NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND OPERATIONS
Daily Journal Corporation (“Daily Journal”) 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.
Journal Technologies, Inc. (“Journal Technologies”), a wholly-owned subsidiary of Daily Journal, supplies case management software systems and related products to courts, prosecutor and public defender offices, probation departments and other justice agencies, including administrative law organizations, city and county governments and bar associations. These organizations use the Journal Technologies family of products to help manage cases and information electronically, to interface with other critical justice partners and to extend electronic services to the public, including efiling and a website to pay traffic citations and fees online, and bar members. These products are licensed to more than 500 organizations in 42 states and internationally.
Essentially all of the Company’s U.S. operations are based in California, Arizona and Utah. The Company also has a presence in Australia where Journal Technologies is working on three software installation projects.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The consolidated financial statements include the accounts of the Daily Journal and Journal Technologies (collectively the “Company”). All intercompany accounts and transactions have been eliminated in consolidation.
Certain reclassifications of previously reported amounts have been made to conform to the current year's presentation.
Concentrations of Credit Risk: 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 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 are incorrect, additional allowances might be required and its results of operations could be materially affected.
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 $2,041,000 and $2,015,000 at September 30, 2020 and 2019, respectively, represents cash held to secure two letters of credit issued by a bank for a software installation contract in Australia.
Fair Value of Financial Instruments: The carrying amounts of cash, accounts receivable and accounts payable approximate fair value because of their short maturities. In addition, the Company has investments in marketable securities, all categorized as “available-for-sale” and stated at fair market value. In fiscal 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU requires an entity that holds financial assets or owes financial liabilities to, among other things, measure equity investments at fair value and recognize unrealized gains (losses) through net income (loss). Accordingly, the Company’s net income of $4,041,000 for fiscal 2020, included net unrealized losses on investments of $3,099,000. In fiscal 2019, the Company’s net loss of $25,216,000 included net unrealized losses on investments of $17,715,000. 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 Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement and Disclosures. At September 30, 2020, the aggregate fair market value of the Company’s marketable securities was $179,368,000. These investments had approximately $137,593,000 of net unrealized gains before taxes of $35,870,000. Most of the unrealized net gains were in the common stocks of three U.S. financial institutions. At September 30, 2019, the Company had marketable securities at fair market value of approximately $194,581,000, including approximately $140,692,000 of unrealized net gains before taxes of $37,241,000.
All investments are classified as “Current assets” because they are available for sale at any time. In August 2020, the Company sold part of its investments for $16,307,000, realizing a net gain of approximately $4,193,000.
Investment in Financial Instruments
|
|
September 30, 2020
|
|
|
September 30, 2019
|
|
|
|
Aggregate
fair value
|
|
|
Amortized/
Adjusted
cost basis
|
|
|
Pretax
unrealized
gains
|
|
|
Aggregate
fair value
|
|
|
Amortized/
Adjusted
cost basis
|
|
|
Pretax
unrealized
gains
|
|
Marketable securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stocks
|
|
$
|
179,368,000
|
|
|
$
|
41,775,000
|
|
|
$
|
137,593,000
|
|
|
$
|
194,581,000
|
|
|
$
|
53,889,000
|
|
|
$
|
140,692,000
|
|
As of September 30, 2020, there were no unrealized losses related to the marketable securities.
Goodwill: The entire goodwill of $13,400,000 was concluded to be impaired and thus fully written off as of September 30, 2019 (fiscal 2019).
Inventories: Inventories, comprised of newsprint and paper, are stated at cost, on a first-in, first-out basis, which does not exceed current net realizable value.
Property, plant and equipment: Property, plant and equipment are carried on the basis of cost or fair value for assets acquired in business combinations. Depreciation of assets is provided in amounts sufficient to depreciate the cost of related assets over their estimated useful lives ranging from 3 – 39 years. At September 30, 2020, the estimated useful lives were (i) 5 – 39 years for building and improvements, (ii) 3 – 5 years for furniture, office equipment and software, and (iii) 3 – 10 years for machinery and equipment. Leasehold improvements are amortized over the term of the related leases or the useful life of the assets, whichever is shorter. Assets are depreciated using the straight-line method for financial statements and accelerated method for tax purposes. Depreciation and amortization expenses were $524,000 and $589,000 for fiscal 2020 and 2019, respectively.
