Property and Equipment (Net of Accumulated Depreciation)

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Property and Equipment (Net of Accumulated Depreciation)

NOTE 6 – PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following:

	September 30			December 31
	2020			2019
Real estate held for sale located in Calabasas,  California,  net of accumulated depreciation and amortization	$	8,335,017		$	8,535,464
Furniture, fixtures, and equipment		2,184,752			2,110,653
Computer software		461,900			459,899
Accumulated depreciation and amortization		(2,317,361	)		(1,953,819	)
Computer software under development		1,607,555			1,074,398
Property and equipment, net	$	10,271,863		$	10,226,595

Real estate held for sale, owned by Crusader, includes land, building, and leasehold improvements. On September 29, 2020, the real estate was listed for sale at a price of $12,999,000. Upon the listing, the Company stopped recording the depreciation expense on the Calabasas building and the leasehold improvements in the Calabasas building. The carrying value of the real estate held for sale less expected disposal costs do not present impairment issues.

Through the date of the real estate listing, depreciation on the Calabasas building was 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. Through the date of the real estate listing, amortization of leasehold improvements in the Calabasas building was 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, 2020, was $190,916 and $567,639 respectively, and for the three and nine months ended September 30, 2019, was $132,664 and $402,769, respectively.

For the three and nine months ended September 30, 2020, the Calabasas building generated rental revenue from non-affiliated tenants in the amount of $33,325 and $122,684, respectively, and for the three and nine months ended September 30, 2019, rental revenue from non-affiliated tenants in the amount of $43,158 and $125,545, respectively, which is included in “Other income” from insurance company operation in the Company’s Condensed Consolidated Statements of Operations.

For the three and nine months ended September 30, 2020, the Calabasas building incurred operating expenses (including depreciation) in the amount of $200,067 and $573,100, respectively, and, for the three and nine months ended September 30, 2019, it incurred operating expenses of $126,962 and $482,257, respectively, 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 September 30, 2020, 6,942 square feet of the Calabasas building was leased to non-affiliated entities and 7,539 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 or incurred internally to upgrade the existing systems. 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.