<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 27, 1999
DAILY JOURNAL CORPORATION
----------------------------------------------
(Exact Name of Registrant as Specified in Charter)
South Carolina 0-14665 95-4133299
- -------------- ------- ----------
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
355 South Grand Avenue, 34th Floor
Los Angeles, California 90071-1560
- ------------------------------------ ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (213) 624-7715
Not Applicable
------------------
(Former Name or Former Address, if Changed Since Last Report)
1
<PAGE>
Explanatory Note
----------------
This Amendment No. 1 to the current report on Form 8-K dated as of January 27,
1999 is filed to include the financial statements required to be filed under
Item 7.
<TABLE>
<S> <C>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
The required financial statements are included as exhibit 99.1 below.
(b) Pro Forma Financial Information
The required pro forma financial information is included below as exhibit 99.2.
(c) Exhibits
The following exhibits are filed herewith:
</TABLE>
Exhibit Number Description
-------------- -----------
99.1 Audited Balance Sheet of Choice Information Systems as
of December 31, 1998 and the related audited Statement
of Income and Retained Earnings and audited Cash Flows
Statement for the year ended December 31, 1998,
together with the Notes to Financial Statements and
the Auditor's Report.
99.2 Unaudited Pro Forma Combined Balance Sheet as of
December 31, 1998 and Unaudited Pro Forma Statement of
Income for fiscal 1998 and for the three months ended
December 31, 1998 together with the Notes to the Pro
Forma Combined Financial Statements.
2
<PAGE>
SIGNATURES
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 hereunto duly authorized.
DAILY JOURNAL CORPORATION
By: /s/ GERALD L. SALZMAN
--------------------------
Name: Gerald L. Salzman
Title: Chief Financial Officer
Dated: June 16, 1999
3
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Number Description
-------------- -----------
99.1 Audited Balance Sheet of Choice Information Systems as of
December 31, 1998 and the related audited Statement of
Income and Retained Earnings and audited Cash Flows
Statement for the year ended December 31, 1998, together
with the Notes to Financial Statements and the Auditor's
Report.
99.2 Unaudited Pro Forma Combined Balance Sheet as of December
31, 1998 and Unaudited Pro Forma Statement of Income for
fiscal 1998 and for the three months ended December 31,
1998 together with the Notes to the Pro Forma Combined
Financial Statements.
4
<PAGE>
Exhibit 99.1
DAILY JOURNAL CORPORATION
FORM 8-K/A
CHOICE INFORMATION SYSTEMS, INCORPORATED
FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
C O N T E N T S
________
<TABLE>
<S> <C>
Independent Auditor's Report 1
Financial Statements:
Balance Sheet 2
Statement of Income and Retained Earnings 3
Statement of Cash Flows 4
Notes to Financial Statements 5-7
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Daily Journal Corporation
We have audited the accompanying balance sheet of Choice Information
Systems, Incorporated as of December 31, 1998, and the related statements of
income, retained earnings and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Choice Information Systems,
Incorporated at December 31, 1998, and the results of its operations and cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ HART & STEINMULLER, P.C.
HART & STEINMULLER, P.C.
Certified Public Accountants
April 1, 1999
1
<PAGE>
CHOICE INFORMATION SYSTEMS, INCORPORATED
BALANCE SHEET
DECEMBER 31, 1998
------------
<TABLE>
<CAPTION>
Assets
<S> <C>
Current assets:
Cash $ 407,528
Accounts receivable, trade 253,493
City tax refund receivable 12,403
Prepaid expenses 15,042
Notes receivable, stockholders (Note 2) 626,367
----------
Total current assets 1,314,833
Property and equipment - net (Note 3) 80,532
Other asset:
Deferred tax benefit (Note 4) 100,205
----------
Total assets $1,495,570
==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade $ 23,667
Deferred revenue 527,244
Payroll and accrued withholdings 34,950
Income tax payable 139,487
Profit sharing payable 114,758
----------
Total current liabilities and total liabilities 840,106
----------
Stockholders' equity:
Common stock, no par value; 150 shares
authorized, 150 shares issued and outstanding 444,285
Retained earnings 211,179
----------
Total stockholders' equity 655,464
----------
Total liabilities and stockholders' equity $1,495,570
==========
</TABLE>
The Accompanying Notes Are An Integral
Part Of These Financial Statements.
