UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended
September 30, 2009
or
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission File Number:
000-51314
Winston Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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30-0132755
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(State or other Jurisdiction of
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(IRS Employer Identification No.)
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Incorporation)
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100 North Fairway Drive,
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Suite 134
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Vernon Hills, Illinois
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60061
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(Address of Principal Executive Offices)
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(Zip Code)
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(847) 362-8200
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files) (the
Registrant is not yet required to submit Interactive Data). Yes
o
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
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Large Accelerated Filer
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Accelerated Filer
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Non-accelerated Filer
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Smaller reporting company
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).
Yes
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No
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As of November 13, 2009, 77,408,893 shares of the registrant’s Common Stock were issued
and outstanding.
WINSTON PHARMACEUTICALS, INC. AND SUBSIDARIES
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
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ITEM 1.
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FINANCIAL STATEMENTS
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Winston Pharmaceuticals, Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
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September 30, 2009
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December 31, 2008
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ASSETS
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CURRENT ASSETS
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Cash and cash equivalents
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$
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2,319,229
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$
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5,626,913
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Accounts receivable
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33,806
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17,498
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Related party receivable
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19,484
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38,142
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Prepaid and other current assets
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47,121
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68,465
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Total current assets
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2,419,640
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5,751,018
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PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $140,049 at September 30, 2009
and $161,907 at December 31, 2008
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15,144
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18,823
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INTANGIBLE ASSETS, NET
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17,982
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21,540
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TOTAL ASSETS
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$
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2,452,766
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$
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5,791,381
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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CURRENT LIABILITIES
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Accounts payable
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$
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545,290
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$
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1,052,730
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Accrued expenses and other current liabilities
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268,924
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239,861
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Unearned revenue — current portion
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633,412
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1,266,825
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Total current liabilities
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1,447,626
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2,559,416
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Unearned revenue — long-term portion
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—
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316,706
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Total liabilities
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1,447,626
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2,876,122
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Commitments and Contingencies
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Stockholders’ equity
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Preferred Stock, $.001 par value,
250,000,000 shares authorized
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Series A, Convertible 0 and 12,730
shares issued and outstanding at September 30, 2009 and at December 31, 2008
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—
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13
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Series B, Convertible 0 and 9,157 shares
issued and outstanding at September 30, 2009 and at December 31, 2008
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—
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9
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Common stock, $.001 par value, 900,000,000 shares authorized
77,383,893 and 55,106,364 shares issued and outstanding at
September 30, 2009 and at December 31, 2008
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77,384
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55,106
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Additional paid-in capital
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49,748,913
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49,587,913
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Accumulated deficit
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(48,821,157
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(46,727,782
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Total stockholders’ equity
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1,005,140
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2,915,259
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
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$
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2,452,766
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$
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5,791,381
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See notes to unaudited condensed consolidated financial statements
3
Winston Pharmaceuticals, Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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Three Months ended September 30
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Nine Months ended September 30
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2009
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2008
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2009
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2008
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REVENUES
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License revenues
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$
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316,706
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$
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—
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$
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950,119
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$
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—
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Royalty revenues
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33,806
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6,911
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105,423
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106,904
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350,512
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6,911
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1,055,542
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106,904
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EXPENSES
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Research and development
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582,916
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607,613
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1,716,642
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2,629,815
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General and administrative
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468,140
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516,622
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1,511,124
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1,415,465
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Depreciation and amortization
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2,185
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2,473
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6,821
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6,178
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Total operating expenses
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1,053,241
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1,126,708
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3,234,587
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4,051,458
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Loss from operations
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(702,729
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(1,119,797
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(2,179,045
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(3,944,554
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Interest income
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248
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10,100
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10,290
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67,793
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Other income
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—
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1,544
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75,380
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1,890
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Other income
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248
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11,644
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85,670
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69,683
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Loss before income taxes
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(702,481
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(1,108,153
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(2,093,375
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(3,874,871
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Income Taxes
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Current
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—
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—
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—
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—
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Deferred
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—
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—
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—
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—
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Income Taxes
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—
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—
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—
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—
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NET LOSS
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$
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(702,481
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$
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(1,108,153
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$
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(2,093,375
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$
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(3,874,871
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Loss per share, basic and diluted
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$
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(0.01
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$
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(0.02
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$
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(0.04
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$
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(0.07
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Weighted average number of shares outstanding, basic and diluted
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56,686,404
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52,939,362
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55,817,160
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52,856,636
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See notes to unaudited condensed consolidated financial statements
4
Winston Pharmaceuticals, Inc. and Subsidiaries
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2009 and 2008
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2009
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2008
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Cash flows from operating activities
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Net loss
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$
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(2,093,375
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$
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(3,874,871
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Depreciation and amortization
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6,821
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6,178
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Stock option expense
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55,826
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—
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Changes in:
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Accounts receivable
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2,350
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33,832
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Prepaid and other current assets
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21,344
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(9,184
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Other assets
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1,154
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—
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Unearned revenue
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(950,119
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—
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Accounts payable
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(507,440
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374,363
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Accrued expenses and other current liabilities
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29,063
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277,809
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Net cash used in operating activities
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(3,434,376
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(3,191,873
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Cash flows from investing activities
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Purchases of equipment
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(738
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(14,603
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Purchases of intangibles
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—
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(1,730
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Net cash used in investing activities
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(738
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(16,333
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Cash flows from financing activities
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Cash received upon consummation of merger
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477,067
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Cost incurred in connection with merger
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(250,000
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Proceeds from exercise of stock options
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127,430
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—
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Issuance of preferred stock, net of issuance cost
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3,996,789
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Net cash provided by financing activities
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127,430
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4,223,856
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NET DECREASE IN CASH AND CASH EQUIVALENTS
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(3,307,684
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1,015,650
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Cash and cash equivalents at beginning of period
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5,626,913
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4,481,611
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Cash and cash equivalents at end of period
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$
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2,319,229
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$
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5,497,261
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Supplemental disclosures of cash flow information
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Interest paid
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$
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—
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$
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—
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Income taxes paid
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$
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—
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$
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—
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On September 24, 2009, each outstanding share of Winston Pharmaceuticals, Inc.
(the “Company”) Series A Convertible Preferred Stock, par value $.001 per share, and
Series B Convertible Preferred Stock, par value $.001 per share, automatically converted
into 1,000 fully-paid, non-assessable shares of the Company’s common stock, par value
$.001 per share (“Common Stock”). In addition, in connection with such conversion, each
outstanding warrant to purchase shares of Series A Convertible Preferred Stock
automatically converted into the right to acquire 1,000 shares of Common Stock upon the
exercise of such warrant, at an exercise price of $0.39 per share of Common Stock.
The Merger transaction (the “Merger”) involving the Company (formerly known as Getting
Ready Corporation) and Winston Laboratories, Inc. (“Winston Labs”), which Merger is
discussed in further detail below under the caption
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
, was consummated on September 25, 2008. The
Merger was accounted for as a “reverse merger,” since as a result of the Merger the former
shareholders of Winston Labs acquired a majority of the outstanding shares of the common
stock of the Company. At the date of consummation of the Merger, Getting Ready Corporation
had $477,067 in cash, approximately $8,800 in assets and no liabilities, which amounts are
reflected in the amounts shown on the Company’s balance sheet as of September 30, 2008.
See notes to unaudited condensed consolidated financial statements
5
Winston Pharmaceuticals, Inc. and Subsidiaries
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — BASIS OF PRESENTATION
Winston Pharmaceuticals, Inc. (“Winston” or the “Company”) is a research-based specialty
pharmaceutical company engaged in the discovery, development and commercialization of
pain-management products.
The accompanying financial statements are unaudited but in the opinion of management contain
all the adjustments (consisting of those of a normal recurring nature) considered necessary to
present fairly the financial position and the results of operations and cash flow for the periods
presented in conformity with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 8-03 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by United States generally
accepted accounting principles for complete financial statements.
The Company continues to incur recurring net losses and negative cash flows from operations.
