 2024, FASB issued ASU 2024-03,Income Statement–* Reporting Comprehensive Income*–Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses, which requires additional disclosure of certain amounts included in the expense captions presented on the statement of operations, as well as disclosures about selling expenses. ASU2024-03 is effective for fiscal years beginning after December 15, 2026*,* or the Company’s fiscal year 2028*,* and subsequent interim periods, with early adoption permitted. Early adoption is permitted for annual financial statements that have not yet been issued. The Company is evaluating the disclosure requirements related to the new standard.

In September 2025, the FASB issued ASU No. 2025-06,Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40), which modernizes the accounting guidance for internal-use software costs by eliminating the requirement to assess software development stages and introduces a new capitalization threshold. ASU2025-06 is effective for fiscal years beginning after December 15, 2027*,* or the Company’s fiscal year 2029*,* and subsequent interim periods, with early adoption permitted. Early adoption is permitted for annual financial statements that have not yet been issued. The Company is currently in the process of reviewing the guidance and evaluating its impact on its consolidated financial statements.

New Accounting Pronouncements Adopted

There were no new accounting standards adopted during the three months ended December 31, 2025.

Note 3. Revenue

The Company’s revenues were primarily generated in the United States. Revenues from foreign countries and U.S. territories were attributable to the Journal Technologies segment, and were approximately $1.1 million, or 5.8% of total revenues for the three months ended December 31, 2025, and $1.2 million, or 6.8% for the three months ended December 31, 2024. The following table presents revenues by country and territory (in thousands):

The components of total deferred revenues, including the long-term portion, are as follows (in thousands):

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

The decreases in deferred revenue during the three months ended December 31, 2025 and 2024 were primarily driven by the recognition of revenue associated with performance obligations satisfied during the period, partially offset by amounts billed in advance for new and renewal contracts.

During the three months ended December 31, 2025 and 2024, $6.1 million and $5.7 million in revenue, respectively, were recognized from deferred revenue at the start of each period.

Note 4. Fair Value of Financial Instruments

The Company’s financial instruments include marketable securities, and cash equivalents are measured at fair value on a recurring basis.

As of December 31, 2025, the Company’s holdings of marketable securities were concentrated in just six companies.

Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

The Company determines the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company performs an analysis of the assets and liabilities at each reporting period end.

The carrying amounts of cash, restricted cash, accounts receivable, accrued liabilities and accounts payable approximate fair value because of the short maturity and high liquidity of these instruments. Marketable securities and cash equivalents, which consist of money market funds, are measured and recorded at fair value on the Company’s consolidated balance sheet using Level 1 inputs. The Company determined the fair value of its Level 1 financial instruments, which are traded in active markets, using quoted market prices for identical instruments. There were no transfers between Level 1 and Level 2 or transfers in or out of Level 3 during the periods ended December 31, 2025 and September 30, 2025.

The following table summarizes the fair value hierarchy of financial assets measured at fair value as of December 31, 2025 (in thousands):

The following table summarizes the fair value hierarchy of the Company’s financial assets measured at fair value as of September 30, 2025 (in thousands):

Marketable Securities

As of December 31, 2025 and September 30, 2025, there were accumulated pretax unrealized gains of marketable securities of $342.2 million and $353.9 million, respectively, recorded in the accompanying condensed consolidated balance sheets.

During the three months ended December 31, 2025 and 2024, the Company recorded and included in net income (loss), net unrealized losses on marketable securities of $11.7 million and net unrealized gains on marketable securities of $13.4 million, respectively. There wereno purchases or sales of marketable securities during the periods ended December 31, 2025 and 2024.

Investments in marketable securities as of December 31, 2025 and September 30, 2025 are summarized below (in thousands).

Note 5. Income Taxes

For the three months ended December, 2025, the Company recorded an income tax benefit of $2.1 million on the pretax loss of $10.1 million. The income tax benefit (expense) consisted primarily of tax benefit of $2.4 million related to unrealized losses on marketable securities, and $0.3 million on income from US operations and dividend income. Consequently, the overall effective tax rate for the three months ended December 31, 2025 was 21.3%, after including the taxes on the unrealized losses on marketable securities.

For the three months ended December 31, 2024, the Company recorded an income tax provision of $4.0 million on pretax income of $14.9 million. The income tax provision consisted of $3.5 million related to unrealized gains on marketable securities , $0.3 million related to income from U.S. operations and dividend income, and $0.2 million related to the effect of a change in state apportionment on the beginning-of-year deferred tax liability. Consequently, the overall effective tax rate for the three months ended December 31, 2024 was 26.9%, after including taxes on unrealized gains on marketable securities.

The Company files consolidated federal income tax returns, with its domestic subsidiary, in the United States and with various state jurisdictions and is no longer subject to examinations for fiscal years before fiscal year 2021 with regard to federal income taxes and fiscal year 2020 for state income taxes. The Canadian subsidiary files a federal and provincial tax return in Canada.

