Property and Equipment (Net of Accumulated Depreciation)

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Property and Equipmentr (Net of Accumulated Depreciation)

NOTE 6 – PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following:

		June 30			December 31
		2015			2014
Building, furniture, fixtures, equipment and leasehold improvements located in Calabasas, California	$	7,384,605		$	7,269,449
Furniture, fixtures, equipment and leasehold improvements located in Woodland Hills, California		2,634,931			2,633,536
Accumulated depreciation and amortization		(2,872,311	)		(2,637,966	)
Land located in Calabasas, California		1,787,485			1,787,485
Computer software under development		1,681,170			1,457,802
Property and equipment, net	$	10,615,880		$	10,510,306

Depreciation on the Calabasas building 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 on furniture, fixtures and equipment located in Woodland Hills is computed using the straight line method over 3 to 7 years. Amortization of leasehold improvements on property located in Woodland Hills 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 six months ended June 30, 2015, was $116,894 and $234,345, respectively, and for the three and six months ended June 30, 2014, was $139,749 and $277,935, respectively.

The Calabasas building has generated rental revenues in the amount of $39,109 and $88,966 for the three and six months ended June 30, 2015, respectively, and $233,744 and $463,591 for the three and six months ended June 30, 2014, respectively. The Calabasas building has incurred operating expenses, which included depreciation, in the amount of $166,126 and $344,205 for the three and six months ended June 30, 2015, respectively, and $181,468 and $383,787 for the three and six months ended June 30, 2014, respectively. These amounts are included in other income from insurance company operation and other operating expenses, respectively, in the Company’s consolidated statements of operations.

On September 7, 2014, a lease from a single tenant occupying approximately 32,403 square feet of the Calabasas 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 by the end of third quarter of 2015. The Company’s current home office located in Woodland Hills, California, will be vacated, and the month-to-month lease for this office will be terminated upon the completion of the move to the Calabasas building.

The total square footage of the Calabasas building is 46,884, including common areas. As of June 30, 2015, 8,442 square feet of the Calabasas building was leased to non-affiliated entities, and 6,039 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. 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 will not be depreciated until the software is placed into production.