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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000898430-02-000626.txt : 20020414
<SEC-HEADER>0000898430-02-000626.hdr.sgml : 20020414
ACCESSION NUMBER:		0000898430-02-000626
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20011231
FILED AS OF DATE:		20020214

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DAILY JOURNAL CORP
		CENTRAL INDEX KEY:			0000783412
		STANDARD INDUSTRIAL CLASSIFICATION:	NEWSPAPERS:  PUBLISHING OR PUBLISHING & PRINTING [2711]
		IRS NUMBER:				954133299
		STATE OF INCORPORATION:			SC
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-14665
		FILM NUMBER:		02547428

	BUSINESS ADDRESS:	
		STREET 1:		355 SOUTH GRAND AVENUE 34TH FLOOR
		CITY:			LOS ANGELES
		STATE:			CA
		ZIP:			90071-1560
		BUSINESS PHONE:		2136247715

	MAIL ADDRESS:	
		STREET 1:		355 SOUTH GRAND AVENUE 34TH FLOOR
		CITY:			LOS ANGELES
		STATE:			CA
		ZIP:			90071-1560

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DAILY JOURNAL CO
		DATE OF NAME CHANGE:	19870427
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>d10q.txt
<DESCRIPTION>FORM 10-Q PERIOD ENDING 12/31/2001
<TEXT>
<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

(Mark One)


[X]    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
       OF 1934

For the quarterly period ended December 31, 2001

                                       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.)


355 South Grand Ave., 34th floor
Los Angeles, California                                           90071-1560
- -----------------------                                           ----------
(Address of principal executive office)                           (Zip code)

Registrant's telephone number, including area code:             (213) 624-7715

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 the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.

                Class                           Outstanding at January 31, 2002
- ---------------------------------------         -------------------------------
Common Stock, par value $,01 per share                 1,533,521 shares

                                    1 of 17
<PAGE>

                            DAILY JOURNAL CORPORATION


                                      INDEX

<TABLE>
                                                                  Page Nos.
<S>                                                               <C>

PART I   Financial Information

         Item 1.  Financial statements

              Consolidated Balance Sheets -
                 December 31, 2001 and September 30, 2001             3

              Consolidated Statements of Operations -
                 Three months ended December 31, 2001 and 2000        4

              Consolidated Statements of Cash Flows -
                 Three months ended December 31, 2001 and 2000        5

              Notes to Consolidated Financial Statements              6

         Item 2.  Management's Discussion and Analysis of
              Financial Condition and Results of Operations           9

PART II  Other Information

              Item 5.  Other Information                             12

              Item 6.  Exhibits and Reports on Form 8-K              12
</TABLE>

                                    2 of 17
<PAGE>

                                     PART I
                          Item 1. Financial Statements
             DAILY JOURNAL CORPORATION - CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                      December 31          September 30
                                                                                         2001                  2001
                                                                                     ------------          ------------
<S>                                                                                  <C>                    <C>
ASSETS
Current assets
     Cash and cash equivalents                                                        $   630,000          $ 2,901,000
     U.S. Treasury Bills, at cost plus discount earned                                  2,484,000                  ---
     Accounts receivable, less allowance for doubtful account of $500,000
        at December 31, 2001 and September 30, 2001                                     5,530,000            6,597,000
     Inventories                                                                           57,000               67,000
     Prepaid expenses and other assets                                                    157,000              154,000
     Deferred income taxes                                                                736,000              696,000
                                                                                      -----------          -----------
            Total current assets                                                        9,594,000           10,415,000
                                                                                      -----------          -----------
Property, plant and equipment, at cost:
     Land, buildings and improvements                                                   8,571,000            8,568,000
     Furniture and office equipment                                                     6,694,000            6,326,000
     Machinery and equipment                                                            1,470,000            1,533,000
                                                                                      -----------          -----------
                                                                                       16,735,000           16,427,000
     Less accumulated depreciation                                                     (7,294,000)          (6,943,000)
                                                                                      -----------          -----------
                                                                                        9,441,000            9,484,000

Capitalized software, net                                                               1,088,000            1,239,000

Deferred income taxes                                                                         ---               29,000
                                                                                      -----------          -----------
                                                                                      $20,123,000          $21,167,000
                                                                                      ===========          ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                                 $ 4,670,000          $ 5,124,000
     Accrued liabilities                                                                1,580,000            2,080,000
     Notes payable - current portion                                                       84,000               75,000
     Income taxes                                                                         204,000              298,000
     Deferred subscription revenue and other revenues                                   7,886,000            7,777,000
                                                                                      -----------          -----------
            Total current liabilities                                                  14,424,000           15,354,000
                                                                                      -----------          -----------