Significant expenditures which extend the useful lives of existing assets are capitalized. Maintenance and repair costs are expensed as incurred. Gains or losses on dispositions of assets are reflected in current earnings.
Impairment of Long-Lived Assets: The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. There were no such impairments identified during fiscal 2020 and 2019.
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.
The Company believes its process for developing software is essentially completed concurrent with the establishment of technological feasibility, and accordingly, no software development costs have been capitalized to date.
Revenue Recognition:
The Company recognizes revenues in accordance with the provisions of ASU No. 2014-09, Revenue from Contracts with Customers (ASC Topic 606), which it adopted effective October 1, 2017, using the modified retrospective method.
For the Traditional Business, proceeds from the sale of subscriptions for newspapers, court rule books and other publications and other services are recorded as deferred revenue and are included in earned revenue only when the services are provided, generally over the subscription term. Advertising revenues are recognized when advertisements are published and are net of agency commissions.
Journal Technologies contracts may include several products and services, which are generally distinct and include separate transaction pricing and performance obligations. Most are one-transaction contracts. These current subscription-type contract revenues include (i) implementation consulting fees to configure the system to go-live, (ii) subscription software license, maintenance (including updates and upgrades) and support fees, and (iii) third-party hosting fees when used. Revenues for consulting are recognized at point of delivery (go-live) upon completion of services. These contracts include assurance warranty provisions for limited periods and do not include financing terms. For some contracts, the Company acts as a principal with respect to certain services, such as data conversion, interfaces and hosting that are provided by third-parties, and recognizes such revenues on a gross basis. For legacy contracts with perpetual license arrangements, licenses and consulting services are recognized at point of delivery (go-live), and maintenance revenues are recognized ratably after the go-live. Other public service fees are earned and recognized as revenues when the Company processes credit card payments on behalf of the courts via its websites through which the public can efile cases and pay traffic citations and other fees.
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. For its software contracts, the Company incurs an immaterial amount of sales commission costs which have no significant impact on the Company’s financial condition and results of operations. In addition, the Company’s implementation and fulfillment costs do not meet all criteria required for capitalization.
Since the Company recognizes revenues when it can invoice the customer pursuant to the contract for the value of completed performance, as a practical expedient and because reliable estimates cannot be made, it has elected not to include the transaction price allocated to unsatisfied performance obligations. Also, as a practical expedient, the Company has elected not to include its evaluation of variable consideration of certain usage based 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.
Approximately 71% and 65% of the Company’s revenues in fiscal 2020 and 2019, respectively, were derived from sales of software licenses, annual software licenses, maintenance and support agreements and consulting services that typically include implementation and training.
The change in allowance for doubtful accounts is as follows:
Allowance for Doubtful Accounts
Description
|
|
Balance at
Beginning
of Year
|
|
|
Additions
Charged to
Costs and
Expenses
|
|
|
Accounts
Charged
off less
Recoveries
|
|
|
Balance
at End
of Year
|
|
Fiscal 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
200,000
|
|
|
$
|
116,000
|
|
|
$
|
(66,000
|
)
|
|
$
|
250,000
|
|
Fiscal 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
200,000
|
|
|
$
|
8,000
|
|
|
$
|
(8,000
|
)
|
|
$
|
200,000
|
|
Management Incentive Plan: In fiscal 1987, the Company implemented a Management Incentive Plan (the “Incentive Plan”) that entitles a participant to participate in pretax earnings before adjustment for certain items of the Company for ten years.
Certificate interests entitled participants to receive 7.51% and 6.79% (amounting to $502,700 and $465,500, respectively) of Daily Journal non-consolidated income before taxes, workers’ compensation, supplemental compensation and certain other items, 9.4% and 9.00% (amounting to $0 and $0 for fiscal 2020 and 2019, respectively) for Journal Technologies and 8.2% and 8.2% (amounting to $452,900 and $0, respectively) for Daily Journal consolidated in fiscal 2020 and 2019, respectively. The Company accrued $1,445,000 and $230,000 as of September 30, 2020 and 2019, respectively, for the Plan’s future commitment for those who will still have Certificates at the age of 65. This future commitment included an increase in the accrual in fiscal 2020 of $1,215,000 or $.88 per outstanding share on an adjusted pretax basis as compared with an increase in fiscal 2019 of $60,000 or $.04 per outstanding share, in each case due to increased estimated future pretax income. The estimated Incentive Plan’s future commitment is calculated based on an average of the past year and the current year pretax earnings before certain items, discounted to the present value at 6% since each granted Certificate will expire over its remaining life term of up to 10 years.
