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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, 2009
 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)
 (Registrants telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o
  Large Accelerated Filer o
    
    Accelerated Filer  o
    
    Non-accelerated Filer   o
    
    Smaller reporting
company   þ
 Yes o No þ




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##### 



WINSTON PHARMACEUTICALS, INC. AND SUBSIDARIES
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial Statements (unaudited)
    
    
    3Condensed Consolidated Balance Sheets at March 31, 2009 and December 31, 2008
    
    
    3Condensed Consolidated Statements of Operations for the three month periods ended

March 31, 2009 and 2008
    
    
    4Condensed Consolidated Statements of Cash Flows for the three month periods ended

March 31, 2009 and 2008
    
    
    5Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4. Controls and Procedures
    
    
    17PART II. OTHER INFORMATION
    
    
    18Item 1. Legal Proceedings
    
    
    18Item 1A. Risk Factors
    
    
    18Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3. Defaults Upon Senior Securities
    
    
    18Item 4. Submission of Matters to a Vote of Security Holders
    
    
    18Item 5. Other Information
    
    
    18Item 6. Exhibits
    
    
    18Signatures
    
    
    19Exhibit 31.1Exhibit 31.2Exhibit 32.1
   2




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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 Winston Pharmaceuticals, Inc. and Subsidiaries
 
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31, 2009
    
    
    December 31, 2008ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    4,169,788
    
    
    $
    5,626,913Accounts receivable
    
    
    23,281
    
    
    
    17,498Related party receivable
    
    
    17,714
    
    
    
    38,142Prepaid and other current assets
    
    
    57,092
    
    
    
    68,465Total current assets
    
    
    4,267,875
    
    
    
    5,751,018PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$137,148 at March 31, 2009 and $161,907 at December 31, 2008
    
    
    18,045
    
    
    
    18,823INTANGIBLE ASSETS, NET
    
    
    19,584
    
    
    
    21,540TOTAL ASSETS
    
    $
    4,305,504
    
    
    $
    5,791,381LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    622,930
    
    
    $
    1,052,730Accrued expenses and other current liabilities
    
    
    196,323
    
    
    
    239,861Unearned revenue  current portion
    
    
    1,266,825
    
    
    
    1,266,825Total current liabilities
    
    
    2,086,078
    
    
    
    2,559,416Unearned revenue  long-term portion
    
    
    
    
    
    
    316,706Total liabilities
    
    
    2,086,078
    
    
    
    2,876,122Commitments and ContingenciesStockholders equityPreferred Stock, $.001 par value, 250,000,000 shares authorizedSeries A, Convertible 12,730 shares issued and outstanding
at March 31, 2009 and at December 31, 2008
    
    
    13
    
    
    
    13Series B, Convertible 9,157 shares issued and outstanding
at March 31, 2009 and at December 31, 2008
    
    
    9
    
    
    
    9Common stock, $.001 par value, 900,000,000 shares authorized
55,338,034 and 55,106,364 shares issued and outstanding at
March 31, 2009 and at December 31, 2008
    
    
    55,338
    
    
    
    55,106Additional paid-in capital
    
    
    49,670,632
    
    
    
    49,587,913Accumulated deficit
    
    
    (47,506,566
    )
    
    
    (46,727,782
    )Total stockholders equity
    
    
    2,219,426
    
    
    
    2,915,259TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    4,305,504
    
    
    $
    5,791,381
 See notes to unaudited condensed consolidated financial statements
  3




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Winston Pharmaceuticals, Inc. and Subsidiaries
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months ended March 312009
    
    
    2008REVENUESLicense revenues
    
    $
    316,706
    
    
    $
    Royalty revenues
    
    
    23,280
    
    
    
    79,880339,986
    
    
    
    79,880EXPENSESResearch and development
    
    
    545,966
    
    
    
    992,920General and administrative
    
    
    580,309
    
    
    
    456,392Depreciation and amortization
    
    
    2,318
    
    
    
    1,874Total operating expenses
    
    
    1,128,593
    
    
    
    1,451,186Loss from operations
    
    
    (788,607
    )
    
    
    (1,371,306
    )Interest income
    
    
    9,727
    
    
    
    40,365Other income
    
    
    96
    
    
    
    549,823
    
    
    