Deferred income taxes                                                                      67,000                  ---
Notes payable - long-term portion                                                       1,857,000            1,884,000
Minority interest in subsidiary (7%)                                                          ---                  ---
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;
       1,533,521 shares outstanding                                                        15,000               15,000
     Other paid-in capital                                                              1,949,000            1,949,000
     Retained earnings                                                                  2,600,000            2,754,000
     Less 43,271 treasury shares, at cost                                                (789,000)            (789,000)
                                                                                      -----------          -----------
            Total shareholders' equity                                                  3,775,000            3,929,000
                                                                                      -----------          -----------
                                                                                      $20,123,000          $21,167,000
                                                                                      ===========          ===========
</TABLE>

         See accompanying notes to consolidated financial statements.

                                    3 of 17
<PAGE>

                            DAILY JOURNAL CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                         Three months
                                                                                       ended December 31
                                                                          ------------------------------------------
                                                                                   2001                  2000
                                                                            -----------------     -----------------
<S>                                                                        <C>                    <C>
Revenues:
    Advertising                                                                $3,914,000              $4,481,000
    Circulation                                                                 2,759,000               2,889,000
    Information systems and services                                              508,000                 417,000
    Advertising service fees and other                                            821,000                 741,000
                                                                               ----------              ----------
                                                                                8,002,000               8,528,000
                                                                               ----------              ----------
Costs and expenses:
    Salaries and employee benefits                                              4,417,000               4,308,000
    Newsprint and printing expenses                                               574,000                 777,000
    Commissions and other outside services                                      1,272,000               1,468,000
    Postage and delivery expenses                                                 504,000                 486,000
    Depreciation and amortization                                                 565,000                 655,000
    Other general and administrative expenses                                     803,000                 949,000
                                                                               ----------              ----------
                                                                                8,135,000               8,643,000
                                                                               ----------              ----------
Loss from operations                                                             (133,000)               (115,000)
Other income and expense:
    Interest income                                                                19,000                  36,000
    Interest expense                                                              (40,000)                    ---
                                                                               ----------              ----------
Loss before taxes                                                                (154,000)                (79,000)
Benefits from income taxes                                                            ---                  30,000
                                                                               ----------              ----------
Loss before minority interest in net loss of subsidiary                          (154,000)                (49,000)
Minority interest in net loss of subsidiary (7%)                                      ---                  46,000
                                                                               ----------              ----------
Net loss                                                                       $ (154,000)             $   (3,000)
                                                                               ==========              ==========

Weighted average number of common
   shares outstanding - basic and diluted                                       1,490,250               1,508,677
                                                                               ----------              ----------
Basic and diluted net income (loss) per share                                  $     (.10)             $     (.00)
                                                                               ----------              ----------
</TABLE>


         See accompanying notes to consolidated financial statements.

                                    4 of 17
<PAGE>

                            DAILY JOURNAL CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                           Three months
                                                                                         ended December 31
                                                                                -----------------------------------
                                                                                      2001               2000
                                                                                    --------           ---------
<S>                                                                              <C>                   <C>
Cash flows from operating activities:
      Net loss                                                                   $   (154,000)         $   (3,000)
      Adjustments to reconcile net income to net cash
         provided by operations:
           Depreciation and amortization                                              565,000             655,000
           Minority interest in consolidated subsidiary                                   ---             (46,000)
           Deferred income taxes                                                       56,000             (31,000)
           Income tax receivable                                                          ---               1,000
           Discount earned on U.S. Treasury Bills                                      (4,000)                ---
           Changes in assets and liabilities:
            (Increase) decrease in current assets
               Accounts receivable, net                                            1,067,000              (55,000)
               Inventories                                                            10,000               42,000
               Prepaid expenses and other assets                                      (3,000)             (32,000)
             Increase (decrease) in current liabilities
               Accounts payable                                                     (454,000)             622,000
               Accrued liabilities                                                   (500,000)          1,441,000
               Income taxes payable                                                   (94,000)                ---
               Deferred subscription and other revenues                               109,000            (475,000)
                                                                                 ------------         -----------
                     Cash provided by operating activities                            598,000           2,119,000
                                                                                 ------------         -----------

Cash flows from investing activities:
      Net (purchases) sales in U.S. Treasury Bills                                (2,480,000)           1,972,000
      Capital and capitalized software expenditures:
           Purchases of property, plant and equipment, net                          (371,000)            (487,000)
           Capitalized software for Sustain                                              ---           (2,746,000)
                                                                                 -----------          -----------
               Net cash used for investing activities                             (2,851,000)          (1,261,000)
                                                                                 -----------          -----------
Cash flows from financing activities:
      Payment of loan principal                                                      (18,000)                 ---
      Purchase of common stock                                                           ---             (554,000)
                                                                                 -----------          -----------
                     Cash used for financing activities                              (18,000)            (554,000)
                                                                                 -----------          -----------
(Decrease) increase in cash and cash equivalents                                  (2,271,000)             304,000

Cash and cash equivalents:
      Beginning of period                                                           2,901,000             380,000
                                                                                 ------------         -----------
      End of period                                                              $    630,000         $   684,000
                                                                                 ============         ===========
Interest paid during period                                                      $     40,000         $       ---
                                                                                 ============         ===========
</TABLE>


         See accompanying notes to consolidated financial statements.

