3. Property and Equipment and Intangible Assets

Property and equipment consists of the following:

	December 31,		December 31,
	2013		2014
Laboratory equipment	$	4,468,055	$	4,543,019
Furniture and equipment		736,886		762,466
Leasehold improvements		487,843		496,523
		5,692,784		5,802,008
Less: Accumulated depreciation		(3,758,202)		(4,395,603)
Total property and equipment, net	$	1,934,582	$	1,406,405

Purchased software	$	749,587	$	803,719
Internally developed software		213,361		213,361
Trademarks		33,000		33,000
		995,948		1,050,080
Less: Accumulated amortization		(228,725)		(418,931)
Total intangible assets, net	$	767,223	$	631,149

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. During the first quarter of 2013, the Company deployed its new Laboratory Information Management System (“LIMS”) and began amortizing the cost.

Depreciation and amortization expense, included in general and administrative expenses for the years ended December 31, 2013 and 2014 was $632,975 and $827,609, 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 Origin^® test in February 2014. Therefore, depreciation and amortization of these assets began 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: $193,926 in 2015, $179,887 in 2016, $160,028 in 2017, $59,413 in 2018 and $4,895 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 and 2014 as follows:

	2013		2014
Equipment and software financed under capital leases	$	584,150	$	655,467
Less: Accumulated amortization		(320,769)		(472,679)
Equipment and software financed under capital leases, net	$	263,381	$	182,788

Future minimum lease payments under capital leases as of December 31, 2014 are as follows:

Years ending December 31,
2015	$	129,154
2016		68,792
2017		16,364
2018		16,364
Thereafter		9,546
Total minimum lease payments		240,220
Less amount represented by interest		(35,797)
Less current portion		(100,951)
Capital lease obligation, net of current portion	$	103,472