UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)


þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2008~~2009


o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 000-51314

Winston Pharmaceuticals, Inc.

(Name of registrant as specified in its charter)


Delaware		30-0132755
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

100 North Fairway Drive, Suite 134 Vernon Hills, IL		60061
(Address of principal executive offices)		(Zip Code)

Issuer’s telephone number (847) 362-8200

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of each class: Common Stock, $.001 par value per share

Common Stock, $.001 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the ~~past~~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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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.


o Large Accelerated Filer		o Accelerated Filer		o Non-accelerated Filer		þ Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of March 261, ~~2009~~2010, 5577,~~106~~408,~~364~~893 shares of the registrant’s Common Stock were outstanding. As of June 30, ~~2008~~2009, the aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant (without admitting that such person whose shares are not included in such calculation is an affiliate) was $1612,~~499~~326,~~606~~041 based on the last sale price as reported on the over-the-counter bulletin board on such date.

Document incorporated by reference: None

WINSTON PHARMACEUTICALS, INC. FORM 10-K FOR THE YEAR ENDED DECEMBER 31, ~~2008~~2009

INDEX

	Page
PART I
Item 1. Description of Business		1
Item 1. Business		1
Item 1A. Risk Factors		1216
Item 1B. Unresolved Staff Comments		1216
Item 2. Description of Properties		12
Item 2. Properties		16
Item 3. Legal Proceedings		1216
Item 4. Submission of Matters to a Vote of Security Holders		12
Item 4. Removed and Reserved		16
PART II
Item 5. Market Information for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		13
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		17
Item 6. Selected Consolidated Financial Data		13
Item 6. Selected Financial Data		18
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1418
Item 7A. Quantitative and Qualitative Disclosures About Market Risk		2428
Item 8. Financial Statements and Supplementary Data		2428
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure		2528
Item 9A(T). Controls and Procedures		2528
Item 9B. Other Information		2529
PART III
Item 10. Directors, Executive Officers and Corporate Governance		2630
Item 11. Executive Compensation		3033
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		3637
Item 13. Certain Relationships and Related Transactions, and Director Independence		3840
Item 14. Principal Accounting Fees and Services		4042
PART IV
Item 15. Exhibits, Financial Statement Schedules		4143
Index to Financial Statements		F-1
Exhibit 21.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I

Item 1. ~~Description of~~ Business

Cautionary Note Regarding Forward Looking Statements

This Annual Report on Form 10-K contains certain statements that are “forward-looking” 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 (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, including statements regarding our expected financial position and business and financing plans. These forward looking statements and other information are based on our beliefs as well as ~~assumptions~~ 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 Report on Form 10-K. 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.

Going Concern Audit Opinion

As described herein under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Financial Statements filed as part of this Form 10-K, the Report of Independent Registered Public Accounting Firm contains an emphasis of matter paragraph which indicates that there is substantial doubt about the Company’s ability to continue as a going concern. As described herein under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources, the Company plans to raise additional funds early in the second quarter of 2010 in order to support its operations through December 31, 2010.

Executive Overview

On September 25, 2008, Getting Ready Corporation (the “Company”) completed its merger transaction (the “Merger”) with Winston Laboratories, Inc., a Delaware corporation (“Winston Labs”), by merging the Company’s wholly-owned subsidiary into Winston Labs. 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. The Merger was accounted for as a reverse merger for accounting purposes with Winston as the accounting acquirer. Effective as of November 17, 2008, the Company changed its name to Winston Pharmaceuticals, Inc. ~~Unless~~ Unless the context otherwise requires, all references to “we,” “us,” “our” or the “Company” ~~shall~~ shall mean the ~~combined entity that is the~~ Company and Winston ~~after~~Labs, ~~the effective date of the Merger~~collectively.

Our common stock is currently quoted on the OTC Bulletin Board, or OTCBB, sponsored by the National Association of Securities Dealers, Inc. under the symbol “WPHM.” The OTCBB is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current “bids” and “asks,” as well as volume information.

Winston Labs was incorporated in July 1998 as a specialty pharmaceutical company and is engaged in the discovery and development of products for pain management. Its core proprietary technology affects the functioning of certain neurotransmitters that control and mediate pain transmission. Based on this technology, ~~Winston~~We isare developing products that reduce pain transmission from peripheral receptors along nerve pathways to the brain. ~~Winston~~We focus ~~focuses~~ on major pain indications such as ~~osteoarthritis~~neuropathic pain syndromes, chronic daily headache, migraine headache, and ~~neuropathic pain syndromes~~osteoarthritis, which have estimated worldwide market sizes of $104 billion (~~Analyst~~Datamonitor, ~~Research)~~Commercial Insight: Neuropathic Pain, July 2006), $5 billion (Analyst Research), $4 billion (Analyst Research) and $410 billion (~~Datamonitor,~~Analyst ~~Commercial Insight: Neuropathic Pain, July 2006~~Research), respectively, as well as niche indications that have limited or no products currently available.

Pain Management Market

Pain is a ~~worldwide~~significant, ~~problem~~costly, ~~with~~and ~~serious~~growing health ~~and~~care ~~economic consequences~~issue. ~~The~~In ~~medical~~the ~~effort~~United States, to76.5 million ~~treat~~Americans ~~pain,~~(26% ~~known~~of asadults ~~pain~~age ~~management,~~20 ~~addresses~~or older) reported a ~~large~~problem ~~and~~with ~~under-served~~pain lasting ~~market~~for more than 24 hours. ~~Pain~~The majority of adults in the ~~hospital~~ isUnited ~~associated~~States ~~with~~(57% ~~increased~~or ~~length~~170 million) ofhave ~~stay,~~experienced ~~longer~~chronic ~~recovery~~or ~~times~~recurrent ~~and~~pain ~~poorer~~in ~~patient outcomes,~~the ~~all~~past year. The economic cost of ~~which~~pain, ~~have~~including health care ~~quality~~costs ~~and~~as ~~cost~~well ~~implications.~~as ~~Decision~~lost ~~Resources~~productivity due to pain, anis ~~international~~estimated ~~research/analyst~~at ~~firm,~~$100 billion ~~estimates~~annually ~~that~~in the ~~worldwide~~United ~~prescription~~States. ~~market~~Some ~~for~~$61 billion of this amount is lost productivity attributable to pain, with an average loss of five hours per week ~~drugs~~for ~~totaled~~workers ~~$27 billion~~experiencing inreduced ~~2006~~performance or work absences. InAmong pain conditions, headache is the ~~United~~primary ~~States:~~reason for lost productive time.

•The ~~Decision~~market ~~Resources~~for ~~estimates~~pain ~~that~~management ~~nearly~~products ~~$17~~is ~~billion~~large. ~~was~~According ~~spent~~to inIMS ~~2006~~Health ondata, ~~prescription~~the total ~~pain~~U.S. ~~drugs;~~market •for ~~approximately~~prescription ~~25 million Americans experience acute~~ pain ~~each~~management ~~year~~pharmaceuticals, ~~due~~including tothose ~~injury~~for arthritis or ~~surgery,~~headache ~~according to the American Pain Society~~pain, asexceeded ~~published~~$25 billion in ~~2006~~2008 by(at ~~Medtech~~a ~~Insight~~compound (aannual ~~division~~growth rate of ~~Windhover~~4% ~~Information,~~between ~~Inc.,~~2003 ~~that provides business information~~ and ~~intelligence~~2008). onSeven ~~new~~(7) of ~~trends, technologies, and companies in~~ the ~~medical~~top ~~device,~~50 ~~diagnostics,~~prescription ~~and~~drugs ~~biotech~~ranked ~~marketplace);~~by worldwide ~~and~~sales •in ~~approximately~~2008 50had ~~million Americans suffer from chronic~~ pain, ~~according~~management ~~to the American Pain Society~~indications.

~~According~~Recent todevelopments aregarding ~~2007~~serious ~~Global~~side ~~Market~~effects ~~for~~of ~~Pain~~certain ~~Management~~non-steroidal anti-inflammatory ~~Drug~~drugs (NSAIDs), coupled with the removal of several COX-2 inhibitors from the market and ~~Devices~~a ~~Report~~focus byon ~~BCC~~the ~~Research,~~hepatoxicity of acetaminophen and acetaminophen/opiate combinations, along with the ~~global~~FDA’s ~~pain~~subsequent ~~management~~attention to this matter, have created significant market isopportunities ~~anticipated~~for toalternative ~~grow~~pain attherapy medications and has generated a ~~compounded~~heightened ~~annual~~consumer ~~growth~~caution ~~rate~~and wariness of 5current marketed products.6 ~~percent~~Similarly, ~~through~~potential ~~2012~~for abuse of some existing prescription medications for moderate-to-severe pain, such as opioid-based analgesics, establishes a need among consumers for medications with less risk for addiction.

~~Analgesic~~We ~~Drugs~~believe that as recognition of the importance of pain diagnosis and treatment becomes greater, and as the FDA continues to issue health advisories and tighten restrictions on marketed opioids and NSAIDs including acetaminophen, the increasing need for effective pain medications with fewer side effects and less dependency concerns will create significant market opportunities for new products.

~~Drugs~~Several ~~that~~trends ~~treat pain~~ are ~~referred~~also expected to asdrive ~~analgesics,~~growth and ~~the~~create ~~type~~opportunities ~~of analgesic selected~~ for ~~treatment~~ ~~depends principally upon the severity of the pain. For mild pain, weak analgesics such as~~new ~~acetaminophen~~products orfor ~~non-steroidal anti-inflammatory drugs, or NSAIDs, such as ibuprofen are used. For moderate~~ pain, ~~NSAIDs, weak opioids such as codeine or short-acting formulations of strong opioids~~management: ~~may be used. Severe pain requires strong opioids such as morphine, oxycodone, hydrocodone or fentanyl.~~

~~Shortcomings~~Aging of ~~Current~~the ~~Pain Management~~population

~~Despite~~The ~~widespread~~populations ~~clinical~~in ~~use~~the United States, Europe, and Japan are aging rapidly. By 2025, it is estimated that in the United States, one in four people will be 60 years of ~~drugs~~age ~~for~~or older ~~pain~~(versus one in six in 2000). In Europe and Japan, ~~pain~~the ~~management~~aging ~~remains~~of ~~less~~the ~~than~~population ~~optimal~~is ~~due~~expected to abe ~~variety~~even ofmore ~~factors~~pronounced. As people age, ~~including:~~they tend to be afflicted with more chronic pain conditions and to undergo more surgical procedures which require postoperative pain control.

•Greater ~~Insufficient~~recognition ~~efficacy. Opioids, the current standard~~ of care for severe pain originating from a painful stimulus, or nociceptive pain, reduce pain less than 50 percent in a majority of situations. Neuropathic pain is difficult to treat with existing analgesics because of the ~~differing~~importance ~~types~~ of ~~nerves and organs involved in, and types of injuries causing, this kind of~~ pain. ~~Neuropathic~~diagnosis ~~pain does not respond to treatment with NSAIDs~~ and ~~responds poorly to~~ treatment ~~with opioids at doses that do not impair the ability of patients to live reasonably active lifestyles.~~

•Medical ~~Lack~~and ofhealth ~~site~~care ~~specificity.~~practitioners ~~Most analgesics, including opioids and NSAIDs,~~ are ~~given~~increasingly ~~orally~~aware orof ~~by intravenous infusion and thereby subject~~ the ~~patient~~importance ~~to high circulating concentrations~~ of diagnosing ~~drug,~~and ~~even~~treating ~~though most types of~~ pain ~~are experienced in discrete parts of the body~~. ~~Opioids~~Whereas ~~must be given by mouth or infusion because they provide~~ pain ~~relief~~may byhave ~~acting~~once onbeen ~~nerves~~considered ~~all~~a ~~over~~natural ~~the~~or inevitable ~~body:~~consequence ~~in the spinal cord, in the brain and at the site~~ of ~~injury.~~aging Asor acertain ~~consequence~~medical conditions, ~~opioids~~it ~~do not provide site-specific pain relief because their action~~ is ~~not~~now ~~targeted~~considered ~~specifically~~a topatient’s “fifth ~~the~~vital ~~area~~sign,” ofwhich ~~the body that~~ is ~~experiencing~~essential ~~pain. Moreover, circulating drugs cause side effects at parts of the body unrelated~~ to ~~the~~monitor ~~perception~~and ~~of pain~~treat. ~~Although~~The ~~there~~Joint Commission ~~are~~on ~~currently~~Accreditation ~~means~~ of ~~delivering~~Healthcare ~~site-specific~~Organizations ~~analgesia,~~has ~~such~~established asstandards bythat require ~~injection~~health ofcare ~~short-acting~~facilities ~~anesthetics into joints such as the ankle or knee, these techniques are reserved~~ to ~~provide~~assess ~~relatively short-term anesthesia prior to surgery~~ and ~~are~~treat ~~not appropriate for long-term~~ pain ~~relief~~.

Significant unmet medical needs in pain management

Almost 50% of those surveyed said their pain is not under control. More than 75% of those surveyed strongly agreed that new options are needed to treat their pain. Even among those patients who do receive treatment for pain, many do not achieve significant relief. In fact, one survey found that respondents were so dissatisfied with the efficacy of their prescription and over-the-counter (OTC) pain control medications that 78% were willing to try new treatments, and 43% said they would spend a substantial portion of their financial resources on a treatment if they thought it would work.

•Shortcomings ~~Occurrence~~ of ~~side~~Current ~~effects.~~Pain NSAIDs may cause gastrointestinal ulcers, and between 10,000 and 20,000 patients die each year from gastrointestinal bleeding believed to be related to the use of NSAIDs. Use of opioids is associated with nausea and vomiting in many patients. High-dose opioids cause sedation and may also cause respiratory depression, or a decrease in the ability to breathe spontaneously. Opioids used chronically can cause severe constipation that leads many patients to stop using them, and opioids may sometimes cause severe itching. Drugs used to treat neuropathic pain frequently cause sedation and problems with coordination.Management

Despite widespread clinical use of drugs for pain, pain management remains less than optimal due to a variety of factors, including:

•

Insufficient efficacy. Opioids, the current standard of care for severe pain, reduce pain less than 50 percent in a majority of situations. Neuropathic pain is difficult to treat with existing analgesics because of the differing types of nerves and organs involved in, and types of injuries causing, this kind of pain. Neuropathic pain does not respond to treatment with NSAIDs and responds poorly to treatment with opioids at doses that do not impair the ability of patients to live reasonably active lifestyles.

•

Lack of site specificity. Most analgesics, including opioids and NSAIDs, are given orally or by intravenous infusion and thereby subject the patient to high circulating concentrations of drug, even though most types of pain are experienced in discrete parts of the body. Circulating drugs cause side effects at parts of the body unrelated to the perception of pain. Although there are currently means of delivering site-specific analgesia, such as by injection of short-acting anesthetics into joints such as the ankle or knee, these techniques are reserved to provide relatively short-term anesthesia prior to surgery and are not appropriate for long-term pain relief.

•

Occurrence of side effects. NSAIDs can cause gastrointestinal ulcers, with between 10,000 and 20,000 patients dying each year from gastrointestinal bleeding believed to be related to the use of NSAIDs. Use of opioids is associated with nausea and vomiting in many patients. High-dose opioids cause sedation and may also cause respiratory depression, or a decrease in the ability to breathe spontaneously. Opioids used chronically can cause severe constipation that leads many patients to stop using them, and opioids may sometimes cause severe itching. Drugs used to treat neuropathic pain frequently cause sedation and problems with coordination.

•

Need for frequent dosing. Drugs used to treat neuropathic pain require frequent dosing that makes their use inconvenient, often leading to reduced patient compliance.

• Slow onset of pain relief. This slow onset, as well as poor efficacy, is due to the poor penetration of skin by the anesthetics used in these products.

•

Potential to cause physical dependence. Opioids, when used chronically, can cause physical dependence. Fear of physical dependence often influences clinicians to prescribe less than adequate doses of opioid analgesics. Similar fears lead many patients to refuse opioid analgesics.

Given doctors’ and patients’ desire to achieve adequate control of pain, and the significant shortcomings associated with existing treatments, doctors and patients often struggle to find an appropriate balance between pain relief and adverse side effects. With both over- and under-treatment of pain, patients may be suffering unnecessarily, have poor quality of life and have difficulty meeting their social, familial and work-related commitments.

Winston Product Pipeline

~~Winston~~We ~~has~~have developed multiple proprietary formulations and uses of ~~civamide~~Civamide and doxepin hydrochloride, two agents that affect a variety of neuroactive chemical transmitters that ~~convey~~ convey primary sensory input (e.g., pain) from the periphery to the central nervous system. ~~Winston’s~~ Our focus on neurotransmitter-active compounds has generated several of ~~its~~our most important product candidates. A common feature of these product candidates is the use of an active ingredient that depletes or interferes with the action of a neuroactive transmitter (e.g., substance P (SP), calcitonin gene-related peptide (CGRP), histamine, and serotonin), thereby decreasing the ability of sensory fibers or nerve ganglia to transmit or receive sensory stimuli and mediate inflammatory reactions. SP is believed to be the principal neurotransmitter of pain.

