On December 16, 2020, Seneca and LBS entered into a Merger Agreement. Pursuant to the Merger Agreement, on April 27, 2021, Merger Sub merged with and into LBS with LBS surviving as a wholly owned subsidiary of Seneca.

The transaction was accounted for as a reverse asset acquisition. Under this method of accounting, LBS was deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the facts that, immediately following the Merger: (i) LBS’s stockholders owned a substantial majority of the voting rights in the combined company, (ii) LBS designated a majority of the members of the initial board of directors (five of eight total members at the time) of the combined company, (iii) LBS’s senior management holds all key positions in the senior management of the combined company and (iv) the only employees remaining in the combined company are that of LBS employees (all Seneca employees were terminated on the date of Merger). As a result, as of the closing date of the Merger, the net assets of the Company were recorded at their acquisition-date relative fair values in the

accompanying consolidated financial statements of the Company and the reported operating results prior to the Merger are those of LBS.

Pursuant to the terms of the Merger Agreement, each share of LBS common stock outstanding immediately prior to the closing of the Merger was converted into approximately 0.02719 shares of Company common stock immediately prior to the Merger, such that, immediately following the effective date of the Merger, preexisting LBS equity holders held approximately 74.9% of the capital stock of Seneca outstanding immediately following the Merger, and the equity holders of Seneca immediately before the Merger held approximately 25.1% of the Seneca capital stock outstanding immediately following the Merger.

In accordance with the Merger Agreement, the Company entered into a Contingent Value Rights Agreement (“CVR Agreement”) related to the monetization of the Company’s legacy assets that were being developed prior to the Merger. Under the terms of the CVR Agreement, Seneca shareholders who held shares immediately prior to the effective date of the Merger retain the right to receive a portion of proceeds received within 48 months of the Merger closing from the sale or licensing of all or any part of the intellectual property owned, licensed or controlled by the Seneca immediately prior to the closing of the Merger (the “Legacy Technology”) provided the sale or licensing of such Legacy Technology occurs on or before the 18-month anniversary of such closing (“Legacy Monetization”). The contingent value right (“CVR”) payment amount ("CVR Payment Amount") is calculated as 80% of the net proceeds received, subject to certain conditions, provided, however that (i) no CVR Payment is required in the event such amount is less than $0.3 million during the CVR term and (ii) no distribution of the CVR Payment is required to be made to the holders of the CVR if such distribution would be less than $0.5 million. Based on the information available at the time of the Merger, any contingent consideration associated with the CVR payment was deemed to have a remote possibility. As such, no consideration was recorded on the Company’s consolidated financial statements. The Legacy Monetization period of the CVR expired on October 27, 2022.

As previously disclosed, on December 16, 2020, Seneca exclusively licensed certain patents and technologies, including a sublicense covering a synthetic intermediate, of the Company's NSI-189 assets (“189 License”), along with a purchase option through December 16, 2023 (“Purchase Option”). On October 22, 2021, Alto Neuroscience agreed to terms of an early exercise of the Purchase Option under the 189 License and entered into an Asset Transfer Agreement (“ATA”). Alto Neuroscience is a U.S. based private biopharmaceutical company focused on precision-medicine for central nervous system disorders, including depression, using artificial intelligence-based brain biomarkers.

In connection with the ATA, the Company received gross proceeds of $0.4 million. Pursuant to the terms of the CVR Agreement, no distribution is required to be made to the holders of the CVR if the CVR Payment Amount would be less than $0.5 million. In accordance with the terms of the CVR Agreement, the net proceeds from the sale of the NSI-189 assets, less any applicable transaction costs and expenses, were deposited into the CVR escrow to be used to pay costs and expenses associated with the monetization of the Company's other Legacy Technologies, which may include but are not limited to: financial advisory and consulting fees, legal fees, and any other fees associated with the monetization. There can be no assurance that CVR holders will receive CVR Payment Amounts from the sale of the NSI-189 assets.

On October 27, 2022, the Company entered an agreement to license NSI-532.IGF-1 to the Regents of the University of Michigan ("University of Michigan") for maintaining NSI-532.IGF-1 cell lines, continued development, maintaining patent protection, and seeking licensees. The Company received no upfront fees for the license. NSI-532.IGF-1 is a preclinical cell therapy being investigated as a potential therapy for prevention and treatment of Alzheimer’s disease. The University of Michigan shall bear 100% of the costs for patent filing, prosecution, maintenance, and enforcement of the patent rights. The Company will receive 50% of net revenues received by the University of Michigan from the licensing of patent rights through the last-to-expire patent in patent rights, unless otherwise earlier terminated, less all reasonable and actual out-of-pocket costs incurred in the litigation of patent rights. There can be no assurance that NSI-532.IGF-1 will ever be successfully monetized or that CVR holders will receive CVR Payment Amounts from the sale of the NSI-532.IGF-1 assets.

The Merger was accounted for as an asset acquisition pursuant to Accounting Standards Codification ("ASC") 805, as substantially all of the fair value of the assets acquired were concentrated in a group of similar identifiable intangible assets, and the acquired assets did not have outputs or employees. As Seneca had not yet received regulatory approval for its product candidates, the fair value attributable to these assets was recorded as acquired in-process research and development (“IPR&D”) expense in the Company’s consolidated statements of operations for the year ended December 31, 2021.

The total purchase price paid in the Merger has been allocated to the net assets acquired and liabilities assumed based on their fair values as of the completion of the Merger. The following summarizes the purchase price paid in the Merger (in thousands, except share and per share amounts):


Purchase Price Consideration:
Number of shares of the combined company issued to Seneca's stockholders (i)		2,884,375
Multiplied by the fair value per share of Seneca's common stock (ii)	$	9.96
Total share value consideration		28,728
LBS transaction costs		4,670
Total purchase price	$	33,398

(i)

Represents the actual post reverse stock split effected number of shares of Seneca common stock outstanding immediately prior to the Merger. Amount has not been adjusted for the Reverse Stock Split.

(ii)

The purchase price was based on the closing price as reported on the Nasdaq Capital Market on April 27, 2021 (i.e., the Merger close date). Amount has not been adjusted for the Reverse Stock Split.

The allocation of the purchase price is as follows (in thousands):


	Fair Value of Assets
Cash and cash equivalents	$	3,279
Accounts receivable		24
Prepaid and other current assets		1,270
Accounts payable and accrued expenses		(927	)
Accrued compensation		(165	)
Warrant liabilities, at fair value		(200	)
In-process research and development (IPR&D) (i)		30,117
Purchase price	$	33,398

(i)

Represents the research and development projects of Seneca which were in-process, but not yet completed as of the date of the acquisition, the Merger close date. Current accounting standards require that the fair value of IPR&D projects acquired in an asset acquisition with no alternative future use be allocated a portion of the consideration transferred and charged to expense on the acquisition date.