                                5 of 17
<PAGE>

                            DAILY JOURNAL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

Note 1 - The Corporation and Operations:

     Daily Journal Corporation (the "Company") publishes newspapers in
California, Arizona, Colorado and Nevada, as well as the California Lawyer
magazine and produces several specialized information services. Both the Arizona
and Washington Journals are now only published online. It also publishes The
Code of Colorado Regulations and serves as a newspaper representative
specializing in public notice advertising. SUSTAIN Technologies, Inc.
("Sustain"), now a 93% owned subsidiary as of December 31, 2001, has been
consolidated since it was acquired in January 1999. Sustain provides the
SUSTAIN(R) family of products which consist of technologies and applications to
enable justice agencies to automate their operations and will in the future
allow users to file cases electronically and the courts to publish information
online. Essentially all of the Company's operations are based in California,
Arizona, Colorado, Nevada and Virginia.

Note 2 - Basis of Presentation:

     In the opinion of the Company, the accompanying interim unaudited
consolidated financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary for a fair statement of its financial
position as of December 31, 2001, the results of operations for the three-month
periods ended December 31, 2001 and 2000 and its cash flows for the three months
ended December 31, 2001 and 2000. The results of operations for the three months
ended December 31, 2001 and 2000 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 financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 2001.

Note 3 - Basic and Diluted Income (Loss) Per Share:

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

                                    6 of 17
<PAGE>

Note 4 - Operating Segments:

     Summarized financial information concerning the Company's reportable
segments is shown in the following table:

<TABLE>
<CAPTION>

                                                                      Reportable Segments             Total Results
                                                                      -------------------                for both
                                                                 Non-Sustain          Sustain            Segments
                                                                 -----------          -------            --------
Three months ended December 31, 2001
- ------------------------------------
<S>                                                          <C>                    <C>                <C>
Revenues                                                         $ 7,495,000        $    507,000        $ 8,002,000
Profit (loss) before taxes, net of minority interest                 865,000          (1,019,000)          (154,000)
Total assets                                                      18,751,000           1,372,000         20,123,000
Capital expenditures                                                 350,000              21,000            371,000
Depreciation and amortization                                        364,000             201,000            565,000
Income tax benefits (expenses)                                      (340,000)            340,000              ---
Total after-tax income (loss)                                        525,000            (679,000)          (154,000)

Three months ended December 31, 2000
- ------------------------------------
Revenues                                                         $ 8,111,000        $    417,000        $ 8,528,000
Profit (loss) before taxes, net of minority interest                 929,000            (962,000)           (33,000)
Total assets                                                      17,282,000          18,232,000         35,514,000
Capital expenditures                                                 440,000           2,793,000          3,233,000
Depreciation and amortization                                        348,000             307,000            655,000
Income tax benefits (expenses)                                      (340,000)            370,000             30,000
Total after-tax income (loss)                                        589,000            (592,000)            (3,000)

</TABLE>

Note 5 - Capitalized Software, net:

     The Company's expenditures in support of the Sustain software are highly
significant. The capitalized Sustain software costs consists of purchased
software upon the acquisition of Sustain of $3,023,000, less accumulated
amortization of $1,935,000 and $1,784,000 as of December 31, 2001 and September
30, 2001, respectively. The remaining capitalized software, net, represents
software costs accounted for pursuant to Statement of Financial Accounting
Standards No. 86, Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed. Costs related to the research and development of
new software products are expensed as incurred until technological feasibility
of the product has been established, at which time such costs are capitalized,
subject to expected recoverability. During fiscal 2001 and 2000, there were also
capitalized costs of $15,048,000 for the development of Sustain software related
to the use of an outside service provider. In April 2001, the Company determined
that the purchased software was both seriously flawed and seriously behind
schedule, and therefore the development efforts of the outside provider were
discontinued, and its work was terminated. With its flaws and incompleteness,
the software development project at the time of termination was of virtually
zero commercial value. As a result, the Company wrote off and expensed in fiscal
2001 capitalized software development costs aggregating $15,048,000. In partial
offset, the Company booked, through reported income, a net tax benefit of
$2,000,000 in fiscal 2001 after taking into account management's estimate of the
timing of the utilization of all tax benefits for financial statement purposes.

