UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 22, 2016

MADRIGAL PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

(484) 380-9263

Registrant’s telephone number, including area code

500 Office Center Drive, Suite 400

Fort Washington, Pennsylvania

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨                 Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨                 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨                 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨                 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Introduction

On July 22, 2016, Madrigal Pharmaceuticals, Inc. (formerly known as Synta Pharmaceuticals Corp.), a Delaware corporation (the “Company”), filed a Current Report on Form 8-K announcing that on July 22, 2016, the Company completed its business combination with Madrigal Pharmaceuticals, Inc., a privately held Delaware corporation (“Private Madrigal”), in accordance with the terms of an Agreement and Plan of Merger and Reorganization, dated as of April 13, 2016, by and among the Company, Private Madrigal, and Saffron Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (the “Merger”).  Also on July 22, 2016, in connection with, and prior to completion of the Merger, the Company effected a 1-for-35 reverse stock split of its common stock (the “Reverse Stock Split”). Unless otherwise noted herein, all references to share and per share amounts herein have been retrospectively adjusted, except as otherwise disclosed, to reflect the Reverse Stock Split.  Upon completion of the Merger, there were 11,333,816 shares of the Company’s stock outstanding. The Current Report on Form 8-K filed on July 22, 2016 is incorporated herein by reference.

Item 9.01. Financial Statements and Exhibits.

(a)                                 Financial Statements of Businesses Acquired.

The unaudited interim condensed financial statements of Private Madrigal, including Private Madrigal’s unaudited condensed balance sheet as of June 30, 2016, unaudited condensed balance sheet derived from the audited financial statements as of December 31, 2015, unaudited condensed statements of operations for the three and six months ended June 30, 2016 and 2015, unaudited condensed statement of stockholders’ deficit for the six months ended June 30, 2016 and unaudited condensed statements of cash flows for the six months ended June 30, 2016 and 2015 and the notes related thereto are filed as Exhibit 99.1 and are incorporated herein by reference.  The related management’s discussion and analysis of financial condition and results of operations is filed as Exhibit 99.4 and is incorporated herein by reference.

The audited financial statements of Private Madrigal, including Private Madrigal’s audited balance sheets as of December 31, 2015 and 2014, statements of operations for the years ended December 31, 2015 and 2014, statements of changes in stockholders’ deficit for the years ended December 31, 2015 and 2014, statements of cash flows for the years ended December 31, 2015 and 2014, the notes related thereto and the related independent registered public accounting firm’s report are filed as Exhibit 99.2 and are incorporated herein by reference.

The unaudited pro forma condensed combined financial information of the Company, including the unaudited pro forma condensed combined balance sheet as of June 30, 2016, the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2016, the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015 and the notes related thereto are filed as Exhibit 99.3 and are incorporated herein by reference.

(d)                                 Exhibits.

* * *

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: September 2, 2016

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EXHIBIT INDEX

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Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements on Form S-3 (Nos. 333-187242 and 333-206135) and on Form S-8 (Nos. 333-141903, 333-152824, 333-173862,  333-181117, 333-187243, 333-194477, 333-202680,  333-206128 and 333-212615) of our report dated April 12, 2016, relating to the Madrigal Pharmaceuticals, Inc., (“Private Madrigal”), financial statements as of December 31, 2015 and for each of the years in the two-year period then ended, which includes an explanatory paragraph as to the Company’s ability to continue as going concern, included in this Amendment No. 1 to Current Report on Form 8-K.

Exhibit 99.1

UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS

Condensed Financial Statements (Unaudited)

Condensed Balance Sheets as of June 30, 2016 and December 31, 2015

Condensed Statements of Operations for the three and six months ended June 30, 2016 and June 30, 2015

Condensed Statement of Changes in Stockholders’ Deficit for the six months ended June 30, 2016

Condensed Statements of Cash Flows for the six months ended June 30, 2016 and June 30, 2015

Notes to Condensed Financial Statements

MADRIGAL PHARMACEUTICALS, INC.

Condensed Balance Sheets

(Unaudited)

The accompanying notes are an integral part of these condensed financial statements.

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MADRIGAL PHARMACEUTICALS, INC.

Condensed Statements of Operations

(Unaudited)

The accompanying notes are an integral part of these condensed financial statements.

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MADRIGAL PHARMACEUTICALS, INC.

Condensed Statement of Changes in Stockholders’ Deficit

(Unaudited)

The accompanying notes are an integral part of these condensed financial statements.

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MADRIGAL PHARMACEUTICALS, INC.

Condensed Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of these condensed financial statements.

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Madrigal Pharmaceuticals, Inc. Condensed Notes to Financial Statements (Unaudited)

1.              Organization, Business and Basis of Presentation

Organization and Business

Madrigal Pharmaceuticals, Inc. (the “Company” or “Madrigal”) was incorporated on August 19, 2011 and commenced operations in September 2011.  On September 14, 2011, the Company entered into an Assignment and Issuance Agreement pursuant to which the Company was assigned the rights, title and interest in and to the tangible and intangible assets owned by Bay City Capital Fund IV, L.P. (“Lender A”) and Bay City Capital Fund IV Co-Investment Fund, L.P (“Lender B” and together with Lender A, “BCC”), in exchange for the assumption of outstanding convertible promissory notes, including accrued interest, in the amount of approximately $23,400,000 (see Note 4).  Assets contributed to the Company were primarily intangible assets related to several drug development programs of VIA Pharmaceuticals, Inc. (“VIA”), which was an investee company of BCC.

The underlying assets of VIA transferred to BCC and subsequently contributed to the Company were notionally valued at $3 million.  BCC credit bid $3 million for the VIA assets as part of an assignment for the benefit of creditors process.  Due to the common control nature of the transaction and in accordance with accounting principles generally accepted in the United States of America (“GAAP”), the assigned assets and liabilities were recorded by the Company at their respective carryover basis which was zero for the tangible and intangible assets and $23.4 million for the assumed debt.  In 2012, Madrigal entered into a transaction with Tallikut Pharmaceuticals, Inc. (“Tallikut”) whereby Madrigal sold certain assets to Tallikut in exchange for the assumption of $2 million of convertible promissory notes.  On July 22, 2016 the Company merged into Synta Pharmaceuticals Corp. (the “Merger”) (see Note 9).  These financial statements do not give any effect to the merger.