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 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.
Net income (loss) per common share: The net income (loss) per common share is based on the weighted average number of shares outstanding during each year. The shares used in the calculation were 1,380,746 for fiscal 2020 and 2019. The Company does not have any common stock equivalents, and therefore basic and diluted net income per share is the same.
Use of Estimates: The presentation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Accounting Standards Adopted in Fiscal 2020
At the beginning of fiscal 2020, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) which requires that all leases be recognized by lessees on the balance sheet through a right-of-use asset and corresponding lease liability, including today’s operating leases. There has been no significant impact on the Company’s financial condition, results of operations or disclosures. At September 30, 2020, the Company recorded a right-of-use asset and lease liability of approximately $140,000 for its operating office leases, including approximately $10,000 beyond one year. Operating office leases are included in operating lease ROU assets, current accrued liabilities and long-term accrued liabilities in the Company’s accompanying Consolidated Balance Sheets.
New Accounting Pronouncement:
No other new accounting pronouncement issued or effective has had, or is expected to have, a material impact on the Company’s consolidated financial statements.
3. INCOME TAXES
The provision (benefit) from income taxes consists of the following:
|
|
2020
|
|
|
2019
|
|
Current:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
(420,000
|
)
|
|
$
|
132,000
|
|
State
|
|
|
15,000
|
|
|
|
—
|
|
|
|
|
(405,000
|
)
|
|
|
132,000
|
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
808,000
|
|
|
|
(4,685,000
|
)
|
State
|
|
|
(218,000
|
)
|
|
|
(1,707,000
|
)
|
|
|
|
590,000
|
|
|
|
(6,392,000
|
)
|
|
|
$
|
185,000
|
|
|
$
|
(6,260,000
|
)
|
The difference between the statutory federal income tax rate and the Company’s effective rate is summarized below:
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Statutory federal income tax rate
|
|
|
21.0
|
%
|
|
|
21.0
|
%
|
State franchise taxes (net of federal tax benefit)
|
|
|
5.6
|
|
|
|
4.5
|
|
Effect of state rate change on beginning balance of deferred tax liabilities
|
|
|
(9.4
|
)
|
|
|
(0.2
|
)
|
Business meals/gifts/other permanent differences
|
|
|
0.6
|
|
|
|
(0.1
|
)
|
Goodwill impairment
|
|
|
—
|
|
|
|
(6.5
|
)
|
Dividends received deduction
|
|
|
(11.1
|
)
|
|
|
1.5
|
|
Revenue recognized for book but not tax
|
|
|
0.4
|
|
|
|
—
|
|
Prior year true-up
|
|
|
—
|
|
|
|
0.2
|
|
Foreign tax credits
|
|
|
(0.4
|
)
|
|
|
0.1
|
|
CARES Act benefits
|
|
|
(4.4
|
)
|
|
|
—
|
|
Others
|
|
|
2.1
|
|
|
|
(0.6
|
)
|
Effective tax rate
|
|
|
4.4
|
%
|
|
|
19.9
|
%
|
The Company’s deferred income tax assets and liabilities were comprised of the following:
|
|
2020
|
|
|
2019
|
|
Deferred tax assets attributable to:
|
|
|
|
|
|
|
|
|
Accrued liabilities, including supplemental compensation and vacation pay accrual
|
|
$
|
415,000
|
|
|
$
|
178,000
|
|
Impairment losses on investments
|
|
|
1,016,000
|
|
|
|
2,201,000
|
|
Bad debt reserves not yet deductible
|
|
|
55,000
|
|
|
|
41,000
|
|
Depreciation and amortization
|
|
|
3,482,000
|
|
|
|
3,999,000
|
|
Deferred revenues
|
|
|
913,000
|
|
|
|
885,000
|
|
Goodwill
|
|
|
590,000
|
|
|
|
677,000
|
|
Net operating losses
|
|
|
4,768,000
|
|
|
|
5,195,000
|
|
Credits and other
|
|
|
432,000
|
|
|
|
456,000
|
|
Total deferred tax assets
|
|
|
11,671,000
|
|
|
|
13,632,000
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities attributable to:
|
|
|
|
|
|
|
|
|
Unrealized gains on investments
|
|
|
(35,870,000
|
)
|
|
|
(37,241,000
|
)
|
Net deferred income taxes
|
|
$
|
(24,199,000
|
)
|
|
$
|
(23,609,000
|
)
|
For fiscal 2020, the Company recorded an income tax provision of $185,000 on pretax income of $4,226,000. The effective tax rate was less than the statutory rate primarily due to the dividends received deduction (“DRD”), a benefit resulting from the Coronavirus Aid, Relief and Economic Security (“CARES”) Act and net state tax benefits. The effective tax rate for the fiscal 2020 was 4.4%, after including the DRD, the tax benefits from the CARES Act and state taxes.