2
<PAGE>
CHOICE INFORMATION SYSTEMS, INCORPORATED
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED
DECEMBER 31, 1998
----------
<TABLE>
<S> <C>
Sales revenues $3,291,970
----------
Cost and expenses:
Salaries and employee benefits 1,751,977
Royalties, sales and promotional expenses 840,517
Professional services 92,168
Rent 52,471
Depreciation and amortization 41,091
Other 37,321
----------
2,815,545
----------
Income from operations 476,425
----------
Other income:
Interest 35,464
----------
Net income before income taxes 511,889
Income tax (expense) (Note 4) (183,914)
----------
Net income 327,975
(Deficit) earnings, beginning of year (106,796)
Cash dividends (10,000)
----------
Retained earnings, end of year $ 211,179
==========
</TABLE>
The Accompanying Notes Are An Integral
Part Of These Financial Statements.
3
<PAGE>
CHOICE INFORMATION SYSTEMS, INCORPORATED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED
DECEMBER 31, 1998
-----------
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 327,975
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 41,091
(Increase) in accounts receivable (140,693)
(Increase) in city tax refund receivable (12,403)
(Increase) in prepaid expenses (15,042)
Decrease in deferred tax benefit 16,364
Increase in accounts payable 23,667
Increase in deferred revenue 66,599
(Decrease) in payroll and accrued withholdings (4,497)
Increase in income tax payable 139,487
Increase in profit sharing payable 3,420
---------
Net cash provided by operating activities 445,968
---------
Cash flows from investing activities:
Increase in notes receivable, stockholders (626,367)
Purchase of fixed assets (17,384)
---------
Net cash (used) by investing activities (643,751)
---------
Cash flows from financing activities:
Dividends paid (10,000)
Purchase of stock (539,600)
Proceeds from sale of stock 830,835
---------
Net cash provided by financing activities 281,235
---------
Net increase in cash 83,452
Cash, beginning of year 324,076
---------
Cash, end of year $ 407,528
=========
</TABLE>
The Accompanying Notes Are An Integral
Part Of These Financial Statements.
4
<PAGE>
CHOICE INFORMATION SYSTEMS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENT
DECEMBER 31, 1998
--------
1. Nature of Business and Summary of Significant Accounting Policies:
-----------------------------------------------------------------
Nature of business
------------------
The Company is in the business of software development, implementation and
maintenance for court systems.
The Company has entered into an agreement to be purchased by the Daily
Journal Corporation (DJC) as described more fully in Note 7.
Basis of accounting
-------------------
The Company uses the accrual method of accounting. That is, income is
recorded at date of transaction, whether or not payment is received, and
expenses are recorded when incurred, whether or not payment is made.
Concentration of credit
-----------------------
The Company maintains its cash in bank deposit accounts which, at times, may
exceed federally insured limits. The Company has not experienced any losses
in such accounts. The Company believes it is not exposed to any significant
credit risk on cash.
Accounts receivable
-------------------
Substantially all of the Company's customers are governmentally funded court
systems. Accordingly, all receivables are deemed to be fully collectible.
Advertising costs
-----------------
Advertising costs are expensed as they are incurred.
Property, equipment and depreciation
------------------------------------
Property and equipment are stated at cost. Depreciation is provided using
straight-line and accelerated methods, over the estimated useful lives of
the related assets.
Use of estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles 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. Actual results could differ from those estimates.
5
<PAGE>
CHOICE INFORMATION SYSTEMS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
--------
2. Notes Receivable, Stockholders:
------------------------------
The Company has three notes receivable from stockholders with a combined
balance at December 31, 1998 of $626,367. The interest rate is variable. The
entire amount of principal will be repaid from each stockholder's portion of
the proceeds from the sale of their stock. (See also Note 7.)