Civamide is a proprietary TRPV-1 (transient receptor potential vanilloid ~~receptor~~-1) receptor modulator, and doxepin hydrochloride is a potent histamine receptor blocker and serotonin ~~reuptake~~ reuptake inhibitor. Civamide is being developed in several different dosage forms for a variety of painful conditions. Doxepin is being developed in a nasal solution for prophylaxis and treatment of chronic daily headache.

LATE-STAGE PRODUCT PIPELINE
				U.S.
Product/	Dosage		Development	Market Size
Compound	Form	Product Indication(s)	Status in U.S. , Canada and Europe	($MM)
Civamide	Topical (Cream)	• Treatment of Osteoarthritis	• MAA (EU) filed 1/08		5,000
			• NDS (Canada) filed 11/08
			• File NDA Q2 09
Civamide	Oral Capsule	• Treatment of Chronic Neuropathic Pain	• In Phase I, Phase II Q3 09		3,000
		Treatment of Cancer Pain	• In Phase I, Phase II Q3 09		850
		Treatment of Post-Surgical Pain			3,000
Civamide	Patch	• Treatment of Neuropathic Pain	• Phase I Completed		3,000
			• In Phase II
Civamide	Nasal Solution	• Treatment of PHN of the Trigeminal Nerve	• Phase II/III		50
		• Prophylaxis of Episodic Cluster Headache	• In Phase III		2,000
		• Treatment of Dry Eye	• Start Phase II Q2 09		1,000
Doxepin hydrochloride	Nasal Solution	• Prophylaxis of Chronic Daily Headache	• Phase IIa Completed		2,500

The following table summarizes the late stage pain control products in our portfolio:

Civamide


				MARKETING
				RIGHTS IN
PRODUCT/		PRODUCT	DEVELOPMENT	NORTH
COMPOUND	DOSAGE FORM	INDICATION(S)	STATUS IN U.S.	AMERICA
Civamide	Patch	Postherpetic Neuralgia	Phase III	Winston

Civamide	Nasal Spray	Episodic Cluster Headache PHN of Trigeminal Nerve	Phase III Phase II	Winston Winston

Doxepin	Nasal Spray	Chronic Daily Headache	Phase II	Winston

Civamide	Cream	Osteoarthritis	Phase III Completed NDA 2010	Winston Sanofi Aventis (Canada)

OTHER PRODUCTS

Civamide	Capsule	Crohn’s Disease	Phase II	Winston

Civamide	Nasal Spray	Keratoconjunctivitis Sicca	Phase II	Winston

Civamide, a synthetically produced, proprietary new chemical entity, is the active ingredient in several of Winston’s product candidates. Civamide produces analgesia by decreasing the activity of sensory neurons. Civamide appears to affect preferentially type-C neurons by specific binding to a membrane receptor, the TRPV-1 receptor, which is coupled to an action channel. The specificity of civamide for type-C neurons limits its sensory effects to the inhibition of pain transmission unlike local anesthetics, which act to block the activity of all sensory neurons, thereby impairing all sensations including touch, pressure, heat, and vibration, in addition to pain signals.

Initial applications of civamide cause a transient release of SP from type-C neurons and probably account for the transient burning sensation that is often felt following initial applications of civamide. Civamide has also been shown to inhibit the synthesis of SP and reduce axonal transport of granules containing SP from the cell body to the nerve terminals. These effects may likely contribute to the analgesic effects of civamide by reducing the amount of SP available for release. The analgesic effect of civamide is completely reversible, since after administration of civamide is discontinued, SP stores gradually return to normal and neuronal sensitivity to noxious stimuli returns. However, in animal and human studies, civamide has a very long duration of analgesic activity, with a single dose or one-week course of treatment providing weeks of effective analgesic activity. In human studies to date, civamide has not exhibited systemic toxicity. Because of these attributes, Winston believes civamide represents a clinically significant treatment advance for a number of painful conditions, including headache pain, arthritis pain, neuropathic pain and cancer pain.

~~Winston has completed all clinical studies required for a new drug application (an “NDA”) submission to the Food and Drug Administration (“FDA”) on~~ Civamide ~~Cream for osteoarthritis. In a~~ pivotal 695 patient Phase III trial in osteoarthritis, Civamide Cream demonstrated statistically significant reductions in all three co-primary efficacy parameters. Winston submitted Marketing Authorization Applications (MAA) in Europe for Civamide Cream in January 2008, and anticipates approval in Europe during the third quarter, 2009. Winston submitted a new drug submission (“NDS”) in Canada in October 2008 and plans to submit an NDA 505(b)(2) in the United States in the second quarter of 2009, with approval anticipated in the first quarter of 2010 in Canada, and the second quarter of 2010 in the United States. Winston is currently in partnering discussions with several pharmaceutical companies regarding marketing and distribution of Civamide Cream in the United States and Europe.

AnCivamide, ~~investigational~~a ~~new~~synthetically ~~drug~~produced, ~~application~~proprietary ~~(an~~new ~~“IND”)~~chemical ~~was~~entity, ~~filed~~is in the ~~United~~active ingredient ~~States~~ in ~~the second~~several ~~quarter~~ of ~~2008~~our ~~for~~product ~~the civamide oral capsule for chronic neuropathic pain~~candidates. AThe ~~Phase~~chemical ~~I pharmacokinetic~~structure ~~study~~ is ~~underway.~~shown below:

On February 9, 2009, Winston announced positive topline results from Study WL1001-04-01, a Phase I clinical trial evaluating the tolerability and pharmacokinetic profile of two concentrations of the company’s patch formulation of Civamide~~, a novel TRPV-1 receptor modulator.~~ The study successfully demonstrated the tolerability of the two concentrations tested for continuous application to the skin for a period of one week. Additionally, there was no systemic absorption of civamide detected in any patients, supporting its local use for the topical treatment of post-herpetic neuralgia.

~~On February 24, 2009, Winston received orphan drug designation from the FDA for civamide, a novel TRPV~~(cis-~~1 receptor modulator, being developed as a dermal patch for the treatment of post~~8-~~herpetic neuralgia.~~methyl-N-vanilly1-6-nonenamide)

~~Study~~Civamide ~~WL1001-04-01~~produces ~~was~~analgesia aby ~~randomized,~~decreasing ~~double-blind, placebo-controlled, single-center study of 38 patients designed to evaluate~~ the ~~safety~~activity ~~and tolerability~~ of ~~two~~sensory ~~strengths of Civamide Patch~~neurons, shown 0below.~~0075%~~ ~~and~~Civamide ~~0.015%~~appears ~~versus~~to ~~placebo.~~affect Inpreferentially ~~this~~type-C ~~study,~~neurons aby ~~patch~~specific ~~was~~binding ~~applied once daily~~ to ~~the same area~~a ofmembrane ~~the abdomen~~receptor, ~~and~~the ~~worn~~TRPV-1 ~~for~~receptor, 24which ~~hours~~is ~~before~~coupled ~~replacing~~to ~~with~~ a ~~new~~cation ~~patch, during a 7 day study~~channel. ~~Both~~The ~~strengths~~specificity of Civamide ~~Patch~~for ~~were~~type-C ~~tolerable,~~neurons ~~with~~limits ~~all~~its ~~subjects~~sensory ~~completing~~effects ~~the study and with all but one subject being able~~ to ~~wear~~ the ~~patch for the entire 7 day period. Subjects applying active~~inhibition ~~Civamide~~of ~~Patches~~pain ~~experienced~~transmission ~~transient~~unlike ~~burning~~local ~~sensations~~anesthetics, which ~~progressively~~act ~~lessened~~to orblock ~~resolved with each application during~~ the ~~study.~~activity ~~Based upon the favorable results~~ of ~~this~~all sensory ~~study~~neurons, ~~Winston~~thereby ~~is now~~impairing ~~initiating~~all asensations ~~Phase~~including IItouch, ~~study~~pressure, ofheat, the 0.015% Civamide patch for treatment of post-herpetic neuralgia. The lack of systemic absorption should permit the use of the Civamide Patch adjunctively with systemic medications such as Cymbalta® (Pregabalin) and ~~Lyrica®~~vibration, ~~(Duloxetine)~~in ~~without~~addition ~~the~~to ~~risk~~pain ~~of drug-drug interactions~~signals.

The FDA approved a Special Protocol Assessment (an “SPA”) for a Phase III pivotal study of Civamide Nasal Solution for prophylaxis and treatment of episodic cluster headache. The SPA is a process that provides for an official FDA evaluation of Phase III clinical study protocols. The SPA provides trial sponsors with a binding written agreement that the design and analysis of the studies are adequate to support a license application submission if the study is performed according to the SPA and the results are successful. The FDA has agreed that if this pivotal study is robustly positive, it would be the final study necessary to support approval of Civamide Nasal Solution 0.01% for this indication. Civamide Nasal Solution has been studied in several additional indications, and there is positive Phase II data for acute migraine treatment and for vasomotor rhinitis. Civamide Nasal Solution has received orphan designation by FDA for treatment of PHN of the trigeminal nerve. An orphan designation grants special status to a product to treat a rare disease or condition upon request of a sponsor. This is a key designation as the marketing application for a prescription drug product that has been designated as a drug for a rare disease or condition is not subject to a prescription drug user fee unless the application includes an indication for other than a rare disease or condition. The product also receives seven year market exclusivity and tax credits for the sponsor.

~~Doxepin~~Initial applications of Civamide cause a transient release of SP from type-C neurons which may produce the transient burning sensation that is often felt following initial applications of Civamide. Civamide has also been shown to inhibit the synthesis of SP and reduce axonal transport of granules containing SP from the cell body to the nerve terminals. These effects may likely contribute to the analgesic effects of Civamide by reducing the amount of SP available for release. The analgesic effect of Civamide is completely reversible, since after administration of Civamide is discontinued, SP stores gradually return to normal and neuronal sensitivity to noxious stimuli returns. However, in animal and human studies, Civamide has a very long duration of analgesic activity, with a single dose or one-week course of treatment providing weeks of effective analgesic activity.

~~Winston~~We ishave ~~also~~extensive ~~developing~~preclinical ~~doxepin~~and ~~hydrochloride,~~clinical aexperience ~~potent~~with ~~histamine~~Civamide, ~~receptor~~with ~~blocker~~over ~~and~~1,600 ~~serotonin~~patients ~~reuptake~~having ~~inhibitor~~been astreated awith ~~nasal solution for~~ the ~~prophylaxis~~drug ~~and~~in ~~treatment~~Phase ofI ~~chronic~~to ~~daily headache,~~Phase anIII ~~indication~~clinical ~~for~~trials ~~which there are no FDA-approved treatment options. There are~~in ~~approximately~~different ~~12 million~~formulations ~~patients~~including in the ~~United~~patch, ~~States~~nasal ~~with~~spray, ~~chronic~~oral ~~daily~~capsule, ~~headaches.~~and ~~This~~topical ~~product~~cream. ~~appears~~The tomost ~~interfere~~significant ~~with~~adverse ~~the~~event ~~release/actions~~noted ofhas ~~histamine~~been ~~and~~localized ~~serotonin~~burning assensation ~~well~~at ~~as modulating~~the ~~neuronal~~site ~~sodium ion channels involved in the pathogenesis~~ of ~~this disorder~~application. ABecause ~~successful Phase IIa trial~~ of ~~Doxepin~~these ~~Nasal~~attributes, ~~Solution~~we inbelieve ~~this~~Civamide ~~condition~~represents ~~has~~a clinically ~~been~~significant ~~completed.~~treatment ~~Winston’s~~advance ~~next~~for ~~step~~a innumber ~~the clinical development~~ of ~~Doxepin~~painful ~~Nasal~~conditions, ~~Solution~~including neuropathic ispain, tocancer ~~conduct~~pain, aheadache ~~Phase~~pain, ~~II/III~~and ~~study~~arthritis ~~of longer duration~~pain.

~~Manufacturing~~Civamide ~~and Raw Materials~~Patch

~~All~~Civamide Patch is an ultra-thin patch containing Civamide in a concentration of 0.015% ~~Winston’s~~which ~~manufacturing~~is being developed for postherpetic neuralgia (“PHN”) of the trunk. PHN is ~~performed~~a condition ~~under~~that ~~contract~~affects bythe ~~outside~~nerve ~~vendors~~fibers in the skin. ~~Winston~~It ~~has~~is the most common complication ~~manufacturing~~of ~~agreements~~shingles ~~with~~and ~~DPT~~results ~~Laboratories,~~from ~~Ltd~~damage to nerve fibers during shingles. The rash and ~~Patheon,~~pain from ~~Inc~~shingles usually lasts about a month. toBut ~~produce~~in ~~certain~~people ofwith ~~its~~PHN, the pain from ~~development-stage~~shingles ~~products~~may last for ~~clinical~~months, ~~studies~~ and, ifsometimes ~~approved~~years, ~~for~~after ~~commercial~~the ~~sale.~~shingles ~~Most~~rash ofhas healed. ~~Winston’s~~Capsaicinoids ~~development-stage~~in ~~products~~a ~~may~~topical becream ~~manufactured~~formulation ~~only~~have atbeen ashown ~~site~~to ~~approved~~have byefficacy ~~the~~in ~~FDA~~treating ~~specifically~~PHN and other neuropathic pain syndromes in numerous studies. The development of Civamide Patch for ~~the~~PHN ~~individual~~would ~~product,~~also asoffer ~~specified~~a substantial improvement in the ~~NDA~~delivery ~~for~~of medication to the ~~product~~cutaneous nerves involved in PHN.

~~Winston~~Civamide ~~believes~~Patch ~~that~~can ~~adequate~~be ~~and~~applied ~~reliable~~to ~~sources~~the ofskin ~~raw~~for ~~materials~~up ~~and~~to ~~manufacturing~~24 ~~for~~hours ~~all~~ daily and the ~~development-stage~~patient can ~~products~~bathe ~~are~~or ~~currently~~shower ~~available~~without removing it. ~~Winston~~As ~~currently~~there ~~relies~~is onno ameasurable ~~limited number~~systemic absorption of Civamide ~~suppliers~~from tothe ~~provide~~patch, ~~raw~~we ~~materials~~believe ~~and~~it ~~manufacture~~is safer than its ~~finished~~competitors, ~~products~~i.e. ~~Some~~oral medications ofincluding Cymbalta® and Lyrica® as well as the ~~raw~~Lidoderm® Patch. Compared to ~~materials~~Lidoderm, ~~and~~the ~~finished~~Civamide ~~drug~~Patch ~~products~~will ~~are~~not ~~purchased~~have ~~from~~the ~~only~~potential ~~one~~of ~~supplier~~cardiovascular ~~and,~~side aseffects or drug interactions that Lidoderm® has. Civamide Patch is also a ~~result~~thinner, more flexible ~~Winston’s~~patch ~~operations~~and ~~may~~thus bewill ~~adversely~~have ~~affected~~better ifadherence ~~certain~~to ~~suppliers~~the ~~are~~skin ~~unable~~and towill ~~provide~~only ~~raw materials~~require ora single patch to ~~manufacture~~treat ~~drug~~a ~~substance~~dermatome oraffected ~~finished~~by ~~products~~PHN, onwhile ~~its~~Lidoderm ~~behalf~~requires three or four patches.

Sales and Marketing

Winston’s goal is to continue to develop novel drugs that are more effective or safer than drugs used today. Winston’s strategy includes the following elements:

• Winston intends to continue to outsource preclinical studies, clinical trials and formulation and manufacturing activities. Winston believes outsourcing permits significant time savings and allows for more efficient deployment of its resources.

• Winston intends to continue to license its lead products to medium to large pharmaceutical companies with existing sales forces and marketing capabilities, specifically outside of the United States where it currently does not have a sales and marketing infrastructure.

• Winston will also consider building its own sales force when economics and other factors indicate that this is a better strategy than out-licensing.

Intellectual Property

Winston attempts, to the extent practicable, to use patent protection in the commercialization of its owned and licensed technology, e.g. civamide nasal solution for keratoconjunctivitis (dry eye). Winston actively seeks patent protection for its proprietary technology in the United States and, as appropriate and cost-effective, in other countries. Winston currently has three U.S. issued patents and one pending U.S. application and numerous issued foreign patents. These patents and patent applications are principally composition of matter and method of use claims. Upon regulatory approval of any of Winston’s patent-protected products, Winston plans to seek patent extension, where available, under existing U.S. and foreign regulations permitting extension of a pharmaceutical patent.