The CARES Act, which was signed into law on March 27, 2020, contains two federal tax provisions beneficial to the Company. One provision provides that net operating losses arising in tax years beginning in 2018, that were previously only available to be carried forward, can now be carried back to the five previous years. In addition, any alternative minimum tax credits carried forward from prior years can be claimed as a refund in years beginning in 2018. Consequently, the Company recorded a tax benefit resulting from carrying back a portion of the net operating loss generated in fiscal 2019 to fiscal 2014. The Company anticipates receiving a refund for all taxes and alternative minimum taxes paid in fiscal 2014. The tax benefit of $187,000 resulting from carrying back the net operating loss is primarily attributable to the difference in the federal tax rates of 34% in fiscal 2014 and 21% in fiscal 2019.
During fiscal 2020, the Company recorded net unrealized losses on investments of $3,099,000. An income tax benefit of $1,371,000 resulting from these losses was recorded as a temporary difference in deferred income taxes. The Company also recorded a net gain of $4,193,000 on the sales of marketable securities.
For fiscal 2019, the Company recorded an income tax benefit of $6,260,000 on a pretax loss of $31,476,000. The effective tax rate was below the statutory rate due to the impairment of goodwill, partially offset by the dividends received deduction and a benefit for state taxes.
The Company’s effective tax rate was 4.4% for fiscal 2020 as compared with 20% in the prior fiscal year.
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 2017 with regard to federal income taxes and fiscal 2016 for state income taxes.
The Company has federal and state income tax net operating losses (“NOLs”). A portion of the fiscal 2017 federal and state NOLs were carried back to previous years and a portion of the fiscal 2019 federal NOL was carried back to fiscal 2014. As of September 30, 2020, the Company had federal, California and other state NOL carryforwards of $20.1 million, $6.1 million and $2.6 million, respectively. These NOLs will expire at various dates from fiscal 2036 through 2039, as follows:
Fiscal Year ended
|
|
Federal NOL
|
|
|
California NOL
|
|
|
Other State NOL
|
|
|
|
(in millions)
|
|
September 30, 2036
|
|
$
|
.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
September 30, 2037
|
|
|
6.6
|
|
|
|
—
|
|
|
|
.3
|
|
September 30, 2038
|
|
|
11.1
|
|
|
|
5.4
|
|
|
|
2.0
|
|
September 30, 2039
|
|
|
—
|
|
|
|
.7
|
|
|
|
.3
|
|
No expiration
|
|
|
1.6
|
|
|
|
—
|
|
|
|
—
|
|
The Company believes it is more likely than not that the benefit of these NOLs will be realized in the future. Consequently, the Company has not provided a valuation allowance.
4. DEBTS 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 September 30, 2020 was .75%. These investment margin account borrowings do not mature.
In November 2015, the Company purchased a 30,700 square foot office building constructed in 1998 on about 3.6 acres in Logan, Utah that had been previously leased by Journal Technologies. The Company paid $1.24 million and financed the balance with a real estate bank loan of $2.26 million which bears a fixed interest rate of 4.66% and is repayable in equal monthly installments of about $17,600 through 2030. This loan is secured by the Logan facility and can be paid off at any time without prepayment penalty. This real estate loan had a balance of approximately $1.71 million as of September 30, 2020. (In October 2020, the Company executed an amendment to lower the interest rate of this loan to a fixed rate of 3.33% for the remaining of its 10 years.)
The Company also owns its facilities in Los Angeles and leases space for its other offices under operating leases which expire at various dates through fiscal 2022. The Company leased approximately 6,200 square feet of office space in San Francisco, but the Company closed its San Francisco office upon the end of the lease in October 2019.