Until the Company can generate significant cash from its operations, if ever, it expects to
continue to fund its operations with existing cash resources generated from the proceeds of
offerings of its equity securities as well as potentially through strategic collaboration
agreements, debt financing or the sale of additional equity securities. The Company may not enter
into collaboration agreements, or, if it does, receive milestone or royalty payments under those
agreements. In addition, there can be no assurance that the Company’s existing cash and investment
resources will be adequate or that additional financing will be available when needed or that, if
available, financing will be obtained on favorable terms. Having insufficient funds may require the
Company to delay, scale back or eliminate some or all of its development programs, relinquish some
or all rights to product candidates at an earlier stage of development or negotiate less favorable
terms with third parties with respect to such product candidates than the Company would otherwise
choose. Failure to obtain adequate financing also may adversely affect the launch of the Company’s
product candidates, if approved for marketing, or its ability to continue in business. If the
Company raises additional funds by issuing equity securities, substantial dilution to existing
stockholders could result. If the Company raises additional funds by incurring debt financing, the
terms of the debt could involve significant cash payment obligations as well as covenants and
specific financial ratios that may restrict the Company’s ability to operate its business.
As of September 30, 2009, the Company had cash and cash equivalents of approximately $2.3
million. During the three and nine months ended September 30, 2009, the Company used a total of
approximately $0.8 million and $3.4 million, respectively, of cash in operating activities.
Management currently anticipates that cash uses will generally remain at these levels or less until
such time as the Company is able to secure additional funding to increase its investment in
pre-commercialization activities and advance its development programs. As a result, the Company
anticipates that its existing cash will be sufficient to meet its projected operating requirements
through at least December 31, 2009. The Company intends to seek additional funding through
strategic alliances, debt facilities or other financing vehicles which may include the public or
private sales of its equity securities. If the Company fails to raise additional capital to
support its operations for the next twelve months, it may not have sufficient funds to support
working capital needs through December 31, 2010. If it is determined the Company does not have
sufficient funds to support operations, it is possible the Company will be unable to continue as a
going concern and therefore the audit opinion will include a going concern emphasis paragraph for
the year ending December 31, 2009.
6
Operating results for the three and nine months ended September 30, 2009 are not necessarily
indicative of the results that may be expected for the year ending December 31, 2009. For further
information, refer to the consolidated financial statements and footnotes thereto included in the
Company’s annual report on Form 10-K/A for the year ended December 31, 2008.
In June 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards
Codification Topic 105,
Generally Accepted Accounting Principle
, which established the FASB
Accounting Standards Codification (ASC) as the sole source of authoritative generally accepted
accounting principals. Pursuant to the provisions of ASC 105, the Company has updated references to
GAAP in its financial statements issued for the period ended September 30, 2009. The adoption of
ASC 105 did not have a material impact on the Company’s financial position, results of operations
or cash flows.
Principles of Consolidation
The consolidated financial statements of the Company include the accounts of Winston
Laboratories, Inc., the Company’s wholly-owned subsidiary (“Winston Labs”) and its subsidiaries,
Winston Laboratories Limited (“UK Ltd.”) and Rodlen Laboratories, Inc. (“Rodlen”). All
intercompany balances and transactions have been eliminated.
7
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers all instruments with original
maturities of three months or less to be cash equivalents. It is the Company’s policy to include
investments in mutual funds at $1 carrying value as a cash equivalent. Included in cash and cash
equivalents at December 31, 2008 is a $3.5 million certificate of deposit, which carried an annual
interest rate of 2.3% and matured on February 12, 2009. Also included in cash and cash equivalents
at September 30, 2009 and December 31, 2008, respectively, is approximately $0.8 million and $1.9
million in a U.S. Treasury mutual fund.
Fair Value of Financial Instruments
The carrying amounts of financial instruments, including cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses approximate fair value due to the short term
maturity of these instruments.
The Company adopted ASC 820-10, Fair Value Measurements, on January 1, 2008. ASC 820-10
defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and
expands disclosures about fair value measurements. The adoption of ASC 820-10 did not have a
material impact on the Company’s fair value measurements.
ASC 820-10 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in
measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted
prices in active markets; Level 2, defined as inputs other than quoted prices in active markets
that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in
which little or no market data exists, therefore requiring an entity to develop its own
assumptions.
The Company’s financial assets measured at fair value on a recurring basis, subject to the
disclosure requirements of ASC 820-10, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at September 30, 2009
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
Active Markets
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
|
for Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual fund
|
|
$
|
790,594
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
790,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
790,594
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
790,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2008
|
|
|
|
|
Quoted Prices in
|
|
|
Significant
|
|
|
|
|
|
|
|
|
|
|
Active Markets
|
|
|
Other
|
|
|
Significant
|
|
|
|
|
|
|
|
for Identical
|
|
|
Observable
|
|
|
Unobservable
|
|
|
|
|
|
|
|
Assets
|
|
|
Inputs
|
|
|
Inputs
|
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual fund
|
|
$
|
1,961,059
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,961,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,961,059
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,961,059
|
|
The above investment in a mutual fund is included in cash and cash equivalents on the
Consolidated Balance Sheet as of September 30, 2009 and as of December 31, 2008.
Research and Development Expenses
Research and development costs totaled $582,916 and $1,716,642 for the three and nine month periods
ended September 30, 2009 and $607,613 and $2,629,815 for the three and nine month periods ended
September 30, 2008.
8
Income Taxes
The Company files a consolidated tax return that includes all subsidiaries. Deferred income
taxes are recognized for the tax consequences in future years of differences between the tax bases
of assets and liabilities and their financial reporting amounts at each year-end, based on enacted
tax laws and statutory tax rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to reduce deferred
income tax assets to the amount expected to be realized.
In July 2006, the FASB issued ASC 740-10, Accounting for Uncertainty in Income Taxes. ASC
740-10 prescribes a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC
740-10 developed a two-step process to evaluate a tax position and also provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods, disclosure,
and transition. The Company adopted this interpretation on July 1, 2008. The Company has not
recorded a reserve for any tax positions for which the ultimate deductibility is highly certain but
for which there is uncertainty about the timing of such deductibility. The Company files tax
returns in all appropriate jurisdictions. The open tax years are those years ending December 31,
2006 to December 31, 2008, which statutes expire in 2009-2012. As of September 30, 2009 and
December 31, 2008, the Company has no liability for unrecognized tax benefits. The adoption and
implementation of ASC 740-10 had no effect on the Company’s results of operations, net loss or
basic and diluted loss per share for the three and nine month periods ended September 30, 2009 and
2008. The Company recognizes interest and penalties related to uncertain tax positions as income
tax expense as incurred. No expense for interest and penalties was recognized for the three and
nine month periods ended September 30, 2009.
Segment Information
The Company is operated on the basis of a single reportable segment, which is the business of
discovery and development of products for pain management. The Company’s chief operating
decision-maker is the Chief Executive Officer, who evaluates the Company as a single operating
segment.
Reclassification
Certain reclassifications have been made to the prior year financial statements to conform to
the current year presentation. These classifications had no effect on reported net loss or
stockholders’ equity.
Recent Accounting Pronouncements
In December 2007, the FASB issued a new standard on Business Combinations which is part of ASC
805. This Statement provides greater consistency in the accounting and financial reporting for
business combinations. ASC 805 establishes disclosure requirements and, among other things,
requires the acquiring entity in a business combination to record contingent consideration payable,
to expense transaction costs, and to recognize all assets acquired and liabilities assumed at
acquisition-date fair value. The Company adopted this new standard on January 1, 2009 and such
adoption had no effect on the Company’s results of operations, net loss or basic diluted loss per
share for the three and nine month periods ended September 30, 2009.
In December 2007, the FASB issued ASC 810-10, on Noncontrolling Interests in Consolidated
Financial Statements (“ASC 810-10”). ASC 810-10 establishes accounting and reporting standards for
the minority or noncontrolling interests in a subsidiary or variable interest entity and for the
deconsolidation of a subsidiary or variable interest entity. Minority interests will be
recharacterized as noncontrolling interests and classified as a component of equity. It also
establishes a single method of accounting for changes in a parent’s ownership interest in a
subsidiary and requires expanded disclosures. The Company adopted ASC 810-10 on January 1, 2009.
The adoption of ASC 810-10 had no effect on the Company’s results of operations, net loss or basic
diluted loss per share for the three and nine month period ended September 30, 2009.