In the United States, the Hatch-Waxman Act provides for patent term extension calculated as a portion of time during which the drug was in clinical development or under review at the FDA with a maximum extension of five years. Additionally, under the Hatch-Waxman Act, all new molecular entities (“NMEs”) such as civamide automatically receive five (5) years data exclusivity upon approval. Winston believes that it is eligible for the full five-year patent term extension period on patents covering civamide. Also, Winston expects to employ product life-cycle management, including the development of new formulations, new indications, and other significant product improvements, in order to maximize the value of its intellectual property.

~~Set~~On ~~forth~~February 9, ~~below~~2009, ~~please~~we ~~find~~announced positive top line results from Study WL1001-04-01, a ~~table~~Phase I clinical trial evaluating the tolerability and pharmacokinetic profile of ~~Winston’s~~two concentrations ~~current~~of ~~trademarks:~~Civamide Patch 0.0075% and 0.015% vs. placebo. The study successfully demonstrated the tolerability of the two concentrations tested for continuous application to the skin for a period of one week. Additionally, there was no systemic absorption of Civamide detected in any patients, supporting its local use for the topical treatment of postherpetic neuralgia. In this 38 patient study, a patch was applied once daily to the same area of the abdomen, and worn for 24 hours before replacing with a new patch, during a 7 day study. Both strengths of Civamide Patch were tolerable, with all subjects completing the study and with all but one subject being able to wear the patch for the entire 7 day period. Subjects applying active Civamide Patches experienced transient burning sensations which progressively lessened or resolved with each application during the study. Based upon the favorable results of this study, we conducted Study WL1001-04-03, a Phase II study of the 0.015% Civamide Patch for treatment of postherpetic neuralgia.

Trademark Name/Reg. No.	Owner	Filed (US)	Registered
CIVANEX 2,729,437	Winston Labs	February 16, 1999	June 24, 2003
MICANOL 3,283,446	Winston Labs	March 27, 2003	August 21, 2007
WINSTON LABORATORIES, The Pain Company 2,856,161	Winston Labs	October 13, 1999	June 22, 2004
WINSTON LABORATORIES	Winston Labs		August 13, 1993
Illinois State Trademark 73000
AXSAIN 2,925,798	Winston Labs	November 14, 2002	February 8, 2005

On February 24, 2009, we received orphan drug designation from the FDA for Civamide Patch for the treatment of postherpetic neuralgia. An orphan designation grants special status to a product to treat a rare disease or condition upon request of a sponsor. This is a key designation as the marketing application for a prescription drug product that has been designated as a drug for a rare disease or condition is not subject to a prescription drug user fee unless the application includes an indication for other than a rare disease or condition. The product also receives seven year market exclusivity and tax credits for the sponsor.

In ~~addition~~September, to2009, ~~seeking~~we completed Study WL-1001-04-03, a Phase II clinical trial evaluating the ~~protection~~efficacy and safety of ~~patents,~~Civamide ~~licenses~~Patch ~~and~~0.015% ~~trademarks,~~in ~~Winston~~the ~~also~~treatment ~~relies~~of PHN. Twenty-two patients with at least a 6 month history of PHN already on ~~unpatented~~stable ~~proprietary~~doses ~~technology~~of medication ~~and~~for ~~know~~PHN, but with recalcitrant pain of at least a 4 on a 0-~~how~~10 categorical scale during the week prior to ~~maintain~~enrollment, ~~its~~were ~~competitive~~enrolled ~~position~~in the study. ToCivamide ~~protect~~Patch ~~its~~0.015% ~~rights~~was inapplied ~~these~~over ~~areas~~a 4 week Treatment Period, ~~Winston~~for ~~has~~up to 24 hours daily. Daily Pain and Sleep Scores were assessed as the primary efficacy variables. There was a ~~policy~~2 week Post-Observation ofTreatment ~~requiring~~Period ~~its~~during ~~employees,~~which ~~consultants,~~no ~~advisors~~patch was applied, but patients ~~prospective~~continued ~~licensees~~to record efficacy and ~~business~~safety ~~partners~~parameters. toResults ~~enter~~demonstrated ~~into~~that ~~confidentiality~~by ~~agreements~~Week 2 and continuing throughout the Treatment Period and Post Treatment Observation Period, there was approximately a 40% improvement from Baseline in both Daily Pain Scores and Sleep Scores, seen below.

Civamide Patch Phase II

Study WL-1001-04-03

Adverse events were primarily transient self-limited application site burning sensations. There were no systemic adverse events. The lack of systemic absorption should permit the use of the Civamide Patch as both monotherapy and adjunctively with systemic medications such as Cymbalta^® (duloxetine) and Lyrica^® (pregabalin) without the risk of drug-drug interactions.

Civamide Nasal Spray

Civamide Nasal Spray contains Civamide in a concentration of 0.01% and is being developed for the prophylaxis and treatment of Episodic Cluster Headache (“ECH”). Cluster headache, nicknamed “suicide headache”, is a neurological disease that involves, as its most prominent feature, an immense degree of pain. “Cluster” refers to the tendency of these headaches to occur periodically, with active periods interrupted by spontaneous remissions. The cause of the disease is currently unknown. There are currently no approved products for this indication except injectable sumatriptan, which is approved for the treatment of individual cluster headaches, but not for the prevention of others occurring within the cluster period. There is no systemic absorption of Civamide from this formulation making Civamide Nasal Spray safer to use than other medications which might be used off label.

We have completed a Phase II as well two Phase III clinical trials. A meta-analysis of the data was performed. After a single week of treatment with Civamide Nasal Spray there was a decrease of approximately 70% vs. 35% in the control group (by the third week post-treatment). The per protocol results are shown below.

Civamide Nasal Spray

Phase II and Phase III Meta-analysis

Episodic Cluster Headache

The FDA approved a Special Protocol Assessment (an “SPA”) for a Phase III pivotal study of Civamide Nasal Spray for prophylaxis and treatment of episodic cluster headache. The SPA is a process that provides for an official FDA evaluation of Phase III clinical study protocols. The SPA provides trial sponsors with a binding written agreement that the design and analysis of the studies are adequate to support a license application submission if the study is performed according to the SPA and the study is successful. The FDA has agreed that if this pivotal study is robustly positive, it would be the final study necessary to support approval of Civamide Nasal Spray 0.01% for this indication. Civamide Nasal Spray has been studied in several additional indications, and there is positive Phase II data for acute migraine treatment and for treatment of vasomotor rhinitis, a nonallergic condition that involves a constant runny nose, sneezing, and nasal congestion. Civamide Nasal Spray has received orphan designation from FDA for treatment of PHN of the trigeminal nerve.

Civamide Cream

Civamide Cream is a cream formulation containing Civamide in a concentration of 0.075% being developed for osteoarthritis, the most common form of arthritis, which occurs when cartilage in the joints wears down over time. The lack of systemic absorption of Civamide from this formulation makes it safer to use than any oral COX-2 or NSAID. i.e., without the risk of cardiovascular and gastrointestinal side effects, or the risks of drug-drug interactions. Additionally, Civamide Cream 0.075% would also be without the safety concerns of topical NSAIDs, e.g. Volteren^® Gel, which because its use results in diclofenac absorption, has similar safety concerns to that of the oral products.

We believe that we have completed all studies required for a new drug application (an “NDA”) submission to the Food and Drug Administration (“FDA”) on Civamide Cream for osteoarthritis. In a pivotal 695 patient Phase III trial in osteoarthritis, Civamide Cream demonstrated statistically significant reductions in all three co-primary efficacy parameters and in important secondary parameters.

Table 1: TWA and Day 84 P-Values for Co-Primary Efficacy Variables in Favor of CIVANEX Over Control Study WL-1001-05-01 (ITT Population)


Primary Efficacy Variable	TWA		Day 84
WOMAC^® Pain Subscale		0.0089		0.0126
WOMAC^® Physical Function Subscale		<0.0001		0.0005
Subject Global Evaluation		0.0080		0.0485


*		For the WOMAC^® Pain and WOMAC^® Physical Function Subscales, these p-values correspond to treatment differences for Baseline scores >10 and, >39, respectively, as a result of investigating the significant Baseline-by-Treatment interaction. For SGE these p-values correspond to treatment differences for Baseline scores ≤1(TWA) and 0 (Day 84).

The filing of an NDA 505(b)(2) in the United States had been delayed pending approval of a User Fee Waiver of the approximately $1.4 million filing fee. The User Fee Waiver was granted to the Company on February 12, 2010. Consequently, the Company intends to file an NDA 505(b)(2) in the second quarter, 2010. The Marketing Authorization Applications (MAA) in Europe for Civamide Cream filed January 2008 was not approved in July 2009 and an appeal has been filed in the United Kingdom and Sweden. A new drug submission (“NDS”) submitted in Canada in October 2008 was issued a Notice of Noncompliance in October, 2009, which decision is currently being appealed by the Company. We have licensed the marketing rights for Civamide Cream to Sanofi-Aventis in Canada and continue discussions with several pharmaceutical companies regarding the marketing rights in the United States, Europe and the Pacific Rim.

Doxepin

Doxepin Nasal Spray

We are also developing doxepin hydrochloride, a potent histamine receptor blocker and serotonin reuptake inhibitor in a patented nasal solution formulation in a concentration of 0.4%, for the prophylaxis and treatment of chronic daily headache. There are approximately 12 million patients in the United States with chronic daily headaches, for which there are no FDA-approved treatment options. This product appears to interfere with the release/actions of histamine and serotonin as well as modulating neuronal sodium ion channels involved in the pathogenesis of this disorder.

Doxepin Nasal Spray would have advantages over oral tricyclics that may be used off-label for this indication. Unlike systemically administered doxepin, there are virtually no sedative or anti-cholinergic side affects which accompany nasal administration of doxepin nasal spray.

A successful Phase IIa trial of Doxepin Nasal Spray in chronic daily headache has been completed. There were 210 patients enrolled in a 28-day lead-in Vehicle Treatment Period to eliminate placebo responders. Of these patients, 92 continued in either a 14- or 28-day Double-blind Treatment Period. There was statistical significant improvement seen in decreases in headache duration and increases in global satisfaction, seen below.

Our next step in the clinical development of Doxepin Nasal Spray is to conduct a Phase II/III study of longer duration.

Other Products

Civamide Capsule

Civamide Capsules are being developed for the treatment of Crohn’s disease. Crohn’s disease is an inflammatory disease of the intestines that may affect any part of the gastrointestinal tract from anus to mouth, causing a wide variety of symptoms. It primarily causes abdominal pain, diarrhea (which may be bloody), vomiting, or weight loss, but may also cause complications outside of the gastrointestinal tract such as skin rashes, arthritis and inflammation of the eye. If effective for this indication, it would represent a breakthrough therapy as it would be without the systemic side effects of systemic medications currently used, including systemic steroids, immunosuppressives, and biologics.

An investigational new drug application (“IND”) was filed in the United States in the second quarter of 2008 for the Civamide soft-gel oral capsule. One Phase I pharmacokinetic study has been completed which demonstrated that a single dose of the enteric-coated capsule 5mg or 10mg, either in a fasting or fed state was safe and did not provide measurable blood levels of Civamide. Since recent data have strongly suggested that pain and inflammation in Crohn’s disease may be related to an accumulation of substance P in nerve fibers in all layers of the intestinal wall, we are planning to initiate a Phase II double-blind evaluation of several dosages of our Civamide Capsule for relief of pain and inflammation in Crohn’s disease.

Civamide Nasal Spray

Civamide Nasal Spray in a concentration of 0.01%, is also being developed for the treatment of keratoconjuctivitis sicca, also known as dry eye syndrome, in addition to its development for the prophylaxis and treatment of Episodic Cluster Headache described above. The product was licensed to Opko Health in September 2007. On February 24, 2010, the Company received communications from Opko that it was terminating the license agreement effective May 24, 2010. As a result, all of Opko’s rights to certain products, as defined in the agreement, will revert back to the Company. The only product approved for this indication in the U.S. is Restasis^® which had sales of over $400 million in 2008. Our product has several important advantages over Restasis, and if successfully developed and approved could become the U.S. market leader for this condition.

Manufacturing and Raw Materials

All of our manufacturing is performed under contract by outside vendors. Currently, our primary suppliers of contract manufacturing services are DPT Laboratories, Ltd., Patheon, Inc., Catalant Pharma Solutions, and Aveva Drug Delivery Systems. All of our current products may be manufactured only at a site approved by the FDA specifically for the individual product, as specified in the NDA for the product.

We believe that adequate and reliable sources of raw materials for our products are currently available. In particular, Civamide is manufactured for us by Sigma-Aldrich Fine Chemicals. Since some of the raw materials and finished drug products are purchased from only one supplier, Winston’s operations may be adversely affected if certain suppliers are unable to provide raw materials or to manufacture drug substance or finished products on its behalf.

Commercialization Strategy

We currently have no marketing sales or distribution capabilities. In order to commercialize our product candidates, we must develop sales, marketing and distribution capabilities or make arrangements with other parties to perform these services for us. As part of our commercialization plan, we will conduct a variety of promotional and educational programs aimed at establishing awareness of our products in the physician community, and will focus on differentiating our products from other competitive products. These programs are planned to include sales representative promotion, publications in medical journals, continuing medical education, symposia, regional speaker programs and medical conference exhibits.

Our current plans call for us to market only those products of ours and those we might obtain by acquisition or license, that are for pain control and which can be successfully served with a focused specialty sales force. Consequently, we plan to build our own U.S. sales force to market our Civamide Patch for PHN, our Civamide Nasal Spray for ECH and our Doxepin Nasal Spray for chronic daily headache. This sales force will call on the approximately 5,000 pain centers and 10,000 neurologists and other specialists who specialize in treating chronic pain in the U.S.

For those products of ours which address large generalist medical markets, as our Civamide Cream for osteoarthritis, or large markets unrelated to pain control as our product for Crohn’s disease, we intend to seek U.S. marketing partners to handle the primary commercialization of these products.

Outside of the United States, and subject to marketing approval in the relevant countries, we intend to engage sales, marketing and distribution partners in Europe, Asia and Latin America.

We attempt, to the extent practicable, to use patent protection in the commercialization of our owned and licensed technology. We actively seek patent protection for our proprietary technology in the United States and, as appropriate and cost-effective, in other countries. We currently have five issued U.S. patents and 25 issued foreign patents and several pending foreign patent applications. These patents and patent applications are principally composition of matter and method of use claims. The range of expiration dates of our issued U.S. patents is from March 25, 2010 to October 16, 2023 with the patents most material to our business expiring January 28, 2019 and October 16, 2023. Upon regulatory approval of any of our patent-protected products, we plan to seek patent extension, where available, under existing U.S. and foreign regulations permitting extension of a pharmaceutical patent. In the United States, the Hatch-Waxman Act provides for patent term extension calculated as a portion of time during which the drug was in clinical development or under review at the FDA with a maximum extension of five years. Additionally, under the Hatch-Waxman Act, all new molecular entities (“NMEs”) such as Civamide automatically receive five (5) years data exclusivity upon approval. We believe that we are eligible for the full five-year patent term extension period on patents covering Civamide. Also, we expect to employ product life-cycle management, including the development of new formulations, new indications, and other significant product improvements, in order to maximize the value of our intellectual property.

Set forth below, please find a table of our current trademarks:


Trademark Name/Reg. No.	Owner	Filed (US)	Registered
CIVANEX 2,729,437	Winston Labs	February 16, 1999	June 24, 2003

MICANOL 3,283,446	Winston Labs	March 27, 2003	August 21, 2007

WINSTON LABORATORIES, The Pain Company 2,856,161	Winston Labs	October 13, 1999	June 22, 2004

WINSTON LABORATORIES Illinois State Trademark 73000	Winston Labs		August 13, 1993

AXSAIN 2,925,798	Winston Labs	November 14, 2002	February 8, 2005

ANTHRODERM	Winston Labs	February 1, 2010

RHEUMODERM	Winston Labs	February 1, 2010

CIVADERM	Winston Labs	February 1, 2010

NEURODERM	Winston Labs	February 1, 2010

DOLORAC	Winston Labs	November 10, 2009

In addition to seeking the protection of patents, licenses and trademarks, we also rely on unpatented proprietary technology and know-how to maintain its competitive position. To protect its rights in these areas, we have has a policy of requiring its employees, consultants, advisors, prospective licensees and business partners to enter into confidentiality agreements.

Competition

In general, a company’s ability to compete successfully in the pharmaceutical industry is based on: relative product performance (efficacy, safety, ease of use); price; acceptance by physicians, patients, and third-party payers; marketing support and distribution; availability of patent protection; and the ability to obtain and maintain FDA approval for testing, manufacturing and marketing.

