Property and Equipment (Net of Accumulated Depreciation)

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Property and Equipment (Net of Accumulated Depreciation)

NOTE 6 – PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following:

	June 30			December 31
	2019			2018
Building  and leasehold improvements located in Calabasas, California	$	8,398,275		$	8,398,275
Furniture, fixtures, and equipment		2,081,157			2,063,549
Computer software		363,016			363,016
Accumulated depreciation and amortization		(3,321,610	)		(3,051,505	)
Computer software under development		601,634			131,505
Land located in Calabasas, California		1,787,485			1,787,485
Property and equipment, net	$	9,909,957		$	9,692,325

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 six months ended June 30, 2019, was $135,078 and $270,105, respectively, and for the three and six months ended June 30, 2018, was $141,516 and $281,717, respectively.

For the three and six months ended June 30, 2019, the Calabasas building has generated rental revenue from non-affiliated tenants in the amount of $40,158 and $82,388, respectively, and for the three and six months ended June 30, 2018, rental revenue from non-affiliated tenants in the amount of $89,211 and $175,117, respectively, which is included in “Other income” from insurance company operation in the Company’s Condensed Consolidated Statements of Operations.

For the three and six months ended June 30, 2019, the Calabasas building incurred operating expenses (including depreciation) in the amount of $198,507 and $355,296, respectively, and $186,205 and $374,109 for the three and six months ended June 30, 2018, respectively, which 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 June 30, 2019, 5,092 square feet of the Calabasas building was leased to non-affiliated entities and 9,389 square feet was vacant and available to be leased to non-affiliated entities.

The Company capitalizes certain computer software costs purchased from outside vendors for internal use or incurred internally to upgrade the existing systems. 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.