9
In March 2008, the FASB issued ASC 815-10, on Disclosures about Derivative Instruments and
Hedging Activities. This statement establishes the requirements for the disclosure of derivative
instruments and hedging activities that include the reasons a company uses derivative instruments,
how derivative instruments and related hedged items are accounted under ASC 815-10 and how
derivative instruments and related hedged items affect a company’s financial position, financial
performance and cash flows. The Company adopted ASC 815-10 on January 1, 2009 and such adoption had
no effect on the Company’s results of operations, net loss or basic diluted loss per share for the
three and nine month periods ended September 30, 2009.
In June 2008, the FASB ratified ASC 815-40-15, on Determining Whether an Instrument (or
Embedded Feature) is Indexed to an Entity’s Own Stock. ASC 815-40-15 mandates a two-step process
for evaluating whether an equity-linked financial instrument or embedded feature is indexed to the
entity’s own stock. It is effective for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years, which is our first quarter of 2009. The adoption of ASC
815-40-15 did not have a material effect on the Company’s financial position, results of
operations, or cash flow.
In May 2009, the FASB issued ASC 855-10, on Subsequent Events, which established general
accounting standards and disclosure for subsequent events. The Company adopted ASC 855-10 during
the second quarter of 2009. In accordance with ASC 855-10, the Company has evaluated subsequent
events through the date and time the financial statements were issued on November 12, 2009.
In June 2009, the FASB issued FAS 167, “Amendments to FASB Interpretation No. 46(R)”, which
changes the approach to determining the primary beneficiary of a variable interest entity (“VIE”)
and requires companies to more frequently assess whether they must consolidate VIEs. This new
standard is effective for the Company beginning on January 1, 2010. The adoption of FAS 167 is not
expected to have a material impact on the Company’s financial position, results of operations or
cash flows.
NOTE 2 — EARNINGS PER SHARE
Basic EPS is computed by dividing income (loss) attributable to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted EPS is computed
giving effect to all dilutive potential common shares that were outstanding during the period.
Dilutive potential common shares consist of the incremental common shares issuable upon the
exercise of stock options and warrants and unvested shares granted to employees and to non-employee
directors.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares
outstanding
|
|
|
56,686,404
|
|
|
|
52,939,362
|
|
|
|
55,817,160
|
|
|
|
52,856,636
|
|
|
Loss per common
share — basic and
diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.02
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.07
|
)
|
The Company’s Basic EPS and Diluted EPS is identical as inclusion of the incremental
common shares attributable upon the exercise of stock options and warrants would have been
anti-dilutive.
10
NOTE 3 — TECHNOLOGY LICENSE AGREEMENTS
Under its technology license agreement with DUSA Pharmaceuticals Inc. (“DUSA”), the Company
recorded royalty revenues of $0 and 34,861 for the three and nine months ended September 30, 2008,
respectively. The license agreement with DUSA expired on September 30, 2008. In July 2008, the
Company learned that DUSA had breached a license agreement with Winston Labs. Winston Labs
initiated arbitration in October 2008 to recover the damages caused by this breach. In June, 2009,
DUSA settled this matter by agreeing to pay $75,000 in damages. This settlement is included in
other income in the Condensed Consolidated Statements of Operations.
Under its technology license agreement with Hi-Tech Pharmacal Co.(“Hi-Tech”), the Company
recorded royalty revenues of $33,806 and $6,911 for the three months ended September 30, 2009 and
2008, respectively, and $105,423 and $72,043 for the nine months ended September 30, 2009 and 2008,
respectively. On October 30, 2009, the Company received communication from Hi-Tech that it has
discontinued the sale of the product as defined in the license agreement. As a result, the Company
does not expect to receive any more royalties from Hi-Tech in the future.
Under its licensing agreement with sanofi-aventis Canada Inc., the Company recognized $316,706
and $0 as license revenue for the three months ended September 30, 2009, and 2008, respectively,
and $950,119 and $0 for the nine months ended September 30, 2009 and 2008, respectively with the
remainder being treated as unearned revenue on the Consolidated Balance Sheet as of September 30,
2009 and as of December 31, 2008.
11
NOTE 4 — RELATED-PARTY TRANSACTIONS
Elorac, Inc. (“Elorac”), a company whose chairman is Joel E. Bernstein, M.D., and whose
directors include Robert A. Yolles, has been located in the same offices as the Company since
Elorac was formed in August 2007, and therefore has shared in certain of the Company’s expenses
such as rent, utilities, internet usage, etc. The amount of Elorac’s share of such expenses is
based on various allocation factors related to a particular expense. The Company has received
approximately $52,314 and $37,565 for such services for the three months ended September 30, 2009
and 2008, respectively, and $104,529 and $82,413 for the nine months ended September 30, 2009 and
2008, respectively which are included as a reduction of the Company’s expenses on the Consolidated
Statement of Operations. As of September 30, 2009 and December 31, 2008, respectively, the Company
had $3,682 and $0 of receivables related to such expenses which are included in related party
receivable on the Consolidated Balance Sheets. Subsequent to September 30, 2009, Elorac paid the
$3,682 balance.
Gideon Pharmaceuticals, Inc. (“Gideon”) is a corporation whose chairman and sole director is
Joel E. Bernstein, M.D., president and CEO of the Company. Gideon reimburses the Company for
certain expenses that the Company incurs on behalf of Gideon. As of September 30, 2009 and
December 31, 2008, respectively, the Company had $12,087 and $0 of receivables related to such
expenses which are included in related party receivable on the Consolidated Balance Sheets.
On September 19, 2007, Winston Labs entered into an exclusive technology license agreement
with Opko Ophthalmologic, LLC, (“OPKO”). The CEO and Chairman of OPKO is the sole trustee of Frost
Gamma Investments Trust which, as of September 30, 2009, was the beneficial owner of 29.7% of the
Company’s common stock on an as-converted basis. The CFO of OPKO is a director of the Company, a
member of its Audit Committee and, as of September 30, 2009, was the beneficial owner of 0.4% of
the Company’s common stock on an as-converted basis. The agreement calls for Opko to reimburse
Winston Labs for costs incurred by Winston Labs in efforts to assist Opko in obtaining all
marketing authorizations, as defined by the agreement. No such costs were incurred by Winston Labs
for the three month period ending September 30, 2009. In addition, the agreement calls for Opko to
reimburse Winston Labs for certain legal expenses Winston has incurred related to
keratoconjunctivitis. As of September 30, 2009, the Company had $3,715 of receivables related to
such expenses which are included in related party receivable on the Consolidated Balance Sheets.
Subsequent to September 30, 2009, OPKO paid the $2,037 aggregate balance of such costs and
expenses. In 2008, $38,142 of legal fees were billed to OPKO, all of which were outstanding as of
December 31, 2008 and are included in related party receivable on the Consolidated Balance Sheets
at December 31, 2008. Subsequent to December 31, 2008, OPKO paid the $38,142 balance.
NOTE 5 — INCOME TAXES
Due to the continuing operating losses, no tax benefit is being recorded. The Company
continues to provide a full valuation allowance for any future tax benefits resulting from the
Company’s net operating losses.