     At December 31, 2001, the Company has a net deferred tax asset of
$5,095,000 primarily related to fiscal 2001's net operating loss and research
and development credit carry-forwards which expire in years 2015 through 2021.
Due to the uncertainty surrounding the timing of realizing the benefits of its

                                    7 of 17
<PAGE>

tax attributes in future tax returns, the Company has provided a valuation
allowance against the asset of $4,359,000, resulting in a net deferred tax asset
of $736,000.

     The Company has expanded its staff to meet its planned internal software
development efforts and has also expanded relationships with other service
providers. If these development programs are not successful, they will
significantly and adversely impact the Company's ability to maximize its
existing investment in the Sustain software, to service its existing customers,
and to compete for new opportunities in the case management software business.
These Sustain incremental internal development costs ($486,000 during the period
ended December 31, 2001 and none in the quarter ended December 31, 2000) are
being expensed as incurred and accordingly will materially impact earnings at
least through fiscal 2002, and very likely much longer.

     Management believes that both accounting for capitalized software costs
and income tax accounting are critical accounting policies.

Note  6 - Debt and Operating Lease Commitments:

     In January 2002, the Company renewed its $4 million revolving bank line of
credit bearing interest payable monthly at a quarter point under the prime rate,
which expires on April 1, 2003. Such line of credit is secured by substantially
all of the Company's non-real estate assets. As of December 31, 2001, there was
no borrowing under this line of credit. In addition, the Company has a real
estate loan of $1,941,000, which bears interest at approximately 8% and is
repayable in equal monthly installments through 2016. The real estate loan is
secured by the Company's existing facilities in Los Angeles.

     The Company owns office and printing facilities in Los Angeles, office and
storage facilities in Sacramento and leases space for its other offices under
operating leases which expire at various dates through 2004. The Company is
responsible for a portion of maintenance, insurance and property tax expenses
relating to certain leased property. Minimum rental payments required under the
operating leases for fiscal 2002, 2003, and 2004 are $810,000, $768,000 and
$481,000, respectively.

                                    8 of 17
<PAGE>

       Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

Results of Operations

     Revenues were $8,002,000 and $8,528,000 for the three months ended December
31, 2001 and 2000, respectively. This decrease of $526,000 (6%) was primarily
attributable to a decline in revenues from display and classified advertising
which was partially offset by the advertising and subscription rate increases.

     Display advertising and conference revenues declined by $416,000, and
classified advertising revenues decreased by $159,000. Public notice advertising
revenues increased by $8,000. 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. Public
notice advertising revenues and related advertising and other service fees
constituted about 29% of the Company's total revenues. Circulation revenues
decreased an aggregate of $130,000 primarily because the subscription revenues
from the semi-annual California Directory of Attorneys were recognized in
December 2000 and deferred to January 2002 because of a change in the production
process. The Daily Journals accounted for about 71% of the Company's total
circulation revenues, and their circulation levels decreased slightly. The court
rule and judicial profile services generated about 18% of the total circulation
revenues, with the other newspapers and services accounting for the balance.
Information and system service revenues increased by $91,000 primarily because
of increased consulting revenues of Sustain. The Company's revenues derived from
Sustain's operations constituted about 6% and 5% of the Company's total revenues
for the three months ended in December 31, 2001 and 2000, respectively.

     Costs and expenses decreased by $508,000 (6%), to $8,135,000 from
$8,643,000. Total personnel costs were $4,417,000, representing an increase of
$109,000 (3%), primarily because of the expanded staff to develop Sustain
software. Newsprint and printing expenses decreased by $203,000 (26%) primarily
because of the deferral of the printing of the California Directory of Attorneys
and the reduction in newsprint usage and prices. Commissions and other outside
services decreased by $196,000 (13%) primarily because of fewer commissionable
commercial advertising sales. Depreciation and amortization expenses decreased
by $90,000 (14%) primarily because the Sustain goodwill had all been written off
as of September 30, 2001. Other expenses declined by $146,000 (15%) mainly
resulting from less bad debt expenses and reduced legal fees. There was interest
expense of $40,000 during this quarter for the Company's bank loans.