3. Property and Equipment:
-----------------------
A summary of property and equipment and accumulated depreciation at December
31, 1998 follows:
<TABLE>
<S> <C>
Computer equipment $191,032
Software 62,068
Furniture and fixtures 65,552
--------
318,652
Less: accumulated depreciation 238,120
--------
$ 80,532
=========
</TABLE>
4. Income Taxes:
------------
Deferred income taxes arise from timing differences resulting from income
and expense items reported for financial accounting and tax purposes in
different periods. Deferred taxes are classified as current or noncurrent,
depending on the classification of the assets and liabilities to which they
relate. Deferred taxes arising from timing differences that are not related
to an asset or liability are classified as current or noncurrent, depending
on the periods in which the timing differences are expected to reverse.
Income tax (expense) for the year ended December 31, 1998 is as follows:
<TABLE>
<S> <C>
Currently (payable) $(167,550)
Decrease in deferred tax benefit due to timing
differences (16,364)
---------
$(183,914)
=========
</TABLE>
The principal source of the timing differences is prepaid software maintenance
revenue recognized on the cash basis for tax purposes.
6
<PAGE>
CHOICE INFORMATION SYSTEMS, INCORPORATED
NOTES TO THE FINANCIAL STATEMENTS, CONTINUED
--------
5. Commitments:
-----------
The Company conducts its operations from leased premises. Rent payments are
due monthly until June 30, 2003. Rent expense under this lease for the year
ended December 31, 1998 was $52,471.
Minimum lease payments over the term of the lease are as follows:
<TABLE>
<CAPTION>
Year Ended
December 31, Amount
------------ --------
<S> <C>
1999 $59,827
2000 61,882
2001 64,042
2002 66,307
2003 33,733
-------
$285,791
========
</TABLE>
6. Pension Plan:
------------
The Company has a money purchase plan that covers all full-time employees.
Contributions to the plan are paid annually and are equal to 5% of
compensation. Additionally, the company has a profit sharing plan. The
contributions to the profit sharing plan are at the sole discretion of the
board of directors. Contributions to the money purchase and profit sharing
plans for the year ended December 31, 1998 are $33,448 and $81,310,
respectively. The Company will terminate their pension plans during 1999. No
further obligations are required.
7. Subsequent Event:
----------------
The Company entered into an agreement to be acquired by the Daily Journal
Corporation. Effective January 26, 1999, the Daily Journal Corporation
acquired 80% of the Company's stock for $2,382,924.
7
<PAGE>
Exhibit 99.2
DAILY JOURNAL CORPORATION
FORM 8-K/A
Unaudited Pro Forma Combined Financial Statements
The Pro Forma Combined Balance Sheet as of December 31, 1998 presents the
financial position of Daily Journal Corporation assuming the acquisition had
been completed as of that date. The Pro Forma Statement of Income for fiscal
1998 and for the three months ended December 31, 1998 present the results of
operations of Daily Journal Corporation assuming that the acquisition had been
completed as of the beginning of each of the respective periods. These
statements include all material adjustments necessary to restate the historical
results to accommodate these assumptions.