~~Winston’s~~Our products and technologies face competition from various classes of drugs, ~~currently~~ currently marketed and in development, across a range of therapeutic categories, from ~~migraine~~ headache to neuropathic pain. For some ~~niche~~ indications, such as prophylaxis of episodic cluster headache, chronic daily headache and PHN of the trigeminal nerve, there are no existing FDA-approved products, and ~~Winston~~the Company is not aware of any other drugs presently in development for these conditions. ~~A summary of what Winston~~ ~~believes to be the competitive advantages of its major products is presented below:~~

Competitive Advantages Summary
Winston Product	Indication	Competitor Product(s)	Winston’s Competitive Advantages
Civamide Topical
(Cream) 0.075%	• Osteoarthritis Pain • Rheumatoid Arthritis Pain	• Oral Cox-2 Inhibitors (e.g., Celebrex®) • Oral NSAIDs (e.g., Mobic®, Naprosyn®)	• No Cardiovascular or GI Side Effects • No Safety Monitoring Required
		• Topical NSAID’s (e.g., Volteran®)	• No Drug Interaction • Can Be Used Adjunctively • Long-Lasting Effect after Discontinuance
Civamide Oral
Capsule	• Cancer Pain • Neuropathic Pain	• Cymbalta® • Neurontin®	• Single Dose Provides ≥ 7 Days Analgesia
		• Lyrica®	• No Addiction Potential
		• Opioids
Civamide Patch	• Neuropathic Pain	• Lidoderm® Patch • No FDA-approved Patch	• No Cardiovascular or GI Side Effects
			• No Systemic Absorption
			• No Disposal Issues
			• See Also Civamide Cream Advantages
	• Neuropathic Pain	• Cymbalta®	• No Systemic Side Effects
		• Neurontin®	• No Drug Interactions
		• Lyrica®
Civamide Nasal
Solution 0.01%	• Episodic Cluster Headache	• No FDA-approved medication	• No Systemic Side Effects
	• PHN Trigeminal Nerve		• No Drug Interactions
Doxepin Nasal
Solution	• Chronic Daily Headache	• No FDA-approved medication	• No Systemic Side Effects • No Drug Interactions

For other markets such as PHN, Crohn’s disease and osteoarthritis, our products targeted delivery combined with their lack of systemic side effects or potential for drug interactions, conveys substantial competitive advantage over competitors products for these conditions.

812

~~Winston’s~~Our primary competitors include: ~~drug~~small ~~development~~ companies focused on pain management, ~~such~~ such as Adolor ~~Corporation~~, ~~Anesiva, Inc., Neurogen Corporation,~~ NeurogesX, ~~Inc.,~~ NicOx ~~S.A.~~, Pain Therapeutics, ~~Inc., Pozen Inc.,~~ and ~~Renovis, Inc.~~Pozen; mid-sized companies with significant pain franchises, such as ~~Alpharma, Inc.,~~ Endo Pharmaceuticals ~~Holdings~~, ~~Inc.,~~ King Pharmaceuticals, ~~Inc.,~~ Purdue Pharma LP, and Valeant Pharmaceuticals ~~International~~; and very large, diversified pharmaceutical companies including GlaxoSmithKline, Merck, &and CoPfizer. A summary of what we believe to be the competitive advantages of our lead products as compared to the principal competing products currently in the market, ~~Inc.~~if any, ~~and~~is ~~Pfizer~~presented ~~Inc.~~below:

For certain of Winston’s products, particularly those targeting large markets and thus requiring a very large sales force, Winston intends to collaborate with larger pharmaceutical companies to market (and distribute) such products most effectively.


Competitive Advantages Summary
Our Product	Indication	Competitor Product(s)	Our Competitive Advantages
Civamide Patch	Postherpetic Neuralgia	Lyrica^® Neurontin^® Opiates Lidoderm^® Patch	No Systemic Side Effects or Drug Interactions Can be Used Adjunctively No Disposal Issues (as with Lidoderm) Can be Bathed or Showered with (in Contrast to Lidoderm)

Civamide Nasal Spray	Episodic Cluster Headache	None	No Approved Competitor

	Trigeminal PHN	None	No Systemic Side Effects or Drug Interactions

Civamide Capsule	Crohn’s Disease	Aminosalicylates (e.g. sulfasalazine, mesalamine); Oral corticosteroids; Biologic Therapies (e.g. adalimumab (Humira^®), infliximab (Remicade^®))	Targeted Unique Action No Systemic Side Effects or Drug Interactions

Civamide Cream	Osteoarthritis	Oral NSAIDs (e.g. Mobic^®, Naprosyn^®) and COX2 Inhibitors (e.g. Celebrex^®) Topical NSAIDs (e.g. Volteran^®)	No Approved Competitor No Systemic Side Effects or Drug Interactions

Doxepin Nasal Spray	Chronic Daily Headache	None	No Approved Competitor No Systemic Side Effects or Drug Interactions

In the case of certain of our products, particularly those targeting large markets such as osteoarthritis and Crohn’s disease, thus requiring a very large sales force, we intend to pursue collaborations with larger pharmaceutical companies to market such products most effectively.

Government Regulation

Government authorities in the United States, at the federal, state, and local level, and other countries extensively regulate, among other things, the safety, efficacy, research, development, testing, manufacture, storage, record-keeping, labeling, promotion, advertising, distribution, marketing and export and import of pharmaceutical products such as those Winston is developing.

United States Government Regulation

In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act and implements regulations. If ~~Winston~~we ~~fails~~fail to comply with the applicable United ~~States~~ States requirements at any time during the product development process, clinical testing, and the approval process or after approval, ~~Winston~~we may become subject to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties or ~~criminal~~ criminal prosecution. Any agency enforcement action could have a material adverse effect on ~~Winston~~ the Company.

~~Winston~~The Company’s products are considered by the FDA to be drugs. The drugs are subject to FDA review and approval or clearance. If the FDA denies approval or clearance of the drugs, Winston’s ability to market its products could be significantly delayed or precluded.

The steps required before a drug may be marketed in the United States include:

	•		completion of preclinical laboratory tests, animal studies and formulation studies under the FDA’s good laboratory practices regulations;

	•		submission to the FDA of an Investigational New Drug, or IND, application for human clinical testing, which must become effective before human clinical trials may begin;

	•		performance of adequate and well-controlled clinical trials to establish the safety and efficacy of the product for each proposed indication;

	•		submission to the FDA of an NDA;

	•		satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with current good manufacturing practice, or cGMP; and

	•		FDA review and approval of the NDA before any commercial marketing, sale or shipment of the product.

Preclinical tests include laboratory evaluations of product chemistry, toxicity, and formulation, as well as animal studies. The results of the preclinical tests, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND application. The FDA requires a 30-day waiting period after the filing of each IND application before clinical tests may begin, in order to ensure that human research subjects will not be exposed to unreasonable health risks. An IND will automatically become effective 30 days after receipt by the FDA, unless before that time the FDA has placed the IND on clinical hold. In that case, the IND sponsor and the FDA must resolve any outstanding FDA concerns or questions before clinical trials can proceed. Submission of an IND may result in the FDA not allowing clinical trials to commence or not allowing the trial to commence on the terms originally specified in the IND.

9Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND. Each trial must be reviewed and approved by an independent Institutional Review Board, or IRB, before it can begin and the trial is subject to IRB oversight. The FDA, the IRB or the Company may discontinue a clinical trial at any time for various reasons, including a belief that the subjects are being exposed to an unacceptable health risk. Clinical testing also must satisfy extensive good clinical practice requirements and the requirements for informed consent.

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol must be submitted to the FDA as part of the IND. Each trial must be reviewed and approved by an independent Institutional Review Board, or IRB, before it can begin and the trial is subject to IRB oversight. The FDA, the IRB or Winston may discontinue a clinical trial at any time for various reasons, including a belief that the subjects are being exposed to an unacceptable health risk. Clinical testing also must satisfy extensive good clinical practice requirements and the requirements for informed consent.

Clinical trials typically are conducted in three sequential phases, but the phases may overlap or be combined. Phase I trials usually involve the initial introduction of the investigational drug into humans to evaluate the product’s safety, dosage tolerance, pharmacodynamics, and, if possible, to gain an early indication of its effectiveness.

Phase II trials usually involve controlled trials in a limited patient population to: (a) evaluate dosage tolerance and appropriate dosage; (b) identify possible adverse effects and safety risks; and (c) evaluate preliminary the efficacy of the drug for specific indications.

Phase III trials usually further evaluate clinical efficacy and test further for safety in an expanded patient population. Phase I, Phase II and Phase III testing may not be completed successfully within any specified period, if at all. Furthermore, the FDA or the ~~Winston~~Company may suspend or terminate clinical trials at any time on various grounds, including a finding that the subjects or patients are being exposed to an unacceptable health risk.

Assuming successful completion of the required clinical testing, the results of the preclinical studies and of the clinical studies, together with other detailed information, including extensive manufacturing information and information on the composition of the product, are submitted to the FDA in the form of an NDA requesting approval to market the product for one or more specified indications. An NDA may also be submitted in the format of an electronic Common Technical Document, or eCTD, which under ICH guidelines, is acceptable to the FDA and many foreign regulatory authorities. The FDA reviews an NDA or eCTD to determine, among other things, whether a product is safe and effective for its intended use.

Before approving an application, the FDA will inspect the facility or the facilities at which the product is manufactured, and will not approve the product unless cGMP compliance is satisfactory. FDA will also inspect the clinical sites at which the trials were conducted to assess their compliance, and will not approve the product unless compliance with Good Clinical Practice requirements is satisfactory. If the FDA determines the application demonstrates that the product is safe and effective for the proposed indication and that the manufacturing process and the manufacturing facilities are acceptable, the FDA will issue an approval letter. If the FDA determines the application, manufacturing process or manufacturing facilities are not acceptable, the FDA will outline the deficiencies in the submission and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval and may deny the application, limit the indication for which the drug is approved or require additional post-approval testing or other requirements.

The testing and approval process requires substantial time, effort, and financial resources, and each may take several years to complete. The FDA may not grant approval on a timely basis, or at all. ~~Winston~~We may encounter difficulties or unanticipated costs in its efforts to secure necessary governmental approvals, which could delay or preclude it from marketing its products. The FDA may limit the indications for use or place other conditions on any approvals that could restrict the commercial application of the products. After approval, certain changes to the approved product, such as adding new indications, manufacturing changes, or additional labeling claims are subject to further FDA review and approval.

If and when regulatory approval of a product is obtained, ~~Winston~~we will be required to comply with a number of post-approval requirements. ~~Winston~~We also must comply with other regulatory requirements, including cGMP regulations and adverse event reporting. Holders of an approved NDA are required to report certain adverse reactions and production problems, if any, to the FDA, to provide updated safety and efficacy information and to comply with requirements concerning advertising and promotional labeling for their products. Also, quality control and manufacturing procedures must continue to conform to cGMP after approval. The FDA periodically inspects ~~manufacturing~~ manufacturing facilities to assess compliance with cGMP. Accordingly, manufacturers must continue to to expend time, money, and effort in the area of production and quality control to maintain compliance with cGMP and other aspects of regulatory compliance.

10We use, and will continue to use at least in the near term, third-party manufacturers to produce its products in clinical and commercial quantities. Future FDA inspections may identify compliance issues at its facilities or at the facilities of its contract manufacturers that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of problems with a product or the failure to comply with requirements may result in restrictions on a product, manufacturer, or holder of an approved NDA, including withdrawal or recall of the product from the market or other voluntary or FDA-initiated action that could delay further marketing. Also, new government requirements may be established that could delay or prevent regulatory approval of our products under development.

Winston uses, and will continue to use at least in the near term, third-party manufacturers to produce its products in clinical and commercial quantities. Future FDA inspections may identify compliance issues at its facilities or at the facilities of its contract manufacturers that may disrupt production or distribution, or require substantial resources to correct. In addition, discovery of problems with a product or the failure to comply with requirements may result in restrictions on a product, manufacturer, or holder of an approved NDA, including withdrawal or recall of the product from the market or other voluntary or FDA-initiated action that could delay further marketing. Also, new government requirements may be established that could delay or prevent regulatory approval of Winston’s products under development.

Foreign Regulation

In addition to regulations in the United States, ~~Winston~~we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of ~~its~~ its products. Whether or not ~~Winston~~we ~~obtains~~obtain FDA approval for a product, it must obtain approval of a product by the comparable regulatory authorities of foreign countries before it can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to country.

Under European Union regulatory systems, marketing authorizations may be submitted either under a centralized or mutual recognition procedure. The centralized procedure provides for the grant of a single marketing authorization that is valid for all European Union member states. The mutual recognition procedure provides for mutual recognition of national approval decisions. Under this procedure, the holder of a national marketing authorization may submit an application to the remaining member states. Within 90 days of receiving the applications and assessment report, each member state must decide whether to recognize approval.

In addition to regulations in Europe and the United States, ~~Winston~~we will be subject to a variety of foreign regulations governing clinical trials and commercial distribution of its products.

Product Liability

We maintain product liability insurance on our products and clinical trials that provides coverage in the amount of $5 million per incident and $5 million in the annual aggregate.

Executive Officers and Key Employees of the Registrant

Information concerning our executive officers and key employees, including their names, ages and certain biographical information can be found in Part III, Item 10 under the caption, “Directors, Executive Officers and ~~Key~~Corporate ~~Employees of the Registrant.~~Governance”. This information is incorporated by reference into Part I of this report.

Human Resources

As of March 261, ~~2009,~~2010 we employed 139 persons, including 74 engaged in research and ~~development~~ development activities, including clinical development, and regulatory affairs, and 65 in general and administrative functions such as human resources, finance, accounting, business development and investor relations. Our staff includes 42 employees with Ph.D. or M.D. degrees. Our employees are not represented by any collective bargaining unit. We believe that we maintain good relations with our employees.

Financial Information about Segments

We operate in a single accounting segment — the development and commercialization of novel treatments that target the central nervous system. Refer to Note 2, “Segment Information” in the Notes to the Consolidated Financial Statements.

General Information

Item 1A. Risk Factors

We are a “smaller reporting company” as such term is defined in ~~Rule~~Item ~~12b-2~~10(f)(1) of ~~the Exchange Act~~ Regulation S-K and are exempt from making the disclosures required by this item pursuant to the instructions to Item 1A of Form 10-K.

Item 1B. Unresolved Staff Comments

None.

Item 2. ~~Description of~~ Properties

We maintain a 7,300 square foot leased office and warehouse facility in Vernon Hills, Illinois (a suburb of Chicago), which serves as our headquarters. ~~Although we believe this facility is~~ ~~adequate for our business needs at this time, we are currently exploring other facilities that will support our growth plans.~~

Item 3. Legal Proceedings

WeAs ~~are~~previously ~~not~~reported ain ~~party~~the toCompany’s ~~any~~quarterly ~~legal~~reports ~~proceedings~~on Form 10-Q for the quarters ended June 30, ~~other~~2009 ~~than~~and ~~ordinary~~September 30, ~~routine~~2009, ~~litigation~~the ~~incidental~~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 ~~our~~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 NDA. In September, ~~which~~2009, wethe FDA ~~believe~~filed ~~will~~a ~~not~~motion ~~have~~to dismiss the suit. In October 2009, the Company filed a ~~material~~response ~~effect~~in opposition onto ~~our~~the ~~financial~~FDA’s ~~position~~motion to dismiss and in December 2009, the court ruled in the Company’s ~~results~~favor. ofConsequently, ~~operations~~on February 12, or2010, ~~cash~~the ~~flows~~Company was granted the user fee waiver.

~~Item 4.~~There ~~Submission~~are ofno ~~Matters~~other topending alegal ~~Vote of Security Holders~~proceedings.

~~None~~Item 4. (Removed and Reserved)

1216

PART II

Item 5. Market ~~Information~~ for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock is quoted on the Over-The-Counter Bulletin Board (the “OTCBB”) under the symbol “WPHM.” The following table sets forth the high and low bid prices for our common stock for each of the last two fiscal years, as reported on the OTCBB ~~under the name Getting Ready Corporation, the Company’s predecessor in interest, under the symbol “GTRY~~.~~” The~~ ~~prices do not reflect the 8-for-1 reverse stock split of our common stock effectuated on December 15, 2008.~~

For the Year Ended December 31, 2009:


	High		Low
First Quarter		3.40		0.25
Second Quarter		2.80		0.25
Third Quarter		2.25		0.45
Fourth Quarter		1.65		0.28

For the Year Ended December 31, 2008:


	High		Low
First Quarter		1.50		1.05
Second Quarter		1.25		0.75
Third Quarter		1.09		0.51
Fourth Quarter		1.00		0.30

For the Year Ended December 31, 2007:

	High		Low
First Quarter		3.41		0.36
Second Quarter		3.71		1.80
Third Quarter		3.10		1.75
Fourth Quarter		3.16		1.16

Holders

As of ~~March~~January 2029, ~~2009~~2010, there were approximately ~~155~~177 stockholders of record and ~~444~~ 274 beneficial owners of our common stock. The last sale price as reported by the OTCBB on March 251, ~~2009~~2010, was $10.0020.

