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 March 31, 2015

 

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, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer:

Accelerated Filer:     X

Non-accelerated Filer: 

Smaller Reporting Company:

                        

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 April 30, 2015

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 -March 31, 2015 and September 30, 2014

3

 
         
   

Consolidated Statements of Comprehensive Income (Loss) -Three months ended March 31, 2015 and 2014

4

 
         
   

Consolidated Statements of Comprehensive Income (Loss) -Six months ended March 31, 2015 and 2014

5

 
         
   

Consolidated Statements of Cash Flows -Six months ended March 31, 2015 and 2014

6

 
         
   

Notes to Consolidated Financial Statements

7

 

 

       
 

Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations  

  13  
         
 

Item 3.      Quantitative and Qualitative Disclosures about Market Risk

18

 
         
 

Item 4.     Controls and Procedures

  18  
         

Part II

Other Information    
         
 

Item 1A.  Risk Factors  

  19  
         
 

Item 6.      Exhibits  

  20  

 

 
2

 

  

PART I

Item 1. FINANCIAL STATEMENTS

DAILY JOURNAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   

March 31

   

September 30

 
   

2015

   

2014

 
                 

ASSETS

               

Current assets

               

Cash and cash equivalents

  $ 11,855,000     $ 15,410,000  

Marketable securities at fair value, including common stocks of $164,589,000 and bonds of $8,276,000 at March 31, 2015 and common stocks of  $165,734,000 and bonds of $7,942,000 at September 30, 2014

    172,865,000       173,676,000  

Accounts receivable, less allowance for doubtful accounts of $250,000  at March 31, 2015 and September 30, 2014, respectively

    6,563,000       8,566,000  

Inventories

    38,000       51,000  

Prepaid expenses and other assets

    844,000       983,000  

Income tax receivable

    868,000       2,051,000  

Total current assets

    193,033,000       200,737,000  
                 

Property, plant and equipment, at cost

               

Land, buildings and improvements

    12,759,000       12,814,000  

Furniture, office equipment and computer software

    3,132,000       2,889,000  

Machinery and equipment

    1,864,000       1,864,000  
      17,755,000       17,567,000  

Less accumulated depreciation

    (8,633,000 )     (8,552,000 )
      9,122,000       9,015,000  

Intangibles, net

    15,296,000       17,744,000  

Goodwill

    13,400,000       13,400,000  

Deferred income taxes

    3,744,000       2,981,000  
    $ 234,595,000     $ 243,877,000  
                 

LIABILITIES AND SHAREHOLDERS' EQUITY

               

Current liabilities

               

Accounts payable

  $ 4,367,000     $ 4,344,000  

Accrued liabilities

    3,293,000       3,118,000  

Deferred subscriptions

    3,392,000       3,381,000  

Deferred installation contracts

    8,224,000       8,896,000  

Deferred maintenance agreements and others

    5,449,000       7,031,000  

Deferred income taxes, net

    43,097,000       46,502,000  

Total current liabilities

    67,822,000       73,272,000  
                 

Long term liabilities

               

Investment margin account borrowings

    29,493,000       29,493,000  

Deferred maintenance agreements

    184,000       180,000  

Income tax payable

    3,121,000       3,244,000  

Accrued interest and penalty for uncertain and unrecognized tax benefits

    581,000       537,000  

Accrued liabilities

    530,000       780,000  

Total long term liabilities

    33,909,000       34,234,000  
                 

Commitments and contingencies (Note 9)

    ---       ---  
                 

Shareholders' equity

               

Preferred stock, $.01 par value, 5,000,000 shares authorized and no shares issued

    ---       ---  

Common stock, $.01 par value, 5,000,000 shares authorized; 1,805,053 shares issued, including 424,307 treasury shares, at March 31, 2015 and September 30, 2014

    14,000       14,000  

Additional paid-in capital

    1,755,000       1,755,000  

Retained earnings

    59,238,000       58,301,000  

Accumulated other comprehensive income

    71,857,000       76,301,000  

Total shareholders' equity

    132,864,000       136,371,000  
    $ 234,595,000     $ 243,877,000  

 

See accompanying Notes to Consolidated Financial Statements

 

 
3

 

  

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

   

Three months

ended March 31

 
   

2015

   

2014

 
                 

Revenues

               

Advertising

  $ 2,549,000     $ 2,796,000  

Circulation

    1,460,000       1,476,000  

Advertising service fees and other

    650,000       661,000  

Licensing and maintenance fees

    3,680,000       3,135,000  

Consulting fees

    1,418,000       1,109,000  

Other public service fees

    1,635,000       1,651,000  
      11,392,000       10,828,000  
                 

Costs and expenses

               

