Real Estate Held for Sale, Net and Property and Equipment, Net

12 Months Ended

Dec. 31, 2021

Real Estate Held for Sale, Net and Property and Equipment, Net

Real Estate Held For Sale, Net And Property And Equipment, Net

NOTE 6 – REAL ESTATE HELD FOR SALE, NET AND PROPERTY AND EQUIPMENT, NET

Property and equipment consist of the following:

	Year ended 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

	Year ended December 31
	2021			2020
Furniture, fixtures, equipment		2,316,885			2,191,411
Computer software		466,892			467,275
Accumulated depreciation and amortization		(2,983,418	)		(2,423,617	)
Computer software under development		2,354,161			1,803,346
Property and equipment, net	$	2,154,520		$	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 proceeds of $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 has 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 approximately $56,963 per month, where the Company will continue to operate its corporate headquarters.

Through the date of the real estate listing, 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 years ended December 31, 2021 and 2020 were $569,801 and $673,895, respectively.

For the years ended December 31, 2021 and 2020, the Calabasas Building has generated rental revenue from non-affiliated tenants in the amount of $13,806 and $150,319 and incurred operating expenses in the amount of $235,827 and $677,930, which included depreciation, respectively.  These amounts are included in “Other income” from insurance company operations and other operating expenses, respectively, in the Company’s 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 at a cost of approximately $1,500,000, excluding costs of Unico’s employees involved in the upgrade, due to unexpected technical challenges. 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.