The Company is responsible for a portion of maintenance, insurance and property tax expenses relating to the leased properties. Rental expenses for fiscal years 2020 and 2019 were $612,000 and $1,017,000, respectively.
The following table represents the Company’s future obligations
|
|
Payments due by Fiscal Year
|
|
|
|
2021
|
|
|
2022
|
|
|
2023
|
|
|
2024
|
|
|
2025
|
|
|
2026
and after
|
|
|
Total
|
|
Real estate loan
|
|
$
|
131,000
|
|
|
$
|
148,000
|
|
|
$
|
153,000
|
|
|
$
|
158,000
|
|
|
$
|
164,000
|
|
|
$
|
955,000
|
|
|
$
|
1,709,000
|
|
Obligations under operating leases
|
|
|
129,000
|
|
|
|
11,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
140,000
|
|
Long-term accrued liabilities and other*
|
|
|
10,000
|
|
|
|
434,000
|
|
|
|
191,000
|
|
|
|
215,000
|
|
|
|
160,000
|
|
|
|
445,000
|
|
|
|
1,455,000
|
|
|
|
$
|
270,000
|
|
|
$
|
593,000
|
|
|
$
|
344,000
|
|
|
$
|
373,000
|
|
|
$
|
324,000
|
|
|
$
|
1,400,000
|
|
|
$
|
3,304,000
|
|
|
*
|
The long-term accrued liabilities for the Management Incentive Plan are discounted to the present value using a discount rate of 6%.
|
5. 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.
6. REPORTABLE SEGMENTS
An operating segment is defined as a component of an enterprise which has discrete financial information that is evaluated regularly by the Company’s Chief Executive Officer to decide how to allocate resources and to access performance.
In accordance with ASC 280-10, Segment Reporting, the Company has two segments of business. The Company’s reportable segments are: (i) the Traditional Business and (ii) Journal Technologies. All inter-segment transactions were eliminated.
Summarized financial information concerning the Company’s reportable segments and Corporate income and expenses is shown in the following table.
The Company’s Traditional Business is one reportable segment and the other is Journal Technologies. Additional details about each of the reportable segments and its corporate income and expenses is set forth below:
|
|
Reportable Segments
|
|
|
|
|
|
|
|
|
|
|
|
Traditional
Business
|
|
|
Journal
Technologies
|
|
|
Corporate
|
|
|
Total
|
|
Fiscal 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
$
|
7,104,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,104,000
|
|
Circulation
|
|
|
5,090,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,090,000
|
|
Advertising service fees and other
|
|
|
2,501,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,501,000
|
|
Licensing and maintenance fees
|
|
|
—
|
|
|
|
21,647,000
|
|
|
|
—
|
|
|
|
21,647,000
|
|
Consulting fees
|
|
|
—
|
|
|
|
7,718,000
|
|
|
|
—
|
|
|
|
7,718,000
|
|
Other public service fees
|
|
|
—
|
|
|
|
5,882,000
|
|
|
|
—
|
|
|
|
5,882,000
|
|
Operating expenses
|
|
|
16,425,000
|
|
|
|
34,800,000
|
|
|
|
—
|
|
|
|
51,225,000
|
|
Income (loss) from operations
|
|
|
(1,730,000
|
)
|
|
|
447,000
|
|
|
|
—
|
|
|
|
(1,283,000
|
)
|
Dividends and interest income
|
|
|
—
|
|
|
|
—
|
|
|
|
4,965,000
|
|
|
|
4,965,000
|
|
Other income
|
|
|
—
|
|
|
|
—
|
|
|
|
3,000
|
|
|
|
3,000
|
|
Net unrealized losses on investments
|
|
|
—
|
|
|
|
—
|
|
|
|
(3,099,000
|
)
|
|
|
(3,099,000
|
)
|
Interest expenses on note payable collateralized by real estate
|
|
|
(84,000
|
)
|
|
|
—
|
|
|
|
(35,000
|
)
|
|
|
(119,000
|
)
|
Interest expenses on margin loans
|
|
|
—
|
|
|
|
—
|
|
|
|
(434,000
|
)
|
|