     The Company's expenditures in support of the Sustain software are highly
significant and will grossly impact overall results at least through fiscal
2002, and very likely much longer. These Sustain incremental internal
development costs aggregated $486,000 for the three months ended December 31,
2001 and none in the quarter ended December 31, 2000. During fiscal 2001 and
2000, there were about $15,048,000 of expenses, representing costs for the
development of Sustain software related to the use of an outside service
provider. In April 2001, the Company determined that the purchased software so
provided was not functioning as intended, and therefore the development efforts
of the outside provider were discontinued, and its work was terminated. The
software development project was both seriously flawed and seriously behind
schedule at the time of termination and was, therefore, of virtually zero
commercial value. As a result, the Company wrote off and expensed in fiscal 2001
capitalized software development costs aggregating $15,048,000. The Company also
booked a net tax benefit of $2,000,000 in fiscal 2001 based on management's
estimate of the timing of the utilization of tax benefits, for financial
statement purposes, from overall losses attributable to the Sustain segment. In
future years, there may be substantial additional tax benefits from past
Sustain-segment losses.

                                    9 of 17
<PAGE>

     To replace work of the terminated outside service provider, the Company has
expanded its staff to meet its planned internal development efforts and has
expanded relationships with other service providers. If these replacement
development programs are not successful, they will significantly and adversely
impact the Company's ability to maximize its existing investment in the Sustain
software, to service its existing customers, and to compete for new
opportunities in the case management software business.

     The Company's non-Sustain business segment pretax profit decreased by
$64,000 (7%) to $865,000 from $929,000, primarily due to a downturn in
commercial advertising revenues. Sustain's business segment pretax loss
increased by $57,000 to $1,019,000 from $962,000 primarily because Sustain
software development costs are now being expensed as incurred. The consolidated
net loss for the three months ended December 31, 2001 was $154,000 as compared
with $3,000 in the prior comparable period. Net loss per share increased to
$0.10 from $0.00.

Liquidity and Capital Resources

     During the three months ended December 31, 2001, the Company's cash and
cash equivalent and U.S. Treasury Bill positions increased by $213,000. Cash and
cash equivalents were used for the purchase of capital assets of $371,000. The
cash provided by operating activities of $598,000 included a net increase in
prepayments for subscriptions and others of $109,000. Proceeds from the sale of
subscriptions from newspapers, court rule books and other publications and for
software maintenance and other services are recorded as deferred revenue and are
included in earned revenue only when the services are rendered. Cash flows from
operating activities decreased by $1,521,000 during the three months ended
December 31, 2001 when compared with the same prior year period primarily due to
the changes in accounts receivable because of the decline in commercial
advertising sales and accounts payable because of the timing of payments for
services. There continue to be outstanding issues between Sustain and the
terminated outside service provider, including the amounts due to each of them
from the other. In addition, the Company has learned that on December 4, 2001,
the terminated outside service provider filed a voluntary petition for
bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy
Court for the District of Colorado. The bankruptcy of the terminated outside
service provider complicates our ability to resolve outstanding issues with it,
and there can be no assurance that Sustain and the service provider will come to
a mutually acceptable resolution of the issues between them. It is the opinion
of management, however, that adequate provision has been made for any amounts
that may become due as a result of the dispute. Nonetheless, the pendency of
these issues could have an impact on Sustain's ability to attract new customers
or work with its existing customers. During fiscal 2002, the Company expects its
total expenditures in support of the development of the Sustain software to
continue to be very significant, but much below the level of the prior year. As
of December 31, 2001, the Company had working capital of $3,056,000 before
deducting the liability for deferred subscription revenues and other revenues of
$7,886,000 which will be earned within one year.

     In January 2002, the Company renewed its $4 million revolving bank line of
credit, which expires on April 1, 2003. This line of credit is secured by
substantially all of the Company's non-real estate assets. As of December 31,
2001, there was no borrowing under this line of credit. The Company expects that
it will be able to extend or refinance the amounts available or outstanding
under this line of credit on or before the maturity date. There can be no
assurance, however, that a change in the Company's business or prospects will
not result in an inability to refinance on the same or similar terms. If
additional funds are required, the Company may, among other things, change
Sustain's development strategy or attempt to secure additional financing, which
may or may not be available to the Company on acceptable terms.

     The Company also has a real estate loan of $1,941,000 secured by its
existing Los Angeles facilities. The Company intends to begin construction of a
new building in Los Angeles estimated to cost

                                   10 of 17
<PAGE>

approximately $2.5 million possibly in fiscal 2002, and it has a commitment from
a bank to loan the Company up to an additional $2 million when its new building
is completed.

     The above discussion and analysis for the three months ended December 31,
2001 and 2000 should be read in conjuction with the unaudited consolidated
financial statements and the notes thereto included in this report.