The provision for income taxes differs from the amount computed by applying the statutory
federal income tax rate of 34.0% to pre-tax loss as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Tax benefit at U.S. federal statutory rate
|
|
$
|
(239,000
|
)
|
|
$
|
(377,000
|
)
|
|
$
|
(712,000
|
)
|
|
$
|
(1,318,000
|
)
|
|
State tax benefit, net of federal benefit
|
|
|
(34,000
|
)
|
|
|
(53,000
|
)
|
|
|
(101,000
|
)
|
|
|
(186,000
|
)
|
|
Change in valuation allowance
|
|
|
295,000
|
|
|
|
421,000
|
|
|
|
871,000
|
|
|
|
1,516,000
|
|
|
Permanent differences
|
|
|
1,000
|
|
|
|
1,000
|
|
|
|
1,000
|
|
|
|
1,000
|
|
|
Research and development credits
|
|
|
(25,000
|
)
|
|
|
(25,000
|
)
|
|
|
(77,000
|
)
|
|
|
(94,000
|
)
|
|
Other, net
|
|
|
2,000
|
|
|
|
33,000
|
|
|
|
18,000
|
|
|
|
81,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
NOTE 6 — STOCK OPTION PLANS
The following table summarizes stock option activity under the Prior Plans (as defined below):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
Aggregate
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
Grant Date
|
|
|
Intrinsic
|
|
|
Contractual
|
|
|
|
|
Shares
|
|
|
Price
|
|
|
Fair Value
|
|
|
Value
|
|
|
Life
|
|
|
Options at December 31, 2008
|
|
|
3,626,731
|
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
409,500
|
|
|
$
|
1.47
|
|
|
$
|
1.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(390,529
|
)
|
|
$
|
0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeitures
|
|
|
(198,574
|
)
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options at September 30, 2009
|
|
|
3,447,128
|
|
|
$
|
0.48
|
|
|
|
|
|
|
$
|
5,079,268
|
|
|
|
|
|
|
|
3.95
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic value in the table above is before income taxes, based on the fair
value of a share of the Company’s common stock of $1.95 at September 30, 2009. The aggregate
intrinsic value of options outstanding and exercisable as of September 30, 2009 is $5,079,268. The
weighted average grant date fair value in the table above was computed using Black Scholes
valuation model.
Effective April 1, 2009, the Company’s Board of Directors adopted the Company’s Omnibus
Incentive Plan (the “Plan”). The Plan was established by amending, restating and merging the
Company’s existing Stock Option Plan for Non-Employee directors, and the 1999 Stock Option Plan
(collectively, the “Prior Plans”), with and into the Plan. The Plan was approved by the Company’s
shareholders at the Company’s annual meeting held on June 17, 2009.
The Plan provides for a broad range of awards to attract, motivate and retain qualified and
talented employees, directors, consultants and other persons who provide services to the Company
(“Participants”), including stock options, stock appreciation rights, restricted stock, restricted
stock units, performance shares, performance units, and other stock-based awards and cash-based
awards (“Awards”). The Plan promotes the success and enhances the value of the Company by linking
the personal interests of Participants to those of the Company’s stockholders, and by providing
Participants with an incentive for outstanding performance.
Awards under the Plan will be determined by a committee of the Board of Directors (the
“Committee”), the members of which are selected by the Board of Directors. Currently the Plan
provides that the Compensation Committee will serve as the administrator. The number of shares of
Company common stock (“Shares”) as to which an Award is granted and to whom any Award is granted
shall be determined by the Committee, subject to the provisions of the Plan. Awards may be made
exercisable or settled at such prices and may be made terminable under such terms as are
established by the Committee, to the extent not otherwise inconsistent with the terms of the Plan.
Prior to the merger of the Prior Plans with and into the Plan, there were 9,708,055 Shares
reserved for issuance for awards under the Prior Plans, including 3,196,487 Shares reserved for
outstanding awards, and 5,922,466 Shares for future awards. Upon the merger of the Prior Plans
with and into the Plan, effective April 1, 2009, there was no change to such numbers, with
9,708,055 Shares reserved for issuance for Awards under the Plan, of which 3,196,487 Shares were
reserved for outstanding Awards, and 5,922,466 Shares for future Awards.
On April 7, 2009, pursuant to the terms of the Plan, the Compensation Committee of the Board
of Directors granted 267,000 non-qualified stock options to purchase Shares to employees of the
Company, including 225,000 options to key officers of the Company. All of the options expire on
April 7, 2019, vest in five equal installments commencing April 7, 2010, and have an exercise price
of $1.53, as determined by the Compensation Committee of the Board of Directors in accordance with
the terms of the Plan.
13
On September 25, 2009 pursuant to the terms of the Plan, the Compensation Committee of the
Board of Directors granted 142,500 non-qualified stock options to purchase shares to non-employee
directors of the Company. All of the options expire on September 25, 2019 vest in five equal
installments commencing September
25, 2010 and have an exercise price of $1.36 as determined by the Compensation Committee of
the Board of Directors in accordance with the terms of the Plan.
Compensation expense for stock options for the three and nine month period ending September
30, 2009 was $29,148 and $55,826 respectively.
The following table shows the assumptions used to compute stock-based compensation expense for
stock options granted to employees for the nine months ended September 30, 2009 using the
Black-Scholes valuation model. The Company did not grant any stock options to employees during the
three and nine months ended September 30, 2008; therefore no assumptions related to the
Black-Scholes valuation model were made for such period.
|
|
|
|
|
|
|
Stock Options
|
|
|
|
|
|
Expected dividend yield
|
|
|
0
|
%
|
|
Expected volatility
|
|
|
77
|
%
|
|
Expected life (in years)
|
|
|
6
|
|
|
Risk-free interest rate
|
|
|
1.87% – 2.36
|
%
|
On January 12, 2009, a director of the Company exercised 231,670 options at an exercise price
of $0.36 for approximately $83,000. On May 1, 2009, a director of the Company exercised 158,859
options at an exercise price of $0.28 for approximately $44,000. On October 16, 2009, a director of
the company exercised 25,000 options at an exercise price of $0.28 for approximately $7,000.
NOTE 7 — PREFERRED STOCK
In connection with the Merger on September 25, 2008, the Company issued 101,849 shares of its
Series A Convertible Preferred Stock, par value $.001 per share (“Series A Preferred Stock”), and
73,332 shares of its Series B Convertible Preferred Stock, par value $.001 per share (“Series B
Preferred Stock”). Following a 1-for-8 reverse split of the Company’s common and preferred stock
on December 15, 2008, 12,730 shares of its Series A Preferred Stock and 9,157 shares of its Series
B Preferred Stock were issued and outstanding. On September 24, 2009, each outstanding share of
Company Series A Preferred Stock and Series B Preferred Stock automatically converted into 1,000
fully-paid, non-assessable shares of the Company’s common stock, par value $.001 per share (“Common
Stock”). In addition, in connection with such conversion, each outstanding warrant to purchase
shares of Series A Preferred Stock automatically converted into the right to acquire 1,000 shares
of Common Stock upon the exercise of such warrant, at an exercise price of $0.39 per share of
Common Stock.
14
|
|
|
|
|
Item 2.
|
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
The following discussion should be read in conjunction with the Condensed Consolidated
Financial Statements of Winston Pharmaceuticals, Inc., related Notes, and other financial
information included elsewhere in this report and in our Annual Report on Form 10-K/A for the year
ended December 31, 2008. Certain defined terms used herein have the meaning ascribed to them in
such financial statements.
This discussion contains forward-looking statements, within the meaning of Section 27A of the
Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended,
and the Private Securities Litigation Reform Act of 1995, including statements regarding our
expected financial position and business and financing plans. These statements involve risks and
uncertainties. Our actual results could differ materially from the results described in or implied
by these forward-looking statements as a result of various factors. These forward looking
statements and other information are based on our beliefs as well as assumptions made by us using
information currently available.
The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and
similar expressions, as they relate to us, are intended to identify forward-looking statements.
Such statements reflect our current views with respect to future events and are subject to certain
risks, uncertainties and assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated, expected, intended or using other
similar expressions.
We are making investors aware that such forward-looking statements, because they relate to
future events, are by their very nature subject to many important factors that could cause actual
results to differ materially from those contemplated by the forward-looking statements contained in
this Quarterly Report on Form 10-Q. For example, we may encounter competitive, technological,
pharmacological, financial and business challenges making it more difficult than expected to
continue to develop and market our products; the market may not accept our existing and future
products; we may not be able to retain our customers; we may be unable to retain existing key
management personnel; and there may be other material adverse changes in our operations or
business. In addition, assumptions relating to budgeting, marketing, product development and other
management decisions are subjective in many respects and thus susceptible to interpretations and
periodic revisions based on actual experience and business developments, the impact of which may
cause us to alter our marketing, expenditure or other budgets, which may in turn affect our
financial position and results of operations. For all of these reasons, the reader is cautioned not
to place undue reliance on forward-looking statements contained herein, which speak only as of the
date hereof. We assume no responsibility to update any forward-looking statements as a result of
new information, future events, or otherwise, except as required by law.
