3. Property and Equipment and Intangible Assets

Property and equipment consists of the following:

	December 31,		December 31,
	2012		2013
Laboratory equipment	$	3,315,812	$	4,468,055
Furniture and equipment		660,626		736,886
Leasehold improvements		305,059		487,843
		4,281,497		5,692,784
Less: Accumulated depreciation		(3,258,299)		(3,758,202)
Total property and equipment, net	$	1,023,198	$	1,934,582
Purchased software	$	562,699	$	749,587
Internally developed software		108,362		213,361
Trademarks		—		33,000
		671,061		995,948
Less: Accumulated amortization		(95,652)		(228,725)
Total intangible assets, net	$	575,409	$	767,223

Intangible assets are carried at the cost to obtain them. Internally developed intangible assets are amortized using the straight-line method over the estimated useful life of five years. At December 31, 2012, the Company had not yet begun amortizing purchased software costs related to its new Laboratory Information Management System (“LIMS”). During the first quarter of 2013, the Company deployed LIMS and began amortizing the cost. Amortization expense, included in cost of revenue, general and administrative expenses, and research and development expenses for the years ended December 31, 2012 and 2013 was $470,054 and $632,976, respectively.

On August 23, 2013, the Company entered into an asset purchase agreement (the “Pathwork Purchase Agreement”) with Pathwork (assignment for the benefit of creditors), LLC (“Seller”), pursuant to which the Company acquired substantially all of the assets of Pathwork Diagnostics, Inc. (“Pathwork”), which had previously assigned all of its assets to Seller for the benefit of its creditors pursuant to a General Assignment, dated as of April 2, 2013. Pursuant to the Pathwork Purchase Agreement, the Company acquired all intellectual property, know-how, data, equipment and materials formerly owned by Pathwork which relate to its FDA-cleared Tissue of Origin cancer test. Management evaluated the assets acquired from Seller and concluded the combined assets did not meet the definition of a business, primarily because the necessary processes were not acquired. Accordingly, the Company accounted for the transaction as a basket purchase of assets in which the purchase price was allocated to the individual assets acquired based upon relative fair value.

The Company acquired the assets for the following consideration: (i) an aggregate of 500,000 newly-issued registered shares of the Company’s common stock issued to two senior secured creditors of Pathwork which were designated by Seller in the Pathwork Purchase Agreement and (ii) a cash payment of $200,000 to Seller.

Based upon a valuation of the acquired Pathwork assets, the purchase price was allocated as follows: $257,000 to accounts receivable, $785,000 to laboratory equipment, and $138,000 to internally developed software and other intangible assets. The Company launched the Pathwork acquired Tissue of Origin test commercially as its ResponseDX: Tissue of OriginTM test in February 2014. Therefore, depreciation and amortization of these assets will begin during the first quarter of 2014 over their expected useful lives, which are approximately five years.

Expected future amortization of intangible assets over the next five years ending December 31 is as follows: $176,518 in 2014, $179,302 in 2015, $165,033 in 2016, $145,173 in 2017, $64,698 in 2018 and $3,499 thereafter.

Capital Leases

The Company leases certain equipment and related software that is recorded as capital leases. This equipment and software is included in property and equipment on the accompanying balance sheet as of December 31, 2013 as follows:

Equipment and software financed under capital leases	$	584,150
Less: Accumulated amortization		(320,769)
Equipment and software financed under capital leases, net	$	263,381

Future minimum lease payments under capital leases as of December 31, 2013 are as follows:

Years ending December 31,
2014	$	188,427
2015		101,309
2016		46,852
Total minimum lease payments		336,588
Less amount represented by interest		(42,931)
Less current portion		(157,238)
Capital lease obligation, net of current portion	$	136,419

The Company recorded depreciation expense of $115,000 and $131,483 related to the assets under capital leases for the years ended December 31, 2012 and 2013, respectively.