Property and Equipment (Net of Accumulated Depreciation)

6 Months Ended

Jun. 30, 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:

	June 30			December 31
	2017			2016
Building and leasehold improvements located in Calabasas, California	$	8,352,181		$	8,339,807
Furniture, fixtures and equipment		2,705,688			2,673,670
Computer software		220,226			169,177
Accumulated depreciation and amortization		(2,952,317	)		(2,687,607	)
Land located in Calabasas, California		1,787,485			1,787,485
Property and equipment, net	$	10,113,263		$	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 and six months ended June 30, 2017, was $132,441 and $264,710, respectively, and for the three and six months ended June 30, 2016, was $124,631 and $239,914, respectively.

For the three and six months ended June 30, 2017, the Calabasas building has generated rental revenue from non-affiliated tenants in the amount of $57,900 and $115,645, respectively, and for the three and six months ended June 30, 2016, rental revenue from non-affiliated tenants in the amount of $56,628 and $116,034, respectively. This rental revenue is included in “Other income” from insurance company operation in the Company’s Condensed Consolidated Statements of Operations.

The Calabasas building has incurred operating expenses (including depreciation) in the amount of $180,621 and $347,595 for the three and six months ended June 30, 2017, respectively, and $164,360 and $336,237 for the three and six months ended June 30, 2016, respectively. These operating expenses 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, 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. On January 1, 2017, the Company placed its new general ledger system into production. Accordingly, the capitalized costs associated with this system were moved from “Computer software under development” to “Computer software,” and the Company began depreciating these costs.