Executive Overview
On September 25, 2008, the Company, formerly known as Getting Ready Corporation completed its
merger (the “Merger”) with Winston Labs, by merging a wholly-owned subsidiary of Getting Ready
Corporation into Winston Labs. Effective November 17, 2008, Getting Ready Corporation changed its
name to Winston Pharmaceuticals, Inc. (hereafter referred to as “we,” “us,” “our” or the
“Company”). The Company is carrying on the business of Winston Labs as its sole line of business
and it has retained all of Winston Labs’s management.
On January 30, 2006, Winston Labs licensed to Sirius Laboratories, Inc., a company founded by
Dr. Bernstein, the Company’s President and Chief Executive Officer, the rights to market products
containing anthralin owned by Winston Labs, including a marketed 1% anthralin cream trade name
Psoriatec
®
. The license had a two-year term which expired on January 31, 2008
and provided for the following key terms: (i) a 25% royalty on net sales; (ii) a $300,000 minimum
royalty; and (iii) a $750,000 purchase option. This agreement was assigned by Sirius to DUSA
Pharmaceuticals, Inc. following DUSA’s purchase of Sirius. This license had been extended until
September 30, 2008 by mutual written consent of the parties and the extension provided for
continuation of the 25% royalty on net sales but eliminated the minimum royalty and purchase
option. This agreement expired on September 30, 2008. In July 2008, the Company learned that DUSA
had breached such license agreement. Winston Labs initiated arbitration in October 2008 to recover
the damages caused by this breach. In June, 2009, DUSA settled this matter by agreeing to pay
$75,000 in damages, which is included in other income in the Condensed Consolidated Statements of
Operations.
15
On August 14, 2007, Winston Labs entered into an exclusive technology license agreement with
Elorac, formerly known as Exopharma, Inc. Dr. Bernstein is a majority owner and President and Chief
Executive Officer of Elorac. Elorac also has two directors who are directors of the Company. Under
the terms of the license agreement, Winston Labs granted Elorac an exclusive license to the
proprietary rights of certain products (
£
0.025% civamide with the stated indication
of psoriasis of the skin). In exchange, Elorac paid Winston Labs a license fee of $100,000 and is
required to pay a 9% royalty on sales of the product. In addition, the agreement required Elorac to
pay Winston Labs a non-refundable payment of $250,000 upon approval of a marketing authorization by
Elorac on the product(s) described in the agreement. On October 27, 2008 Winston Labs and Elorac
mutually terminated the above license agreement. As a result of this mutual termination, Winston
Labs agreed to pay Elorac the $105,000 in exchange for Winston Labs retaining all the proprietary
rights under the original agreement. Since inception, Elorac has been located in the same offices
as Winston Labs and therefore has shared in certain of Winston Labs expenses such as rent,
utilities, internet usage, etc. The amount of Elorac’s share of such expenses is based on various
allocation factors related to particular expense. Winston Labs has invoiced Elorac $52,314 and
$104,529 for the three month and nine month period ending September 30, 2009 and $10,795 and
$82,413 for the three month and nine month period ending September 30, 2008, respectively, for such
services, which are included as a reduction of expenses on the Consolidated Statement of
Operations.
On September 19, 2007, Winston Labs entered into an exclusive technology license agreement
with Opko Ophthalmologic, LLC, (“OPKO”). Under the terms of the license agreement, Winston Labs
granted OPKO an exclusive license to the proprietary rights of certain products (pharmaceutical
compositions or preparations containing the active ingredient civamide in formulations suitable for
use in the therapeutic or preventative treatment of ophthalmic conditions in humans). In exchange,
OPKO paid Winston Labs a license fee of $100,000 and is required to pay a 10% royalty on sales of
the products. In addition, the agreement requires OPKO to pay Winston Labs a non-refundable payment
of $5,000,000 upon approval of a marketing authorization by OPKO on the product described in the
agreement. In addition, under the terms of the agreement, OPKO and the Company agreed to equally
share the cost related to manufacturing and clinical supplies of Civamide Nasal solution. The
agreement calls for Opko to reimburse Winston Labs for costs incurred by Winston Labs in efforts to
assist Opko in obtaining all marketing authorizations, as defined by the agreement. No such costs
were incurred by Winston Labs for the three month period ending September 30, 2009. In addition,
the agreement calls for OPKO to reimburse Winston Labs for certain legal expenses Winston Labs has
incurred related to the use of the licensed products to treat keratoconjunctivitis. As of September
30, 2009, the Company had $3,715 of receivables related to such expenses which are included in
related party receivable on the Consolidated Balance Sheets. Subsequent to September 30, 2009, OPKO
paid $2,037 of the balance. In 2008, $38,142 of legal fees were billed to OPKO, all of which were
outstanding as of December 31, 2008 and is included in related party receivable on the Consolidated
Balance Sheets as of December 31, 2008. Subsequent to December 31, 2008, OPKO paid $38,000 of the
balance due. Phillip Frost, M.D. is the Chairman and Chief Executive Officer of OPKO’s parent
company, Opko Health, Inc. (“Opko Health”), and the sole trustee of Frost Gamma Investments Trust.
As of November 12, 2009, Dr. Frost was the beneficial owner of more than 50.0% of Opko Health’s
common stock. As of September 30, 2009, Frost Gamma Investments Trust was the beneficial owner of
26,574,659 shares (29.7%) of the Company, including 8,779,797 shares of common stock underlying
warrants. Furthermore, Subbarao Uppaluri, Ph.D., the Senior Vice President – Chief Financial
Officer of Opko Health, is the beneficial owner of 326,538 shares (0.4%) of the Company, including
89,589 shares of common stock underlying warrants.
On October 29, 2008, Winston Labs filed a new drug submission (“NDS”) in Canada, for
CIVANEX
®
Cream (civamide cream 0.075%) for the treatment of signs and
symptoms of osteoarthritis, the first product Winston Labs has developed under its transient
receptor potential vanilloid (TRPV) channel technology. On October 30, 2008, Winston Labs entered
into a License Agreement (the “License Agreement”) with sanofi-aventis Canada Inc. (“sanofi-aventis
Canada”) pursuant to which Winston Labs granted sanofi-aventis an exclusive license to the Canadian
rights to Winston Labs proprietary transient receptor potential vanilloid (TRPV-1) modulator in
formulations for topical application. Under the terms of the License Agreement, sanofi-aventis
Canada owns the rights to manufacture, develop and commercialize civamide cream in Canada along
with a second generation cream that is currently in development. In return for granting
sanofi-aventis Canada the Canadian rights to civamide cream, Winston Labs received an upfront
payment of $1.9 million (US), and will receive an additional $2 million (CAD) upon regulatory
approval of civamide cream in Canada, certain milestone payments, and future royalties on net sales
of civamide or the related second generation cream in Canada.
16
Winston Labs submitted a Marketing Authorization Application (“MAA”) in Europe for its
civamide cream in January 2008. On July 10, 2009 the Company received a negative opinion letter
from the Swedish Medical Products Administration (“MPA”) as the Reference Member State on behalf of
the Concerned Member States, the United Kingdom and Spain on the Company’s MAA for CIVANEX in the
decentralized procedure to obtain mutual recognition of CIVANEX by such states. CIVANEX is an
investigational therapy in development for the signs and symptoms of, including the pain associated
with, osteoarthritis. In its letter to the Company, MPA cited lack of data relating to the full
risk assessment of the carcinogenic potential of CIVANEX. The Company’s management disagrees with
several of the conclusions in the opinion letter and has filed an appeal of the negative opinion of
the Swedish review team with the MPA. The Company intends to file a separate appeal of the opinion
with the Medicines and Healthcare products Regulatory Agency in the United Kingdom shortly. The
Company believes that the current application containing safety and efficacy data support the
approval of CIVANEX for use under the proposed labeling. The Company is currently considering
whether it is advisable to conduct another carcinogenisis study of CIVANEX and, if unsuccessful in
its appeals, to refile its MAA for civamide cream.
In May 2009, the Company completed a Phase I pharmacokinetic and safety study of oral civamide
in an enteric coated soft gel capsule with no systemic absorption detected. The Company intends to
conduct a new study designed to take advantage of this lack of systemic absorption in a proof of
concept study for the treatment of the inflammatory bowel disorder Crohn’s Disease.