Dividends

We have never declared or paid dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain future earnings, if any, to fund the development and growth of our business. Except for the rights of holders of shares of preferred stock that are authorized and which may be issued in the future to receive dividends, any future determination to pay dividends will be at the discretion of our Board of Directors and will be dependent upon our financial condition, operating results, capital requirements, applicable contractual restrictions and other such factors as our Board of Directors may deem relevant.

~~2008~~2009 Equity Compensation Plan Information

Information regarding securities authorized for issuance under our equity compensation plans is disclosed in Part III Item 12 under the caption “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

Recent Sales of Unregistered Securities

None.

~~Performance Graph~~17

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 instruction 6 to Item 201(e) of Regulation S-K.

Item 6. Selected Consolidated Financial Data

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 (c) of Item 301 of Regulation S-K.

~~Item 7.~~Performance ~~Management’s Discussion and Analysis or Plan of Operation~~Graph

We are a “smaller reporting company” as such term is defined in Item 10(f)(1) of Regulation S-K and are exempt from making the disclosures required by this item pursuant to instruction 6 to Item 201(e) of Regulation S-K.

Item 6. Selected Financial Data

We are a “smaller reporting company” as such term is defined in Item 10(f)(1) of Regulation S-K and are exempt from making the disclosures required by this item pursuant to paragraph (c) of Item 301 of Regulation S-K.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

THE FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH THE INFORMATION CONTAINED IN THE FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K.

On September 25, 2008, Getting Ready Corporation completed ~~its~~a merger transaction (the “Merger”) with Winston Laboratories, Inc., a Delaware corporation (“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 ~~intends~~has tocarried ~~carry~~ on the business of Winston Labs as its sole line of business and it has retained all of Winston’s management. The Merger was accounted for as a reverse merger for accounting purposes with Winston Labs as the accounting acquirer.

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. See Item 1. ~~Description of Our~~ Business — Cautionary Note Regarding Forward-Looking Statements.

Executive Overview

Winston Labs is the successor to a research and development partnership, Cisco Ltd. (“Cisco”), formed in 1992 to develop a specific novel neuroactive compound, civamide. Civamide was discovered and patented by Joel E. Bernstein, M.D. (“Dr. Joel Bernstein”), the managing general partner of Cisco and subsequently, the founder and Chief Executive Officer, or CEO, of Winston Labs. In 1997, Cisco became Winston Laboratories LLC, which in 1998 was converted to a “C” Corporation. Winston’s initial operating funds were obtained from a rights offering in 1997 and a private equity placement in 1998. In 1999, Winston Labs sold approximately 19% of its common stock to Bioglan Pharma Plc (“Bioglan”) for $25 million; in 2004, Bioglan’s stock ownership was subsequently reduced below 7% when it did not participate in Winston’s Labs offering of additional shares of its common stock. In September 2007, Winston Labs purchased all of Bioglan’s outstanding ownership in Winston Labs from Bioglan for $225,000. Subsequent to this transaction, Winston Labs retired all of the shares purchased from Bioglan.

In 2000, Winston Labs established a subsidiary, Rodlen Laboratories, Inc. (“Rodlen,” ~~formerly~~ formerly Oncovir Corporation). In 2001, Bioglan purchased approximately 18% of Rodlen’s outstanding common stock for $13.3 million. In 2002, Bioglan’s stock ownership in Rodlen was reduced below 3% as a result of Bioglan’s election not to participate in a Rodlen rights offering. The proceeds of this rights offering were used to acquire the Zostrix® line of over-the-counter topical analgesics. Rodlen marketed the Zostrix® product line until July 2005, when it sold the product line to Hi-Tech Pharmacal Co. (“Hi-Tech”). In October 2004, Rodlen launched the marketing and sale of another topical analgesic, Axsain®, which it promoted to physicians and other health-care professionals. In June 2005, based on disappointing sales, Rodlen sharply reduced the promotion of the Axsain® product and in March 2006, Rodlen discontinued selling this product altogether. In February 2007, Rodlen licensed certain technology underlying the Axsain® product to Hi-Tech. Rodlen operated as a “virtual company” with no employees of its own. From inception to September, 2007, Rodlen was consolidated into the financial statements of of Winston Labs. In September 2007, Winston Labs purchased all of the then outstanding ownership in Rodlen from Bioglan for $10,000. Subsequent to this transaction, all of the shares purchased from Bioglan were retired. On September 21, 2007, Rodlen was merged into Winston Labs.

~~In 2005, Winston established a wholly owned UK subsidiary, Winston Laboratories Limited (“UK~~18 Ltd.”). UK Ltd. was established for the purpose of conducting work with European drug regulatory authorities, who typically require a European entity. UK Ltd. has no employees or material assets. The consolidated entity of Winston, Rodlen, and UK Ltd. is hereinafter referred to as “Winston.”

In November 2005, Winston spun off Gideon Pharmaceuticals, Inc. (“Gideon”). Gideon received certain early-stage technologies not being actively developed by Winston, and all Winston shareholders were offered the opportunity to purchase Gideon shares on a pro-rata basis. Not all Winston shareholders purchased Gideon shares, but overlap in the shareholders of Winston and Gideon is substantial. Gideon is an independent entity and not a subsidiary of Winston; however, as part of the spin-off process, Winston did end up purchasing and maintaining a minority stake in Gideon (approximately 10.7% ownership), for the purpose of preserving the rights of those option holders in Winston prior to the Gideon spin-off. In particular, option holders in Winston prior to the spin off of Gideon have, upon exercise of their Winston options, an opportunity to purchase a pro-rata allotment of Gideon shares. During 2006, Winston undertook certain development projects on behalf of Gideon, which were billed back to Gideon at cost. In October 2007, in preparation for signing a merger agreement with the Company, Winston’s Board of Directors voted to distribute the shares of Gideon owned by Winston on behalf of the Winston option holders on a pro-rata basis to such option holders. As of December 31, 2007, Winston had no ownership stake in Gideon.

~~On January 30,~~In ~~2006~~2005, Winston ~~licensed~~Labs toestablished ~~Sirius Laboratories, Inc.,~~ a ~~company~~wholly ~~founded~~owned byUK ~~Dr. Joel Bernstein~~subsidiary, ~~the rights to market products containing anthralin owned by~~ Winston, ~~including a~~Laboratories ~~marketed~~Limited 1%(“UK ~~anthralin~~Ltd.”). ~~cream~~UK ~~trade name Psoriatec®~~Ltd. ~~The~~was ~~license~~established ~~had a two-year term which expired on January 31, 2008 and provided~~ for the ~~following~~purpose ~~key~~of ~~terms:~~conducting ~~(i) a~~work ~~25% royalty on net~~with ~~sales;~~European ~~(ii) a~~drug ~~$300~~regulatory authorities,~~000~~ ~~minimum~~who ~~royalty;~~typically ~~and~~require ~~(iii)~~ a ~~$750,000~~European entity. ~~purchase~~UK ~~option~~Ltd. ~~This~~has ~~agreement~~no ~~was assigned~~employees byor ~~Sirius~~material ~~to DUSA Pharmaceuticals, Inc~~assets. ~~following~~The ~~DUSA’s~~consolidated ~~purchase~~entity of ~~Sirius. This license~~ ~~had~~Winston ~~been~~Labs, ~~extended until September 30~~Rodlen, ~~2008 by mutual written consent of the parties~~ and ~~the extension~~UK ~~provided~~Ltd. ~~for~~is ~~continuation~~hereinafter ofreferred ~~the~~to ~~25%~~as ~~royalty~~“Winston ~~on net sales but eliminated the minimum royalty and purchase option~~Labs. ~~This agreement expired on September 30, 2008.~~”

OnGideon ~~August 14~~Pharmaceuticals, ~~2007, Winston entered into an exclusive technology license agreement with Exopharma,~~ Inc., ~~now known as Elorac, Inc.~~ (“~~Elorac~~Gideon”). ~~Dr. Joel Bernstein~~ is a ~~majority~~corporation ~~owner~~whose ~~and~~chairman ~~President~~ and ~~Chief Executive~~sole ~~Officer~~director ofis ~~Elorac~~Joel E. ~~Under the terms of the license agreement~~Bernstein, ~~Winston granted Elorac an exclusive license to the proprietary rights of certain products (£ 0~~M.~~025% civamide with the stated indication of psoriasis of the skin)~~D. ~~In exchange~~, ~~Elorac~~president ~~paid Winston a license fee of $100,000~~ and isCEO ~~required to pay a 9% royalty on sales~~ of the ~~product~~Company. InGideon ~~addition, the agreement~~reimburses ~~required Elorac to pay Winston 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 the~~ Company ~~and~~for ~~Elorac~~certain ~~mutually~~expenses ~~terminated~~that the ~~above~~Company ~~license~~incurs ~~agreement.~~on Asbehalf ~~a result~~ of ~~this~~Gideon. ~~mutual~~Amounts ~~termination,~~due ~~the~~from ~~Company~~Gideon ~~agreed~~of ~~to pay Elorac the~~ $~~105~~12,~~000~~675 inand ~~exchange~~$0 ~~for Winston retaining all the proprietary rights under the original agreement. Since inception, Elorac has been located in the same offices~~ as ~~Winston and therefore has shared in certain~~ of ~~Winston’s expenses such as rent~~December 31, ~~utilities,~~ ~~internet~~2009 ~~usage,~~and ~~etc. The amount of Elorac’s share of such expenses is based on various allocation factors related to particular expense. Winston has received approximately $128~~2008,~~323~~ ~~in 2008 for such services~~respectively, ~~which~~ are included asin arelated ~~reduction~~party ofreceivable ~~Winston’s expenses~~ on the Consolidated ~~Statement~~ ofBalance ~~Operations~~Sheets.

On ~~September~~January 1930, ~~2007~~2006, Winston ~~entered~~Labs ~~into~~licensed anto ~~exclusive~~Sirius ~~technology~~Laboratories, ~~license~~Inc., ~~agreement~~a ~~with~~company ~~Opko~~founded ~~Ophthalmologics,~~by ~~LLC, (“OPKO”)~~Dr. Joel ~~Under~~Bernstein, the ~~terms~~rights ofto ~~the~~market ~~license~~products ~~agreement,~~containing ~~Winston~~anthralin ~~granted OPKO~~owned anby ~~exclusive~~Winston ~~license~~Labs, toincluding ~~the~~a ~~proprietary~~marketed ~~rights~~1% ofanthralin ~~certain~~cream ~~products~~trade ~~(pharmaceutical~~name ~~compositions~~Psoriatec® or. The ~~preparations~~license ~~containing~~had ~~the~~a ~~active~~two-year ~~ingredient~~term ~~civamide~~which inexpired ~~formulations~~on ~~suitable~~January 31, ~~for~~2008 ~~use~~and inprovided for the ~~therapeutic~~following orkey ~~preventative~~terms: ~~treatment~~(i) a of25% ~~ophthalmic~~royalty ~~conditions~~on innet ~~humans~~sales; (ii). a ~~In exchange~~$300,000 ~~OPKO~~minimum ~~paid Winston~~royalty; and (iii) a ~~license fee of~~ $~~100~~750,000 ~~and~~purchase isoption. ~~required~~This toagreement ~~pay~~was aassigned ~~10%~~by ~~royalty~~Sirius onto ~~sales of the products. In~~DUSA ~~addition~~Pharmaceuticals, ~~the~~Inc. ~~agreement~~following ~~requires~~DUSA’s ~~OPKO~~purchase toof ~~pay~~Sirius. ~~Winston~~This alicense ~~non-refundable~~had ~~payment~~been ofextended until $5September 30,~~000,000~~ ~~upon approval~~2008 ofby amutual ~~marketing~~written ~~authorization~~consent byof ~~OPKO on~~ the ~~product~~parties ~~described~~and in the ~~agreement. In~~extension ~~addition,~~provided ~~under~~for ~~the~~continuation ~~terms~~ of the ~~agreement,~~25% ~~OPKO~~royalty ~~and~~on ~~the~~net ~~Company~~sales ~~agreed~~but toeliminated ~~equally share~~ the ~~cost~~minimum ~~related~~royalty ~~to manufacturing~~ and ~~clinical~~purchase ~~supplies of Civamide Nasal solution~~option. ~~During~~This ~~2008,~~agreement ~~OPKO reimbursed~~expired ~~Winston~~on ~~approximately $80~~September 30,~~000~~ ~~for such costs~~2008. InUnder ~~addition,~~ the ~~agreement calls for OPKO~~ totechnology ~~reimburse~~license ~~Winston~~agreement, ~~for~~the ~~certain~~Company ~~legal~~recorded ~~expenses~~royalty ~~Winston~~revenue ~~has~~of ~~incurred~~$0 ~~related~~and to$34,861 for the ~~use~~years ofended ~~the licensed~~December 31, ~~products~~2009 toand ~~treat~~2008, ~~keratoconjunctivitis~~respectively. In July 2008, ~~approximately~~the ~~$38,000 of legal fees were~~Company ~~billed~~learned tothat ~~OPKO,~~DUSA ~~all~~had ofbreached ~~which~~a ~~were~~license ~~outstanding~~agreement aswith ofWinston ~~December 31,~~Labs. ~~2008~~Winston ~~and~~Labs initiated isarbitration ~~included~~ in ~~related party~~October 2008 ~~receivable~~to onrecover the ~~Consolidated~~damages ~~Balance~~caused ~~Sheets~~by asthis ofbreach. ~~December~~In June 312009, ~~2008.~~DUSA ~~Subsequent~~settled tothis ~~December 31,~~matter ~~2008,~~by ~~OPKO~~agreeing ~~paid~~to pay $3875,000 ofin ~~the balance due~~damages. ~~Phillip~~This settlement ~~Frost, M.D.~~ is ~~the~~included ~~Chairman~~in ~~and~~other ~~Chief Executive~~income ~~Officer~~in ~~of OPKO’s parent company, Opko Health, Inc. (“Opko Health”), and as of December 31, 2008 was~~ the ~~beneficial~~Consolidated ~~owner~~Statements of 47Operations.~~3% of Opko Health’s common stock.~~

AsOn ~~of December~~August 3114, ~~2008~~2007, Winston Labs entered into an exclusive technology license agreement with Exopharma, Inc., now known as Elorac, Inc. (“Elorac”). Dr. ~~Frost~~Joel Bernstein is ~~also~~a ~~the~~majority ~~indirect~~owner ~~beneficial~~and ~~owner~~President and Chief Executive Officer of ~~26,575,429~~Elorac. ~~shares~~Under the terms of the ~~Company’s~~license ~~capital~~agreement, ~~stock~~Winston onLabs agranted ~~fully~~Elorac ~~diluted~~an ~~basis~~exclusive license to the proprietary rights of certain products (29£ 0.6025% ofcivamide with the ~~total~~stated indication ~~issued~~of ~~and~~psoriasis ~~outstanding shares~~of the skin),. ~~including~~In 12exchange,~~476,548~~ ~~shares~~Elorac ofpaid ~~common~~Winston ~~stock~~Labs ~~underlying~~a ~~shares~~license fee of ~~the~~$100,000 ~~Company’s~~and ~~Series A Convertible~~is ~~Preferred~~required ~~Stock,~~to ~~par~~pay ~~value~~a ~~$0.001~~9% ~~per~~royalty ~~share~~on ~~(“Series A~~sales ~~Preferred~~of ~~Stock”),~~the ~~8,779,797 shares~~product. ofIn ~~common~~addition, ~~stock~~the agreement ~~underlying~~required ~~warrants~~Elorac to ~~purchase~~pay ~~shares~~Winston ofLabs ~~Series A~~a ~~Preferred~~non-refundable ~~Stock~~payment of $250,000 ~~and~~upon ~~4,583,222~~approval ~~shares~~ of ~~common~~a ~~stock~~marketing ~~underlying~~authorization ~~shares~~by ofElorac on the ~~Company’~~product(s) ~~Series B~~described ~~Convertible~~in ~~Preferred~~the ~~Stock,~~agreement. ~~par~~On ~~value~~October 27, ~~$0.001~~2008 ~~per~~the ~~share~~Winston ~~(“Series B~~Labs ~~Preferred~~and ~~Stock”).~~Elorac ~~Furthermore,~~mutually ~~Subbarao~~terminated ~~Uppaluri,~~the above Phlicense agreement.~~D.,~~ As a ~~director~~result of this mutual termination, the ~~Company~~Winston ~~and~~Labs agreed to pay Elorac the ~~Senior~~$105,000 ~~Vice~~in ~~President~~exchange —for ~~Chief~~Winston ~~Financial~~Labs ~~Officer~~retaining ofall ~~Opko~~the proprietary rights ~~Health~~under the original agreement. Since inception, isElorac has been located in the ~~beneficial~~same offices ~~owner~~as Winston Labs and therefore has shared in certain of ~~299~~Winston Labs expenses such as rent,~~351~~ ~~shares~~utilities, internet usage, etc. The amount of ~~the Company~~Elorac’s ~~capital~~share ~~stock~~of such expenses is based on avarious ~~fully-diluted~~allocation ~~basis~~factors related to particular expense. Winston Labs received $162,977 ~~including~~and ~~127~~$128,~~313~~323 ~~shares~~in of2009 ~~common~~and ~~stock~~2008, ~~underlying~~respectively ~~shares~~for such services, which are included as a reduction of Winston Labs expenses on the Consolidated Statement of ~~Company’s~~Operations. ~~Series A~~Amounts ~~Preferred~~due ~~Stock~~from ~~and~~Elorac 89of $2,~~589~~601 ~~shares~~and of$0 ~~common~~as ~~stock~~of ~~underlying~~December 31, ~~warrants~~2009 toand 2008, ~~purchase~~respectively, ~~shares~~are ofincluded ~~Series A~~in ~~Preferred~~related ~~Stock~~party receivables in the Company’s Consolidated Balance Sheets.