The Company is developing novel, high-quality small-molecule drugs addressing major unmet needs in cardiovascular and metabolic diseases.  The lead compound MGL-3196 is Phase II ready and is being advanced for indications in dyslipidemia, particularly LDL-cholesterol lowering, and non-alcoholic steatohepatitis, a liver disease that commonly affects people with metabolic diseases such as obesity and diabetes.

Basis of Presentation

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been condensed or omitted.  Accordingly, the unaudited condensed financial statements do not include all information and footnotes required by GAAP for complete annual financial statements.  However, we believe that the disclosures included in these financial statements are adequate to make the information presented not misleading. The unaudited condensed financial statements, in the opinion of management, reflect all adjustments which include normal recurring adjustments necessary for a fair presentation of such interim results.  The interim results are not necessarily indicative of the results that we will have for the full year ended December 31, 2016 or any subsequent period.  These unaudited condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes to those statements for the year ended December 31, 2015.

2.              Liquidity and Uncertainties

The Company is subject to risks common to development stage companies in the Bio-Pharmaceutical industry including, but not limited to, uncertainty of product development and commercialization, dependence on key personnel, uncertainty of market acceptance of products and product reimbursement, product liability, uncertain protection of proprietary technology, potential inability to raise additional financing necessary for development and commercialization, and compliance with the U.S. Food and Drug Administration and other government regulations.

The Company has incurred losses since inception, including approximately $4,590,000 for the six months ended June 30, 2016, resulting in an accumulated deficit of approximately $53,509,000 as of June 30, 2016.  Management expects to incur losses for the foreseeable future and has a working capital deficit of approximately $42,279,000 at June 30, 2016.  To date, the Company has funded its operations primarily through the issuance of convertible debt with a maturity date of December 31, 2016.

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On April 13, 2016, the Company amended and restated the terms of its March 1, 2016 Note Purchase Agreement to increase the principal amount of the notes available thereunder to $9,000,000 (see Note 4) in order to provide funding for working capital and general corporate purposes through the date of the anticipated merger, as described below.  In addition, all of the Note Purchase Agreements were amended in April 2016 to (1) add mandatory conversion features whereby the principal will automatically convert into shares of common stock of the Company immediately prior to the consummation of the merger) (2) waive all accrued interest thereunder through April 13, 2016 and (3) make such notes non-interest bearing from April 13, 2016 through the consummation or termination of the anticipated merger.

On April 13, 2016, the Company also entered into an Agreement and Plan of Merger and Reorganization (“the Merger Agreement”) with Synta Pharmaceuticals Corp. (“Synta”)  which was consummated and approved by the stockholders of Synta and completed in the third quarter of 2016 (see Note 9).  The working capital obtained through the merger together with the proceeds from the issuance of the March 1, 2016 Note Purchase Agreement, as well as the permanent waiver of accrued interest and the conversion of all outstanding convertible notes is anticipated to fund the Company’s operations for at least the next twelve months from the balance sheet date.  Total post combination cash, cash equivalents and marketable securities on hand at August 31, 2016 was $41.4 million.

3.              Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.  The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances.  Changes in estimates are recorded in the period in which they become known.  Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of six months or less at the date of purchase to be cash equivalents.  The Company maintains its cash in a bank account, which at times, exceeds Federal Deposit Insurance Corporation insured limits.

Research and Development Costs

Research and development costs are expensed as incurred.  Research and development costs are comprised of costs incurred in performing research and development activities, including internal costs, costs for consultants, associated with the Company’s preclinical and clinical programs.  In particular, Madrigal has conducted safety studies in animals, optimized and implemented the API manufacturing, and conducted Phase I clinical trials, all of which are considered research and development expenditures.

Patents

Costs to secure and defend patents are expensed as incurred and are classified as general and administrative expense in the Company’s statements of operations.  Patent expenses were approximately $28,000 and $95,000 for the quarters ended June 30, 2016 and 2015, respectively and $39,000 and $141,000 for the six months ended June 30, 2016 and 2015, respectively.

Income Taxes

The Company uses the asset and liability method to account for income taxes.  Deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the Company’s financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse.  The Company currently maintains a 100% valuation allowance on its deferred tax assets.

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4.              Convertible Promissory Notes — Related Parties

Convertible Promissory Note Amendments:

Effective April 13, 2016, the Lenders collectively waived all accrued and unpaid interest under all of the convertible notes.  The total accrued and waived interest amounted to $13,680,000.  No additional interest on these notes will be accrued through the date on which the Merger is consummated or terminated.  On April 13, 2016, the Company reduced the convertible notes payable by the waived interest less $2,456,000 of accrued interest for the period April 14, 2016 through the maturity date of December 31, 2016, as required under Troubled Debt Restructuring accounting guidance.  The net waived interest of $11,224,000 was recorded as an increase in Additional Paid in Capital (“APIC”) as the notes were held by related parties and the $2,456,000 increased the outstanding convertible notes as of June 30, 2016.

September14, 2011 Notes

The Company was assigned (see Note 1) convertible promissory notes (“the September 14, 2011 Notes”) pursuant to an Assignment and Issuance Agreement with Lender A and Lender B or collectively the “Lender(s)”.  Lender A and Lender B are stockholders of the Company.  Interest on the outstanding principal accrued and compounded monthly at 8% per annum.  Accrued and unpaid interest shall either be paid upon principal repayment or converted with the outstanding principal amount.  The notes were collateralized by all assets of the Company.  The initial maturity date was December 31, 2012 but has been amended on various dates extending the maturity date to December 31, 2016.  The September 14, 2011 Notes can be converted as follows:

(a)         Optional Conversion — Third Party Financing.  At any time following the closing of a preferred equity financing with an outside investor (“Third Party”), all outstanding principal and interest (“Accreted Value”) may, at the option of the Lenders, be converted into equity securities of the Company, having the same rights, preferences and privileges as the securities issued in the Third Party financing (“Third Party Led Securities”).  The numbers of shares to be issued upon such conversion shall be equal to the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) eighty percent (80%) of the per share purchase price of the Third Party Led Securities.

(b)         Optional Conversion — Series A Preferred Stock.  At any time, all Accreted Value may, at the option of the Lenders, be converted into shares of the Company’s Series A Preferred Stock.  The number of shares of Series A Preferred Stock to be issued upon such conversion shall be equal to the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) the original issue prices of the Series A Preferred Stock.