Salaries and employee benefits

    6,771,000       6,358,000  

Other outside services

    835,000       801,000  

Postage and delivery expenses

    312,000       305,000  

Newsprint and printing expenses

    258,000       251,000  

Depreciation and amortization

    1,367,000       1,385,000  

Other general and administrative expenses

    2,815,000       2,246,000  
      12,358,000       11,346,000  

Loss from operations

    (966,000 )     (518,000 )

Other income (expense)

               

Dividends and interest income

    860,000       622,000  

Other income and capital gains

    14,000       25,000  

Interest expense accrued for uncertain and unrecognized tax benefits

    (24,000 )     ---  

Interest expense

    (55,000 )     (56,000 )

(Loss) income before income taxes

    (171,000 )     73,000  

Benefit from (provision for) income taxes

    675,000       (20,000 )

Net income

  $ 504,000     $ 53,000  
                 

Weighted average number of common shares outstanding - basic and diluted

    1,380,746       1,380,746  

Basic and diluted net income per share

  $ .37     $ .04  
                 
                 

Comprehensive (loss) income

               

Net income

  $ 504,000     $ 53,000  

Net change in unrealized appreciation  of investments (net of taxes)

    (802,000 )     10,667,000  
    $ (298,000 )   $ 10,720,000  

 

 

See accompanying Notes to Consolidated Financial Statements.

 

 
4

 

 

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

   

Six months

ended March 31

 
   

2015

   

2014

 
                 

Revenues

               

Advertising

  $ 5,253,000     $ 5,644,000  

Circulation

    2,984,000       3,016,000  

Advertising service fees and other

    1,335,000       1,337,000  

Licensing and maintenance fees

    7,437,000       6,143,000  

Consulting fees

    2,610,000       1,526,000  

Other public service fees

    3,096,000       3,113,000  
      22,715,000       20,779,000  
                 

Costs and expenses

               

Salaries and employee benefits

    13,383,000       12,857,000  

Other outside services

    1,682,000       1,587,000  

Postage and delivery expenses

    644,000       626,000  

Newsprint and printing expenses

    600,000       580,000  

Depreciation and amortization

    2,727,000       2,749,000  

Other general and administrative expenses

    5,006,000       4,167,000  
      24,042,000       22,566,000  

Loss from operations

    (1,327,000 )     (1,787,000 )

Other income (expense)

               

Dividends and interest income

    1,688,000       1,276,000  

Other income and capital gains

    32,000       51,000  

Interest expense accrued for uncertain and unrecognized tax benefits

    (44,000 )     ---  

Interest expense

    (112,000 )     (117,000 )

Income (loss) before income taxes

    237,000       (577,000 )

Benefit from (provision for) income taxes

    700,000       (10,000 )

Net income (loss)

  $ 937,000     $ (587,000 )
                 

Weighted average number of common shares outstanding - basic and diluted

    1,380,746       1,380,746  

Basic and diluted net income (loss) per share

  $ .68     $ (.43 )
                 
                 

Comprehensive (loss) income

               

Net income (loss)

  $ 937,000     $ (587,000 )

Net change in unrealized appreciation of investments (net of taxes)

    (4,444,000 )     18,866,000  
    $ (3,507,000 )   $ 18,279,000  

 

See accompanying Notes to Consolidated Financial Statements.

 

 
5

 

 

DAILY JOURNAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   

Six months

ended March 31

 
   

2015

   

2014

 
                 

Cash flows from operating activities

               

Net income (loss)

  $ 937,000     $ (587,000 )

Adjustments to reconcile net income (loss) to net cash provided by operations

               

Depreciation and amortization

    2,727,000       2,749,000  

Gains on sales of marketable securities

    (4,000 )     --- -  

Deferred income taxes

    (862,000 )     (375,000 )

Discounts earned on bonds

    (2,000 )     (2,000 )

Changes in assets and liabilities

               

(Increase) decrease in current assets (net of acquisitions)

               

Accounts receivable, net

    2,003,000       (25,000 )

Inventories

    13,000       18,000  

Prepaid expenses and other assets

    139,000       427,000  

Income tax receivable

    1,183,000       289,000  

Increase (decrease) in liabilities (net of acquisitions)

               

Accounts payable

    23,000       (66,000 )

Accrued liabilities

    (31,000 )     (1,874,000 )

Income taxes

    (123,000 )     79,000  

Deferred subscriptions

    11,000       17,000  

Deferred maintenance agreements and others

    (1,578,000 )     (1,390,000 )

Deferred installation contracts

    (672,000 )     885,000  

Net cash provided by operating activities

    3,764,000       145,000  
                 

Cash flows from investing activities

               

Sales of marketable securities

    4,044,000       --- -  

Purchases of marketable securities

    (10,977,000 )     --- -  

Purchases of property, plant and equipment

    (386,000 )     (209,000 )

Net cash used in investing activities

    (7,319,000 )     (209,000 )
                 

Decrease in cash and cash equivalents

    (3,555,000 )     (64,000 )
                 

Cash and cash equivalents

               

Beginning of period

    15,410,000       11,338,000  

End of period

  $ 11,855,000     $ 11,274,000  
                 

Interest paid during period

  $ 112,000     $ 110,000  

Net income taxes (refunded) paid during period

  $ (899,000 )   $ 17,000  

 

See accompanying Notes to Consolidated Financial Statements.