<PAGE>
DAILY JOURNAL CORPORATION
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
December 31, 1998
<TABLE>
<CAPTION>
Pro forma
Daily Journal adjustments/ Pro forma
Corporation eliminations (Note 1) combined
------------ ------------------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 987,000 $ 1,048,000 $ 2,035,000
U.S. Treasury Bills, at cost plus discount earned 12,090,000 (6,728,000)
3,350,000 8,712,000
Accounts receivable, less allowance for doubtful
accounts of $700,000 6,097,000 362,000 6,459,000
Inventories 72,000 72,000
Prepaid expenses and other assets 325,000 10,000 335,000
Deferred income taxes 707,000 107,000 814,000
------------ -----------
Total current assets 20,278,000 18,427,000
------------ -----------
Property, plant and equipment, at cost:
Land, buildings and improvements 8,093,000 8,093,000
Furniture, office equipment and computer software 5,390,000 3,613,000 9,003,000
Machinery and equipment 1,365,000 1,365,000
------------ -----------
14,848,000 18,461,000
Less accumulated depreciation (6,544,000) (240,000) (6,784,000)
------------ -----------
8,304,000 11,677,000
Deferred income taxes 307,000 307,000
Intangible assets, at cost, less accumulated
amortization of $0 - 556,000 556,000
------------ -----------
$ 28,889,000 $30,967,000
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,558,000 $ 2,558,000
Accrued liabilities 1,862,000 343,000 2,205,000
Income taxes 559,000 133,000 692,000
Deferred subscription revenue and other 6,873,000 508,000 7,381,000
------------ -----------
Total current liabilities 11,852,000 12,836,000
------------ -----------
Minority interest - 1,094,000 1,094,000
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; 1,618,570 shares, outstanding 16,000 16,000
Other paid-in capital 2,058,000 2,058,000
Retained earnings 15,460,000 15,460,000
Less 34,387 treasury shares, at cost (497,000) (497,000)
------------ -----------
Total shareholders' equity 17,037,000 17,037,000
------------ -----------
$ 28,889,000 $30,967,000
============ ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
PRO FORMA STATEMENT OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Year ended
------------------------------------------------------
Sept. 30, 1998 Dec. 31, 1998 Dec. 31, 1998
(audited) (audited) (audited)
Pro forma
Choice adjustments/
Daily Journal Information Quindeca eliminations Pro forma
Corporation Systems, Inc. Corporation (Note 2) combined
-------------- -------------- -------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Advertising $21,109,000 $ - $ - $21,109,000
Circulation 11,449,000 - - 11,449,000
Information systems and services 3,292,000 1,367,000 (664,000) (c) 3,995,000
(2,000) (c)
Advertising service fees and other 3,547,000 35,000 - (120,000) (a) 3,434,000
----------- ---------- ---------- -----------
36,105,000 3,327,000 1,367,000 39,987,000
----------- ---------- ---------- -----------
Costs and expenses:
Salaries and employee benefits 15,551,000 1,752,000 527,000 17,830,000
Sales and promotional expenses
and royalties - 176,000 524,000 700,000
Newsprint and printing expenses 3,377,000 - - 3,377,000
Commissions and other outside
services 4,254,000 664,000 - (664,000) (c) 4,254,000
Postage and delivery expenses 2,266,000 - - 2,266,000
Depreciation and amortization 1,696,000 41,000 30,000 602,000 (b) 2,369,000
Other 3,553,000 182,000 465,000 (2,000) (c) 4,172,000
----------- ---------- ---------- -----------
30,697,000 2,815,000 1,546,000 34,968,000
----------- ---------- ---------- -----------
Income/(loss) before taxes 5,408,000 512,000 (179,000) 5,019,000
Provision for income taxes 2,150,000 184,000 - (334,000) (d) 2,000,000
----------- ---------- ---------- -----------
Net income, including minority
interest 3,258,000 328,000 (179,000) 3,019,000
Minority interest in net loss of
subsidiary (20%) - - - 24,000 (e) 24,000
----------- ---------- ---------- -----------
Net income/(loss) $ 3,258,000 $ 328,000 $ (179,000) $ 3,043,000
=========== ========== ========== ===========
Weighted average number of common
shares outstanding 1,589,971 1,589,971
Net income per share $ 2.05 $ 1.91
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
PRO FORMA STATEMENT OF INCOME (Unaudited)
<TABLE>
<CAPTION>
Three months ended
December 31, 1998 (Unaudited)