(c)          Optional Conversion — Common Stock.  At any time, Lenders may convert all or any portion of the Accreted Value of the Note into common shares of the Company with the number of common shares issuable upon such conversion to equal the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) 14.29759.  Any Third Party Led Securities and Series A Preferred Stock issued to the Lenders shall be convertible at any time at the option of Lenders into common stock of the Company.

(d)         Mandatory Conversion.  If the principal and interest of the convertible note has not been repaid in full by the maturity date, the Accreted Value shall automatically convert into common stock of the Company.  The conversion price shall equal to the per share value of the Company’s common stock at the time of conversion.

September 14, 2011 Notes (Amended and Restated April 13, 2016)

On April 13, 2016, the Company amended and restated the terms to modify the conversion terms to include the following:

(a)         Optional Conversion — Common Stock.  At any time following the date on which the Merger Agreement is terminated as defined in the agreement, Lenders may convert all of the Accreted Value of the Note into common shares of the Company with the number of common shares issuable upon such conversion to equal the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) 1.00.

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(b)         Mandatory Conversion Upon a Merger with Synta.  If Merger is consummated prior to the maturity date all Accreted Value will automatically be converted into shares of Common Stock of the Company.  The number of shares of Common Stock to be issued upon such conversion shall be equal to the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) 1.00.

September 16, 2011 Notes

The Company entered into a Note Purchase Agreement with Lender A and Lender B in which the Company agreed to sell and issue to the Lenders secured convertible promissory notes (“the September 16, 2011 Notes”).  Interest on the outstanding principal accrued and compounded monthly at 8% per annum.  Accrued and unpaid interest shall either be paid upon principal repayment or converted with the outstanding principal amount.  The notes were collateralized by all assets of the Company.  The initial maturity date was the earliest of October 31, 2012 or an event of default as defined in the agreement but such notes have been amended on various dates extending the maturity date to December 31, 2016.  The September 16, 2011 notes can by converted as follows:

(a)         Optional Conversion — Third Party Financing.  At any time following the closing of a preferred equity financing with a Third Party, all Accreted Value may, at the option of the Lenders, be converted into equity securities of the Company, having the same rights, preferences and privileges as the securities issued in the Third Party financing.  The numbers of shares to be issued upon such conversion shall be equal to the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) eighty percent (80%) of the per share purchase price of the Third Party Led Securities.

In addition, the Company shall issue to each Lender, upon conversion of such Lender’s note, a warrant to purchase up to the number of shares of Third Party Led Securities sold in such Third Party Financing that equals the quotient obtained by dividing (a) ten percent (10%) of the original principal amount of the notes issued to such Lenders pursuant to the Note Purchase Agreement by (b) the per share purchase price of the Third Party Led Securities.  The Company has not issued any warrants to date.

(b)         Optional Conversion — Series A Preferred Stock.  At any time, all Accreted Value may, at the option of the Lenders, be converted into shares of the Company’s Series A Preferred Stock.  The number of shares of Series A Preferred Stock to be issued upon such conversion shall be equal to the Quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) 14.29759.

September 16, 2011 Notes (Amended and Restated April 13, 2016)

On April 13, 2016, the Company amended and restated the terms to modify the conversion terms to include the following:

(a)         Optional Conversion — Common Stock.  At any time following the date on which the Merger Agreement is terminated as defined in the agreement, Lenders may convert all of the Accreted Value of the Note into common shares of the Company with the number of common shares issuable upon such conversion to equal the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) 1.00.

(b)         Optional Conversion — Series A Preferred Stock.  At any time following the date on which the Merger Agreement is terminated as defined in the agreement, Lenders may convert all of the Accreted Value of the Note into Series A Preferred Stock of the Company, $0.0001 par value per share (“Series A Preferred Stock”) with the number of Series A Preferred Stock issuable upon such conversion to equal the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) the original issue price of the Series A Preferred Stock, as adjusted for splits, dividends and the like.

(c)          Mandatory Conversion Upon a Merger with Synta.  If Merger is consummated prior to the maturity date all Accreted Value will automatically be converted into shares of Common Stock of the Company.  The number of shares of Common Stock to be issued upon such conversion shall be equal to the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) 1.00.

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March 1, 2016 Notes

On March 1, 2016, the Company entered into a Note Purchase Agreement with Lender A and Lender B in which the Company agreed to sell and issue to the Lenders secured convertible promissory notes (“the March 1, 2016 Notes”) in the amount of up to $2,000,000.  Interest on the outstanding principal accrued and compounded monthly at 8% per annum.  Accrued and unpaid interest shall either be paid upon repayment or converted with the outstanding principal amount.  The notes were collateralized by all assets of the Company.  The maturity date is the earliest of December 31, 2016 or an event of default as defined in the agreement.  On March 1, 2016, the first closing date, $750,000 aggregate principal amount was issued.  The March 1, 2016 notes can by converted as follows:

(a)         Optional Conversion — Third Party Financing.  At any time following the closing of a preferred equity financing by the Company led by a Third Party, all Accreted Value may, at the option of the Lenders, be converted into equity securities of the Company, having the same rights, preferences and privileges as the securities issued in the Third Party financing .  The numbers of shares to be issued upon such conversion shall be equal to the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) the per share purchase price of the Third Party Led Securities.

(b)         Optional Conversion — Series A Preferred Stock.  At any time, all Accreted Value may, at the option of the Lenders, be converted into shares of the Company’s Series A Preferred Stock.  The number of shares of Series A Preferred Stock to be issued upon such conversion shall be equal to the Quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) the original issue price of the Series A Preferred Stock.

(c)          Optional Conversion — Common Stock.  At any time, Lenders may convert all of the Accreted Value of the Note into common shares of the Company with the number of common shares issuable upon such conversion to equal the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) the then per share fair market value of Common Stock.  Any Third Party Led Securities and Series A Preferred Stock issued to the Lenders shall be convertible at any time at the option of Lenders into common stock of the Company.

March 1, 2016 Notes (Amended and Restated April 13, 2016)

On April 13, 2016, the Company amended and restated the terms of its March 1, 2016 Note Purchase Agreement to increase the principal amount of notes available for issuance to $9,000,000, to be funded at specific dates in accordance with a funding schedule, and to add two additional related party lenders (“Lender C and Lender D”).  The notes were collateralized by all assets of the Company and are senior in right of payment to all outstanding indebtedness of the Company.  The maturity date is the earliest of December 31, 2016, the date the Merger Agreement is terminated (see Note 9), or an event of default as defined in the agreement.  The conversion terms of the March 1, 2016 notes were amended to include the following:

(a)         Optional Conversion-Qualified Financing.  At any time following the closing of a preferred equity financing of the Company (a “Qualified Financing”), all Accreted Value may, at the option of the Lenders, be converted into equity securities of the Company of the same class and having the same rights, preferences and privileges as the securities issued in the Qualified Financing (the “Qualified Financing Securities”).  The number of shares of Qualified Financing Securities to be issued upon such conversion shall be equal to the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) the product of 0.85 times the lowest per share purchase price of the Qualified Financing Securities paid by the other investors in the Qualified Financing.

