3. Reverse Merger

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 private Madrigal common stock was converted into 0.1593 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 private Madrigal in exchange for common shares of private 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 continue to be recorded at their historical carrying amounts and the historical operations that will be reflected in the financial statements will be those of the Company.

Immediately prior to the closing of the merger, Synta completed a one-for-35 reverse stock split. 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. The impact of the recapitalization of the Company has been retroactively applied to all periods presented.

Upon the closing of the merger transaction, the Company incurred an expense for a success fee of $750,000 in cash, plus settled $750,000 for both parties in shares of the post-merger combined company's common stock with a third party financial advisor.

Purchase Price

Pursuant to the Merger Agreement, Synta issued to Madrigal stockholders a number of shares of Synta common stock representing approximately 64% of the outstanding shares of common stock of the combined company. The purchase price, which represents the consideration transferred to Synta stockholders in the reverse merger is calculated based on the number of shares of common stock of the combined company that Synta stockholders will own as of the closing of the merger, which consists of the following:

Number of shares of the combined company to be owned by Synta stockholders(1)		4,032,734
Multiplied by the fair value of Synta common stock(2)	$	9.48

Purchase price (in thousands)	$	38,236


(1)	Represents the number of shares of common stock of the combined company that Synta stockholders owned as of the closing of the merger pursuant to the Merger Agreement, including restricted stock awards and common stock underlying outstanding restricted stock units attributed to pre-combination services rendered by certain Synta employees and directors. This amount is calculated as 3,937,309 shares of Synta common stock outstanding as of July 22, 2016, including unvested restricted common stock, plus 95,425 shares of Synta common stock issuable pursuant to restricted stock units, net of tax withholdings, that vested immediately upon closing of the merger. The number of shares of common stock Synta issued to Madrigal stockholders was 7,253,655, calculated pursuant to the terms of the Merger Agreement based on Synta's common stock outstanding as of July 22, 2016.
(2)	The fair value of Synta common stock used in determining the purchase price was $9.48, which was derived from the $0.2709 per share closing price of Synta common stock on July 21, 2016, the current price at the time of the closing, adjusted for the 1-for-35 reverse stock split.

Under the acquisition method of accounting, the total purchase price is allocated to the acquired tangible and intangible assets and assumed liabilities of Synta based on their estimated fair values as of the merger closing date. The excess of the purchase price over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill. The allocation of the purchase price to the acquired assets and liabilities assumed of Synta based on the fair values as of July 22, 2016 is as follows, including measurement period adjustments since the fair values presented in the Company's Form 10-Q for the quarter ended September 30, 2016 (in thousands):

	July 22, 2016			Measurement period adjustments			July 22 2016 (As adjusted)
Cash, cash equivalents and marketable securities	$	42,611					$	42,611
Prepaid expenses and other currents assets		1,715						1,715
Property and equipment, net		482			65			547
Accounts payable, accrued expenses and other liabilities		(7,019	)					(7,019	)
Term loans and capital lease obligations		(18	)					(18	)
In-process research and development		150			250			400
Goodwill		315			(315	)		—

Net assets acquired	$	38,236					$	38,236

The Company's measurement period adjustments were complete as of December 31, 2016. As a result of the measurement period adjustments recorded above, there was no gain or losses on the disposed tangible or intangible assets.

Convertible Promissory Notes-Related Parties

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 $47.6 million on July 22, including accrued but unpaid interest, were converted into 7.1 million shares of common stock on a post-split basis of the Company pursuant to their respective amended and restated terms (see Note 6).

Bonus Plan Awards

Pursuant to the terms of the Change in Control Bonus Plan, the participants therein received 0.6 million shares of common stock of the Company 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. The Company recorded $5.4 million in stock compensation associated with the transaction (see Note 9).

Stock Based Compensation

Following the consummation of the merger, the Company issued a combined 208,255 shares of restricted common stock and 557,386 stock options to purchase shares of common stock to the new Chief Executive Officer, Chief Medical Officer and Executive Vice President, and Chief Financial Officer and Senior Vice President.