 

 
6

 

 

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, as well as the California Lawyer magazine, 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, includes as of October 1, 2014, the combined operations of Sustain Technologies, Inc. (“Sustain”), a wholly-owned subsidiary since 2008; New Dawn Technologies, Inc. (“New Dawn”), acquired in December 2012; and ISD Technologies, Inc. (“ISD”), acquired in September 2013. Effective October 1, 2014, Sustain and ISD merged into New Dawn, and New Dawn changed its name to Journal Technologies. The merger was concluded in accordance with Accounting Standards Codification (“ASC”) 805-50-15, Business Combinations - Transactions Between Entities Under Common Control which is when a parent’s subsidiary issues its shares in exchange for shares of another subsidiary previously owned by the same parent. Because pushdown accounting had been applied at the time of acquisitions, all assets and liabilities of Sustain and ISD were integrated into Journal Technologies at their carrying book values. Journal Technologies supplies case management software systems and related products to courts and other justice agencies, including administrative law organizations, 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 bar members and the public, including a website to pay traffic citations online. These products are licensed to more than 500 organizations in 41 states, 3 U.S. territories and 2 other countries.

 

Essentially all of the Company’s operations are based in California, Arizona 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 statement of its financial position as of March 31, 2015, its results of operations for the three- and six-month periods ended March 31, 2015 and 2014 and its cash flows for the six-month period ended March 31, 2015 and 2014. The results of operations for the three- and six-month periods ended March 31, 2015 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 audited consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2014.

 

 
7

 

 

Note 3 - Basic and Diluted Income Per Share

 

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

 

Note 4 - Intangible Assets

 

Intangible Assets

 
                                                 
   

March 31, 2015

   

September 30, 2014

 
   

Customer Relationships

   

Developed Technology

   

Total

   

Customer Relationships

   

Developed Technology

   

Total

 
                                                 

Gross intangible

  $ 21,950,000     $ 2,525,000     $ 24,475,000     $ 21,950,000     $ 2,525,000     $ 24,475,000  

Accumulated  amortization

    (8,199,000 )     (980,000 )     (9,179,000 )     (6,004,000 )     (727,000 )     (6,731,000 )
    $ 13,751,000     $ 1,545,000     $ 15,296,000     $ 15,946,000     $ 1,798,000     $ 17,744,000  

 

These identifiable intangible assets are being amortized over five years for financial statement purposes due to the short life cycle of technology that customer relationships depend on and over a 15-year period on a straight line basis for tax purposes. The intangible amortization expenses were $2,448,000 for the six months ended March 31, 2015 as compared with $2,419,000 in the prior year period.

 

Note 5 – Goodwill

 

     The Company accounts for goodwill in accordance with 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 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, among other things.

 

In addition, Accounting Standards Codification 2011-08, 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 2014 did not result in an impairment charge based on the qualitative assessment. There was no goodwill impairment during the three- and six-month periods ended March 31, 2015 and 2014.

 

Note 6 – Revenue Recognition

 

      For the Company’s traditional publishing business (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 commissions. An allowance for doubtful accounts is recorded for the accounts receivable.

 

 
8

 

 

Journal Technologies recognizes revenues in accordance with the provisions of ASC 985-605, Software—Revenue Recognition and ASC 605-35 Construction-Type and Production-Type Contracts. Revenues from leases of software products are recognized over the life of the lease while revenues from software product sales are generally recognized upon delivery, installation or acceptance pursuant to a signed agreement. Revenues from annual license and maintenance contracts generally call for the Company to provide software updates and upgrades to customers and are recognized ratably over the maintenance period. Consulting and other services are recognized upon acceptance by the customers under the completed contract method. The Company elects to use the completed contract method because each customer’s acceptance is unpredictable and reliable estimates of the progress towards completion cannot be made. Only after a customer’s acceptance of a completed project are customer advances generally no longer at risk of refund and are therefore considered earned.

 

Approximately 58% and 52% of the Company’s revenues during the six months ended March 31, 2015 and 2014, respectively, were derived from Journal Technologies.