(b)         Optional Conversion — Series A Preferred Stock.  At any time following the date on which the Merger Agreement is terminated as defined in the agreement, all Accreted Value may, at the option of the Lenders, be converted into shares of the Company’s Series A Preferred Stock.  The number of shares of Series A Preferred Stock to be issued upon such conversion shall be equal to the Quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) the original issue price of the Series A Preferred Stock.

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(c)          Optional Conversion — Common Stock.  At any time following the date on which the Merger Agreement is terminated as defined in the agreement, Lenders may convert all of the Accreted Value of the Note into common shares of the Company with the number of common shares issuable upon such conversion to equal the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) 1.07581.

(d)         Mandatory Conversion Upon a Merger with Synta.  If Merger is consummated prior to the maturity date all Accreted Value will automatically be converted into shares of Common Stock of the Company.  The number of shares of Common Stock to be issued upon such conversion shall be equal to the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) 1.07581.

Lenders A, B, C and D provided convertible promissory note financing of $6,875,000 in cash during the period March 1, 2016 through June 30, 2016.  Additionally, on April 13, 2016, Lender D exchanged $500,000 of Advances Payable for an equal amount of convertible promissory notes.

The original issue amount, outstanding principal and interest balance (Accreted Value) by the Lenders are as follows:

5.              Advances Payable — Related Party

On June 29, 2015 and July 30, 2015 a related party agreed to advance the Company $250,000 and $250,000 to be used for working capital requirements.  The advances accrued interest at a rate of four percent (4%) per annum compounded annually.  On April 13, 2016, these advances were exchanged for $500,000 in convertible promissory notes payable and all accrued interest was waived (see Note 4).

6.              Stockholders’ Deficit

The Company’s Certificate of Incorporation as amended on April 13, 2016, authorizes the Company to issue 50,000,000 shares of Common Stock, $0.0001 par value per share (“Common Stock”), and 45,000,000 shares of Preferred Stock, $0.0001 par value per share (“Series A Preferred Stock”).

The Preferred Stock accrues dividends at 8% per annum, and has certain rights, preferences and privileges to include preferential payment in liquidation, voting and conversion.  In the event of liquidation, dissolution or winding up of the Company, the holders of Series A Preferred Stock, would be paid an amount per share equal to 14.29759 times the original issue price, plus accruing dividends prior to payment to common stock holders.  Each share of Series A Preferred Stock is entitled to cast the number of votes equal to the whole shares of Common Stock into which the shares of Series A Preferred Stock held are convertible.  At June 30, 2016 and December 31, 2015, the Company had not issued any shares of Preferred Stock.

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Issued and outstanding Common Stock is held solely by Lender A, Lender B and the Company’s Chief Executive Officer.  Shares of common stock may not be sold, assigned, transferred, encumbered or disposed of without written agreement between the Company and the stockholder.

7.              Related Party Transactions

Related party financing

Lenders A and B have provided financing to the Company since its inception.  Lenders A, B, C and D have agreed to provide funding under the April 13, 2016 amended and restated March 1, 2016 agreement.  For the six months ended June 30, 2016 and June 30, 2015, the Company incurred approximately $1,213,000 and $1,728,000, respectively of interest expense to these Lenders which was subsequently waived (see Note 4).  At June 30, 2016 and December 31, 2015, the Company has approximately $45,968,000 and $48,595,000 respectively of convertible promissory notes payable to related party Lenders and $0 and $500,000 of Advances payable to related parties.

Consulting agreement

The Company has a consulting agreement with its Chief Executive Officer (“CEO”), who is also a stockholder of the Company.  The consulting agreement automatically renews monthly until it is terminated.  The consulting agreement can be terminated upon fifteen (15) day notice by the Company or the CEO.  For the quarters ended June 30, 2016 and 2015, the consultant was paid $41,250 in each quarter.  The consultant was paid $82,500 and $82,500, respectively, for the six months ended June 30, 2016 and 2015.  On July 22, 2016, this consulting agreement was replaced by an employment agreement upon the completion of the Merger (see Note 9).

8.              Commitments and contingencies

The Company has a Research, Development and Commercialization Agreement with Hoffmann-La Roche (“Roche”) which grants a sole and exclusive license to develop, use, sell, offer for sale and import any Licensed Product as defined by the agreement.

The Company entered Phase I clinical trials in 2011 and paid the related milestone payment to Roche on October 12, 2011. The agreement requires future milestone payments to Roche, the remainder of which total $10.8 million and are earned by the commencement of Phase II and Phase III clinical trials as well as future regulatory approval in the United States and Europe of a product developed from MGL-3916. A single-digit royalty payment range is based on net sales of products developed from MGL-3196, subject to certain reductions.  The Company has not achieved any additional product development or regulatory milestones to date and has no Licensed Product sales for the quarters ended June 30, 2016 and 2015.  Phase II is expected to commence in the second half of 2016.

During the second quarter, the Company entered in several customary contractual arrangements and letters of intent in preparation for and in support of the expected Phase II clinical trial.

The Company has a Change in Control Bonus Plan (the “Bonus Plan”) pursuant to which certain key service providers of the Company will be awarded bonuses in the event of a change in control of the Company, as defined in the Bonus Plan.  The purpose of the Bonus Plan is to compensate for past services, and secure to a limited extent, continued services of certain key service providers of the Company.  In accordance with the Bonus Plan, as amended on April 13, 2016, up to 7.87% of the net proceeds, as defined in the Bonus Plan, from a change in control transaction will be allocated to an award pool and paid to eligible participants based upon their participation agreement.  The award pool will be funded out of the consideration actually provided to the Company and/or the stockholders of the Company in connection with a change of control transaction and will be the same form of consideration actually transferred.

The Company is party to an agreement with a financial advisor pursuant to which the Company will be required to pay a success fee of 1.5% of consideration received, as defined in the agreement, upon the consummation of a definitive strategic transaction with a third party.

