DAILY JOURNAL CORP Stock Compensation Disclosure
Note 7. Stock-Based Compensation
The Company has implemented two equity incentive plans, one for key employees and one for non-employee directors, each providing for the grant of incentive stock options, non-qualified stock options, restricted stock units, and other equity-based awards. As of both September 30, 2025, and 2024, there were 2,920 shares available for future grants under the key employee’s equity incentive plan, which authorizes the issuance of up to 3,720 shares. Under the non-employee director plan, which was approved in February 2025 and authorizes issuance of 2,000 shares, there were 1,805 available for grants as of September 30, 2025. Restricted stock units generally vest ratably over years of continuous service from the grant date and, upon vesting, are issued from the Company’s treasury shares. The Company accounts for share-based compensation utilizing the fair value recognition requirement pursuant to ASC 718.
For restricted stock units, the Company uses the closed market price on the date of grant as the fair market value of the stock. The Company has not historically paid any cash dividends on its common stock and as a result does not reduce the grant-date fair value per share by the present value of dividends expected to be paid during the requisite service period for restricted stock units. Share based compensation awards are expensed on a straight-line basis over the requisite service periods, which are generally the vesting periods.
The Company will recognize the effect of awards for which the requisite service period is not rendered when the award is forfeited. That is, the Company recognizes the effect of forfeitures in compensation cost when they occur. Previously recognized compensation cost for an award is reversed in the period the award is forfeited.
The following table summarizes stock unit activity during the periods presented:
|
Number of RSUs outstanding |
Weighted Average Grant Date Fair Value per Share |
|||||||
|
Unvested as of September 30, 2023 |
— | — | ||||||
|
Granted |
800 | $ | 463.64 | |||||
|
Vested |
(400 | ) | 463.64 | |||||
|
Forfeited |
— | — | ||||||
|
Unvested as of September 30, 2024 |
400 | 463.64 | ||||||
|
Granted |
195 | 508.20 | ||||||
|
Vested |
(230 | ) | 453.93 | |||||
|
Forfeited |
— | — | ||||||
|
Unvested as of September 30, 2025 |
365 | $ | 494.43 | |||||
As of September 30, 2025 and 2024, total fair value of shares vested during the year was $0.1 million and $0.2 million, respectively. For fiscal year 2025 and 2024, the Company recognized a total of compensation cost of $0.1 million and $0.2 million, respectively. For fiscal year 2025 and 2024, the Company had total unrecognized compensation cost of approximately $0.1 million and $0.2 million, respectively, related to unvested restricted stock units which is expected to be amortized over a weighted average amortization period of approximately 0.87 years.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.