Note 6. Stock-Based Compensation

The Company has implemented two equity incentive plans, one for key employees and one for non-employee directors, each providing for the grant of incentive stock options, non-qualified stock options, restricted stock units, and other equity-based awards. As of both December 31, 2025, and 2024, there were 2,920 shares available for future grants under the key employee’s equity incentive plan, which authorizes the issuance of up to 3,720 shares. Under the non-employee director plan, which authorizes the issuance of 2,000 shares, there were 1,655 shares available for grants as of December 31, 2025. The Company has generally issued restricted stock units that vest ratably overtwo years of continuous service from the grant date and, upon vesting, are issued from the Company’s treasury shares. The Company accounts for share-based compensation utilizing the fair value recognition requirement pursuant toASC 718, Compensation—Stock Compensation.

For its restricted stock units, the Company uses the closed market price on the date of grant as the fair market value of the stock. The Company has not historically paid any cash dividends on its common stock and as a result does not reduce the grant-date fair value per share by the present value of dividends expected to be paid during the requisite service period for restricted stock units. Share based compensation awards are expensed on a straight-line basis over the requisite service periods, which are generally the vesting periods.

The Company will recognize the effect of awards for which the requisite service period is not rendered when the award is forfeited. That is, the Company recognizes the effect of forfeitures in compensation cost when they occur. Previously recognized compensation cost for an award is reversed in the period the award is forfeited.

The following table summarizes stock unit activity during the periods presented:

As of December 31, 2025 and 2024, the total fair value of shares vested during the respective quarters was immaterial.

Note 7. Accrued Liabilities

Current accrued liabilities consist of (in thousands):

Long term accrued liabilities consist primarily of the Management Incentive Plan, which was $5.7 million and $5.5 million as of December 31, 2025, and September 30, 2025, respectively.

Note 8. Commitments and Contingencies

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

Margin Loan

During fiscal year 2013, the Company borrowed from its investment margin account the aggregate purchase price of $29.5 million for two acquisitions, in each case pledging its marketable securities as collateral. In addition, there were subsequent borrowings of $45.5 million to purchase additional marketable securities in fiscal year 2023. Since then, the Company has been paying down the margin loan when deemed appropriate by the Board.

During the fiscal year 2025, the Company used excess cash from operations to repay $5.5 million of the margin loan. During the three months ended December 31, 2025, the Company repaid an additional $2.0 million. As of December 31, 2025, the outstanding margin loan balance was $20.0 million.

The interest rate for these investment margin account borrowings fluctuates based on the Federal Funds Rate plus 50 basis points with interest only payable monthly. The interest rate as of December 31, 2025 was 4.25%.

Real Estate Loan

In November 2015, the Company purchased a building in Logan, Utah. The Company obtained a loan, secured by the underlying real estate asset, which has a fixed rate of 3.3%, and matures in 2030. This real estate loan had a balance of approximately $0.9 million as of December 31, 2025.

Note 9. Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed using the treasury stock method by dividing net income by the weighted average number of dilutive common shares outstanding during the period. Diluted shares outstanding is calculated by adding to the weighted average shares outstanding any potential dilutive securities outstanding for the period. Potential dilutive securities for the Company include only unvested restricted stock units, which have been excluded from the calculation of diluted net loss per share for the periods presented because including them would have been antidilutive. Accordingly, basic and diluted net income (loss) per share are equal for this period.

The Company’s basic and diluted net income (loss) per share was as follows (in thousands, except share and per share amounts):

Note 10. Segments Information

The key factors used to identify the reportable segments are the organization of the Company’s businesses and alignment of its internal operations. Operating segments are defined as components of an enterprise for which discrete financial information is available and is evaluated regularly by the Chief Operating Decision Maker (“CODM”), in deciding how to allocate resources and assess performance.

The Company’s Chief Executive Officer, serving as the CODM, reviews consolidated financial data to allocate resources and assess performance. The CODM focuses on consolidated net income (loss) from the statements of operations, comparing results with prior periods, forecasts, and relevant expenditure categories for each segment.

The Company identifies itsreportable segments based on the nature of the products and services provided and the manner in which the CODM manages the business and allocates resources between (i) the Traditional Business, which consists of newspaper publishing, advertising, circulation, and related information services, and (ii) Journal Technologies, which provides case management software and related services to courts and other justice agencies. Accordingly, Traditional Business revenues are comprised of advertising, circulation, and advertising service fees and other, while Journal Technologies revenues are comprised of licensing and maintenance fees, consulting fees, and other public service fees. All inter-segment transactions were eliminated. Corporate is presented below as a non-operating segment to reconcile segment results to the Company’s consolidated financial statement line-item totals. Additional details about each of the reportable segments and its income and expenses for the three months ended December 31, 2025 and 2024, are set forth below (in thousands):

• Other segment items within net income (loss) include rental income, net unrealized gains on non-qualified compensation plan, interest expense on note payable collateralized by real estate, agency commissions, outside services, postage and delivery expenses, newsprint and printing expenses, depreciation and amortization, equipment maintenance and software, credit card merchant discount fees, rent expenses, accounting and legal fees, and other general and administrative expense.

The measure of segment assets reviewed by the CODM is the consolidated total assets, as reported on the consolidated balance sheet. The following table presents the measure of segment assets regularly provided to the CODM as of (in thousands):

The Company’s long-lived assets, which consist primarily of property, plant and equipment, net, and operating lease right-of-use assets, are primarily located in the United States. As of December 31, 2025 and September 30, 2025, no individual country other than the U.S. accounted for 10% or more of these assets.