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On April 13, 2016 the Company entered into employment agreements for the positions of the Chairman and Chief Executive Officer (“CEO”) and Chief Medical Officer, Executive Vice President Research & Development (“CMO”).  The employment agreements became effective upon closing of the merger transaction on July 22, 2016 (see Note 9).  Under the terms of the agreement, the CEO will receive a base salary of $400,000 plus bonus potential up to 50% of the base salary based upon the achievement of certain corporate targets.  In addition, the CEO will receive restricted stock awards representing 1.25% of the issued and outstanding common stock of the post-merger combined company and nonqualified stock option to purchase an additional 2.5% of the issued and outstanding stock of the post-merger combined company on a fully-diluted basis.  Under the terms of the agreement, the CMO will receive a base salary of $370,000 plus bonus potential up to 40% of the base salary based upon the achievement of certain corporate targets.  In addition, the CMO will receive restricted stock awards representing 0.25% of the issued and outstanding common stock of the post-merger combined company and nonqualified stock option to purchase an additional 1.25% of the issued and outstanding stock of the post-merger combined company on a fully-diluted basis.  Restricted stock awards and nonqualified stock awards for both executives will vest 25% on the completion of the Merger Agreement and 25% at each of the first, second and third anniversary date of the Merger Agreement.

9.              Subsequent Events

Convertible Promissory Notes-Related Parties

On July 15, 2016, the Company issued a total of $1,625,000 of convertible notes to Lenders A, B, C and D in the amounts of $353,470, $7,605, $902,850 and $361,075, respectively, under the March 1, 2016 Amended and Restated Note Purchase Agreement.  These notes were converted to the Company’s common stock prior to the Merger.

Immediately prior to the consummation of the merger, the September 14, 2011, September 16, 2011 and March 1, 2016 (amended and restated April 13, 2016) convertible note issuances outstanding totaling $45.1 million on July 22 were converted into 44.5 million shares of common stock of the Company pursuant to their respective amended and restated terms. 

Merger

On July 22, 2016, prior to the closing of the merger, Synta Pharmaceuticals Corp. (“Synta”) completed a one-for-35 reverse stock split.

On July 22, 2016, the Company, Synta, and Saffron Merger Sub, Inc., a wholly owned subsidiary of Synta (“Merger Sub”) completed their merger transaction pursuant to which Merger Sub merged with and into the Company with the Company becoming a wholly-owned subsidiary of Synta and the surviving corporation of the merger.  Each outstanding share of Madrigal common stock was converted into 1.593 shares of common stock of the post-merger combined company.  As a result, Synta issued 7.3 million shares of common stock to the stockholders of the Company in exchange for common shares of Madrigal. For accounting purposes, the Company is considered to be acquiring Synta in the merger. The Company was determined to be the accounting acquirer based upon the terms of the Merger Agreement and other factors including: (i) Madrigal security holders own approximately 64% of the voting interests of the combined company immediately following the closing of the merger; (ii) directors appointed by Madrigal hold a majority of board seats in the combined company; and (iii) Madrigal management hold a majority of the key positions in the management of the combined company. As the accounting acquirer, the Company’s assets and liabilities will be recorded at their pre combination carrying amounts and the historical operations that will be reflected in the financial statements will be those of the Company.

Following the reverse stock split and the merger, the post-merger combined company had approximately 11.3 million shares outstanding and the former stockholders of the Company owned approximately 64% of the outstanding capital stock of the post-merger combined company.

Upon the closing of the merger transaction on July 22, 2016, the Company incurred an expense for a success fee of $750,000 in cash plus $500,000 settled in shares of the post-merger combined company’s common stock with a third party financial advisor (see Note 8).

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Bonus Plan Awards

Pursuant to the terms of the Change in Control Bonus Plan, the participants therein received 0.6 million shares of Synta common stock from certain former stockholders of the Company in connection with the merger, which represented 7.87% of Madrigal’s common shares outstanding at the time of the merger.

Stock Based Compensation

Immediately following the consummation of the merger, the post-merger combined company issued 153,128 shares of restricted common stock and 306,256 stock options to purchase shares of common stock to the new chief executive officer and 30,626 shares of restricted common stock and 153,128 stock options to purchase shares of common stock to the new chief medical officer and executive vice president, research and development pursuant to the terms of their respective employment agreements (Note 8).

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Exhibit 99.2

AUDITED FINANCIAL STATEMENTS

1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Madrigal Pharmaceuticals, Inc.

We have audited the accompanying balance sheets of Madrigal Pharmaceuticals, Inc. (the “Company”) as of December 31, 2015 and 2014, and the related statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 to the financial statements, the Company has sustained recurring losses from operations, has not yet generated any revenues, and has a working capital deficiency of approximately $48,913,000 at December 31, 2015. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Friedman LLP

East Hanover, NJ
April 12, 2016

2

MADRIGAL PHARMACEUTICALS, INC.

Balance Sheets

The accompanying notes are an integral part of these financial statements

3

MADRIGAL PHARMACEUTICALS, INC.

Statements of Operations

The accompanying notes are an integral part of these financial statements

4

MADRIGAL PHARMACEUTICALS, INC.

Statements of Changes in Stockholders’ Deficit

The accompanying notes are an integral part of these financial statements

5

MADRIGAL PHARMACEUTICALS, INC.

Statements of Cash Flows

The accompanying notes are an integral part of these financial statements

6

MADRIGAL PHARMACEUTICALS, INC.

Notes to Financial Statements

December 31, 2015 and 2014

1. Organization and Nature of Business

Madrigal Pharmaceuticals, Inc. (the “Company”) was incorporated on August 19, 2011 and commenced operations in September 2011. On September 14, 2011, the Company entered into an Assignment and Issuance agreement in which the Company was assigned the rights, title and interest in the tangible and intangible assets owned by Bay City Capital Fund IV, L.P. (“Lender A”) and Bay City Capital Fund IV Co-Investment Fund, L.P (“Lender B”), collectively BCC in exchange for convertible promissory notes including accrued interest in the amount of approximately $23,400,000 (See Note 4). Assets contributed to the company were primarily intangible assets related to several drug development programs of VIA Pharmaceuticals, Inc. (“VIA”), which was an investee company of BCC.