Winston is currently conducting a Phase II proof of concept study of civamide Patch 0.015% for
the treatment of post-herpetic neuralgia and chronic post-incisional pain syndromes. Enrollment in
the study is being completed, and top-line results are expected by early fourth quarter, 2009.
As previously reported in the Company’s quarterly report on Form 10-Q for the quarter ended
June 30, 2009, in July 2009, the Company filed suit against the FDA in the United States District
Court for Northern District of Illinois for declaratory and injunctive relief with respect to the
FDA’s refusal to waive it’s application user fee under small business waiver rules relating to the
Company’s submission of the civamide cream application. In September, 2009, the FDA filed a motion
to dismiss the suit. In October, 2009, the Company filed a response in opposition to the FDA’s
motion to dismiss. If the Company is unsuccessful in its action against the FDA, an application
fee of approximately $1.4 million would be due upon submission by the Company of any NDA including
one with respect to the Civamide cream. Such submission would have a material effect on the
Company’s cash condition and would adversely affect its ability to conduct research and development
projects in a time frame previously anticipated by management. At this stage of the litigation, it
is not feasible to predict the outcome of this proceeding.
Effective September 22, 2009, Robert Yolles succeeded Dr. Joel E. Bernstein as Chairman of the
Board of the Company’s Board of Directors.
On October 15, 2009, Winston Labs announced that it received a Notice of Non-compliance
(“NON”) from the Therapeutics Drug Directorate, Health Canada (the “Directorate”) for its New Drug
Submission (NDS) for CIVANEX (zucapsaicin cream 0.075%) for the treatment of the signs and symptoms
of osteoarthritis. The Directorate remarked that the analysis of the pivotal trial did not support
the requested indication. Winston Labs has a period of ninety days to submit a response to the
Directorate’s NON, which it intends to do. In the event that the Company is not be able to obtain
regulatory approval in Canada by June 30, 2010, the sanofi-aventis payment due upon regulatory
approval will be reduced by $250,000 (CAD) to $1,750,000 (CAD).
Winston Labs does not currently market any products. In the past, Winston Labs marketed
certain products revenues from which were used to help fund its research programs. Winston Labs is
engaged in the development of innovative products for managing and alleviating pain. After
discontinuing the Zostrix
®
and Axsain
®
product lines,
Winston Labs has devoted most of its resources to research and development. Winston Labs has spent
$1,716,642, $3,496,150 and $1,853,501, for the nine month period ending September 30, 2009 and
during each of the years 2008 and 2007, respectively, on research and development activities.
Winston Labs has incurred significant operating losses since the initiation of operations in 1997
and as of September 30, 2009, had an accumulated deficit of approximately $48.8 million.
17
Results of Operations
For the three months ended September 30, 2009 compared to the three months ended
September30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
$ Change
|
|
|
% Change
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License Revenue
|
|
$
|
316,706
|
|
|
$
|
—
|
|
|
$
|
316,706
|
|
|
|
N/A
|
|
|
Royalty Revenue
|
|
|
33,806
|
|
|
|
6,911
|
|
|
|
26,895
|
|
|
|
389
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,512
|
|
|
|
6,911
|
|
|
|
343,601
|
|
|
|
4,972
|
%
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
582,916
|
|
|
|
607,613
|
|
|
|
(24,697
|
)
|
|
|
(4
|
)%
|
|
General and administrative
|
|
|
468,140
|
|
|
|
516,622
|
|
|
|
(48,482
|
)
|
|
|
(9
|
)%
|
|
Depreciation and amortization
|
|
|
2,185
|
|
|
|
2,473
|
|
|
|
(288
|
)
|
|
|
(12
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
1,053,241
|
|
|
|
1,126,708
|
|
|
|
(73,467
|
)
|
|
|
(7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(702,729
|
)
|
|
|
(1,119,797
|
)
|
|
|
417,068
|
|
|
|
(37
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
248
|
|
|
|
10,100
|
|
|
|
(9,852
|
)
|
|
|
(98
|
)%
|
|
Other income
|
|
|
0
|
|
|
|
1,544
|
|
|
|
(1,544
|
)
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
248
|
|
|
|
11,644
|
|
|
|
(11,396
|
)
|
|
|
(4,595
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(702,481
|
)
|
|
|
(1,108,153
|
)
|
|
|
405,672
|
|
|
|
(37
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Deferred
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
NET LOSS
|
|
$
|
(702,481
|
)
|
|
$
|
(1,108,153
|
)
|
|
$
|
405,672
|
|
|
|
(37
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
Revenues from licenses increased to $316,706 for the three months ended September 30, 2009
compared to $0 for the same period in 2008. The $316,706 license revenue in 2009 represents 3
months of revenue recognition related to a $1.9 million upfront cash payment received by Winston
Labs from sanofi-aventis Canada Inc. in accordance with a license agreement entered into by Winston
Labs in the fourth quarter of 2008.
Revenues from royalties increased to $33,806 for the three months ended September 30, 2009
compared to $6,911 for the same period in 2008. The $33,806 royalty revenue for the three month
period ending September 30, 2009 is comprised entirely of royalties earned from Hi-Tech. The $6,911
royalty revenue for the three month period ending September 30, 2008 represents royalties earned
from Hi- Tech. On October 30, 2009, the Company received communication from Hi-Tech that it has
discontinued the sale of the product as defined in the license agreement. As a result, the Company
does not expect to receive any more royalties from Hi-Tech in the future.
Research & Development Expenses
Research and development expenses declined by $24,697 to $582,916 for the three months ended
September 30, 2009 compared to $607,613 for the same period in 2008. The decline was primarily due
to decreased spending on various European and Canadian filing fees and the timing of certain R&D
projects. Research and development expenses in the third quarter were consistent with the second
quarter.
General and Administrative Expenses
General and administrative expenses declined by $48,482 to $468,140 for the three months ended
September 30, 2009 compared to $516,622 for the same period in 2008. The decrease is due largely to
a decrease in accounting fees.
18
Interest Income
Interest income decreased by $9,852 to $248 for the three month period ended September 30,
2009 from $10,100 for the same period in 2008 due to majority of Company funds being held in U.S.
Treasury mutual fund for the three month period ending September 30, 2009, which pays a much lower
interest rate than a Certificate of Deposit, which accounted for majority of the Company’s cash and
cash equivalents for the three month period ending September 30, 2008.
Other Income
Other income decreased by $1,544 to $0 for the three month period ended September 30, 2009
from $1,544 for the same period in 2008.
Net Loss
Net loss was $702,481, or $(0.01) per share, for the three months ended in September 30, 2009,
compared to a net loss of $1,108,153, or $(0.02) per share for the same period in 2008. The
decrease in net loss is primarily attributed to an increase in revenues totaling $0.3 million and a
decrease in operating expenses totaling $0.07 million, primarily consisting of a decrease in
accounting fees.
19
Results of Operations
|
|
|
For the nine months ended September 30, 2009 compared to the nine months ended September
30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
$ Change
|
|
|
% Change
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
License Revenue
|
|
$
|
950,119
|
|
|
$
|
—
|
|
|
$
|
950,119
|
|
|
|
|
|
|
Royalty Revenue
|
|
|
105,423
|
|
|
|
106,904
|
|
|
|
(1,481
|
)
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,055,542
|
|
|
|
106,904
|
|
|
|
948,638
|
|
|
|
887
|
%
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
1,716,642
|
|
|
|
2,629,815
|
|
|
|
(913,173
|
)
|
|
|
(35
|
)%
|
|
General and administrative
|
|
|
1,511,124
|
|
|
|
1,415,465
|
|
|
|
95,659
|
|
|
|
7
|
%
|
|
Depreciation and amortization
|
|
|
6,821
|
|
|
|
6,178
|
|
|
|
643
|
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses
|
|
|
3,234,587
|
|
|
|
4,051,458
|
|
|
|
(816,871
|
)
|
|
|
(20
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from Operations
|
|
|
(2,179,045
|
)
|
|
|
(3,944,554
|
)
|
|
|
1,765,509
|
|
|
|
(45
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
10,290
|
|
|
|
67,793
|
|
|
|
(57,503
|
)
|
|
|
(85
|
)%
|
|
Other income
|
|
|
75,380
|
|
|
|
1,890
|
|
|
|
73,490
|
|
|
|
3,888
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
85,670
|
|
|
|
69,683
|
|
|
|
15,987
|
|
|
|
23
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(2,093,375
|
)
|
|
|
(3,874,871
|
)
|
|
|
1,781,496
|
|
|
|
(46
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Deferred
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
NET LOSS
|
|
$
|
(2,093,375
|
)
|
|
$
|
(3,874,871
|
)
|
|
$
|
1,781,496
|
|
|
|
(46
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
Revenues from licenses increased to $950,119 for the nine months ended September 30, 2009
compared to $0 for the same period in 2008. The $950,119 license revenue in 2009 represents nine
months of revenue recognition related to a $1.9 million upfront cash payment received by Winston
Labs from sanofi-aventis Canada Inc. in accordance with a license agreement entered into by Winston
Labs in the fourth quarter of 2008.