 

     The Company has established Vendor Specific Objective Evidence (VSOE) of fair value of the annual maintenance because a substantial majority of the Journal Technologies’ actual maintenance renewals is within a narrow range of pricing as a percentage of the underlying license fees for the legacy contracts and is deemed substantive.

 

Note 7 - Income Taxes

 

For the six months ended March 31, 2015, the Company recorded an income tax benefit of $700,000 on pretax income of $237,000. The income tax benefit was the result of applying the effective tax rate anticipated for fiscal 2015 to pretax income for the six months ended March 31, 2015. The effective tax rate is lower than the statutory rate primarily due to the dividends received deduction, the domestic production activity deduction and a discrete benefit of about $400,000 related to the California Enterprise Zone credits. On a pretax loss of $577,000 for the six months ended March 31, 2014, the Company recorded a tax provision of $10,000 which was the net result from applying the effective tax rate anticipated for fiscal 2014 to the loss from continuing operations for the first two quarters of fiscal 2014. The Company’s effective tax rate was -295% and -2% for the six months ended March 31, 2015 and 2014, respectively.  The Company files 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 2011 with regard to federal income taxes and fiscal 2010 for state income taxes. 

 

At March 31, 2015, the Company had an accrued liability of approximately $3,121,000 for uncertain and unrecognized tax benefits relating to an acquisition in fiscal 2013. The Company does not anticipate a significant increase or decrease in this liability in the next twelve months.   If recognized, it is expected that these unrecognized tax benefits would not have a significant impact on the Company’s effective tax rate. During the six months ended March 31, 2015, interest expense of approximately $44,000 was recorded as “interest and penalty expense accrued for uncertain and unrecognized tax benefits” in the statement of comprehensive income (loss).

 

Note 8 - 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 March 31, 2015 and September 30, 2014, an unrealized gain of $117,948,000 and $125,700,000, respectively, was recorded net of taxes of $45,590,000 and $48,896,000, 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.

 

 
9

 

 

Investments in equity securities and securities with fixed maturity as of March 31, 2015 and September 30, 2014 are summarized below.

 

 

   

Investments

 
   

March 31, 2015

   

September 30, 2014

 
   

(Unaudited)

                         
   

Aggregate

fair value

   

Amortized/Adjusted

cost basis

   

Pretax unrealized gains

   

Aggregate

fair value

   

Amortized/Adjusted

cost basis

   

Pretax unrealized gains

 

Marketable securities

                                               

Common stocks

  $ 164,589,000     $ 49,980,000     $ 114,609,000     $ 165,734,000     $ 43,042,000     $ 122,692,000  

Bonds

    8,276,000       4,937,000       3,339,000       7,942,000       4,934,000       3,008,000  

Total

  $ 172,865,000     $ 54,917,000     $ 117,948,000     $ 173,676,000     $ 47,976,000     $ 125,700,000  

 

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

 

As of March 31, 2015, the Company performed separate evaluations for impaired equity securities to determine if the unrealized losses were 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 securities until fair value recovers. The assessment of the ability and intent to hold these securities to recovery focuses on liquidity needs, asset/liability management objectives and securities portfolio objectives. Based on the results of the evaluations, the Company concluded that as of March 31, 2015, all unrealized losses related to the equity securities it owns were temporary.

 

Note 9 - Debt and Commitments and Contingencies

 

In December 2012, the Company borrowed from its investment margin account the purchase price of $14 million for the New Dawn acquisition, and in September 2013, it borrowed another $15.5 million for the ISD acquisition, 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 March 31, 2015 was 0.75%. These investment margin account borrowings do not mature.

 

The Company owns its facilities in Los Angeles and leases space for its other Daily Journal offices under operating leases which expire at various dates through fiscal 2020. The Company is responsible for a portion of maintenance, insurance and property tax expenses relating to these leased properties and certain other leased properties. Rental expenses for six-month periods ended March 31, 2015 and 2014 were $588,000 and $633,000, respectively.

 

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 effect on the Company’s financial position or results of operations or cash flows.

 

 
10

 

 

Note 10 - Operating Segments

 

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

  

    Reportable Segments              
   

Traditional

Business

   

Journal

Technologies

   

Non-operating items

   

Total

 

Six months ended March 31, 2015

                               

Revenues

                               

Advertising

  $ 5,253,000     $ ---     $ ---     $ 5,253,000  

Circulation

    2,984,000       ---       ---       2,984,000  

Advertising service fees and other

    1,335,000       ---       ---       1,335,000  

Licensing and maintenance fees

    ---       7,437,000       ---       7,437,000  

Consulting fees

    ---       2,610,000       ---       2,610,000  

Other public service fees

    ---       3,096,000       ---       3,096,000  

Operating expenses

    9,176,000       14,866,000       ---       24,042,000  

Income (loss) from operations

    396,000       (1,723,000 )     ---       (1,327,000 )