The underlying assets of VIA that were transferred to BCC and subsequently contributed to Company were notionally valued at $3 million. BCC credit bid $3 million for the VIA assets as part of an assignment for the benefit of creditors (“ABC”) process. Due to the common control nature of the transaction and in accordance with GAAP, the assigned assets and liabilities were recorded by the Company at their respective carryover basis which was zero for the tangible and intangible assets and $23.4 million for the assigned debt. In 2012, Madrigal entered into a transaction with Tallikut Pharmaceuticals, Inc. (“Tallikut”) whereby Madrigal sold certain assets to Tallikut in exchange for the assumption of $2 million of convertible promissory notes.

The Company is developing novel, high-quality small-molecule drugs addressing major unmet needs in cardiovascular and metabolic diseases. The lead compound MGL-3196 is Phase-2 ready and is being advanced for indications in dyslipidemia, particularly LDL-cholesterol lowering, and non-alcoholic steatohepatitis, a liver disease that commonly affects people with metabolic diseases such as obesity and diabetes.

The Company is subject to risks common to emerging companies in the drug development and pharmaceutical industry including, but not limited to, uncertainty of product development and commercialization, lack of marketing and sales history, dependence on key personnel, uncertainty of market acceptance of products and product reimbursement, product liability, uncertain protection of proprietary technology, potential inability to raise additional financing necessary for development and commercialization, if applicable, and compliance with the U.S. Food and Drug Administration and other government regulations.

2. Liquidity and Ability to Continue as a Going Concern

The financial statements have been prepared in conformity with generally accepted accounting principles which contemplate continuation of the Company as a going concern. The Company has incurred losses since inception, including approximately $6,845,000 in the year ended December 31, 2015, resulting in an accumulated deficit of approximately $48,913,000 as of December 31, 2015. Management expects to incur losses for the foreseeable future and has a working capital deficit of approximately $48,913,000 at December 31, 2015. The Company has funded itself primarily through the issuance of convertible debt with a maturity date of December 31, 2016.

The Company will be required to obtain additional financing and capital and expects to satisfy its cash needs primarily from the additional issuance of convertible debt in order to sustain operations until it can achieve profitability and positive cash flows, if ever. The Company may also be required to obtain other sources of funding to sustain its current operations and meet its development objectives.

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During 2016, the Company commenced negotiations to effect a reverse merger concurrently with a private financing. There can be no assurances, however, that the reverse merger transaction or additional funding, either through the issuance of convertible debt or other sources, will be available on favorable terms, or at all. If adequate funds are not available, the Company may be required to delay, significantly modify or terminate its research and development programs.

All of the above matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

3. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The Company bases its estimates on historical experience and various other assumptions that management believes to be reasonable under the circumstances. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. The Company maintains its cash in a bank account, which at times, exceeds Federal Deposit Insurance Corporation (“FDIC”) insured limits.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development costs are comprised of costs incurred in performing research and development activities, including internal costs, costs for consultants, associated with the Company’s preclinical and clinical programs. In particular, Madrigal has conducted safety studies in animals, optimized and implemented the API manufacturing, and conducted Phase 1 clinical trials, all of which are considered research and development expenditures.

Patents

Costs to secure and defend patents are expensed as incurred and are classified as general and administrative expense in the Company’s statements of operations. Patent expenses were approximately $62,300 and $0 for the years ended December 31, 2015 and 2014, respectively.

Income Taxes

The Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the Company’s financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax assets to the amount that will more likely than not be realized.

Recent Accounting Pronouncements

In August, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-15—Presentation of Financial Statements, Disclosures of Uncertainties about an

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Entity’s ability to Continue as a Going Concern. The ASU requires Management to evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the financial statements are issued and if Management’s plans will alleviate that doubt. Management will be required to make this evaluation for both annual and interim periods. The accounting guidance is effective beginning in the first quarter of 2016.

In April 2015, the FASB issued an Accounting Standards Update which requires that debt issuance costs be presented in the balance sheet as a direct reduction to the carrying amount of the associated debt liability, consistent with debt discounts. Currently debt issuance costs are recognized as an asset. The ASU is effective for the Company in the first quarter of 2016 and is required to be applied retrospectively. Early adoption is permitted. The Company does not expect the adoption of this standard to have a material impact on its results of operations, financial position, and cash flows.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which amends the guidance requiring companies to separate deferred income tax liabilities and assets into current and non-current amounts in a classified statement of financial position. This accounting guidance simplifies the presentation of deferred income taxes, such that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. This determination is still required to be performed at a jurisdiction-by-jurisdiction basis. The accounting guidance is effective beginning in the first quarter of 2017.

4. Convertible Promissory Notes—Related Party

A)

September 14, 2011 Notes

On September 14, 2011, the Company was assigned (See Note 1) convertible promissory notes (“the September 14, 2011 Notes”) pursuant to an Assignment and Issuance Agreement, with Lender A and Lender B or collectively the “Lender(s)”. Lender A and Lender B are stockholders of the Company. Interest on the outstanding principal accrues and compounds monthly at 8% per annum. Accrued and unpaid interest shall either be paid upon repayment or converted with the outstanding principal amount. The notes are collateralized by all assets of the Company. The initial maturity date was the earliest of December 31, 2012 or an event of default as defined in the agreement. The September 14, 2011 Notes have been amended on various dates with each amendment extending the maturity date. The current maturity date is December 31, 2016. The September 14, 2011 Notes can be converted as follows:

(a)

Optional Conversion—Third Party Financing. At any time following the closing of a preferred equity financing by the Company led by an outside investor (“Third Party”), all outstanding principal and interest (“Accreted Value”) may, at the option of the Lenders, be converted into equity securities of the Company, having the same rights, preferences and privileges as the securities issued in the Third Party financing (“Third Party Led Securities”). The numbers of shares of Third Party Led Securities to be issued upon such conversion shall be equal to the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) eighty percent (80%) of the per share purchase price of the Third Party Led Securities.

(b)

Optional Conversion—Series A Preferred Stock. At any time, all Accreted Value may, at the option of the Lenders, be converted into shares of the Company’s Series A Preferred Stock. The number of shares of Series A Preferred Stock to be issued upon such conversion shall be equal to the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) The original issue prices of the Series A Preferred Stock.

(c)

Optional Conversion—Common Stock. At any time, Lenders may convert all or any portion of the Accreted Value of the Note into common shares of the Company with the number of common

9

shares issuable upon such conversion to equal the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) 14.29759. Any Third Party Led Securities and Series A Preferred Stock issued to the Lenders shall be convertible at any time at the option of Lenders into common stock of the Company.