Revenues from royalties declined to $105,423 for the nine months ended September 30, 2009
compared to $106,904 for the same period in 2008. The decline was primarily due to a change in
terms of the License Agreement with DUSA that included a $25,000 minimum monthly payment received
in January 2008 that was not received for same period in 2009. The license agreement with DUSA
expired on September 30, 2008. The $105,423 royalty revenue for the nine month period ending
September 30, 2009 is comprised entirely of royalties earned from Hi-Tech. The $106,904 royalty
revenue for the nine month period ending September 30, 2008 represents $34,861 and $72,043 of
royalties earned from DUSA and Hi-Tech, respectively. On October 30, 2009, the Company received
communication from Hi-Tech that it has discontinued the sale of the product as defined in the
license agreement. As a result, the Company does not expect to receive any more royalties from
Hi-Tech in the future.
Research & Development Expenses
Research and development expenses declined by $913,173,to $1,716,642 for the nine months ended
September 30, 2009 compared to $2,629,815 for the same period in 2008. The decline was primarily
due to decreased spending on various European and Canadian filing fees and the timing of certain
R&D projects.
20
General and Administrative Expenses
General and administrative expenses increased to $1,511,124 for the nine months ended
September 30, 2009 compared to $1,415,465 for the same period in 2008. The increase is due largely
to increase in payroll due primarily to hiring of additional administrative staff.
Interest Income
Interest income decreased by $57,503 to $10,290 for the nine month period ended September 30,
2009 from $67,793 for the same period in 2008 due to a majority of Company funds being held in U.S.
Treasury mutual fund for the nine month period ending September 30, 2009, which pays a much lower
interest rate than a Certificate of Deposit, which accounted for majority of the Company’s cash and
cash equivalents for the nine month period ending September 30, 2008.
Other Income
Other income increased by $73,490 to $75,380 for the nine month period ended September 30,
2009 from $1,890 for the same period in 2008 due to a $75,000 legal settlement with DUSA.
Net Loss
Net loss was $2,093,375, or $(0.04) per share, for the nine months ended in September 30,
2009, compared to a net loss of $3,874,871, or $(0.07) per share for the same period in 2008. The
decrease in net loss is primarily attributed to an increase in revenues totaling $0.9 million and a
decrease in operating expenses totaling $0.8 million, consisting of a decrease in research and
development totaling $0.9 million and an increase in general and administrative expenses totaling
$0.1 million.
Liquidity and Capital Resources
Since Winston Labs’s inception, it has financed its operations through the private placement
of equity securities and, to a lesser extent, through licensing revenues and product sales. Through
March 31, 2009, Winston Labs has raised approximately $54 million from the private placement of
Winston Labs and Rodlen common shares.
While the focus going forward is to improve our financial performance, we expect operating
losses and negative cash flow to continue for the foreseeable future and, as described below, we
will need to raise additional capital to fund these losses. We anticipate that our losses may
increase from current levels because we expect to incur significant costs and expenses related to
being a public company, continuing our research and development activities, filing with regulatory
agencies (e.g. FDA) as well as developing new compounds and products, advertising, marketing and
promotional activities, all of which will involve employing additional personnel as our business
expands. Our ability to become profitable depends on our ability to develop products and to
generate and sustain substantial revenue related to those products through new license and
distribution agreements while maintaining reasonable expense levels.
The bulk of our expenditures are for operating activities. Our net cash used in operating
activities was $1.8 million for the year ended December 31, 2007, $3.1 million for the year ended
December 31, 2008 and $3.4 million for the nine months ended September 30, 2009. These amounts were
used to fund our operating losses for the periods, adjusted for non-cash expenses and changes in
operating assets and liabilities.
Historically, our investing activities have included the acquisition or purchase of product
rights, such as Psoriatec
®
in 2001 and Zostrix
®
in 2002,
the divestment of product rights, such as Zostrix
®
in 2005, and the acquisition
or redemption of holdings in other companies, such as the preferred shares in Ovation that we
redeemed in 2005.
On November 13, 2007, Winston Labs issued 5,815,851 shares of Winston Labs Series A Preferred
Stock and warrants to purchase 4,092,636 shares of Winston Labs Series A Preferred Stock in a
private placement for an aggregate purchase price of $5.0 million. Immediately prior to
consummation of the Merger, Winston Labs issued 4,187,413 shares of Winston Labs Series B Preferred
Stock in a private placement for an aggregate purchase price of $4.0 million. All of the Winston
Labs shares and warrants issued in these transactions were exchanged for shares of the Company’s
Series A and B Preferred Stock and warrants to purchase the Company’s Series A Preferred Stock upon
consummation of the Merger.
21
On September 25, 2008 at the closing of the Merger, all of the issued and outstanding capital
stock of
Winston Labs, consisting of 23,937,358 shares of common stock, par value $0.001 per share
(“Common Stock”), 5,815,851 shares of the Winston Labs Series A Convertible Preferred Stock, par
value $0.001 per share (“Series A Preferred Stock”), and 4,187,413 shares of the Winston Labs
Series B Convertible Preferred Stock, par value $0.001 per share (“Series B Preferred Stock”), was
exchanged for 422,518,545 shares of the Company’s common stock, par value $0.001 per share (at an
exchange ratio of 17.65101 shares of the Company’s common stock per share of Winston Labs common
stock), 101,849 shares of the Company’s Series A Preferred Stock and 73,332 shares of the Company’s
Series B Preferred Stock (at an exchange ratio of .01751238 shares of the Company’s preferred stock
per share of Winston Labs’ preferred stock). Following a 1-for-8 reverse split of the Company’s
common and preferred stock on December 15, 2008, 12,730 shares of its Series A Preferred Stock and
9,157 shares of its Series B Preferred Stock were issued and outstanding. On September 24, 2009,
each outstanding share of Company Series A Preferred Stock and Series B Preferred Stock
automatically converted into 1,000 fully-paid, non-assessable shares of the Company’s Common Stock.
In addition, in connection with such conversion, each outstanding warrant to purchase shares of
Series A Preferred Stock automatically converted into the right to acquire 1,000 shares of Common
Stock upon the exercise of such warrant, at an exercise price of $0.39 per share of Common Stock.
On October 30, 2008, Winston Labs and sanofi-aventis Canada Inc. entered into a licensing
agreement for the Canadian rights to Winston Labs’ transient receptor potential vanilloid (TRPV-1)
modulator in formulations for topical application. Under the terms of the agreement,
sanofi-aventis Canada Inc. owns the rights to develop, manufacture and commercialize civamide cream
in Canada along with a second generation cream that is currently in development. In return for
granting sanofi-aventis Canada Inc. the Canadian rights, Winston Labs received an upfront payment
of $1.9 million (US) and will receive an additional $2 million (CAD) upon regulatory approval of
civamide cream in Canada, certain milestone payments and future royalties on net sales of civamide
or the related second generation cream in Canada. In connection with this agreement, Winston Labs
is recognizing the upfront payment of $1.9 million over 18 months. As such, approximately $316,000
and $0 has been recognized as revenue for the three months ended September 30, 2009 and in 2008,
respectively, with the remainder being treated as unearned revenue on our Consolidated Balance
Sheet as of September 30, 2009 and as of December 31, 2008.
