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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-51314
 Winston Pharmaceuticals, Inc.
  Delaware
    
    30-0132755(State or other Jurisdiction of 
Incorporation)
    
    (IRS Employer Identification No.)100 North Fairway Drive,Suite 134Vernon Hills, Illinois
    
    60061(Address of Principal Executive Offices)
    
    (Zip Code)
 
  þ o
 o o
  Large
Accelerated
Filer oAccelerated
Filer oNon-accelerated Filer o(Do not check if a smaller reporting company)
Smaller reporting company þ o þ




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##### 



WINSTON PHARMACEUTICALS, INC. AND SUBSIDIARIES
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements (unaudited)
    
    
    3Condensed Consolidated Balance Sheets at March 31, 2010 and December 31, 2009
    
    
    3Condensed Consolidated Statements of Operations for the three month periods ended
March 31, 2010 and 2009
    
    
    4Condensed Consolidated Statements of Cash Flows for the three month periods ended
March 31, 2010 and 2009
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20PART II. OTHER INFORMATION
    
    
    21Item 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3. Defaults Upon Senior Securities
    
    
    21Item 4. Removed and Reserved
    
    
    21Item 5. Other Information
    
    
    21Item 6. Exhibits
    
    
    21Signatures
    
    
    22Exhibit 31.1Exhibit 31.2Exhibit 32.1
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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 Winston Pharmaceuticals, Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,2010
    
    
    2009ASSETSCURRENT ASSETSCash
    
    $
    677,522
    
    
    $
    1,562,848Accounts receivable
    
    
    
    
    
    
    15,653Related party receivables
    
    
    59,440
    
    
    
    22,395Inventory
    
    
    28,925
    
    
    
    Prepaid and other current assets
    
    
    45,414
    
    
    
    43,944Total current assets
    
    
    811,301
    
    
    
    1,644,840EQUIPMENT, net of accumulated depreciation of
$142,817 at March 31, 2010 and $141,433 at
December 31, 2009
    
    
    12,376
    
    
    
    13,760INTANGIBLE ASSETS, NET
    
    
    18,597
    
    
    
    17,455TOTAL ASSETS
    
    $
    842,274
    
    
    $
    1,676,055LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    715,248
    
    
    $
    724,140Accrued expenses and other current liabilities
    
    
    61,793
    
    
    
    146,638Unearned revenue
    
    
    
    
    
    
    316,706Total liabilities
    
    
    777,041
    
    
    
    1,187,484Commitments and ContingenciesStockholders equityCommon stock, $.001 par value, 900,000,000
shares authorized, 77,408,893 shares issued
and outstanding at March 31, 2010 and at
December 31, 2009
    
    
    77,409
    
    
    
    77,409Additional paid-in capital
    
    
    49,831,613
    
    
    
    49,794,260Accumulated deficit
    
    
    (49,843,789
    )
    
    
    (49,383,098
    )Total stockholders equity
    
    
    65,233
    
    
    
    488,571TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    842,274
    
    
    $
    1,676,055
 See notes to unaudited condensed consolidated financial statements
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Winston Pharmaceuticals, Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months ended March 312010
    
    
    2009REVENUESLicense revenues
    
    $
    316,706
    
    
    $
    316,706Royalty revenues
    
    
    
    
    
    
    23,280316,706
    
    
    
    339,986EXPENSESResearch and development
    
    
    326,340
    
    
    
    545,966General and administrative
    
    
    449,765
    
    
    
    580,309Depreciation and amortization
    
    
    2,141
    
    
    
    2,318Total operating expenses
    
    
    778,246
    
    
    
    1,128,593Loss from operations
    
    
    (461,540
    )
    
    
    (788,607
    )Interest income
    
    
    159
    
    
    
    9,727Other income
    
    
    690
    
    
    
    96849
    
    
    
    9,823Loss before income taxes
    
    
    (460,691
    )
    
    
    (778,784
    )Income TaxesCurrent
    
    
    
    
    
    
    Deferred
    
    
    
    
    
    
    NET LOSS
    
    $
    (460,691
    )
    
    $
    (778,784
    )Loss per share, basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.01
    )Weighted average number of shares outstanding, basic and diluted
    
    
    77,408,893
    
    
    
    55,307,145
 See notes to unaudited condensed consolidated financial statements
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Winston Pharmaceuticals, Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 2010 and 2009
 2010
    
    
    2009Cash flows from operating activitiesNet loss
    
    $
    (460,691
    )
    