(d)

Mandatory Conversion. If the principal and interest of the convertible note has not been repaid in full by the maturity date, the Accreted Value shall automatically convert into common stock of the Company. The conversion price shall be a price per share equal to the per share value of the Company’s common stock at the time of conversion.

ASC 815 requires that a conversion feature should be accounted for as a derivative when specific criteria are met. The Company has determined that the conversion features do not meet the criteria for derivative accounting as the underlying stock cannot be readily converted into cash due to the lack of an active market. This assessment will be made on an ongoing basis throughout the contracts life.

B)

September 16, 2011 Notes

On September 16, 2011, the Company entered into a Note Purchase Agreement with Lender A and Lender B in which the Company agrees to sell and issue to the Lenders secured convertible promissory notes (“the September 16, 2011 Notes”). Interest on the outstanding principal accrues and compounds monthly at 8% per annum. Accrued and unpaid interest shall either be paid upon repayment or converted with the outstanding principal amount. The notes are collateralized by all assets of the Company. The initial maturity date was the earliest of October 31, 2012 or an event of default as defined in the agreement. The September 16, 2011 notes have been amended on various

4. Convertible Promissory Notes—Related Party (Continued)

dates with each amendment extending the maturity date. The current maturity date is December 31, 2016. The September 16, 2011 notes can by converted as follows:

(a)

Optional Conversion—Third Party Financing. At any time following the closing of a preferred equity financing by the Company led by Third Party, all Accreted Value may, at the option of the Lenders, be converted into equity securities of the Company, having the same rights, preferences and privileges as the securities issued in the Third Party financing. The numbers of shares of Third Party Led Securities to be issued upon such conversion shall be equal to the quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) eighty percent (80%) of the per share purchase price of the Third Party Led Securities.

In addition, the Company shall issue to each Lender, upon conversion of such Lender’s note, a warrant to purchase from the Company up to the number of fully paid and nonassessable shares of Third Party Led Securities sold in such Third Party Financing that equals the quotient obtained by dividing (a) ten percent (10%) of the original principal amount of the notes issued to such Lenders pursuant to the Note Purchase Agreement by (b) the per share purchase price of the Third Party Led Securities. The Company has not issued any warrants to date or during the years ended December 31, 2015 and 2014.

(b)

Optional Conversion—Series A Preferred Stock. At any time, all Accreted Value may, at the option of the Lenders, be converted into shares of the Company’s Series A Preferred Stock. The number of shares of Series A Preferred Stock to be issued upon such conversion shall be equal to the Quotient obtained by dividing (a) the Accreted Value on the date of conversion by (b) 14.29759.

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ASC 815 requires that a conversion feature should be accounted for as a derivative when specific criteria are met. The Company has determined that the conversion features do not meet the criteria for derivative accounting as the underlying stock cannot be readily converted into cash due to the lack of an active market. This assessment will be made on an ongoing basis throughout the contracts life.

The original issue amount, outstanding principal and interest balance (Accreted Value) by the Lenders are as follows:

5. Advances Payable—Related Party

On June 29, 2015 and July 30, 2015 a related party agreed to advance the Company $250,000 and $250,000 to be used for working capital requirements. The advances accrue interest at a rate of four percent (4%) per annum compounded annually. Accrued and unpaid interest shall be paid upon repayment of the advance. The advances consisted of the following:

6. Stockholders’ Equity

The Company’s Certificate of Incorporation as amended on September 1, 2011 authorizes the Company to issue 35,000,000 shares of Common Stock, $0.0001 par value per share (“Common Stock”), and 30,000,000 shares of Preferred Stock, $0.0001 par value per share (“Series A Preferred Stock”). Holders of Preferred Stock accrue dividends at 8% per annum. Preferred Stock has certain rights, preferences and privileges to include preferential payment in liquidation, voting and conversion. In the event of liquidation, dissolution or winding up of the Company, the holders of Series A Preferred Stock, would be paid an amount per share equal to 14.29759 times the original issue price, plus accruing dividends prior to payment to common stock holders. Each share of Series A Preferred Stock is entitled to cast the number of votes equal to the whole shares of Common Stock into which the shares of Series A Preferred Stock held are convertible. At December 31, 2015 and December 31, 2014, the Company had not issued any shares of Preferred Stock.

Issued and outstanding Common Stock is held solely by Lender A, Lender B and the Company’s Acting Chief Executive Officer. Shares of common stock may not be sold, assigned, transferred, encumbered or disposed of without written agreement between the Company and the stockholder.

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7. Income Taxes

At December 31, 2015, the Company had federal net operating loss (“NOL”) carryforwards of approximately $19,176,000 and state operating loss carryforwards of approximately $12,197,000, available to reduce future taxable income, which expire between 2031 and 2035. The Company has unused federal research and development carryforwards of approximately $456,000. These will begin to expire in 2032.

The Internal Revenue Code (“IRC”) limits the amounts of NOL carryforwards that a Company may use in any one year in the event of certain cumulative changes in ownership over a three-year period as described in Section 382 of the IRC. Such change in ownership could limit the Company’s utilization of the NOL, and could be triggered by subsequent sales of securities by the Company or stockholders. The deferred tax asset related to the NOL reflected on the financial statements could be affected by this limitation. We have not performed a detailed analysis to determine whether an ownership change has occurred.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. As there is no assurance of future taxable income, a full valuation allowance has been established to offset the deferred tax assets. The valuation allowance increased $1,986,500 and increased $862,600 for the years ended December 31, 2015 and 2014, respectively. Changes in the deferred tax asset will be recorded as an income tax benefit or expense on the accompanying statements of operations.

Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns. The Company has analyzed its tax positions and has concluded that as of December 31, 2015 there were no uncertain positions. The 2011 through 2015 tax returns are open to review by the IRS and state taxing authorities. Interest and penalties, if any, as they relate to income taxes assessed, are included in the income tax provision. There was no income tax related interest and penalties included in the income tax provision for 2015.

Temporary differences that give rise to deferred tax assets and liabilities are as follows:

Differences between the effective income tax rate and the US statutory rate were as follows:

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8. Related Party Transactions

Related party financing

Lender A and B have provided financing to the Company since its inception. For the years ended December 31, 2015 and December 31, 2014 the Lenders have provided in convertible promissory note financing $2,800,000 and $1,375,000, respectively. For the years ended December 31, 2015 and December 31, 2014, the Company has incurred approximately $3,603,000 and $3,168,000, respectively in interest expense to the Lenders on outstanding convertible promissory notes payable. At December 31, 2015 and December 31, 2014, the Company has approximately $48,595,000 and $42,193,000, respectively of convertible promissory notes payable to the Lenders as more fully described in Note 4.

