Property and Equipment (Net of Accumulated Depreciation)

9 Months Ended

Sep. 30, 2014

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
		2014			2013
Land located in Calabasas, California	$	1,787,485		$	1,787,485
Building located in Calabasas, California		7,220,529			7,212,515
Leasehold improvements & office equipment located in Woodland Hills, California		3,762,351			3,268,298
Accumulated depreciation and amortization		(2,520,367	)		(2,098,358	)
Net property and equipment	$	10,249,998		$	10,169,940

On September 26, 2013, Crusader closed escrow on the purchase of land and a 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, about four miles from the Company’s current location. The office building has approximately 46,884 rentable square feet. The purchase price of the land and building was $9,500,000. Acquisition costs of $106,505 were expensed as period costs during the three months ended September 30, 2013. 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, which was recorded as a deferred asset and was amortized monthly through June 30, 2014. The deferred asset is reflected in Other Assets on the Consolidated Balance Sheets as of December 31, 2013, and was fully amortized as of June 30, 2014.

On September 7, 2014, a lease from a single tenant occupying approximately 32,403 square feet of the building ended and the tenant has vacated the premises. The Company intends to occupy most of this recently vacated space as its new home office and is currently in the process of planning and implementing the steps necessary to modify the space to fit its operational needs with a targeted move in date in early 2015. The Company’s current home office located in Woodland Hills, California, is leased on a month-to-month basis and will be vacated upon the completion of the move to the Calabasas building. As of September 30, 2014, 12,631 square feet (including 4,189 square feet previously subleased by the tenant that vacated the premises on September 7, 2014) of the remaining 14,481 rentable square feet was leased by non-affiliated entities.

In February 2014, the Company completed its purchase price allocation and costs segregation analysis for the acquisition of the Calabasas building, including the determination of depreciable lives. The purchase price of the land and building was allocated based on the fair values of the assets acquired on the purchase date of September 26, 2013. Depreciation on the building is computed using the straight line method over 39 years. Depreciation on other property and equipment located in the Calabasas building is computed using the straight line methods over 3 to 15 years. Amortization of leasehold improvements on the property is being computed using the shorter of the useful life of the leasehold improvements or the remaining years of the lease.

Depreciation on property and equipment located in Woodland Hills, California is computed using straight line methods over 3 to 7 years. Amortization of leasehold improvements on property located in Woodland Hills, California, is 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, 2014 was $144,074 and $422,009, respectively, and for the three and nine months ended September 30, 2013 was $54,776 and $161,427, respectively.