Dividends and interest income

    ---       ---       1,688,000       1,688,000  

Other income and capital gains

    ---       ---       32,000       32,000  

Interest expense accrued for uncertain and unrecognized tax benefits

    ---       ---       (44,000 )     (44,000 )

Interest expenses

    ---       ---       (112,000 )     (112,000 )

Pretax income (loss)

    396,000       (1,723,000 )     1,564,000       237,000  

Income tax benefit

    ---       ---       700,000       700,000  

Net income (loss)

    396,000       (1,723,000 )     2,264,000       937,000  

Total assets

    14,012,000       47,718,000       172,865,000       234,595,000  

Capital expenditures

    306,000       80,000       ---       386,000  

Amortization of intangible assets

    ---       2,448,000       ---       2,448,000  
                                 

Six months ended March 31, 2014

                               

Revenues

                               

Advertising

  $ 5,644,000     $ ---       ---     $ 5,644,000  

Circulation

    3,016,000       ---       ---       3,016,000  

Advertising service fees and other

    1,337,000       ---       ---       1,337,000  

Licensing and maintenance fees

    ---       6,143,000       ---       6,143,000  

Consulting fees

    ---       1,526,000       ---       1,526,000  

Other public service fees

    ---       3,113,000       ---       3,113,000  

Operating expenses

    8,863,000       13,703,000       ---       22,566,000  

Income (loss) from operations

    1,134,000       (2,921,000 )     ---       (1,787,000 )

Dividends and interest income

    ---       ---       1,276,000       1,276,000  

Other income and capital gains

    ---       ---       51,000       51,000  

Interest expenses

    ---       ---       (117,000 )     (117,000 )

Pretax income (loss)

    1,134,000       (2,921,000 )     1,210,000       (577,000 )

Income tax (expense)

    ---       ---       (10,000 )     (10,000 )

Net income (loss)

    1,134,000       (2,921,000 )     1,200,000       (587,000 )

Total assets

    10,169,000       47,329,000       173,676,000       231,174,000  

Capital expenditures

    52,000       157,000       ---       209,000  

Amortization of intangible assets

    ---       2,419,000       ---       2,419,000  

 

 
11

 

  

    Reportable Segments              
   

Traditional

Business

   

Journal

Technologies

   

Non-operating items

   

Total

 
                                 

Three months ended March 31, 2015

                               

Revenues

                               

Advertising

  $ 2,549,000     $ ---     $ ---     $ 2,549,000  

Circulation

    1,460,000       ---       ---       1,460,000  

Advertising service fees and other

    650,000       ---       ---       650,000  

Licensing and maintenance fees

    ---       3,680,000       ---       3,680,000  

Consulting fees

    ---       1,418,000       ---       1,418,000  

Other public service fees

    ---       1,635,000       ---       1,635,000  

Operating expenses

    4,553,000       7,805,000       ---       12,358,000  

Income (loss) from operations

    106,000       (1,072,000 )     ---       (966,000 )

Dividends and interest income

    ---       ---       860,000       860,000  

Other income and capital gains

    ---       ---       14,000       14,000  

Interest expense accrued for uncertain and unrecognized tax benefits

    ---       ---       (24,000 )     (24,000 )

Interest expenses

    ---       ---       (55,000 )     (55,000 )

Pretax income (loss)

    106,000       (1,072,000 )     795,000       (171,000 )

Income tax benefit

    ---       ---       675,000       675,000  

Net income (loss)

    106,000       (1,072,000 )     1,470,000       504,000  

Total assets

    14,012,000       47,718,000       172,865,000       234,595,000  

Capital expenditures

    248,000       69,000       ---       317,000  

Amortization of intangible assets

    ---       1,224,000       ---       1,224,000  
                                 

Three months ended March 31, 2014

                               

Revenues

                               

Advertising

  $ 2,796,000     $ ---     $ ---     $ 2,796,000  

Circulation

    1,476,000       ---       ---       1,476,000  

Advertising service fees and other

    661,000       ---       ---       661,000  

Licensing and maintenance fees

    ---       3,135,000       ---       3,135,000  

Consulting fees

    ---       1,109,000       ---       1,109,000  

Other public service fees

    ---       1,651,000       ---       1,651,000  

Operating expenses

    4,493,000       6,853,000       ---       11,346,000  

Income (loss) from operations

    440,000       (958,000 )     ---       (518,000 )

Dividends and interest income

    ---       ---       622,000       622,000  

Other income and capital gains

    ---       ---       25,000       25,000  

Interest expenses

    ---       ---       (56,000 )     (56,000 )

Pretax income (loss)

    440,000       (958,000 )     591,000       73,000  

Income tax expense

    ---       ---       (20,000 )     (20,000 )

Net income (loss)

    440,000       (958,000 )     571,000       53,000  

Total assets

    10,169,000       47,329,000       173,676,000       231,174,000  

Capital expenditures

    27,000       91,000       ---       118,000  

Amortization of intangible assets

    ---       1,224,000       ---       1,224,000  

 

Note 11 - Subsequent Events

 

The Company has completed an evaluation of all subsequent events through the issuance date of these financial statements and concluded that no subsequent events occurred that required recognition to the financial statements or disclosures in the notes to consolidated financial statements or cash flows.