15On September 19, 2007, Winston Labs entered into an exclusive technology license agreement with Opko Ophthalmologics, 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 Winston Labs agreed to equally share the cost related to manufacturing and clinical supplies of Civamide Nasal Spray. During 2009 and 2008, OPKO reimbursed Winston Labs approximately $111,539 and $80,000, respectively for such costs. 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. In 2009 and 2008, approximately $38,800 and $38,000, respectively of legal fees were billed to OPKO, of which approximately $7,000 and $38,000 were outstanding as of December 31, 2009 and 2008 and are included in related party receivable on the Consolidated Balance Sheets. Subsequent to December 31, 2009 and 2008, respectively, OPKO paid $7,000 and $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 as of December 31, 2009 was the beneficial owner of more than 50% of Opko Health’s common stock.

On February 24, 2010, the Company received communications from Opko that it was terminating the license agreement effective May 24, 2010. As a result, all of Opko’s rights to certain products, as defined in the agreement, will revert back to the Company.

As of December 31, 2009, Dr. Frost is also the indirect beneficial owner of 26,574,659 shares of the Company’s capital stock on a fully diluted basis (29.7% of the total issued and outstanding shares), including, 8,779,797 shares of common stock underlying warrants. Furthermore, Subbarao Uppaluri, Ph.D., a director of the Company and the Senior Vice President — Chief Financial Officer of Opko Health, is the beneficial owner of 326,538 shares of the Company’s capital stock on a fully-diluted basis, including 27,500 shares of common stock underlying options and 89,589 shares of common stock underlying warrants.

On November 13, 2007, the Company entered into a merger agreement with Winston Labs and Winston Acquisition Corp., the Company’s wholly-owned subsidiary, pursuant to which, upon completion of the Merger on September 25, 2008, Winston Labs became our wholly-owned subsidiary and:

• 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, 5,815,851 shares of the Winston Labs Series A Convertible Preferred Stock, par value $0.001 per share (“Winston Labs Series A Preferred Stock”), and 4,187,413 shares of the Winston Labs Series B Convertible Preferred Stock, par value $0.001 per share (“Winston Labs Series B Preferred Stock”), was exchanged for 422,518,545 shares of our common stock, par value $0.001 per share (at an exchange ratio of 17.65101 shares of our common stock per share of Winston Labs common stock), 101,849 shares of our Series A Preferred Stock and 73,332 shares of our Series B Preferred Stock (at an exchange ratio of .01751238 shares of our preferred stock per share of Winston Labs preferred stock); • we assumed Winston Labs’s stock option plans; • Winston Labs’s outstanding 1,643,750 options to purchase 1,643,750 shares of Winston Labs’s common stock were converted to options to purchase 29,013,848 shares of our common stock; and • outstanding warrants to purchase Winston Labs Series A Preferred Stock were assumed by us and converted into the right to acquire, expiring November 13, 2012, upon the exercise of such warrants, an aggregate of 71,672 shares of our Series A Preferred Stock at a price per share of $49.09.

Immediately following the closing of the Merger, we had outstanding 440,851,441 shares of common stock. Our Board of Directors recommended and our stockholders approved, an amendment to our charter to increase the number of authorized shares of our common stock from 499,000,000 shares to 900,000,000 shares to permit the conversion of all outstanding shares of our preferred stock, including shares of our preferred stock underlying outstanding warrants.

Subsequent to the completion of the Merger, the Company has carried on the business of Winston Labs as its sole line of business and has retained all of Winston Labs’s management. Our executive offices are located at 100 North Fairway Drive, Suite 134, Vernon Hills, Illinois 60061 and our telephone number is (847) 362-8200. Effective November 17, 2008, we changed our name from Getting Ready Corporation to “Winston Pharmaceuticals, Inc.” and have discontinued any and all prior business operations in favor of the business plan and operations of Winston, which ~~will~~has bebeen our only ~~significant~~ significant operation as a result of the merger with Winston. ~~On December 15, 2008, the Company completed an eight-to-one reverse stock split of all issued and outstanding shares of each class of its capital stock~~Labs.

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~~ potential vanilloid (TRPV) channel technology. On October 30, 2008, Winston ~~entered~~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’s 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~~Civamide ~~cream~~Cream in Canada along with a second generation ~~cream~~ cream that is currently in development. In return for granting sanofi-aventis Canada the ~~Canadian~~ Canadian rights to ~~civamide~~Civamide ~~cream~~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~~Civamide ~~cream~~Cream in Canada, certain milestone payments, and future royalties on net sales of ~~civamide~~Civamide or the related second generation cream in Canada.

On December 15, 2008 the Company amended its Certificate of Incorporation to provide for the reduction of the total number of issued and outstanding shares of the Company’s common stock, par value $.001 per share (“Common Stock”) and its preferred stock, par value $.001 per share (“Preferred Stock”), by exchanging each eight (8) shares of such issued and outstanding shares of Common Stock and Preferred Stock for one (1) share of Common Stock or Preferred Stock, respectively.

16Following 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.

Winston Labs submitted a Marketing Authorization Application (“MAA”) in Europe for CIVANEX 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. On November 2, 2009, the Company filed a separate appeal of the opinion with the Medicines and Healthcare products Regulatory Agency in the United Kingdom. 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 to conduct another carcinogenesis study of CIVANEX.

~~Winston does not currently market any products.~~ In ~~the past~~May 2009, ~~Winston~~the ~~has~~Company ~~marketed~~completed ~~certain products,~~a ~~revenues~~Phase ~~from~~I ~~which~~pharmacokinetic ~~were~~and ~~used~~safety tostudy ~~help~~of oral ~~fund~~civamide ~~its research programs. Winston is engaged~~ in ~~the~~ ~~development~~an ofenteric ~~innovative~~coated ~~products~~soft ~~for~~gel ~~managing~~capsule ~~and~~with ~~alleviating~~no ~~pain.~~systemic ~~After~~absorption ~~discontinuing the~~detected. ~~Zostrix~~The ®Company ~~and~~intends ~~Axsain~~to ®conduct ~~product~~a ~~lines,~~new ~~Winston~~study ~~has~~designed ~~devoted most of its resources~~ to ~~research~~take ~~and~~advantage ~~development.~~of ~~Winston~~this ~~has~~lack ~~spent $3,496,150 and~~of ~~$1,853,501~~systemic ~~per~~absorption ~~year,~~in ~~during~~a ~~each~~proof of ~~the~~concept ~~years~~study ~~2008~~for ~~and~~the ~~2007,~~treatment ~~respectively,~~of ~~on research and development activities. Winston has incurred significant operating losses since~~ the ~~initiation of~~inflammatory ~~operations~~bowel ~~in 1997 and as of December 31~~disorder, ~~2008,~~Crohn’s ~~had an accumulated deficit of approximately $46~~Disease.~~7 million.~~

~~Critical~~As ~~Accounting~~previously ~~Policies~~reported ~~and~~in ~~Estimates~~the Company’s quarterly report on Form 10-Q for ~~Continuing~~the quarter ~~Operations~~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 its 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 and in December 2009, the court ruled in the Company’s favor. Consequently, on February 12, 2010, the Company was granted the user fee waiver.

In September, 2009, we completed Study WL-1001-04-03, a Phase II clinical trial evaluating the efficacy and safety of Civamide Patch 0.015% in the treatment PHN. Twenty-two patients with at least a 6 month history of PHN already on stable doses of medication for PHN, but with recalcitrant pain of at least a 4 on a 0-10 categorical scale during the week prior to enrollment, were enrolled in the study. Civamide Patch 0.015% was applied over a 4 week Treatment Period, for up to 24 hours daily. Daily Pain and Sleep Scores were assessed as the primary efficacy variables. There was a 2 week Post-Observation Treatment Period during which no patch was applied, but patients continued to record efficacy and safety parameters. Results demonstrated that by Week 2 and continuing throughout the Treatment Period and Post Treatment Observation Period, there was approximately up to a 40% improvement from Baseline in both Daily Pain Scores and Sleep Scores as discussed in further detail in Part I, Item I, Business, elsewhere in this Annual Report on Form 10-K.

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 had a period of ninety days to submit a response to the Directorate’s NON, which it did on January 29, 2010. 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).

On February 12, 2010, Pharmaceutical Financial Syndicate, LLC (“PFS”), whose members include Dr. Joel Bernstein, the Company’s President and Chief Executive Officer and Robert A. Yolles and Neal S. Penneys, directors of the Company, executed a letter of intent (“LOI”) with Frost Gamma Investments Trust, Subbarao Uppaluri, a director of the company, and certain other shareholders of the Company (collectively, the “Frost Group”), to acquire 100% of the Company’s capital stock (the “Acquisition”) beneficially owned by all of the members of the Frost Group consisting of an aggregate of 18,399,271 outstanding shares of common stock and warrants to purchase an aggregate of 8,958,975 shares of common stock (collectively, the “Acquired Securities”).

As provided in the LOI, consummation of the Acquisition is subject to a number of conditions, including the parties entering into a definitive acquisition agreement. The LOI also provides that simultaneous with the completion of the Acquisition, three of the Company’s directors, namely Subbarao Uppaluri, Glenn Halpryn and Curtis Lockshin, shall resign as directors of the Company, and each of Messrs. Uppaluri, Halpryn and Lockshin have advised the Company that they have consented to resign upon completion of the Acquisition. Upon completion of the Acquisition, as the manager of PFS, Dr. Bernstein would be deemed to be the beneficial owner of all of the Acquired Securities, however Dr. Bernstein intends to disclaim beneficial ownership of those Acquired Securities in which he does not have a pecuniary interest through PFS.

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 $2,062,933 and, $3,496,150, each of the years 2009 and 2008, respectively, on research and development activities. Winston Labs has incurred significant operating losses since the initiation of operations in 1997 and as of December 31, 2009, had an accumulated deficit of approximately $49.3 million.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make a number of assumptions and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported periods. Significant estimates and assumptions are required in the determination of revenue recognition and sales deductions for certain royalties and returns and losses. Significant estimates and assumptions are also required in the appropriateness of capitalization and amortization periods for identifiable intangible assets, income taxes, contingencies, and stock-based compensation. We base our estimates on historical experience and various other assumptions, available at that time, that we believe to be reasonable under the circumstances. Some of these judgments can be subjective and complex. For any given individual estimate or assumption made by us, there may also be other estimates or assumptions that are reasonable. These items are monitored and analyzed by management for changes in facts and circumstances, and material changes in these estimates could occur in the future. Changes in estimates are recorded in the period in which they become known. Actual results may differ from our estimates if past experience or other assumptions do not turn out to be substantially accurate.

Revenue Recognition

The Company has historically generated revenues from product sales, collaborative research and development arrangements, and other commercial arrangements such as, royalties, and sales of technology rights. Payments received under such arrangements may include non-refundable fees at the inception of the arrangements, milestone payments for specific achievements designated in the agreements, royalties on sales of products resulting from collaborative arrangements, and payments for the sale of rights to future royalties.

The Company recognizes revenue in accordance with the SEC’s Staff Accounting Bulletin Topic 13 (“Topic 13”), “Revenue Recognition.” Revenue is recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price to the buyer is fixed and determinable; and (4) collectability is reasonably assured.

Certain sales transactions include multiple deliverables. The Company allocates amounts to separate elements in multiple element arrangements in accordance with ~~the FASB’s Emerging Issues~~ASC ~~Task~~Topic ~~Force (“EITF”) Issue No. 00-21 (“EITF 00-21”)~~605, ~~“Accounting for~~ Revenue ~~Arrangements with Multiple Deliverables~~ Recognition.” Revenues are allocated to a delivered product or service when all of the following criteria are met: (1) the delivered item has value to the customer on a standalone basis; (2) there is objective and reliable evidence of the fair value of the undelivered item; and (3) if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in the Company’s control. The Company uses the relative fair values of the separate deliverables to allocate revenue. For arrangements with multiple elements that are separated, the Company recognizes revenues in accordance with Topic 13.

Multiple Element Arrangements

The Company has arrangements whereby it delivers to the customer multiple elements including technology and/or services. Such arrangements have generally included some combination of the following: licensed rights to technology, patented products, compounds, data and other intellectual property; and research and development services. ~~In accordance with~~ ~~EITF~~The ~~00-21, the~~ Company analyzes its multiple element arrangements to determine whether the ~~elements~~ elements can be separated. The Company performs its analysis at the inception of the ~~arrangement~~ arrangement and as each product or service is delivered. If a product or service is not separable, the combined deliverables will be accounted for as a single unit of accounting.

17When a delivered element meets the criteria for separation, the Company allocates amounts based upon the relative fair values of each element. The Company determines the fair value of a separate deliverable using the price it charges other customers when it sells that product or service separately; however, if the Company does not sell the product or service separately, it uses third-party evidence of fair value. The Company considers licensed rights or technology to have standalone value to its customers if it or others have sold such rights or technology separately or its customers can sell such rights or technology separately without the need for the Company’s continuing involvement.

When a delivered element meets the criteria for separation in accordance with EITF 00-21, the Company allocates amounts based upon the relative fair values of each element. The Company determines the fair value of a separate deliverable using the price it charges other customers when it sells that product or service separately; however, if the Company does not sell the product or service separately, it uses third-party evidence of fair value. The Company considers licensed rights or technology to have standalone value to its customers if it or others have sold such rights or technology separately or its customers can sell such rights or technology separately without the need for the Company’s continuing involvement.

License Arrangements. License arrangements may consist of non-refundable upfront license fees, data transfer fees, research reimbursement payments, exclusive licensed rights to patented or patent pending compounds, technology access fees, various performance or sales milestones. These arrangements are often multiple element arrangements.

Non-refundable, up-front fees that are not contingent on any future performance by the Company, and require no consequential continuing involvement on its part, are recognized as revenue when the license term commences and the licensed data, technology and/or compound is delivered. Such deliverables may include physical quantities of compounds, design of the compounds and structure-activity relationships, the conceptual framework and mechanism of action, and rights to the patents or patents pending for such compounds. The Company defers recognition of non-refundable upfront fees if it has continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable fee has no utility to the licensee that is separate and independent of the Company’s performance under the other elements of the arrangement. In addition, if the Company has required continuing involvement through research and development services that are related to its proprietary know-how and expertise of the delivered technology, or can only be performed by the Company, then such up-front fees are deferred and recognized over the period of continuing involvement. Under the license agreement with sanofi-aventis Canada, Inc., referred to under “Results of Operations — Revenues”, and described under “Liquidity and Capital Resources — Financing Activities”, the obligation period was not contractually defined in relation to the $1.9 million upfront fee. Under the circumstances, management exercised judgment in estimating the period of time over which certain deliverables will be provided to enable the licensee to utilize the license, which was determined to be 18 months. The estimated period of 18 months was primarily determined based on the management’s estimate of the maximum amount of time it would take the Canadian regulatory authorities to approve the Company’s new drug submission (NDS).

Payments related to substantive, performance-based milestones in a research and development arrangement are recognized as revenues upon the achievement of the milestones as specified in the underlying agreements when they represent the culmination of the earnings process.

Research Services Arrangements. Revenues from research services are recognized ~~during~~ during the period in which the services are performed and are based upon the number of full-time-equivalent personnel working on the specific project at the agreed-upon rate. Reimbursements from collaborative partners for agreed upon direct costs including direct materials and outsourced services, or subcontracted, pre-clinical studies are classified as as revenues in accordance with ~~EITF~~ASC ~~Issue~~Topic ~~No. 99-19,~~605 ~~“Reporting Revenue Gross as a Principal versus Net as an Agent,”~~ and recognized in the period the reimbursable expenses are incurred. Payments received in advance are deferred until the research services are performed or costs are incurred.

Royalty Arrangements. The Company recognizes royalty revenues from licensed products when earned in accordance with the terms of the license agreements. Net sales amounts generally required to be used for calculating royalties include deductions for returned product, pricing allowances, cash discounts, freight and warehousing.