|
(434,000
|
)
|
Gains on sales of marketable securities, net
|
|
|
—
|
|
|
|
—
|
|
|
|
4,193,000
|
|
|
|
4,193,000
|
|
Pretax income
|
|
|
(1,814,000
|
)
|
|
|
447,000
|
|
|
|
5,593,000
|
|
|
|
4,226,000
|
|
Income tax expense
|
|
|
685,000
|
|
|
|
100,000
|
|
|
|
(970,000
|
)
|
|
|
(185,000
|
)
|
Net loss
|
|
|
(1,129,000
|
)
|
|
|
547,000
|
|
|
|
4,623,000
|
|
|
|
4,041,000
|
|
Total assets
|
|
|
35,896,000
|
|
|
|
22,277,000
|
|
|
|
180,402,000
|
|
|
|
238,575,000
|
|
Capital expenditures
|
|
|
121,000
|
|
|
|
63,000
|
|
|
|
—
|
|
|
|
184,000
|
|
|
|
Reportable Segments
|
|
|
|
|
|
|
|
|
|
|
|
Traditional
Business
|
|
|
Journal
Technologies
|
|
|
Corporate
|
|
|
Total
|
|
Fiscal 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising
|
|
$
|
9,132,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,132,000
|
|
Circulation
|
|
|
5,249,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,249,000
|
|
Advertising service fees and other
|
|
|
2,712,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,712,000
|
|
Licensing and maintenance fees
|
|
|
—
|
|
|
|
20,179,000
|
|
|
|
—
|
|
|
|
20,179,000
|
|
Consulting fees
|
|
|
—
|
|
|
|
5,539,000
|
|
|
|
—
|
|
|
|
5,539,000
|
|
Other public service fees
|
|
|
—
|
|
|
|
5,844,000
|
|
|
|
—
|
|
|
|
5,844,000
|
|
Operating expenses
|
|
|
16,981,000
|
|
|
|
49,898,000*
|
|
|
|
—
|
|
|
|
66,879,000
|
*
|
Income (loss) from operations
|
|
|
112,000
|
|
|
|
(18,336,000
|
)
|
|
|
—
|
|
|
|
(18,224,000
|
)
|
Dividends and interest income
|
|
|
—
|
|
|
|
—
|
|
|
|
5,380,000
|
|
|
|
5,380,000
|
|
Other income
|
|
|
—
|
|
|
|
—
|
|
|
|
38,000
|
|
|
|
38,000
|
|
Net unrealized losses on investments
|
|
|
—
|
|
|
|
—
|
|
|
|
(17,715,000
|
)
|
|
|
(17,715,000
|
)
|
Interest expenses on note payable collateralized by real estate
|
|
|
(93,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(93,000
|
)
|
Interest expenses on margin loans
|
|
|
—
|
|
|
|
—
|
|
|
|
(862,000
|
)
|
|
|
(862,000
|
)
|
Pretax income
|
|
|
19,000
|
|
|
|
(18,336,000
|
)
|
|
|
(13,159,000
|
)
|
|
|
(31,476,000
|
)
|
Income tax expense
|
|
|
(5,000
|
)
|
|
|
2,450,000
|
|
|
|
3,815,000
|
|
|
|
6,260,000
|
|
Net loss
|
|
|
14,000
|
|
|
|
(15,886,000
|
)
|
|
|
(9,344,000
|
)
|
|
|
(25,216,000
|
)
|
Total assets
|
|
|
17,176,000
|
|
|
|
22,741,000
|
|
|
|
197,459,000
|
|
|
|
237,376,000
|
|
Capital expenditures
|
|
|
132,000
|
|
|
|
33,000
|
|
|
|
—
|
|
|
|
165,000
|
|
* included goodwill impairment of $13,400,000
During fiscal 2020 and 2019, the Traditional Business had total operating revenues of $14,695,000 and $17,093,000 of which $9,605,000 and $11,844,000, respectively, were recognized after services were provided while $5,090,000 and $5,249,000, respectively, were recognized ratably over the subscription terms. Total operating revenues for the Company’s software business were $35,247,000 and $31,562,000, of which $14,025,000 and $12,353,000, respectively, were recognized upon completion of services while $21,222,000 and $19,209,000, respectively, were recognized ratably over the subscription periods.
7. SUBSEQUENT EVENTS
The Company has completed an evaluation of all subsequent events through the issuance date of these financial statements and concluded that no additional subsequent events occurred that required recognition in the financial statements or disclosures in the Notes to Consolidated Financial Statements.