 

 
12

 

 

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 and magazine publishing and related services that the Company had before 1999 when it purchased a majority interest in Sustain, and (2) Journal Technologies, which supplies case management software systems and related products to courts and other justice agencies, including administrative law organizations, county governments and bar associations. The Company also generates non-operating revenues in the form of dividends and interest income, and other income and capital gains, from its ownership of marketable securities.

 

Overall Results

 

During the six months ended March 31, 2015, consolidated pretax income increased by $814,000 (141%) to $237,000 from a loss of $577,000 in the prior year period. The Traditional Business segment’s pretax income decreased by $738,000 (65%) to $396,000 from $1,134,000, primarily resulting from a reduction in trustee sale notice and related service fee revenues of $447,000. Journal Technologies’ business segment pretax loss decreased by $1,198,000 (41%) to $1,723,000 primarily resulting from additional revenues as further discussed below. The Company’s non-operating income, net of expenses, increased by $354,000 (29%) to $1,564,000 primarily because of additional dividends and interest income from the marketable securities owned by the Company.

 

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

 

 

Overall Operating Results (000)

 

For the six months ended March 31, 2015

 
                                                                 
   

Reportable Segments

                                 
   

Traditional

Business

   

Journal

Technologies

   

Non-operating

income and expenses

   

Total

 
   

2015

   

2014

   

2015

   

2014

   

2015

   

2014

   

2015

   

2014

 

Revenues

                                                               

Advertising

  $ 5,253     $ 5,644     $ ---     $ ---     $ ---     $ ---     $ 5,253     $ 5,644  

Circulation

    2,984       3,016       ---       ---       ---       ---       2,984       3,016  

Advertising service fees and other

    1,335       1,337       ---       ---       ---       ---       1,335       1,337  

Licensing and maintenance fees

    ---       ---       7,437       6,143       ---       ---       7,437       6,143  

Consulting fees

    ---       ---       2,610       1,526       ---       ---       2,610       1,526  

Other public service fees

    ---       ---       3,096       3,113       ---       ---       3,096       3,113  
      9,572       9,997       13,143       10,782       ---       ---       22,715       20,779  

Expenses

                                                               

Salaries and employee benefits

    4,937       4,929       8,446       7,928       ---       ---       13,383       12,857  

Amortization of intangible assets

    ---       ---       2,448       2,419       ---       ---       2,448       2,419  

Others

    4,239       3,934       3,972       3,356       ---       ---       8,211       7,290  
      9,176       8,863       14,866       13,703       ---       ---       24,042       22,566  

Income (loss) from operations

    396       1,134       (1,723 )     (2,921 )     ---       ---       (1,327 )     (1,787 )

Other income (net), primarily dividends and interest income

    ---       ---       ---       ---       1,564       1,210       1,564       1,210  

Pretax income (loss)

  $ 396     $ 1,134     $ (1,723 )   $ (2,921 )   $ 1,564     $ 1,210     $ 237     $ (577 )

  

 
13

 

  

Comprehensive (Loss) Income

 
                 
   

Six months ended March 31

 
   

2015

   

2014

 
                 

Net income (loss)

  $ 937,000     $ (587,000 )

Net change in unrealized appreciation of investments (net of taxes)

    (4,444,000 )     18,866,000  
    $ (3,507,000 )   $ 18,279,000  

 

 

At March 31, 2015, the aggregate fair market value of the Company’s marketable securities was $172,865,000. These securities had approximately $117,948,000 of unrealized gains before taxes of $45,590,000 and generated approximately $1,688,000 in dividends and interest income during the period, which lowers the Company’s effective income tax rate because of the dividends received deduction.

 

Consolidated revenues were $22,715,000 and $20,779,000 for the six months ended March 31, 2015 and 2014, respectively. This increase of $1,936,000 (9%) was primarily from additional Journal Technologies licensing and maintenance and consulting revenues of $2,378,000, partially offset by the reduction in trustee sale notice and related service fee revenues of $447,000. The Company’s revenues derived from Journal Technologies’ operations constituted about 58% and 52% of the Company’s total revenues for the six months ended March 31, 2015 and 2014, respectively. (Consolidated revenues were $11,392,000 and $10,828,000 for the three months ended March 31, 2015 and 2014, respectively.)