Certain royalty arrangements require that royalties are earned only if a sales threshold is exceeded. Under these types of arrangements, the threshold is typically based on annual sales. The Company recognizes royalty revenue in the period in which the threshold is exceeded.

Research and development expenses

InThe ~~June 2007,~~guidance ~~the~~in ~~FASB~~ASC ~~ratified~~Topic ~~a consensus opinion reached by the EITF on EITF Issue 07-3~~730, ~~“Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future~~ Research and Development, ~~Activities”~~requires ~~(“EITF~~the ~~07-3”).~~Company ~~The guidance in EITF 07-3 requires us~~ to defer and capitalize nonrefundable advance payments made for goods or services to be used in research and development activities until the goods have been delivered or the related services have been performed. If the goods are no longer expected to be delivered or the services are no longer expected to be performed, wethe Company would be required to expense the related capitalized advance payments. ~~EITF 07-3 is effective for fiscal years beginning after December~~ 15, 2007 and is to be applied prospectively to new contracts entered into on or after the commencement of that fiscal year. Early adoption is not permitted. Retrospective application of EITF 07-3 also is not permitted. The Company adopted EITF 07-3 effective January 1, 2008, and the adoption had no effect on its financial position, results of operations or cash flows and consequently had no material effect on its financial statements.

Research and development expenses consist of expenses incurred in performing research and development activities including salaries and benefits, facilities and other overhead expenses, clinical trials, contract services and outsource contracts. Research and development expenses are charged to operations as they are incurred.

Acquired contractual rights. Payments to acquire contractual rights to a licensed technology or drug candidate are expensed as incurred when there is uncertainty in ~~receiving~~ receiving future economic benefits from the acquired contractual rights. WeThe ~~consider~~Company considers the future economic benefits from the acquired contractual rights to a drug candidate to be uncertain until such drug candidate is approved by the FDA or when other significant risk factors are abated.

Share-Based Compensation Expense

WeASC ~~grant~~Topic ~~options~~718, toStock ~~purchase~~Compensation, ~~our~~requires ~~common~~that ~~stock~~the tocompensation ~~our~~cost ~~employees,~~relating ~~directors and consultants~~to ~~under~~share-based ~~our~~payment ~~stock~~transactions ~~option~~be ~~plans.~~recognized ~~The~~in ~~benefits~~financial ~~provided~~statements, ~~under~~based ~~these~~on ~~plans~~the ~~are share-based payments~~fair ~~subject~~value toof the ~~provisions~~instruments ofissued. ~~revised~~ASC ~~Statement~~Topic of718 ~~Financial~~covers ~~Accounting~~a ~~Standards~~wide ~~(“FAS”)~~range ~~No. 123,~~of ~~“ Share~~share-~~Based~~based compensation ~~Payment~~including ”stock ~~(“FAS 123R”)~~options, ~~including~~restricted ~~the~~stock, ~~provisions~~performance-based ofawards, ~~the~~share appreciation ~~SEC’s~~rights ~~Staff~~and ~~Accounting~~employee ~~Bulletin (“SAB”)~~share Nopurchase plans. ~~107~~ ~~(“SAB~~Prior ~~107”)~~to January 1, ~~that~~2006, ~~require~~ the Company ~~fair~~accounted ~~value~~for ~~method~~stock-based tocompensation ~~account~~arrangements ~~for~~using ~~share-based~~the intrinsic value ~~payments~~method.

~~The fair value of each option award is estimated on the date of grant using a~~23 Black-Scholes-Merton option pricing model (“Black-Scholes model”) that uses assumptions regarding a number of complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends. Expected volatilities are based on historical volatility of our common stock and other factors. The expected terms of options granted are based on analyses of historical employee termination rates and option exercises. The risk-free interest rates are based on the U.S. Treasury yield in effect at the time of the grant. Since we do not expect to pay dividends on our common stock in the foreseeable future, we estimated the dividend yield to be 0%. FAS 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We estimate pre-vesting forfeitures based on our historical experience.

If factors change and we employ different assumptions in the application of FAS 123R in future periods, the compensation expense that we record under FAS 123R may differ significantly from what we have recorded in the current period. There is a high degree of subjectivity involved when using option pricing models to estimate share-based compensation under FAS 123R. Because changes in the subjective input assumptions can materially affect our estimates of fair values of our share-based compensation, in our opinion, existing valuation models, including the Black-Scholes and lattice binomial models, may not provide reliable measures of the fair values of our share-based compensation. Consequently, there is a risk that our estimates of the fair values of our share-based compensation awards on the grant dates may bear little resemblance to the actual values realized upon the exercise, early termination or forfeiture of those share-based payments in the future. Certain share-based payments, such as employee stock options, may expire worthless or otherwise result in zero intrinsic value as compared to the fair values originally estimated on the grant date and reported in our financial statements. For awards with a longer vesting period, such as the three-year cliff vesting awards issued to certain officers, the actual forfeiture rate and related expense may not be known for a longer period of time, which can result in more significant accounting adjustments once the awards are either vested or forfeited.

~~Alternatively,~~The ~~values~~fair ~~may~~value beof ~~realized~~each ~~from~~option ~~these~~award ~~instruments~~is ~~that~~estimated ~~are~~on ~~significantly~~the indate ~~excess~~ of ~~the~~grant ~~fair~~using ~~values~~a Black-Scholes-Merton ~~originally~~option ~~estimated~~pricing onmodel ~~the~~(“Black-Scholes ~~grant~~model”) ~~date~~that uses assumptions regarding a number of complex and ~~reported~~subjective invariables. These variables include, but are not limited to, our ~~financial~~expected ~~statements.~~stock price volatility, actual and ~~There~~projected isemployee nostock ~~current~~option ~~market~~exercise behaviors, risk-free interest rate and expected dividends. Expected volatilities are based ~~mechanism~~on orhistorical volatility of our common stock and other ~~practical~~factors. ~~application~~The toexpected ~~verify~~terms ~~the~~of ~~reliability~~options granted are based on analyses of historical employee termination rates and ~~accuracy~~option exercises. ofThe risk-free interest rates are based on the ~~estimates~~U.S. ~~stemming~~Treasury ~~from~~yield ~~these~~in ~~valuation~~effect ~~models,~~at the ~~nor~~time isof ~~there~~the agrant. ~~means~~Since we do not expect to ~~compare~~pay dividends on our common stock in the ~~and~~foreseeable ~~adjust~~future, we estimated the ~~estimates~~dividend yield to ~~actual~~be ~~values~~0%. ~~Although~~ASC ~~the~~Topic ~~fair~~718 ~~value~~requires forfeitures to be estimated at the time of ~~employee~~grant ~~share-based~~and ~~awards is~~revised, ~~determined~~if necessary, in ~~accordance~~subsequent periods ~~with~~if ~~FAS~~actual ~~123R~~forfeitures ~~and~~differ ~~SAB~~from ~~107~~those ~~using~~estimates. anWe ~~option~~estimate pre-~~pricing~~vesting forfeitures based on our historical experience.

If factors change and we employ different assumptions in the application of ASC Topic 718 in future periods, the compensation expense that we record under ASC Topic 718 may differ significantly from what we have recorded in the current period. There is a high degree of subjectivity involved when using option pricing models to estimate share-based compensation under ASC Topic 718. Because changes in the subjective input assumptions can materially affect our estimates of fair values of our share-based compensation, in our opinion, existing valuation models, including the Black-Scholes and lattice binomial models, may not provide reliable measures of the fair values of our share-based compensation. Consequently, there is a risk that our estimates of the fair values of our share-based compensation awards on the grant dates may bear little resemblance to the actual values realized upon the exercise, early termination or forfeiture of those share-based payments in the future. Certain share-based payments, such as employee stock options, may expire worthless or otherwise result in zero intrinsic value as compared to the fair values originally estimated on the grant date and reported in our financial statements. For awards with a longer vesting period, such as the three-year cliff vesting awards issued to certain officers, the actual forfeiture rate and related expense may not be known for a longer period of time, which can result in more significant accounting adjustments once the awards are either vested or forfeited.

Alternatively, values may be realized from these instruments that are significantly in excess of the fair values originally estimated on the grant date and reported in our financial statements. There is no current market-based mechanism or other practical application to verify the reliability and accuracy of the estimates stemming from these valuation models, nor is there a means to compare and adjust the estimates to actual values. Although the fair value of employee share-based awards is determined in accordance with ASC Topic 718 and SAB 107 using an option-pricing.

Nature of Operating Expenses

In fiscal ~~2008~~2009, our operating expenses consisted mainly of our Phase, III, Phase II, and Phase III clinical trial expenses (research costs) and general and administrative expenses such as human resources, legal and accounting, primarily related ~~with~~to ~~the~~being ~~Merger~~a public company. In fiscal ~~2007~~2008, our operating expenses consisted ~~primarily~~mainly of our Phase II and Phase III clinical trial expenses (research costs) and general and administrative expenses such as human resources, legal and accounting, primarily related with the Merger.

Our business is exposed to significant risks which may result in additional expenses, delays and lost opportunities that could have a material adverse effect on our results of operations and financial condition.

Effects of Inflation

We believe the impact of inflation and changing prices on net revenues and on loss from operations has been minimal during the past two years.

Results of Operations

We operate our business on the basis of a single reportable segment, which is the discovery and development of products for pain management. Our chief operating decision-maker is our Chief Executive Officer, who evaluates our company as a single operating segment.

We categorize revenues by type of revenue in two different categories: 1) licensing ~~revenue~~ revenue and, 2) royalty revenue. All long-lived assets for fiscal ~~2008~~2009 and ~~2007~~2008 are located in the United States.

2024

For the year ended December 31, ~~2008~~2009 compared to the year ended December 31, ~~2007~~2008

	Year Ended December 31,
	2008			2007			$ Change			% Change
	2009			2008			$ Change			% Change
REVENUES
License Revenue	$	~~316~~1,~~706~~266,825		$	~~500~~316,~~000~~706		$	~~(183~~950,~~294~~119	)		~~-36~~300	%
Royalty Revenue		~~135~~127,~~836~~762			~~300~~135,~~000~~836			(~~164~~8,~~164~~074	)		~~-54~~(6	)%
		452,542			800,000			(347,458	)		-43	%
		1,394,587			452,542			942,045			208	%
EXPENSES
Research and development		32,~~496~~062,~~150~~933			13,~~853~~496,~~501~~150			(1,~~642~~433,~~649~~217	)		88(41	)%
General and administrative		2,~~182~~063,~~012~~879			12,~~366~~182,~~401~~012			~~815~~(118,~~611~~133	)		59(5	)%
Depreciation and amortization		89,~~651~~007			108,~~087~~651			~~(1,436~~356	)		~~-14~~4	%
Total Operating Expenses		54,~~686~~135,~~813~~819			35,~~229~~686,~~989~~813			2(1,~~456~~550,~~824~~994	)		76(27	)%
Loss from Operations		(52,~~234~~741,~~271~~232	)		(25,~~429~~234,~~989~~271	)		(2,~~804~~493,~~282~~039	)		~~115~~(48	)%
Interest income		9010,~~614~~487			4290,~~733~~614			47(80,~~881~~127	)		~~112~~(88	)%
Other income		175,~~911~~429			41,~~199~~911			(273,~~288~~518	)		~~-54~~3,847	%
Other income (expenses)		9285,~~525~~916			4692,~~932~~525			45(6,~~593~~609	)		97(7	)%
Loss before income taxes		(52,~~141~~655,~~746~~316	)		(25,~~383~~141,~~057~~746	)		(2,~~758~~486,~~689~~430	)		~~115~~(48	)%
Income Taxes
Current		—			—			—			—
Deferred		—			—			—			—
Income Taxes		—			—			—			—
NET LOSS	$	(52,~~141~~655,~~746~~316	)	$	(25,~~383~~141,~~057~~746	)	$	(2,~~758~~486,~~689~~430	)		~~115~~(48	)%

Revenues

Revenues from licenses ~~declined~~increased to $~~316~~1,~~706~~266,825 for the fiscal year ended December 31, ~~2008~~ 2009 compared to $~~500~~316,~~000~~706 for the fiscal year ended December 31, ~~2007~~2008. ~~This decline was primarily due~~The ~~to one-time~~ $~~300~~1,~~000~~226,825 ~~$100,000~~ and $~~100~~316,~~000~~706 license revenue ~~payments~~in ~~from~~2009 ~~Hi-Tech, Opko~~ and ~~Exopharma~~ ~~(aka~~in ~~Elorac~~2008, ~~Inc.),~~ respectively, ~~received~~represents ~~in 2007 that were not received for the same~~12 ~~period~~and ~~in 2008. No such payments were expected in 2008. The $316,706 license revenue in 2008 represents~~ 3 months of revenue recognition related to a $1.9 million upfront cash payment ~~received~~ received by the Company from sanofi-aventis Canada Inc. in accordance with a license agreement entered into by the Company in the fourth quarter of 2008.

Revenues from royalties declined to $~~135~~127,~~836~~762 for the fiscal year ended December 31, ~~2008~~ 2009 compared to $~~300~~135,~~000~~826 for the fiscal year ended December 31, ~~2007~~2008. The decline was primarily due to a ~~change~~$34,861 of royalties generated in ~~terms~~2008 offrom the License Agreement with DUSA that ~~included~~expired aon ~~$75~~September 30,~~000~~ ~~minimum~~2008. ~~quarterly payment~~Royalties ~~received~~from inHi-Tech ~~2007~~increased ~~that~~from ~~was~~$100,975 in ~~not~~2008 ~~received~~to $127,762 for the same period in ~~2008~~2009. ~~The~~On ~~license~~October 30, ~~agreement~~2009, ~~with~~the Company ~~DUSA~~received ~~expired~~communication onfrom ~~September 30,~~Hi-Tech ~~2008.~~that ~~The~~is ~~$135,836~~has ~~royalty~~discontinued ~~revenue~~the insale ~~2008~~of ~~represents~~the ~~$34,861~~product ~~and~~as ~~$100~~defined in the license agreement. As a result,~~975~~ ofthe ~~royalties~~Company ~~earned~~does ~~from~~not ~~DUSA~~expect ~~and~~to receive any more royalties from Hi- Tech, ~~respectively~~in the future.

Research & Development Expenses

Research and development expenses ~~increased~~decreased to $32,~~496~~062,~~150~~933 for the fiscal year ended ~~December~~ December 31, ~~2008~~2009 compared to $13,~~853~~496,~~501~~150 for the fiscal year ended December 31, ~~2007~~2008. The decrease ~~increase~~ was primarily due to: decreased spending on various European and Canadian filing fees and the timing of certain R&D projects.

Increased spending on various European and Canadian filing fees	$	232,000
Decreased spending on carcinogenicity study completed		(185,586	)
Increased spending on Topical Cream		428,590
Increased spending on Oral Capsule		490,591
Increased spending on Patch		172,453
Increased spending on manufacturing support		87,610
Increased spending on Nasal Solution		126,517
Increased in payroll due to hiring of additional clinical staff		290,474
	$	1,642,649

General and Administrative Expenses

General and administrative expenses ~~increased~~decreased to $2,~~182~~063,~~012~~879 for the fiscal year ended December 31, ~~2008~~2009 compared to $12,~~366~~182,~~401~~012 for the fiscal year ended December 31, ~~2007~~ 2008. The ~~increase~~decrease is due largely to: a decrease in spending on accounting, legal and recruiting fees which countered with a slight increase in payroll due to hiring of additional administrative staff.

Increase in legal fees in preparation of merger	$	267,045
Increase in accounting fees in preparation of merger		244,166
Increase in payroll due to hiring of additional administrative staff		262,892
Net increase in other general and administrative expenses		41,508
	$	815,611

Interest Income

Interest income ~~increased~~decreased by ~~approximately~~ $4880,~~000~~127 to ~~approximately~~ $9110,~~000~~487 for the year ended December 31, ~~2008~~ 2009 from ~~approximately~~ $4390,~~000~~614 for the same period in ~~2007~~2008 due to ~~increased~~decreased amounts of funds on deposit.

Net Loss

Net loss was $5.2.6 million, or $0.1004 per share, for the fiscal year ended December 31, ~~2008~~2009, compared to a net loss of $25.42 million, or $0.0410 per share for the fiscal year ended December 31, ~~2007~~ 2008. The ~~increase~~decrease in net loss is primarily attributed to an increase in revenues of $0.9 million and a decrease in operating expenses ~~totaling~~ totaling $21.5 million, consisting of ana ~~increase~~decrease in research and development ~~totaling~~expenses totaling $1.64 million and ana ~~increase~~decrease in general and administrative expenses totaling $0.81 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 December 31, ~~2008~~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. We anticipate that our losses may increase from current levels because we expect to incur significant additional 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.

