Property and Equipment (Net of Accumulated Depreciation)

12 Months Ended

Dec. 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:

	Year ended December 31
	2017			2016
Building and tenant improvements, located in Calabasas, California	$	8,352,181		$	8,339,807
Furniture, fixtures, equipment		2,724,775			2,673,670
Accumulated depreciation and amortization		(3,204,806	)		(2,687,607	)
Land located in Calabasas, California		1,787,485			1,787,485
Computer software under development		355,234			169,177
Property and equipment, net	$	10,014,869		$	10,282,532

Depreciation on the Calabasas building is computed using the straight line method over 39 years. Improvements to the building structure are amortized over the useful life of the improvements. Depreciation on furniture, fixtures and equipment in the Calabasas building is computed using the straight line method over 3 to 15 years. Amortization of tenant improvements in the Calabasas building is being computed using the shorter of the useful life of the tenant improvements or the remaining years of the lease.

Depreciation and amortization expense on all property and equipment for the years ended December 31, 2017 and 2016 were $517,199 and $483,580, respectively.

For the years ended December 31, 2017 and 2016, the Calabasas building has generated rental revenue in the amount of $1,065,104 and $990,013, and incurred operating expenses in the amount of $796,270 and $722,442, which included depreciation, 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.

The total square footage of the Calabasas building is 46,884, including common areas. As of December 31, 2017, 14,481 square feet of the Calabasas building was leased to non-affiliated entities. As of December 31, 2017, the Calabasas building was fully occupied.

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.

While the Company’s existing policy acquisition system (“PAS”) continues to support the Company’s current operations, the Company believes it would realize more competitive parity with respect to product and service by replacing its existing PAS with a more contemporary platform. The Company is currently evaluating its alternatives.