 

Consolidated operating costs and expenses increased by $1,476,000 (7%) to $24,042,000 from $22,566,000, primarily resulting from additional expenses for Journal Technologies. Total personnel costs increased by $526,000 (4%) to $13,383,000 from $12,857,000 including additional personnel costs for Journal Technologies of $518,000. (Consolidated operating costs were $12,358,000 and $11,346,000 for the three months ended March 31, 2015 and 2014, respectively.)

 

There was net income per share of $0.68 in the six months ended March 31, 2015, as compared with a net loss of $0.43 per share in the prior year period.

 

The Traditional Business

 

     The Traditional Business segment advertising revenues, which declined by $391,000 (7%) to $5,253,000 from $5,644,000, 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 26% during the six months ended March 31, 2015 as compared to the prior year period and accounted for almost all of the decline in revenues. Because this slowing is expected to continue, we anticipate there will be fewer foreclosure notice advertisements and declining revenues in fiscal 2015, and the Company’s print-based earnings will also decline significantly because it will be impractical for the Company to offset all revenue loss 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 92% of the total public notice advertising revenues in the six months ended March 31, 2015. Public notice advertising revenues and related advertising and other service fees constituted about 21% of the Company's total revenues. Because of this concentration, the Company’s revenues would be significantly affected if California (and to a lesser extent Arizona) eliminated the legal requirement to publish public notices in adjudicated newspapers of general circulation, as has been proposed from time to time. 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.

  

 
14

 

 

We do not expect to experience an offsetting increase in commercial advertising which had a small decrease of $14,000 (1%) to $1,800,000 from $1,814,000 because of the continuing challenges in the commercial advertising business. The Daily Journals accounted for about 87% of the Company's total circulation revenues, which declined by $32,000 (1%) to $2,984,000 from $3,016,000. The court rule and judicial profile services generated about 10% 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 increased by $313,000 (4%) to $9,176,000 from $8,863,000 primarily due to additional outside tax specialist services.

 

Journal Technologies

 

Journal Technologies’ revenues increased by $2,361,000 (22%) to $13,143,000 from $10,782,000 in the prior year period. Licensing and maintenance fees increased by $1,294,000 (21%) to $7,437,000 from $6,143,000. Consulting fees increased by $1,084,000 (71%) to $2,610,000 from $1,526,000. Other public service fees decreased by $17,000 (1%) to $3,096,000 from $3,113,000. In most cases, revenues from new installation projects will only be recognized, if at all, upon completion and acceptance of the services by the various customers. Deferred revenues on installation contracts primarily represent the fair value of advances from customers of Journal Technologies for software licenses and installation services. After a customer’s acceptance of the completed project, the advances are generally no longer at risk of refund and are therefore considered earned. Deferred revenues on maintenance contracts represent prepayments of annual maintenance fees.

 

Journal Technologies’ operating expenses, which included the amortization of intangible assets of $2,448,000 and $2,419,000 in the six-month periods ended March 31, 2015 and 2014, respectively, increased by $1,163,000 (8%) to $14,866,000 from $13,703,000 primarily due to increased personnel costs of $518,000 and travel expenses of $318,000. Identifiable intangible assets, including customer relationships and developed technology, are being amortized on a straight-line basis over five years due to the short life cycle of technology that customer relationships depend on and over 15 years for tax purposes. Goodwill, which is not amortized for financial statement purposes, is amortized over a 15-year period 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 business profitability before intangible amortization, fluctuations of revenues, changes in the market place, the status of installation contracts and new business, among other things. The Company 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.

 

 
15

 

 

Taxes 

 

For the six months ended March 31, 2015, the Company recorded an income tax benefit of $700,000 on pretax income of $237,000. The income tax benefit was the result of applying the effective tax rate anticipated for fiscal 2015 to pretax income for the six months ended March 31, 2015. The effective tax rate is lower than the statutory rate primarily due to the dividends received deduction, the domestic production activity deduction and a discrete benefit of about $400,000 related to the California Enterprise Zone credits. On pretax loss of $577,000 for the six months ended March 31, 2014, the Company recorded a tax provision of $10,000 which was the net result from applying the effective tax rate anticipated for fiscal 2014 to the loss from continuing operations for the first two quarters of fiscal 2014. The Company’s effective tax rate was -295% and -2% for the six months ended March 31, 2015 and 2014, respectively.  The Company files 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 2011 with regard to federal income taxes and fiscal 2010 for state income taxes. 