Disclosure regarding Forward-Looking Statements

     This Report 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 without limitation those contained under the captions
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," are forward-looking statements. Forward-looking statements include
statements which are predictive in nature, which depend upon or refer to future
events or conditions, which include words such as "expects", "anticipates",
"intends", "plans", "believes", "estimates", or similar expressions. In
addition, any statements concerning future financial performance (including
future revenues, earnings or growth rates), ongoing business strategies or
prospects, and possible future Company actions, which may be provided by
management, are also forward-looking statements. 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 disclosed in this
Report, including without limitation in conjunction with the forward-looking
statements themselves. The Company has no specific intention to update these
forward-looking statements.

                                   11 of 17
<PAGE>

                           DAILY JOURNAL CORPORATION

                          PART II - OTHER INFORMATION

Item 5.  Other Information

     In January 2002, the Company renewed its $4 million revolving bank line of
credit which expires on April 1, 2003. This line of credit is secured by
substantially all of the Company's non real-estate assets. At the time of
renewal, there was no borrowing under this line of credit. The documents
evidencing the renewal are attached as exhibit hereto. The original Letter
Agreement and Promissory Note were filed as exhibit to the Company's Form 10-Q
for the quarter ended December 31, 2000.

Item 6.  Exhibits and Reports on Form 8-K:


     (A) Exhibits - The following exhibit is filed herewith:

         10.1  Letter Agreement, dated January 28, 2002, regarding the Revolving
               Note dated January 2, 2001 in the original principal sum of
               $4,000,000 executed by Daily Journal Corporation and Sustain
               Technologies, Inc. in favor of City National Bank.

         10.2  Disbursement Request and Authorization dated January 29, 2002
               regarding the Revolving Note of $4,000,000 executed by Daily
               Journal Corporation and Sustain Technologies, Inc. in favor of
               City National Bank.

         10.3  Change in Terms Agreement dated January 29, 2002 regarding the
               Promissory Note dated January 2, 2001, in the principal amount of
               $4,000,000 executed by Daily Journal Corporation and Sustain
               Technologies, Inc. in favor of City National Bank.



                                    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 Financial Officer

DATE: February 14, 2002

                                   12 of 17

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>dex101.txt
<DESCRIPTION>LETTER AGREEMENT DATED JANUARY 28, 2002
<TEXT>
<PAGE>

                                                              ------------------
                                                                  Exhibit 10.1
                                                              ------------------

                               CITY NATIONAL BANK
                       633 West Fifth Street, Tenth Floor
                          Los Angeles, California 90071
                    PHONE (213) 615-8349 FAX (213) 615-8339

S. Steve Tsoflias                                            Downtown Commercial
Vice President                                               Banking Center


                               January 28, 2002

Mr. Gerald L. Salzman
Daily Journal Corporation
915 E. 1st Street
Los Angeles, CA 90012

     Re:   Revolving Note dated January 2, 2001, in the Original Principal Sum
           of $4,000,000.00 ("Note") executed by Daily Journal Corporation and
           Sustain Technologies (collectively "Borrower") in favor of City
           National Bank ("CNB")

Dear Mr. Salzman:

     This letter supercedes the letter dated April 11, 2001. Capitalized terms
not defined in this letter have the meanings given them in the Note. This letter
is hereby incorporated into the Note (this letter and the Note, collectively,
the "Note").

                        A. ADDITIONAL EVENTS OF DEFAULT.

     The following shall constitute additional Events of Default under the Note:

1.   Failure of Borrower to furnish CNB, within the times specified, the
following statements:

     1.1   Within forty-five (45) days after the end of each quarterly
           accounting period of each fiscal year, a financial statement
           consisting of not less than a balance sheet, income statement, and
           statement of cash flows, with notes thereto, prepared in accordance
           with generally accepted accounting principles consistently applied,
           which financial statement may be internally prepared;

     1.2   Within ninety (90) days after the close of each fiscal year, a copy
           of the annual audit report for such year for Borrower and the
           Subsidiaries including therein a balance sheet, income statement,
           reconciliation of net worth and statement of cash flows, with notes
           thereto, the balance sheet, income statement and statement of cash
           flows to be audited by a certified public accountant acceptable to
           CNB, and certified by such accountants to have been prepared in
           accordance with generally accepted accounting principles consistently
           applied.

<PAGE>

     1.3   Within thirty (30) days after the end of each month, excluding months
           that coincide with the quarter ending or fiscal year ending, a
           financial statement consisting of not less than a balance sheet and
           income statement, prepared in accordance with generally accepted
           accounting principals consistently applied, which financial
           statements may be internally prepared;

     1.4   Such additional information, reports and/or statements as CNB may,
           from time to time, reasonably request;

2.   Declare or pay cash dividends and repurchase company stock in aggregate in
     excess of $600,000 during any fiscal period, without CNB consent;

3.   Make acquisitions in excess of $500,000 during any fiscal period without
     consent from CNB;

4.   Change the majority of the existing Board of Directors, except through
     merger or sale of the Borrower so long as the buyer is a stronger credit
     and is approved by CNB in its sole discretion.


