Property and Equipment (Net of Accumulated Depreciation)

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Property and Equipmentr (Net of Accumulated Depreciation)

NOTE 6 – PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following:

	September 30			December 31
	2017			2016
Building and leasehold improvements located in Calabasas, California	$	8,352,180		$	8,339,807
Furniture, fixtures and equipment		2,707,211			2,673,670
Computer software		344,544			169,177
Accumulated depreciation and amortization		(3,073,857	)		(2,687,607	)
Land located in Calabasas, California		1,787,485			1,787,485
Property and equipment, net	$	10,117,563		$	10,282,532

Depreciation on the Calabasas building, owned by Crusader, is computed using the straight line method over 39 years. Depreciation on furniture, fixtures, and equipment in the Calabasas building is computed using the straight line method over 3 to 15 years. Amortization of leasehold improvements in the Calabasas building is being computed using the shorter of the useful life of the leasehold improvements or the remaining years of the lease. Depreciation and amortization expense on all property and equipment for the three and nine months ended September 30, 2017, was $121,540 and $386,250, respectively, and for the three and nine months ended September 30, 2016, was $121,577 and $361,490, respectively.

For the three and nine months ended September 30, 2017, the Calabasas building has generated rental revenue from non-affiliated tenants in the amount of $83,257 and $198,902, respectively, and for the three and nine months ended September 30, 2016, rental revenue from non-affiliated tenants in the amount of $55,099 and $171,133, respectively. This rental revenue is included in “Other income” from insurance company operation in the Company’s Condensed Consolidated Statements of Operations.

The Calabasas building has incurred operating expenses (including depreciation) in the amount of $201,701 and $549,295 for the three and nine months ended September 30, 2017, respectively, and $207,401 and $543,638 for the three and nine months ended September 30, 2016, respectively. These operating expenses are included in “Other operating expenses” in the Company’s Condensed Consolidated Statements of Operations.

The total square footage of the Calabasas building is 46,884, including common areas. As of September 30, 2017, 14,481 square feet of the Calabasas building was leased to non-affiliated entities. As of September 30, 2017, the Calabasas building was fully occupied.

The Company capitalizes certain computer software costs purchased from outside vendors for internal use. These costs also include configuration and customization activities, coding, testing, and installation. Training costs and maintenance are expensed as incurred, while upgrade and enhancements are capitalized if it is probable that such expenditure will result in additional functionality. The capitalized costs are not depreciated until the software is placed into production. On January 1, 2017, the Company placed its new general ledger system into production. Accordingly, the capitalized costs associated with this system were moved from “Computer software under development” to “Computer software,” and the Company began depreciating these costs.