REAL ESTATE HELD FOR SALE, NET AND PROPERTY AND EQUIPMENT, NET

9 Months Ended

Sep. 30, 2021

REAL ESTATE HELD FOR SALE, NET AND PROPERTY AND EQUIPMENT, NET

NOTE 8 - REAL ESTATE HELD FOR SALE, NET AND PROPERTY AND EQUIPMENT, NET

NOTE 8 – REAL ESTATE HELD FOR SALE, NET AND PROPERTY AND EQUIPMENT, NET

Real estate held for sale consisted of the following:

	September 30		December 31
	2021		2020
Real estate held for sale, located in Calabasas, California	$	-	$	10,202,676
Accumulated depreciation and amortization		-		(1,867,659	)
Real estate held for sale, net	$	-	$	8,335,017

Property and equipment consist of the following:

	September 30			December 31
	2021			2020
Furniture, fixtures, and equipment	$	2,299,043		$	2,191,411
Computer software		2,793,702			467,275
Accumulated depreciation and amortization		(2,830,248	)		(2,423,617	)
Computer software under development		-			1,803,346
Property and equipment, net	$	2,262,497		$	2,038,415

On February 12, 2021, the Company, through Crusader, completed the sale of the Company’s headquarters at 26050 Mureau Road, Calabasas, California 91302 (the “Calabasas Building”), for $12,695,000 netting $12,028,876 (the “Sale”) to Mureau Road, LLC (“Mureau Road”), a subsidiary of Alliant Capital, Ltd. (“Alliant”). Mureau Road and Alliant do not have any material relationship with the Company or its subsidiaries, other than through the Sale and the Lease (as defined below) transactions. The Company recognized a gain of $3,693,858 on the sale of the Calabasas Building.

On February 12, 2021, the Standard-Multi Tenant Office Lease – Net, dated January 28, 2021 (the “Lease”), by and between Crusader and Mureau Road became effective in connection with the completion of the Sale. The Company agreed to a lease, which expired on January 31, 2022, with Alliant for the second floor of the Calabasas Building with an initial base rent of $56,963 per month, where the Company operated its corporate headquarters through January 31, 2022, at which time the Company moved its headquarters as explained in the subsequent events Note 14.

Through the date of the real estate listing, depreciation on the Calabasas Building, owned by Crusader, was computed using the straight-line method over 39 years. Depreciation on furniture, fixtures, and equipment in the Calabasas Building was computed using the straight-line method over 3 to 15 years. 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, 2021, was $147,463 and $416,631, respectively, and for the three and nine months ended September 30, 2020, was $190,916 and $567,639, respectively.

For the three and nine months ended September 30, 2021, the Calabasas Building generated rental revenue from non-affiliated tenants in the amount of $0 and $13,806, respectively, and for the three and nine months ended September 30, 2020, $33,325 and $122,684, respectively, which is included in “Other income” from insurance company operations in the Company’s Condensed Consolidated Statements of Operations.

For the three and nine months ended September 30, 2021, the Calabasas Building incurred operating expenses (including depreciation) in the amount of $77,777 and $176,483, respectively, and, for the three and nine months ended September 30, 2020, $200,067 and $573,100, respectively, which are included in “Other operating expenses” in the Company’s Condensed Consolidated Statements of Operations.

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.

In 2018 the Company determined it needed to upgrade or replace its legacy IT system, which it opted to upgrade because the cost was substantially less. The upgrade was completed in first quarter of 2021 for a total cost of $ 2,326,811, which included the capitalization of its employees involved in the upgrade. The Company started depreciating the associated capitalized costs, including the costs of Unico’s employees involved in the upgrade, during the second quarter of 2021.