    $
    (778,784
    )Depreciation and amortization
    
    
    2,141
    
    
    
    2,318Stock Option expense for non-employee directors and employees
    
    
    37,353
    
    
    
    Changes in:Accounts receivable
    
    
    (21,392
    )
    
    
    14,645Inventory
    
    
    (28,925
    )
    
    
    Prepaid and other current assets
    
    
    (1,470
    )
    
    
    11,373Other assets
    
    
    
    
    
    
    1,154Unearned revenue
    
    
    (316,706
    )
    
    
    (316,706
    )Accounts payable
    
    
    (8,892
    )
    
    
    (429,800
    )Accrued expenses and other current liabilities
    
    
    (84,845
    )
    
    
    (43,537
    )Net cash used in operating activities
    
    
    (883,427
    )
    
    
    (1,539,337
    )Cash flows from investing activitiesPurchases of equipment
    
    
    
    
    
    
    (738
    )Purchases of intangibles
    
    
    (1,899
    )
    
    
    Net cash used in investing activities
    
    
    (1,899
    )
    
    
    (738
    )Cash flows from financing activitiesProceeds from exercise of stock options
    
    
    
    
    
    
    82,950Net cash provided by financing activities
    
    
    
    
    
    
    82,950NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (885,326
    )
    
    
    (1,457,125
    )Cash and cash equivalents at beginning of period
    
    
    1,562,848
    
    
    
    5,626,913Cash and cash equivalents at end of period
    
    $
    677,522
    
    
    $
    4,169,788Supplemental disclosures of cash flow informationInterest paid
    
    $
    
    
    
    $
    Income taxes paid
    
    $
    
    
    
    $
    
 See notes to unaudited condensed consolidated financial statements
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Winston Pharmaceuticals, Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  BASIS OF PRESENTATION
      Principles of Consolidation
   6




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Inventories
  Fair Value of Financial Instruments
  Fair Value Measurements and
Disclosures,
  Revenue Recognition
   Revenue Recognition
 Multiple Element Arrangements
    7




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License Arrangements.
   Research Services Arrangements
 Royalty Arrangements
  Research and Development Expenses
 Research and Development,
  Acquired contractual rights
   8




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Income Taxes
  Income Taxes
 Segment Information
  Recent Accounting Pronouncements
  Revenue
Recognition (Topic 605)- Multiple-Deliverable Revenue Arrangements Revenue Recognition
 Revenue Recognition  Milestone Method (Topic
605): Milestone Method of Revenue Recognition FASB Accounting Standards Codification
   9




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NOTE 2  EARNINGS PER SHARE
  Three months ended March 312010
    
    
    2009Denominator:Weighted average common shares outstanding  basic and diluted
    
    
    77,408,893
    
    
    
    55,307,145Loss per common share  basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.01
    )
  NOTE 3  TECHNOLOGY LICENSE AGREEMENTS
   NOTE 4  RELATED-PARTY TRANSACTIONS
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NOTE 5  INCOME TAXES
   March 31,
    
    
    March 31,2010
    
    
    2009Tax benefit at U.S. federal statutory rate
    
    $
    (157,000
    )
    
    $
    (265,000
    )State tax benefit, net of federal benefit
    
    
    (22,000
    )
    
    
    (38,000
    )Change in valuation allowance
    
    
    197,000
    
    
    
    311,000Permanent differences
    
    
    1,000
    
    
    
    1,000Research and development credits
    
    
    (18,000
    )
    
    
    (25,000
    )Other, net
    
    
    (1,000
    )
    
    
    16,000Income tax expense (benefit)
    
    $
    
    
    
    $
    
  11




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NOTE 6  STOCK OPTION PLANS
  WeightedWeighted-
    
    
    Weighted-
    
    
    
    
    
    
    AverageAverage
    
    
    Average
    
    
    Aggregate
    
    
    RemainingExercise
    
    
    Grant Date
    
    
    Intrinsic
    
    
    ContractualShares
    
    
    Price
    
    
    Fair Value
    
    
    Value
    
    
    LifeOptions at December 31, 2009
    
    
    3,041,985
    
    
    $
    0.50Granted
    
    
    
    
    
    
    
    
    
    $
    Exercised
    
    
    
    
    
    $
    Forfeitures
    
    
    (3,000
    )
    
    $
    1.53Options at
March 31, 2010
    
    
    3,038,985
    
    
    $
    0.50
    
    
    
    
    
    
    $
    1,711,362
    
    
    