------------------------------------------------
Pro forma
Choice adjustments/
Daily Journal Information Quindece eliminations Pro forma
Corporation Systems, Inc. Corporation (Note 2) combined
------------- ------------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Advertising $4,837,000 $ - $ - $4,837,000
Circulation 3,033,000 - - 3,033,000
Information systems and services - 693,000 267,000 (109,000) (c) 851,000
(2,000) (c)
910,000 15,000 - (30,000) (a) 893,000
Advertising service fees and other ---------- -------- --------- ----------
8,780,000 708,000 267,000 9,614,000
---------- -------- --------- ----------
Costs and expenses:
Salaries and employee benefits 3,825,000 433,000 290,000 4,548,000
Sales and promotional expenses
and royalties - 92,000 126,000 218,000
Newsprint and printing expenses 874,000 - - 874,000
Commissions and other outside
services 1,018,000 109,000 - (109,000) (c) 1,018,000
Postage and delivery expenses 588,000 - - 588,000
Depreciation and amortization 234,000 10,000 7,000 151,000 (b) 402,000
Other 989,000 59,000 209,000 (2,000) (c) 1,255,000
---------- -------- --------- ----------
7,528,000 703,000 632,000 8,903,000
---------- -------- --------- ----------
Income/(loss) before taxes 1,252,000 5,000 (365,000) 711,000
Provision for income taxes 500,000 2,000 - (217,000) (d) 285,000
---------- -------- --------- ----------
Net income, including minority
interest 752,000 3,000 (365,000) 426,000
---------- -------- --------- ----------
Minority interest in net loss of
subsidiary (20%) - - - 59,000 (e) 59,000
---------- -------- --------- ----------
Net income/(loss) $ 752,000 $ 3,000 $(365,000) $ 485,000
========== ======== ========= ==========
Weighted average number of common
shares outstanding 1,584,183 1,584,183
Net income per share $ .47 $ .31
</TABLE>
See accompanying notes to financial statements.
<PAGE>
DAILY JOURNAL CORPORATION
FORM 8-K/A
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
Note 1 - Pro Forma Combined Balance Sheet has been prepared to reflect the
acquisition by Daily Journal Corporation ("Daily Journal") of 80% of
the capital stock of Choice Information Systems, Inc. ("Choice") and
for its acquisition of substantially all of the assets of Quindeca
Corporation ("Quindeca"). On January 27, 1999, Daily Journal
Corporation ("Daily Journal") invested a total of $6.67 million in cash
(a) to purchase 80% of the capital stock of Choice Information Systems,
Inc. ("Choice") from Choice and Michael W. Payton and Terence E. Hahm,
the two shareholders of Choice, (b) to enable Choice to purchase
substantially all of the assets of Quindeca Corporation ("Quindeca"),
whose assets primarily consisted of software and computers, and (c) to
leave approximately $4 million in Choice as working capital immediately
following these transactions. In connection with this acquisition
Choice has entered into employment agreements with former shareholders
of Choice and Quindeca. Pro forma adjustments are made to reflect these
acquisitions.
(a) The cash payments for the investment.
(b) The recording of Choice's and Quindeca's assets and liabilities at
the acquisition date.
(c) The excess of the acquisition cost for Quindeca over the estimated
fair market value of assets acquired, including computer software,
are recorded as intangible assets.
(d) The recording of a minority interest in Choice.
Note 2 - The Pro Forma Statement of Income is based on the financial statements
of the Daily Journal, Choice and Quindeca after giving effect to the
following pro forma adjustments:
(a) Reduction of interest income resulting from use of cash to purchase
capital stock from Choice's shareholders and for Choice to purchase
certain net assets from Quindeca.
(b) Additional depreciation and amortization primarily resulting from
amortization of the purchased computer software and the intangible
assets.
(c) Elimination of inter-company transactions relative to sales,
interest income, commission and interest expenses between Choice
and Quindeca.
(d) Reduction of provision for income taxes resulting from the loss in
the subsidiary and the reduction of interest income.
(e) Recording of minority interest in Choice, after considering the
additional amortization expenses from the Daily Journal's purchased
Choice computer software and the intangible asset.