 

At March 31, 2015, the Company had an accrued liability of approximately $3,121,000 for uncertain and unrecognized tax benefits relating to an acquisition in fiscal 2013. The Company does not anticipate a significant increase or decrease in this liability in the next twelve months.   If recognized, it is expected that these unrecognized tax benefits would not have a significant impact on the Company’s effective tax rate.  During the six months ended March 31, 2015, interest expense of approximately $44,000 was recorded as “interest and penalty expense accrued for uncertain and unrecognized tax benefits” in the statement of comprehensive income (loss).

 

Liquidity and Capital Resources

 

During the six months ended March 31, 2015, the Company's cash and cash equivalents and marketable security positions decreased by $4,366,000 to $184,720,000. After selling marketable securities for $4,044,000 and realizing a pretax gain of approximately $4,000, cash and cash equivalents were used primarily for the purchase of other marketable securities of $10,977,000 and capital assets, including computer software and office equipment of about $386,000. The investments in marketable securities, which cost approximately $54,917,000 and had a market value of about $172,865,000 at March 31, 2015, generated approximately $1,688,000 in dividends and interest income, which lowers the Company’s effective income tax rate because of the dividends received deduction. As of March 31, 2015, there were unrealized investment pretax gains of $117,948,000 as compared to $125,700,000 as of September 30, 2014. Most of the unrealized gains were in the common stocks of three U.S. financial institutions.

 

The cash provided by operating activities of $3,764,000 included decreases in deferred installation contracts and maintenance agreements of $2,250,000, partially offset by increases in deferred subscriptions of $11,000. Cash flows from operating activities increased by $3,619,000 during the six months ended March 31, 2015 as compared to the prior year period primarily resulting from increases in net income of $1,524,000 and decreases in accounts receivable of $2,028,000 primarily resulting from more collections. 

 

As of March 31, 2015, the Company had working capital of $125,211,000, including the liabilities for deferred subscriptions and deferred installation contracts and maintenance agreements of $13,673,000, which are scheduled to be earned within one year, and the deferred tax liability of $45,590,000 for the unrealized gains described above.

 

The Company believes that it will be able to fund its operations for the foreseeable future through its cash flows from operating activities 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 on favorable terms as it did for prior acquisitions. The Company also may entertain additional business acquisition opportunities. Any excess cash flows could be used to reduce the investment margin account liability or invested as management and the Board of Directors deem appropriate at the time.

 

 
16

 

  

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 March 31, 2015, 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.

 

The Company’s critical accounting policies are detailed in its Annual Report on Form 10-K for the year ended September 30, 2014. The above discussion and analysis should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in this report.

  

 
17

 

 

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 its decision to restate its Form 10-Q for the third quarter of fiscal 2014; and declines in the market prices of the Company’s investments. 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, 2014.

 

 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, 2014. There have been no material changes to the Company’s market risk exposures since September 30, 2014.

 

    Item 4. CONTROLS AND PROCEDURES

 

In light of the material weaknesses in the Company’s internal control over financial reporting discussed in the Company’s Form 10-K for the fiscal year ended September 30, 2014, management concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2015. While the Company has been analyzing possible remedial steps, there were still material weaknesses existing as of March 31, 2015, and there were no material changes in the company’s internal control over financial reporting or in other factors reasonably likely to affect its internal control over financial reporting during the six months ended March 31, 2015.

 

 
18

 

 

PART II

 

Item 1A. Risk Factors

 

In addition to the risk factors and uncertainties previously disclosed in the Company’s Form 10-K for the fiscal year ended September 30, 2014, the Company hereby adds the following:

 

We cannot be sure that customer information and systems are fully protected against security breaches. Journal Technologies’ software processes and stores customer information in the conduct of its business, including in some cases by utilizing a cloud-based system supplied by a third-party vendor. Despite our efforts to maintain up-to-date security controls, it is possible that our system could be improperly used to access or misappropriate customer systems or information, including personally identifiable or other confidential information. A material security breach of this nature could harm our reputation, cause us to lose current and potential customers, require us to allocate more resources to information security, or subject us or our customers to liability, resulting in increased costs, loss of revenue, or both. The Traditional Business also operates certain websites that process and, in certain cases, store customer information. A minor security breach was discovered on a website operated by The Traditional Business, and although it was remediated, there can be no assurance that there will not be more material breaches in the future. Also, our insurance may not cover all of the costs that we may incur as a result of a material security breach.

 

 
19

 

 

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

 

 

 

 

 

Gerald L. Salzman

 

  Chief Executive Officer  
  President  
  Chief Financial Officer  
  Treasurer  
  (Principal Executive Officer,  
  Principal Financial Officer and  
  Principal Accounting Officer)   
     
     
     
DATE: May 8, 2015    

 

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