    40,419Loss before income taxes
    
    
    (778,784
    )
    
    
    (1,330,887
    )Income TaxesCurrent
    
    
    
    
    
    
    Deferred
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (778,784
    )
    
    $
    (1,330,887
    )Loss per share, basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.03
    )Weighted average number of
shares outstanding, basic and
diluted
    
    
    55,307,145
    
    
    
    52,814,818
 See notes to unaudited condensed consolidated financial statements
  4




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Winston Pharmaceuticals, Inc. and Subsidiaries
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months Ended March 31, 2009 and 2008
 2009
    
    
    2008Cash flows from operating activitiesNet loss
    
    $
    (778,784
    )
    
    $
    (1,330,887
    )Depreciation and amortization
    
    
    2,318
    
    
    
    1,874Changes in:Accounts receivable
    
    
    14,645
    
    
    
    (31,687
    )Prepaid and other current assets
    
    
    11,373
    
    
    
    (72,905
    )Other assets
    
    
    1,154
    
    
    
    (650
    )Unearned revenue
    
    
    (316,706
    )
    
    
    Accounts payable
    
    
    (429,800
    )
    
    
    168,810Accrued expenses and other current liabilities
    
    
    (43,537
    )
    
    
    11,012Net cash used in operating activities
    
    
    (1,539,337
    )
    
    
    (1,254,433
    )Cash flows from investing activitiesPurchases of equipment
    
    
    (738
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    (738
    )
    
    
    Cash flows from financing activitiesProceeds from exercise of stock options
    
    
    82,950
    
    
    
    Net cash provided by financing activities
    
    
    82,950
    
    
    
    NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (1,457,125
    )
    
    
    (1,254,433
    )Cash and cash equivalents at beginning of period
    
    
    5,626,913
    
    
    
    4,481,611Cash and cash equivalents at end of period
    
    $
    4,169,788
    
    
    $
    3,227,178Supplemental disclosures of cash flow informationInterest paid
    
    $
    
    
    
    $
    Income taxes paid
    
    $
    
    
    
    $
    
 See notes to unaudited condensed consolidated financial statements
  5




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Winston Pharmaceuticals, Inc. and Subsidiaries
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  BASIS OF PRESENTATION
    Principles of Consolidation
  Cash and Cash Equivalents
  Fair Value of Financial Instruments
  Fair Value Measurements,
   6




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Fair Value Measurements at March 31, 2009Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalAssets:Mutual fund
    
    $
    3,977,546
    
    
    $
    
    
    
    $
    
    
    
    $
    3,977,546Total
    
    $
    3,977,546
    
    
    $
    
    
    
    $
    
    
    
    $
    3,977,546
 Fair Value Measurements at December 31, 2008Quoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    TotalAssets:Mutual fund
    
    $
    1,961,059
    
    
    $
    
    
    
    $
    
    
    
    $
    1,961,059Total
    
    $
    1,961,059
    
    
    $
    
    
    
    $
    
    
    
    $
    1,961,059
  Research and Development Expenses
   7




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Income Taxes
   Segment Information
  Reclassification
  Recent Accounting Pronouncements
     8




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NOTE 2  EARNINGS PER SHARE
  Three months ended March 312009
    
    
    2008Denominator:Weighted average common
shares outstanding 
basic and diluted
    
    
    55,307,145
    
    
    
    52,814,818Loss per common share 
basic and diluted
    
    $
    (0.01
    )
    
    $
    (0.03
    )
  NOTE 3  TECHNOLOGY LICENSE AGREEMENTS
    NOTE 4  RELATED-PARTY TRANSACTIONS
   9




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NOTE 5  INCOME TAXES
   March 31, 2009
    
    
    March 31, 2008Tax benefit at U.S. federal statutory rate
    
    $
    (265,000
    )
    
    $
    (453,000
    )State tax benefit, net of federal benefit
    
    
    (38,000
    )
    
    
    (64,000
    )Change in valuation allowance
    
    
    311,000
    
    
    
    552,000Permanent differences
    
    
    1,000
    
    
    
    1,000Research and development credits
    
    
    (25,000
    )
    
    
    (31,000
    )Other, net
    
    
    16,000
    
    
    
    (5,000
    )Income tax expense (benefit)
    
    $
    
    
    
