Financial Analysis

Note 7. Stock-Based Compensation The Company has implemented two equity incentive plans, one for key employees and one for non-employee directors, each providing for the grant of incentive stock options, non-qualified stock options, restricted stock units, and other equity-based awards. As of both September 30, 2025, and 2024, there were 2,920 shares available for future grants under the key employees equity incentive plan, which authorizes the issuance of up to 3,720 shares. Under the non-employee director plan, which was approved in February 2025 and authorizes issuance of 2,000 shares, there were 1,805 available for grants as of September 30, 2025. Restricted stock units generally vest ratably over two years of continuous service from the grant date and, upon vesting, are issued from the Companys treasury shares. The Company accounts for share-based compensation utilizing the fair value recognition requirement pursuant to ASC 718. For restricted stock units, the Company uses the closed market price on the date of grant as the fair market value of the stock. The Company has not historically paid any cash dividends on its common stock and as a result does not reduce the grant-date fair value per share by the present value of dividends expected to be paid during the requisite service period for restricted stock units. Share based compensation awards are expensed on a straight-line basis over the requisite service periods, which are generally the vesting periods. The Company w …

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Note 4. Fair value of Financial Instruments The Companys financial instruments include marketable securities, cash equivalents are measured at fair value on a recurring basis. As of September 30, 2025, the Companys holdings of marketable securities were concentrated in just six companies. These marketable securities consist solely of investments in publicly traded equity securities and do not include any debt securities. Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 defined as observable inputs based on unadjusted quoted prices for identical instruments in active markets; Level 2 defined as inputs other than Level 1 that are either directly or indirectly observable in the marketplace for identical or similar instruments in markets that are not active; and Level 3 defined as unobservable inputs in which little or no market data exists where valuations are derived from techniques in which one or more significant inputs are unobservable. The Company determines the level in the fair value hierarchy within which each fair value measurement falls in its enti …

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Note 6. Income Taxes The provision from income taxes consists of the following (in thousands): 2025 2024 Current: Federal $ 2,337 $ 3,000 State 878 1,053 Foreign 45 70 Total current expense 3,260 4,123 Deferred: Federal 26,918 17,005 State 7,772 5,037 Foreign - - Total deferred expense 34,690 22,042 Total income tax provision $ 37,950 $ 26,165 The difference between the statutory federal income tax rate and the Companys effective rate is summarized below: 2025 2024 Statutory federal income tax rate 21.0 % 21.0 % State franchise taxes (net of federal tax benefit) 4.8 5.0 Effect of state rate change on beginning balance of deferred tax liabilities (0.3 ) (0.4 ) Dividends received deduction (0.3 ) (0.5 ) Others 0.1 Effective tax rate 25.3 % 25.1 % The Companys deferred income tax assets and liabilities (in thousands) were comprised of the following: 2025 2024 Deferred tax assets attributable to: Accrued liabilities, including supplemental compensation and vacation pay accrual $ 2,422 $ 1,903 Impairment losses on marketable securities (277 ) (280 ) Bad debt reserves not yet deductible 55 55 Depreciation and amortization 1,283 1,730 Deferred revenues 184 517 Goodwill 190 265 Net operating losses 160 166 Credits and other 103 Total deferred tax assets 4,017 4,459 Deferred tax liabilities attributable to: Unrealized gains on marketable securities (91,350 ) (57,100 ) Total deferred tax liabilities Net deferred income taxes $ (87,333 ) $ (52,641 ) During fiscal year 2025, the Company …

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Recent Accounting Pronouncements Accounting Pronouncements Not Yet Adopted In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which provides qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, or the Companys fiscal year 2026, and subsequent interim periods, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is also permitted. The Company is currently in the process of reviewing the guidance and evaluating its impact on its consolidated financial statements. In March 2024, the FASB issued ASU 2024-01, Scope Application of Profits Interest and Similar Awards (ASU 2024-01). ASU 2024-01 clarifies how an entity determines whether a profits interest or similar award is (1) within the scope of ASC 718 or (2) not a share-based payment arrangement and therefore within the scope of other guidance. The guidance in ASU 2024-01 applies to all entities that issue profits interest or similar awards as compensation to employees or nonemployees in exchange f …

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Note 3. Revenue Recognition The change in total deferred revenues, including the long-term portion, is as follows (in thousands): Description Deferred Revenue (Current) Deferred Revenue (Non-current) Balance as of September 30, 2023 $ 25,539 $ 1,000 (Decrease) increase, net (1,826 ) (117 ) Balance as of September 30, 2024 23,713 883 (Decrease) increase, net (5,054 ) 111 Balance as of September 30, 2025 $ 18,659 $ 994 The decreases in deferred revenue during the years ended September 30, 2025 and 2024 were primarily driven by the recognition of revenue associated with performance obligations satisfied during the period, partially offset by amounts billed in advance for new and renewal contracts. During the years ending September 30, 2025 and 2024, $21.7 million and $18.8 million in revenue, respectively, were recognized from deferred revenue at the start of each year.

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Note 11. Segments Information The key factors used to identify the reportable segments are the organization of the Companys 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 Companys Chief Executive Officer, serving as the CODM, reviews consolidated financial data to allocate resources and assess performance. The CODM focuses on consolidated net income (loss) from the statements of operations, comparing results with prior periods, forecasts, and relevant expenditure categories for each segment. The Company identifies its reportable segments based on the nature of the products and services provided and the manner in which the CODM manages the business and allocates resources between (i) the Traditional Business, which consists of newspaper publishing, advertising, circulation, and related information services, and (ii) Journal Technologies, which provides case management software and related services to courts and other justice agencies. Accordingly, Traditional Business revenues are comprised of advertising, circulation, and advertising service fees and other, while Journal Technologies revenues are comprised of licensing and maintenance fees, consulting fees, and other public service fees. All inter-segment transactions w …

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Note 2. Significant Accounting Policies Basis of Presentation The consolidated financial statements include the accounts of Daily Journal and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation. 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 Companys cash, cash equivalents and restricted cash are held at financial institutions where account balances may at times exceed federally insured limits. The Company limits its exposure by primarily placing its cash in interest-bearing deposit accounts with high credit quality financial institutions and marketable securities. Management believes the Company is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash, cash equivalents and restricted cash held. The Company has no financial instruments with off-balance sheet risk of loss. Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates and assumptions made by management include, but are not limited to, the estimated fair values of marketab …

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Note 12. Subsequent Events On October 27, 2025, the Company announced that Tu To, the Companys Chief Financial Officer and Principal Financial Officer, would retire effective January 15, 2026, following a planned transition period. In connection with her retirement, the Company entered into a separation agreement with Ms. To providing for certain post-employment compensation and benefits. Ms. To was expected to step down as the Companys principal financial officer on December 31, 2025, or earlier in connection with the transition. On December 12, 2025, the Company appointed Erik Nakamura as Chief Financial Officer and Principal Financial Officer, effective immediately. Mr. Nakamura previously served as Chief Financial Officer of the Companys Journal Technologies subsidiary. Management has evaluated these events and determined that they did not have a material impact on the Companys consolidated financial statements as of and for the year ended September 30, 2025. …

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