                      C. ADDITIONAL TERMS AND CONDITIONS.

     The following additional terms and conditions shall also apply to the Note:

     1.  Environmental Indemnification.  In consideration of CNB extending
credit to Borrower, Borrower has agreed to indemnify CNB against any claims that
may arise as a result of Borrower's business activities that are environmental
in nature and for which CNB may be named as a liable party.

     Borrower agrees that it shall indemnify and hold harmless CNB, its parent
company, subsidiaries and all of their respective directors, officers,
employees, agents, successors, attorneys, and assigns from and against any loss,
damage, cost, expense, or liability directly or indirectly arising out of or
attributable to the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal, or presence of a hazardous substance
on, under, or about Borrower's property or operations or property leased to
Borrower, including but not limited to attorneys' fees (including the reasonable
estimate of the allocated cost of in-house counsel and staff). For these
purposes, the term "Hazardous substances" means any substance which is or
becomes designated as "hazardous" or "toxic" under any Federal, state, or local
law. This indemnity shall survive repayment of Borrower's obligations to CNB.
<PAGE>

         Except for documents and instruments specifically referenced herein or
in the Note, this letter and the Note constitute the entire agreement of the
parties hereto and supersedes any prior or contemporaneous oral or written
agreements, understandings, representations, warranties and negotiations, if
any, which are merged into this letter and the Note. If you agree to accept the
terms of this letter, please sign this letter, and return them to me on or
before February 15, 2002.

Sincerely,

City National Bank, a national
banking association,

By: /s/ S. Steve Tsoflias, VP
    ------------------------------------------
    S. Steve Tsoflias, Vice President

Accepted and Agreed this 1st day of
February, 2002

Daily Journal Corporation

By: /s/ Gerald L. Salzman
    ------------------------------------------
    Gerald L. Salzman
Title: President


Sustain Technologies, Inc.

By: /s/ Gerald L. Salzman
    ------------------------------------------
    Gerald L. Salzman
Title: Secretary

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>dex102.txt
<DESCRIPTION>DISBURSMENT REQUEST DATED JANUARY 29, 2002
<TEXT>
<PAGE>

CITY NATIONAL BANK
                                                             -------------------
                                                                Exhibit 10.2
                                                             -------------------
                    DISBURSEMENT REQUEST AND AUTHORIZATION

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
  Principal       Loan Date       Maturity      Loan No.   Cell/Call     Account     Officer    Initials
<S>              <C>             <C>           <C>         <C>          <C>         <C>        <C>
$4,000,000.00     01-29-2002     04-01-2003      38058                    648112       SST
- -----------------------------------------------------------------------------------------------------------
  References in the shaded area are for Lender's use only and do not limit the applicability of this
                                document to any particular loan or item.
             Any item above containing "***" has been omitted due to text length limitations.
- -----------------------------------------------------------------------------------------------------------

<CAPTION>
<S>                                                     <C>
Borrower: DAILY JOURNAL CORPORATION, A SOUTH            Lender: City National Bank, NA
          CAROLINA CORPORATION                                  Downtown Los Angeles Commercial Banking Center
          SUSTAIN TECHNOLOGIES, INC., A VIRGINIA                #034000-01
          CORPORATION                                           633 West Fifth Street, Tenth Floor
          915 EAST 1ST STREET                                   Los Angeles, CA 90071
          LOS ANGELES, CA 90012

===========================================================================================================
</TABLE>

LOAN TYPE. This is a Variable Rate Nondisclosable Revolving Line of Credit Loan
to a Corporation for $4,000,000.00 due on April 1, 2003. The reference rate
(CITY NATIONAL BANK PRIME, currently 4.750%) is added to the margin of -0.250%,
resulting in an initial rate of 4.500.

PRIMARY PURPOSE OF LOAN.  The primary purpose of this loan is for:

     [_]  Personal, Family, or Household Purposes or Personal Investment.

     [X]  Business (Including Real Estate Investment).


SPECIFIC PURPOSE.  The specific purpose of this loan is: WORKING CAPITAL.

DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $4,000,000.00 as follows:

<TABLE>
<S>                                                                   <C>
             Amount paid on Borrower's account:                       $4,000,000.00
                 $4,000,000.00 Payment on Loan # 38058 renewal
                                                                      -------------
             Note Principal:                                          $4,000,000.00
</TABLE>

AUTOMATIC PAYMENTS. Borrower hereby authorizes Lender automatically to deduct
from Borrower's account numbered 016-926558 the amount of any loan payment. If
the funds in the account are insufficient to cover any payment, Lender shall not
be obligated to advance funds to cover the payment. At any time and for any
reason, Borrower or Lender may voluntarily terminate Automatic Payments.