    $
    
 NOTE 6  STOCK OPTION PLANS
  WeightedWeighted-
    
    
    Weighted-
    
    
    
    
    
    
    AverageAverage
    
    
    Average
    
    
    Aggregate
    
    
    RemainingExercise
    
    
    Grant Date
    
    
    Intrinsic
    
    
    ContractualShares
    
    
    Price
    
    
    Fair Value
    
    
    Value
    
    
    LifeOptions at December 31, 2008
    
    
    3,626,731
    
    
    $
    0.32Granted
    
    
    
    
    
    
    
    
    
    $
    Exercised
    
    
    (231,670
    )
    
    $
    0.36Forfeitures
    
    
    (198,574
    )
    
    $
    0.28Options at March 31, 2009
    
    
    3,196,487
    
    
    $
    0.34
    
    
    
    
    
    
    $
    0
    
    
    
    3.49
  10




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NOTE 7  SUBSEQUENT EVENTS
         11




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
     Executive Overview
  ®
  12




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£
  ®
 ® ®
  13




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Results of Operations
 For the three months ended March 31, 2009 compared to the three months ended March 31,
2008
 Three Months Ended March 31,2009
    
    
    2008
    
    
    $ Change
    
    
    % ChangeREVENUESLicense Revenue
    
    $
    316,706
    
    
    $
    
    
    
    $
    316,706
    
    
    
    N/ARoyalty Revenue
    
    
    23,280
    
    
    
    79,880
    
    
    
    (56,600
    )
    
    
    (71
    )%339,986
    
    
    
    79,880
    
    
    
    260,106
    
    
    
    325
    %EXPENSESResearch and development
    
    
    545,966
    
    
    
    992,920
    
    
    
    (446,954
    )
    
    
    (45
    )%General and administrative
    
    
    580,309
    
    
    
    456,392
    
    
    
    123,917
    
    
    
    27
    %Depreciation and amortization
    
    
    2,318
    
    
    
    1,874
    
    
    
    444
    
    
    
    23
    %Total Operating Expenses
    
    
    1,128,593
    
    
    
    1,451,186
    
    
    
    (322,593
    )
    
    
    (22
    )%Loss from Operations
    
    
    (788,607
    )
    
    
    (1,371,306
    )
    
    
    582,699
    
    
    
    (42
    )%Interest income
    
    
    9,727
    
    
    
    40,365
    
    
    
    (30,638
    )
    
    
    (75
    )%Other income
    
    
    96
    
    
    
    54
    
    
    
    42
    
    
    
    77
    %Other income
    
    
    9,823
    
    
    
    40,419
    
    
    
    (30,596
    )
    
    
    (75
    )%Loss before income taxes
    
    
    (778,784
    )
    
    
    (1,330,887
    )
    
    
    552,103
    
    
    
    (41
    )%Income TaxesCurrent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income Taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (778,784
    )
    
    $
    (1,330,887
    )
    
    $
    552,103
    
    
    
    (41
    )%
 Revenues
    14




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Research & Development Expenses
  General and Administrative Expenses
  Interest Income
  Net Loss
  Liquidity and Capital Resources
    ® ® ®
  15




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Contractual Obligations
  2009
    
    $
    9,9182010
    
    
    2,708
    16




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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
  17




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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
 (a)
    
    On January 12, 2009, the Company issued 231,670 shares of common stock to
Joel E. Bernstein, M.D., upon the exercise by Dr. Bernstein of an equal number of
options to purchase shares of the Companys common stock at an exercise price of
$0.40 per share, in a private offering pursuant to Section 4(2) of the Securities Act
of 1933 (the Act). Dr. Bernstein is an accredited investor under Rule 501 of the
Act.
 (b)
    
    Not applicable.
 (c)
    
    Not applicable.
 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibit No.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.
  18




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SIGNATURES
  WINSTON PHARMACEUTICALS, INC.
(Registrant)Dated: May 14, 2009
    By:
    /s/ Joel E. BernsteinJoel E. Bernstein, M.D.President and Chief Executive OfficerDated: May 14, 2009
    By:
    /s/ David StarrDavid StarrVice President, Chief Financial Officer  19




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EXHIBIT INDEX
 ExhibitNo.
    
    Description31.1
    
    
    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.
  20