On December 15, 2008, the Company’s Board of Directors approved a 1-for-8 reverse split of its
common and preferred stock.
As of September 30, 2009, we had cash and cash equivalents of approximately $2.3 million.
During the three and nine months ended September 30, 2009, we used a total of approximately $0.8
million and $3.4 million, respectfully, in operating activities. We currently anticipate that our
cash uses will generally remain at these levels or less until such time as we are able to secure
additional funding to increase our investment in pre-commercialization activities and advance our
development programs. We anticipate that our existing cash will be sufficient to meet our projected
operating requirements through at least December 31, 2009. The Company will need and will seek to
obtain additional capital in the next 6-9 months and future years to continue to operate and grow
our business. Should we achieve regulatory and market approval in Canada and should additional
resources become available, we expect that our cash uses will increase to support additional
pre-launch activities as well as launch related activities. On October 15, 2009, Winston Labs
announced that it received a Notice of Non-compliance (“NON”) from the Therapeutics Drug
Directorate, Health Canada (the “Directorate”) for its New Drug Submission (NDS) for CIVANEX
(zucapsaicin cream 0.075%) for the treatment of the signs and symptoms of osteoarthritis. The
Directorate remarked that the analysis of the pivotal trial did not support the requested
indication. Winston Labs has a period of ninety days to submit a response to the Directorate’s NON,
which it intends to do. In the event that the Company is not be able to obtain regulatory approval
in Canada by June 30, 2010, the sanofi-aventis payment due upon regulatory approval will be reduced
by $250,000 (CAD) to $1,750,000 (CAD). It is unlikely that we can obtain Regulatory Approval in
Canada prior to December 31, 2009. We anticipate that licensing revenue for the remainder of 2009
will originate solely from milestone payments under existing license agreements or upfront,
non-refundable payments under new license agreements. Our cash requirements may vary materially
from those currently anticipated due to changes in our operations, including our research and
development activities, expansion of our personnel and the timing of our receipt of license
revenues. If the Company fails to raise additional capital to support its operations for the next
twelve months, it may not have sufficient funds to support working capital needs through December
31, 2010. If it is determined the Company does not have sufficient funds to support operations, it
is possible the Company will be unable to continue as a going concern and therefore the audit
opinion will include a going concern emphasis paragraph for the year ending December 31, 2009.
22
We continue to incur recurring net losses and negative cash flows from operations. Until we
can generate significant cash from our operations, if ever, we expect to continue to fund our
operations with existing cash resources generated from the proceeds of offerings of our equity
securities as well as potentially through strategic collaboration agreements, debt financing or the
sale of additional equity securities. We may not enter into collaboration agreements, or, if we do,
receive milestone or royalty payments under those agreements. In addition,
we cannot be sure that our existing cash and investment resources will be adequate or that
additional financing will be available when needed or that, if available, financing will be
obtained on favorable terms. Having insufficient funds may require us to delay, scale back or
eliminate some or all of our development programs, relinquish some or all rights to product
candidates at an earlier stage of development or negotiate less favorable terms with third parties
in connection with such product candidates than we would otherwise choose. Failure to obtain
adequate financing also may adversely affect the launch of our product candidates, if approved for
marketing, or our ability to continue in business. If we raise additional funds by issuing equity
securities, substantial dilution to existing stockholders could result. If we raise additional
funds by incurring debt financing, the terms of the debt could involve significant cash payment
obligations as well as covenants and specific financial ratios that may restrict our ability to
operate our business.
23
Contractual Obligations
Rental expense for the nine months ended September 30, 2009 and 2008 was $64,553 and $82,733,
respectively.
We enter into contracts in the normal course of business with clinical research organizations
and clinical investigators, for third party manufacturing and formulation development. These
contracts generally provide for termination with notice, and therefore, our management believes
that our non-cancelable obligations under these agreements are not material.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, with the exception of the above noted
operating leases.
|
|
|
|
|
Item 3.
|
|
Quantitative and Qualitative Disclosures About Market Risk.
|
We are a “smaller reporting company” as such term is defined in Rule 12b-2 of the Exchange Act
and are exempt from making the disclosures required by this item pursuant to paragraph (e) of Item
305 of Regulation S-K.
|
|
|
|
|
Item 4.
|
|
Controls and Procedures.
|
Disclosure Controls and Procedures
. Our management, with the participation of our chief
executive officer and chief financial officer, has evaluated the effectiveness of our disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act) as of the end of the period covered by this report. Based on such evaluation, our
chief executive officer and chief financial officer have concluded that, as of the end of such
period, our disclosure controls and procedures are effective in recording, processing, summarizing
and reporting, on a timely basis, information required to be disclosed by us in the reports that we
file or submit under the Exchange Act, including, without limitation, controls and procedures
designed to ensure that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is accumulated and communicated to our management, including our
chief executive officer and chief financial officer, to allow timely decisions regarding required
disclosure.
Internal Control Over Financial Reporting
. There have not been any changes in our internal
control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under
the Exchange Act) during the fiscal quarter to which this report relates that have materially
affected, or are reasonably likely to materially affect, our internal control over financial
reporting.
24
PART II. OTHER INFORMATION
|
|
|
|
|
Item 1.
|
|
Legal Proceedings
|
As previously reported in the Company’s quarterly report on Form 10-Q for the quarter ended
June 30, 2009, in July 2009, the Company filed suit against the FDA in the United States District
Court for Northern District of Illinois for declaratory and injunctive relief with respect to the
FDA’s refusal to waive it’s application user fee under small business waiver rules relating to the
Company’s submission of the civamide cream application. In September, 2009, the FDA filed a motion
to dismiss the suit. In October, 2009, the Company filed a response in opposition to the FDA’s
motion to dismiss. If the Company is unsuccessful in its action against the FDA, an application
fee of approximately $1.4 million would be due upon submission by the Company of any NDA, including
that of Civamide cream. Payment of fees at that level would have a material effect on the
Company’s cash condition and would adversely affect its ability to conduct research and development
projects in a time frame previously anticipated by management. At this stage of the litigation, it
is not feasible to predict the outcome of this proceeding.
There are no other material pending legal proceedings, other than ordinary routine litigation
incidental to its business, to which the Company is a party.
We are a “smaller reporting company” as such term is defined in Rule 12b-2 of the Exchange Act
and are exempt from making the disclosures required by this item pursuant to the instructions to
Item 1A to Part II of Form 10-Q.
|
|
|
|
|
Item 2.
|
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
(a) On September 25, 2009, pursuant to the terms of the Plan, the Compensation Committee of
the Board of Directors granted 142,500 non-qualified stock options to purchase shares to certain
non-employee directors of the Company, including: 30,000 options to Glenn L. Halpryn; 27,500
options to Curtis Lockshin, Ph.D; 27,500 options to Neal S. Penneys, M.D., Ph.D.; 27,500 options to
Subbarao Uppaluri, Ph.D and 30,000 options to Robert A. Yolles. All of the options expire on
September 25, 2019, vest in five equal annual installments commencing September 25, 2010 and have
an exercise price of $1.36 as determined by the Compensation Committee of the Board of Directors in
accordance with the terms of the Plan. A Form of Nonqualified Stock Option Agreement entered into
by and between the Company and each of such directors with respect to these stock option awards is
filed herewith as Exhibit 10.1.
(b) Not applicable.
(c) Not applicable.
|
|
|
|
|
Item 3.
|
|
Defaults Upon Senior Securities
|
None.
|
|
|
|
|
Item 4.
|
|
Submission of Matters to a Vote of Security Holders
|
None
25
|
|
|
|
|
Item 5.
|
|
Other Information
|
None
|
|
|
|
|
|
|
Exhibit No.
|
|
|
10.1
|
|
|
Form of Nonqualified Stock Option Agreement.
|
|
|
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.
|
26
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 thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
WINSTON PHARMACEUTICALS, INC.
|
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
|
|
|
|
Dated: November 13, 2009
|
|
By:
|
|
/s/ Joel E. Bernstein
Joel E. Bernstein, M.D.
|
|
|
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
Dated: November 13, 2009
|
|
By:
|
|
/s/ David Starr
David Starr
|
|
|
|
|
|
|
|
Vice President, Chief Financial Officer
|
|
|
27
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