LOAN PROCEEDS. Loan proceeds are to be credited to Account Number 016-926558 at
City National Bank.

FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED JANUARY 29, 2002.

BORROWER:

DAILY JOURNAL CORPORATION, A SOUTH CAROLINA CORPORATION

By: /s/ Gerald L. Salzman
    ----------------------------------------------
    GERALD L. SALZMAN, Pres./CFO/Treasurer/Sec. of
    DAILY JOURNAL CORPORATION, A SOUTH
    CAROLINA CORPORATION

SUSTAIN TECHNOLOGIES, INC., A VIRGINIA CORPORATION

By: /s/ Gerald L. Salzman
    ----------------------------------------------
    GERALD L. SALZMAN, Secretary of SUSTAIN
    TECHNOLOGIES, INC., VIRGINIA CORPORATION

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>5
<FILENAME>dex103.txt
<DESCRIPTION>TERMS AGREEMENT DATED JANUARY 29, 2002
<TEXT>
<PAGE>

                                                                    ------------
CITY NATIONAL BANK                                                  Exhibit 10.3
                                                                    ------------
                           CHANGE IN TERMS AGREEMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Principal          Loan Date       Maturity      Loan No.    Cell/Call    Account   Officer   Initials
$4,000,000.00      01-29-2002     04-01-2003      38058                   648112     SST
- --------------------------------------------------------------------------------------------------------
<S>                <C>            <C>            <C>         <C>          <C>       <C>       <C>
   References in the shaded area are for Lender's use only and do not limit the applicability of this
                              document to any particular loan or item.
          Any item above containing "* * *" has been omitted due to text length limitations.
- --------------------------------------------------------------------------------------------------------
<CAPTION>
<S>                                               <C>
Borrower: DAILY JOURNAL CORPORATION, A SOUTH      Lender: City National Bank, NA
          CAROLINA CORPORATION                            Downtown Los Angeles Commercial Banking Center
          SUSTAIN TECHNOLOGIES, INC., A VIRGINIA          #034000-01
          CORPORATION                                     633 West Fifth Street, Tenth Floor
          915 EAST 1ST STREET                             Los Angeles, CA 90071
          LOS ANGELES, CA 90012
=========================================================================================================
</TABLE>

<TABLE>
<S>                                   <C>                         <C>
Principal Amount: $4,000,000.00       Initial Rate: 4.500%        Date of Agreement: January 29, 2002
</TABLE>

DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note ("Note") dated January 2,
2001, in favor of City National Bank, NA ("Lender"), executed by Daily Journal
Corporation, a South Carolina corporation and Sustain Technologies, Inc., a
Virginia corporation ("Borrower") in the original principal amount of
$4,000,000.00, payable in full on January 31, 2002, subject to any instalment
maturities in the Note. The principal balance on the Note as of January 29, 2002
is $00.00.

DESCRIPTION OF CHANGE IN TERMS. Maturity date of the Note is hereby extended to
April 1, 2003.

CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of
the original obligation or obligations, including all agreements evidenced or
securing the obligation(s), remain unchanged and in full force and effect.
Consent by Lender to this Agreement does not waive Lender's right to strict
performance of the obligation(s) as changed, nor obligate Lender to make any
future change in terms. Nothing in this Agreement will constitute a satisfaction
of the obligation(s). It is the intention of Lender to retain as liable parties
all makers and endorsers of the original obligation(s), including accommodation
parties, unless a party is expressly released by Lender in writing. Any maker or
endorser, including accommodation makers, will not be released by virtue of this
Agreement. If any person who signed the original obligation does not sign this
Agreement below, then all persons signing below acknowledge that this Agreement
is given conditionally, based on the representation to Lender that the non-
signing party consents to the changes and provisions of this Agreement or
otherwise will not be released by it. This waiver applies not only to any
initial extension, modification or release, but also to all such subsequent
actions.

BORROWER:


DAILY JOURNAL CORPORATION, A SOUTH CAROLINA CORPORATION

By:  /s/ Gerald L. Salzman
     ----------------------------------------------
     GERALD L. SALZMAN, Pres./CFO/Treasurer/Sec. of
     DAILY JOURNAL CORPORATION, A SOUTH
     CAROLINA CORPORATION


SUSTAIN TECHNOLOGIES, INC., A VIRGINIA CORPORATION

By:  /s/ Gerald L. Salzman
     ----------------------------------------------
     GERALD L. SALZMAN, Secretary of SUSTAIN
     TECHNOLOGIES, INC., A VIRGINIA CORPORATION

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
