Property and Equipment (Net of Accumulated Depreciation)

3 Months Ended

Mar. 31, 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:

	March 31			December 31
	2017			2016
Building  and leasehold improvements located in Calabasas, California	$	8,345,740		$	8,339,807
Furniture, fixtures, and equipment		2,683,288			2,673,670
Computer software		189,377			169,177
Accumulated depreciation and amortization		(2,819,876	)		(2,687,607	)
Land located in Calabasas, California		1,787,485			1,787,485
Property and equipment, net	$	10,186,014		$	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 months ended March 31, 2017 and 2016, was $132,269 and $115,283, respectively.

For the three months ended March 31, 2017 and 2016, the Calabasas building has generated rental revenue from non-affiliated tenants in the amount of $57,745 and $59,406 which is included in “Other income” from insurance company operation in the Company’s Condensed Consolidated Statements of Operations.

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For the three months ended March 31, 2017 and 2016, the Calabasas building incurred operating expenses (including depreciation) in the amount of $166,974 and $171,877 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 March 31, 2017, 10,292 square feet of the Calabasas building was leased to non-affiliated entities and 4,189 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 are not depreciated until the software is placed into production. The Company’s software related to the Company’s new general ledger system was placed into production in the current period, and, thus the Company began depreciating the software.