Property and Equipment (Net of Accumulated Depreciation)

9 Months Ended

Sep. 30, 2013

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
		2013			2012
Land and building located in Calabasas, California
Land	$	1,787,485		$	—
Building		7,212,515			—
Other property and equipment located in Woodland Hills, California
Furniture, fixtures, leasehold improvements, computer and office equipment		3,235,458			2,647,971
Accumulated depreciation and amortization		(1,952,548	)		(1,791,121	)
Net property and equipment	$	10,282,910		$	856,850

On September 26, 2013, Crusader closed escrow on the purchase of land and building located in Calabasas, California. There is no relationship between the seller and the Company. The real estate consists of a two-story office building located on commercial land in Calabasas, California, about four miles from the Company’s current location. The office building has approximately 46,843 square feet. The purchase price of the land and building was $9,500,000 plus acquisition costs of $106,505. Acquisition costs were expensed as period costs. The Company determined that the purchase price represented the fair value of the assets acquired. No liabilities were assumed. The consideration for the land and building was cash. The purchase price included $500,000 to reimburse the seller for rents on existing tenants in excess of current market through June 30, 2014. The $500,000 is recorded as a deferred asset and will be amortized monthly through June 30, 2014, the remaining life of the lease terms. The deferred asset is reflected in Other Assets on the Consolidated Balance Sheets. Crusader intends to hold the property for rental income until approximately July 1, 2014. After that date, Crusader intends to lease approximately half of the building to non-affiliated companies. The remaining half is intended to be occupied by Crusader with the remaining portion leased to its affiliated companies. This property is intended to be the new home office of the Company.

The Company considered many factors in its decision to purchase a building. Some of the factors considered by management, though not definitive, include:

1. The Company has been paying rent at its present location since 1987 and, therefore, has not received any benefit from equity buildup or long-term appreciation.

2. The current and expected cost benefit of ownership versus renting is favorable to ownership.

3. The Company would have a facility that can accommodate any future growth.

4. The timing of the current real estate marketplace is favorable.

5. The purchase is a more efficient use of the Company’s available cash compared to maintaining the funds in the Company’s current investment portfolio.

6. The new building will provide the Company with a substantial improvement in the quality and appearance of its office space.

7. Ownership will provide the Company a hedge against possible future inflation of occupancy costs.

The Company is in the process of completing its purchase price allocations and costs segregation analysis for the acquisition of the Calabasas building, including the determination of depreciable lives. The Company expects this analysis to be completed within one year of the purchase date. The Company’s best estimate of the fair values of the assets acquired on the purchase date of September 26, 2013, includes the land and building as reflected in the above table. No deferred charges or other assets were acquired and no liabilities were assumed.

Since the date of the acquisition, the Company has included the Calabasas, California land and building in its consolidated financial statements. The property has generated incremental revenue and income which was considered insignificant for the reporting period due to the timing of the acquisition.

Depreciation on other property and equipment located in Woodland Hills, California is computed using straight line methods over 3 to 7 years. Amortization of leasehold improvements is computed using the shorter of the useful life of the leasehold improvements or the remaining years of the lease. Depreciation and amortization expense for the nine months ended September 30, 2013 and 2012 were $161,427 and $91,129, respectively.