    3.96
   12




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
     Executive Overview
   13




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£
    ®
   14




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15




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® ®
  16




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Results of Operations
 For the three months ended March 31, 2010 compared to the three months ended March
31, 2009
 Three Months Ended March 31,2010
    
    
    2009
    
    
    $ Change
    
    
    % ChangeREVENUESLicense
revenues
    
    $
    316,706
    
    
    $
    316,706
    
    
    $
    
    
    
    
    Royalty
revenues
    
    
    
    
    
    
    23,280
    
    
    
    (23,280
    )
    
    
    100
    %316,706
    
    
    
    339,986
    
    
    
    (23,280
    )
    
    
    (7
    )%EXPENSESResearch and development
    
    
    326,340
    
    
    
    545,966
    
    
    
    (219,626
    )
    
    
    (40
    )%General and administrative
    
    
    449,765
    
    
    
    580,309
    
    
    
    (130,544
    )
    
    
    (22
    )%Depreciation and amortization
    
    
    2,141
    
    
    
    2,318
    
    
    
    (177
    )
    
    
    (8
    )%Total operating expenses
    
    
    778,246
    
    
    
    1,128,593
    
    
    
    (350,347
    )
    
    
    (31
    )%Loss from operations
    
    
    (461,540
    )
    
    
    (788,607
    )
    
    
    327,067
    
    
    
    (41
    )%Interest income
    
    
    159
    
    
    
    9,727
    
    
    
    (9,568
    )
    
    
    (98
    )%Other income
    
    
    690
    
    
    
    96
    
    
    
    594
    
    
    
    619
    %Other income
    
    
    849
    
    
    
    9,823
    
    
    
    (8,974
    )
    
    
    (91
    )%Loss before income taxes
    
    
    (460,691
    )
    
    
    (778,784
    )
    
    
    318,093
    
    
    
    (41
    )%Income Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (460,691
    )
    
    $
    (778,784
    )
    
    $
    318,093
    
    
    
    (41
    )%
 Revenues
    17




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Research & Development Expenses
  General and Administrative Expenses
  Interest Income
  Net Loss
  Liquidity and Capital Resources
        18




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Contractual Obligations
     19




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Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
 Disclosure Controls and Procedures
 Internal Control Over Financial Reporting
  20




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Removed and Reserved
 
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibit No.10.1
    
    Letter of Intent Between Pharmaceutical Financial
Syndicate, LLC, Frost Gamma Investments Trust, Subbarao
Uppaluri, Steven D. Rubin and Jane Hsiao, Ph.D. (filed
as Exhibit 10.1 to the Companys Current Report on Form
8-K dated February 12, 2010 and incorporated herein by
reference).31.1
    
    Certification of the President and Chief Executive
Officer of Winston Pharmaceuticals, Inc., Joel E.
Bernstein, M.D., pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Vice President and Chief Financial
Officer of Winston Pharmaceuticals, Inc., David Starr,
pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    Certification of the President and Chief Executive
Officer of Winston Pharmaceuticals, Inc., Joel E.
Bernstein, M.D., and the Vice President and Chief
Financial Officer of Winston Pharmaceuticals, Inc.,
David Starr, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
  21




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SIGNATURES
  WINSTON PHARMACEUTICALS, INC.
(Registrant)Dated: May 13, 2010
    By:
    /s/ Joel E. BernsteinJoel E. Bernstein, M.D.President and Chief Executive OfficerDated: May 13, 2010
    By:
    /s/ David StarrDavid StarrVice President, Chief Financial Officer  22




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EXHIBIT INDEX
 ExhibitNo.
    
    Description10.1
    
    Letter of Intent Between Pharmaceutical Financial
Syndicate, LLC, Frost Gamma Investments Trust, Subbarao
Uppaluri, Steven D. Rubin and Jane Hsiao, Ph.D. (filed as
Exhibit 10.1 to the Companys Current Report on Form 8-K
dated February 12, 2010 and incorporated herein by
reference).31.1
    
    Certification of the President and Chief Executive Officer
of Winston Pharmaceuticals, Inc., Joel E. Bernstein, M.D.,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Vice President and Chief Financial
Officer of Winston Pharmaceuticals, Inc., David Starr,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the President and Chief Executive Officer
of Winston Pharmaceuticals, Inc., Joel E. Bernstein, M.D.,
and the Vice President and Chief Financial Officer of
Winston Pharmaceuticals, Inc., David Starr, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
  23