Travel and legal expenses

The Company has reimbursed Lender A for certain travel expenses in the amounts of approximately $31,000 and $13,500 for the years ended December 31, 2015 and December 31, 2014, respectively. The Company reimbursed Lender A $41,300 in the year ending December 31, 2015, for certain legal expenses paid on behalf of the Company for corporate legal matters.

Consulting agreement

The Company has a consulting agreement with its Chief Executive Officer (“CEO”), who is also a stockholder of the Company. The consulting agreement automatically renews monthly until it is terminated. The consulting agreement can be terminated upon fifteen (15) day notice by the Company or the CEO. The consulting agreement is in lieu of employment. For the year ended December 31, 2015 and 2014, the Consultant was paid $165,000 in each year.

9. Commitment and contingencies

The Company has a Research, Development and Commercialization Agreement with Hoffmann-La Roche (“Roche”) which grants to the Company a sole and exclusive license to develop, use, sell, offer for sale and import any Licensed Product as defined by the agreement.

The Company entered Phase 1 clinical trials in 2011 and paid the related milestone payment to Roche on October 12, 2011. The agreement requires future milestone payments to Roche, the remainder of which total $10.8 million and are earned by the commencement of Phase 2 and Phase 3 clinical trials as well as future regulatory approval in the United States and Europe of a product developed from MGL-3196. A single-digit royalty payment range is based on net sales of products developed from MGL-3196, subject to certain reductions. The Company has not achieved any additional product development or regulatory milestones to date and has no Licensed Product sales for the years ending December 31, 2015 and 2014.

The Company has a Change in Control Bonus Plan (“Bonus Plan”) in which certain key service providers of the Company, will be awarded bonuses in the event there is a change in control, as defined. The purpose of the Bonus Plan is to compensate for past services, and secure to a limited extent, continued services of certain key service providers of the Company. In accordance with the Bonus Plan, up to 10% of the net proceeds will be paid to eligible participants based upon their participation agreement which will be funded out of the consideration actually provided to the Company and or the Stockholders of the Company in connection with a change of control transaction and will be the same form of consideration actually transferred.

10. Subsequent Events

On March 1, 2016, the Company entered into a Note Purchase Agreement with Lender A and Lender B in which the Company agrees to sell and issue to the Lenders secured convertible promissory notes (“the March 1, 2016 Notes”). Interest on the outstanding principal accrues and compounds monthly at 8% per annum. Accrued and unpaid interest shall either be paid upon repayment or converted with the outstanding principal amount. The Notes have a maturity date of December 31, 2016. The notes can be converted as defined in the March 1, 2016 Note Purchase Agreement. On March 1, 2016, the Company issued notes to Lender A in the amount of $734,175 and to Lender B in the amount of $15,825.

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Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements were prepared using the acquisition method of accounting under existing U.S. generally accepted accounting principles, or GAAP, and give effect to the merger between Madrigal and Synta. For accounting purposes, Private Madrigal is considered to be acquiring Synta in the merger. Private Madrigal was determined to be the accounting acquirer based upon the terms of the Merger Agreement and other factors including: (i) Madrigal security holders own approximately 64% of the voting interests of the combined company immediately following the closing of the merger; (ii) directors appointed by Madrigal hold a majority of board seats in the combined company; and (iii) Madrigal management holds a majority of the key positions in the management of the combined company.

The unaudited pro forma condensed combined balance sheet as of June 30, 2016 assumes that the merger took place on June 30, 2016 and combines the historical balance sheets of Synta and Madrigal as of June 30, 2016. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2016 assumes that the merger took place as of January 1, 2016, and combines the historical results of Synta and Madrigal for the six months ended June 30, 2016. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015 assumes that the merger took place as of January 1, 2015, and combines the historical results of Synta and Madrigal for the year ended December 31, 2015. The historical financial statements of Synta and Madrigal have been adjusted to give pro forma effect to events that are (i) directly attributable to the merger, (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined results.

Because Madrigal will be treated as the accounting acquirer, Madrigal’s assets and liabilities will be recorded at their precombination carrying amounts and the historical operations that are reflected in the financial statements will be those of Madrigal. Synta’s assets and liabilities will be measured and recognized at their fair values as of the transaction date, and consolidated with the assets, liabilities and results of operations of Madrigal after the consummation of the merger.

The unaudited pro forma condensed combined financial statements are based on the assumptions and adjustments that are described in the accompanying notes. The application of the acquisition method of accounting is dependent upon certain valuations and other studies that have yet to be completed. Accordingly, the pro forma adjustments are preliminary, subject to further revision as additional information becomes available and additional analyses are performed, and have been made solely for the purpose of providing unaudited pro forma condensed combined financial statements. Differences between these preliminary estimates and the final acquisition accounting will occur and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and the combined company’s future results of operations and financial position. The actual amounts recorded as of the completion of the merger may differ materially from the information presented in these unaudited pro forma condensed combined financial statements as a result of the amount of cash used by Synta’s operations between the signing of the Merger Agreement and the closing of the merger; the results of certain valuations and other studies that have yet to be completed; and other changes in Synta’s assets and liabilities that occur prior to the completion of the merger.

The unaudited pro forma condensed combined financial statements do not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the integration of the two companies. The unaudited pro forma condensed combined financial statements have been prepared for illustrative purposes only and are not necessarily indicative of the financial position or results of operations in future periods or the results that actually would have been realized had Madrigal and Synta been a combined company during the specified period.

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The unaudited pro forma condensed combined financial statements, including the notes thereto, should be read in conjunction with the separate Madrigal and Synta historical financial statements, and their respective management’s discussion and analysis of financial condition and results of operations. Madrigal’s historical unaudited financial statements for the six months ended June 30, 2016 and historical audited financial statements for the year ended December 31, 2015 are included elsewhere in this statement. Synta’s historical unaudited condensed consolidated financial statements for the six months ended June 30, 2016 are included in its Quarterly Report on Form 10-Q as filed with the SEC on July 20, 2016 and its historical audited consolidated financial statements for the year ended December 31, 2015 are included in its Annual Report on Form 10-K as filed with the SEC on March 15, 2016.

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Unaudited Pro Forma Condensed Combined Balance Sheet

June 30, 2016

( in thousands )