We assess our liquidity by our ability to generate cash to fund future operations. Key factors in the management of our liquidity are: cash required to fund operating activities including expected operating losses and the levels of accounts receivable and accounts payable; the timing and extent of cash received from milestone payments under license agreements; and financial flexibility to attract long-term equity capital on favorable terms. Historically, cash required to fund on-going business operations has been provided by financing activities and used to fund operations, working capital requirements and investing activities.

Cash, cash equivalents and investments, as well as, net cash provided by or used for operating, investing and financing activities, are summarized in the table below.

			Increase
	December 31,		(Decrease)			December 31,
	2008		During Period			2007
	2009		During Period			2008
Cash and cash equivalents	$	51,~~626~~562,~~913~~848	$	1(4,~~145~~064,~~302~~065	)	$	45,~~481~~626,~~611~~913
Net working capital	$	3457,~~191,602~~356	$	(~~617~~2,~~057~~734,246	)	$	3,~~808~~191,~~659~~602

	Year Ended			Change			Year Ended
	December 31,			Between			December 31,
	2008			Periods			2007
	2009			Periods			2008
Net cash used in operating activities	$	(34,~~062~~198,~~220~~636	)	$	(1,~~190~~136,~~254~~416	)	$	(13,~~871~~062,~~966~~220	)
Net cash used in investing activities		(16,334	)		(6,334	)		(10,000	)
Net cash provided by (used in) investing activities		141			16,475			(16,334	)
Net cash provided by financing activities		4134,~~223,856~~430			(~~827~~4,~~376~~089,426	)		54,~~051~~223,~~232~~856
Net increase in cash and cash equivalents	$	1,145,302		$	(2,023,964	)	$	3,169,266
Net increase (decrease) in cash and cash equivalents	$	(4,064,065	)	$	(5,209,367	)	$	1,145,302

~~Operating activities. Net cash used in operating activities was $3.0 million in the fiscal~~26 year 2008 compared to $1.9 million in the fiscal year 2007. The increase in cash used in operating activities resulted from our increased spending on various research and development projects and increased expenses associated with the Merger. These changes resulted in a significant increase in spending in fiscal 2008 as demonstrated in the $2.8 million increase in net loss coupled with a $0.5 million increase in cash used for accounts payable and accrued expenses.

InvestingTable activities. Net cash used in investing activities was $0.01 million in the fiscal year 2008. Our capital expenditures have historically been a small fraction of our overall expenses, since we outsource manufacturing and other capital-intensive functions. The highest annual amount of capital expenditures was $56,000 in the year ended December 31, 2004, reflecting expenditures on computer equipment, phone equipment and furniture to support a field force and increased headcount associated with an unsuccessful product launch. We do not anticipate making significant capital expenditures in the near future. Contents

Operating activities. Net cash used in operating activities was $4.2 million in the fiscal year 2009 compared to $3.0 million in the fiscal year 2008. The increase in cash used in operating activities resulted from a decrease in unearned revenue resulting from the upfront payment of $1.9 million in connection with the licensing agreement with sanofi aventis Canada.

Investing activities. Net cash provided by investing activities was $0.01 million in the fiscal year 2009. Our capital expenditures have historically been a small fraction of our overall expenses, since we outsource manufacturing and other capital-intensive functions. The highest annual amount of capital expenditures was $56,000 in the year ended December 31, 2004, reflecting expenditures on computer equipment, phone equipment and furniture to support a field force and increased headcount associated with an unsuccessful product launch. We do not anticipate making significant capital expenditures in the near future.

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.

Financing activities. Net cash provided by financing activities was $40.21 million in ~~the~~ the fiscal year ~~2008~~2009, compared to $54.12 million in fiscal ~~2007~~2008.

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 $5.1 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.

23On October 30, 2008, the Company and sanofi-aventis Canada Inc. entered into a licensing agreement for the Canadian rights to Civamide, 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 $1,264,000 and $316,000 has been recognized as revenue in 2009 and in 2008, respectively, with the remainder being treated as unearned revenue on our Consolidated Balance Sheet as of December 31, 2009 and 2008.

The Company has incurred significant losses from operations since its inception and expects losses to continue for the foreseeable future. The Company’s success depends primarily on the development and regulatory approval of its product candidates. From inception through December 31, 2009, the Company has incurred cumulative net losses of $49.4 million. Net losses may continue for at least the next several years as the Company proceeds with the development of its product candidates and programs. The size of these losses will depend on the receipt of revenue from its products candidates and programs, if any, and on the level of the Company’s expenses. To achieve profitable operations, the Company must successfully identify, develop, partner and/or commercialize its product candidates and programs. Product candidates developed by the Company will require approval of the U.S. Food and Drug Administration (FDA) or a foreign regulatory authority prior to commercial sales. The regulatory approval process is expensive, time consuming and uncertain, and any denial or delay of approval could have a material adverse effect on the Company’s ability to become profitable or continue operations. Even if approved, the Company’s product candidates may not achieve market acceptance and could face competition.

The Company’s cash and cash equivalents have decreased from $5.6 million as of December 31, 2008 to $1.6 million as of December 31, 2009. The Company will need to raise additional funds in the immediate future to support its operations through December 31, 2010. The Company seeks additional sources of financing through collaborations with third parties, or public or private debt or equity financings. There can be no assurance that additional funds will be available on satisfactory terms, or at all. If adequate funds are not available, the Company may be required to significantly reduce expenses related to its operations and/or delay or reduce the scope of its development programs.

OnAs described ~~October 30,~~herein ~~2008,~~under ~~the~~Item 7. ~~Company~~Management’s Discussion and Analysis ~~sanofi-aventis~~of ~~Canada~~Financial ~~Inc.~~Condition ~~entered~~and ~~into~~Results aof ~~licensing agreement~~Operations ~~for~~and the ~~Canadian~~Financial ~~rights~~Statements tofiled ~~Winston’s~~as ~~transient~~part ~~receptor~~of ~~potential~~this ~~vanilloid~~Form ~~(TRPV~~10-~~1) modulator~~K, ~~in formulations for topical application. Under~~ the ~~terms~~Report of ~~the agreement,~~ ~~sanofi-aventis~~Independent ~~Canada~~Registered ~~Inc.~~Public ~~owns~~Accounting ~~the~~Firm ~~rights~~contains toan ~~develop,~~emphasis ~~manufacture~~of ~~and~~matter ~~commercialize civamide cream~~paragraph inwhich ~~Canada~~indicates ~~along with a second generation cream~~ that there is ~~currently~~substantial indoubt ~~development.~~about ~~In return for granting sanofi-aventis Canada Inc.~~ the ~~Canadian~~Company’s ~~rights,~~ability ~~Winston~~to ~~received~~continue as ana ~~upfront~~going ~~payment of $1~~concern.~~9 million~~ ~~(US) and~~As ~~will~~described ~~receive~~herein anunder ~~additional $2~~Item ~~million~~7. ~~(CAD) upon~~Management’s ~~regulatory~~Discussion ~~approval~~and Analysis of ~~civamide~~ ~~cream~~Financial inCondition ~~Canada, certain milestone payments~~ and ~~future~~Results ~~royalties~~of onOperations ~~net~~— ~~sales~~Liquidity ofand ~~civamide~~Capital orResources, the ~~related~~Company ~~second~~plans ~~generation~~to ~~cream~~raise inadditional ~~Canada.~~funds Inearly ~~connection~~in ~~with this agreement, Winston is recognizing~~ the ~~upfront~~second ~~payment~~ quarter of ~~$1.9 million~~2010 ~~over 18 months. As such, approximately $316,000 has been recognized as revenue~~ in ~~2008,~~order ~~with~~to ~~the~~support ~~remainder~~its ~~being~~operations ~~treated~~through ~~as unearned revenue on our Consolidated Balance Sheet as of~~ December 31, ~~2008~~2010.

As of December 31, 2008, we had cash and cash equivalents of approximately $5.6 million. Although we expect that our available funds and funds generated from our operations will be sufficient to meet our anticipated needs for 12 months, we will need and will seek to obtain additional capital in 2009 and future years to continue to operate and grow our business. We anticipate that licensing revenue in 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. Our ability to obtain additional financing in the future will depend in part upon the prevailing capital market conditions, as well as our business performance. There can be no assurance that we will be successful in our efforts to arrange additional financing on terms satisfactory to us or at all.

Contractual Obligations

We lease our facilities and certain equipment under operating leases that expire through 2010. Future minimum operating lease payments at December 31, 2008, are as follows:


Contractual Obligations	Total		Less than 1 year
Operating Lease Obligations	$	3,000	$	3,000

2009			13,224
2010			2,708

We lease our facilities on a month-to-month basis and certain equipment under operating leases that expire in 2010 and require payments totaling approximately $3,000. Rental expense for the years ended December 31, 2009 and 2008 was $93,944 and $120,649, respectively.

Rental expense for the years ended December 31, 2008 and 2007 was $120,649 and $123,121, 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.

Recent Accounting Pronouncements

See Note 2, “Summary of Accounting Policies” in the Notes to Consolidation Financial Statements for a discussion of recent accounting pronouncements and their effect, if any, on the Company.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk

We are a smaller reporting company, as defined by Item 10(f)(1) of Regulation S-K, and we are not required to make the disclosures required by this item pursuant to Item 305(e) of Regulation S-K.

Item 8. Financial Statements and Supplementary Data

Our Financial statements are annexed to this report beginning on page F-1 and are hereby incorporated by reference.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

None.

Item 9A(T). 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.

Management’s Annual Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934). A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the interim or annual consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, with the participation of our Chief Executive Officer and Chief ~~Financial~~ Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, ~~2008~~2009 based on the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management concluded that, as of December 31, ~~2008~~2009, our internal control over financial reporting was effective based on those criteria.

This annual report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

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.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

Management

As of March 261, ~~2009~~2010, the Company employed ~~thirteen~~9 full-time individuals, including ~~seven~~4 engaged in research and development activities, and ~~six~~5 in general and administrative functions. Most of the Company’s management and professional employees have substantial prior experience with other pharmaceutical, biotechnology or medical products and service companies. ~~The Company expects to increase its employee census over the next two years, principally due to an expansion in its ongoing research programs.~~ None of the Company’s employees is a member of a labor union. The ~~Company~~ Company believes that it maintains good relations with its employees.

The table and text below provide certain descriptive information about our senior management and directors following the Merger.

Name	Age	Position	First Elected		Term Expires
Joel E. Bernstein, M.D.	6667	President and Chief Executive Officer; Director~~, Chairman of the Board~~		2008		~~2009~~2010
Scott B. Phillips, M.D.	4849	Senior Vice President, Scientific Affairs; Director		2008		~~2009~~2010
David Starr	3940	Vice President, Chief Financial Officer, Secretary		—		—
Curtis Lockshin, Ph.D.	48	Director		2006		2009
Robert A. Yolles	69	Director, Audit Committee Chair, Chairman of the Board		2008		2010
Robert A. Yolles	68	Director, Audit Committee Chair		2008		2009
Glenn L. Halpryn	49	Director		2008		2010
Glenn L. Halpryn	48	Director		2006		2009
Curtis Lockshin, Ph.D.	49	Director		2006		2010
Neal S. Penneys, M.D., Ph.D.	6668	Director, Audit Committee Member		2008		~~2009~~2010
Subbarao Uppaluri, Ph.D.	5960	Director, Audit Committee Member		2008		~~2009~~2010

Executive Officers

Joel E. Bernstein, M.D., a director of the Company and its President and Chief Executive Officer since the Merger is also Winston Labs’s founder and has served as Winston Labs’s Chief Executive Officer since ~~2002~~1998 and prior to the Merger as a director of Winston Labs since ~~2002~~1998. Dr. Bernstein is also the founder and Chief Executive Officer of Elorac, Inc. and Gideon Pharmaceuticals, Inc. Before founding Winston, Labs, Dr. Bernstein was the founder, Chairman, and Chief Executive Officer of GenDerm Corporation, a pharmaceutical company that was acquired by Medicis Pharmaceutical Corporation in 1997. Previously, Dr. Bernstein was head of dermatopharmacology at Northwestern University Medical School and the University of Chicago Pritzker School of Medicine. Dr. Bernstein has also held senior scientific positions at Abbott Laboratories and Schering-Plough Corporation. He has authored more than 125 scientific publications and holds over 150 patents. Dr. Bernstein received a B.A. from Carleton College and an M.D. from the University of Chicago Pritzker School of Medicine, where he received the Roche Award for ranking first in his class. He completed specialty training programs in both dermatology and clinical pharmacology at the University of Chicago. Dr. Bernstein is a past president of the University of Chicago Medical and Biological Alumni Association. In 1988, he was chosen as the Illinois high-tech entrepreneur of the year by KPMG and the State of Illinois. Dr. Bernstein was also the founder and non-executive chairman of Sirius Laboratories, Inc., (acquired in 2006 by DUSA Pharmaceuticals) and a co-founder ~~dermatologic~~of ~~products~~Ovation ~~company~~Pharmaceuticals (acquired by Lundbeck in ~~2006~~2009). byBased ~~DUSA~~on ~~Pharmaceuticals~~Dr. Bernstein’s familiarity with the Company as an incumbent member of the Company’s Board of Directors and an executive officer of the Company and his knowledge and expertise in the pharmaceutical industry, the Corporate Governance and Nominating Committee of the Board of Directors concluded that Dr. Bernstein has the requisite experience, qualifications, attributes and skill necessary to serve as a member of the Board of Directors.

Scott B. Phillips, M.D., a director of the Company and its Senior Vice President, Scientific Affairs since the Merger has also been Winston Labs’s Senior Vice President, Scientific Affairs since April 1999. Previously Director of Drug Discovery at GenDerm Corporation, Dr. Phillips has 15 years of experience in the pharmaceutical industry. In addition, he has been Chief of the Clinical Investigations Unit at Harvard Medical School and Clinical Assistant Professor of Dermatology and Medicine at the University of Chicago Pritzker School of Medicine. He received a B.A. in biology from Cornell University and an M.D. from Harvard University. Based on Dr. Phillips’s familiarity with the Company as an incumbent member of the Company’s Board of Directors and an executive officer of the Company and his knowledge and expertise in the pharmaceutical industry, the Corporate Governance and Nominating Committee of the Board of Directors concluded that Dr. Phillips has the requisite experience, qualifications, attributes and skill necessary to serve as a member of the Board of Directors.

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David Starr, the Company’s Vice President and Chief Financial Officer since the Merger has also been Winston Labs’s Vice President and Chief Financial Officer since November 2007 and he has served as Winston Lab’s sole director since the Merger. From August 2005 to October 2007, Mr. Starr was a Chief Financial Officer of DayOne Health, which set up and managed bariatric surgery programs for ambulatory surgery centers. From October 2003 to August 2005, Mr. Starr was a Chief Financial Officer and Director of Operations Research of MSO Medical, a national obesity disease management company serving hospitals with a proprietary version of the gastric bypass surgery. From March 1998 to September 2003, Mr. Starr served in senior management positions at several technology companies. From September 1991 to March 1998, Mr. Starr was an audit manager with Arthur Andersen’s Enterprise Group. Mr. Starr has an MBA from Northwestern’s Kellogg Graduate School of Business and a BS in Accounting from Indiana University, Bloomington.

Outside Directors

~~Curtis~~Robert ~~Lockshin~~A. Yolles, PhJ.D. ~~Since 2003~~, ~~Dr. Lockshin~~the ~~has~~chairman ~~been~~of anthe ~~independent~~Company’s ~~pharmaceutical~~board ~~and life~~of ~~sciences consultant~~directors, ~~focused~~served ~~on small companies that seek to leverage their technology assets~~as ~~inside~~a ~~healthcare,~~director ~~biotechnology~~of ~~and~~Winston ~~security~~Labs ~~sectors.~~prior Atto ~~Sepracor~~the ~~Inc.~~Merger ~~from~~since ~~1998 to~~ 2002, asand is a ~~Scientist,~~ ~~Associate~~retired ~~Director,~~partner ~~and Director~~ of the ~~Discovery~~international ~~Biology~~law &firm ~~Informatics,~~Jones DrDay. ~~Lockshin~~ ~~was instrumental~~While ina ~~establishing the New Leads program~~partner, ~~which~~he ~~delivered~~served ~~novel~~as ~~chemical entities into~~ the ~~preclinical~~chair ~~pipeline.~~of Inthe Firm’s ~~2002-2003,~~domestic ~~while~~and ~~Director~~international offinance ~~Discovery~~practices ~~Biology~~and, ~~at Beyond Genomics~~previously, ~~Inc.,~~ ~~Dr. Lockshin~~ co-~~developed~~chair ~~strategies~~of ~~for~~the Firm’s ~~utilizing~~corporate ~~proprietary~~practice. ~~technology~~He ~~platforms~~received ~~in clinical~~a ~~trial~~B.A. ~~optimization~~ and ~~prediction~~J.D. offrom ~~off-target~~Northwestern ~~drug activities~~University. ~~Since~~Based ~~2004,~~on DrMr. ~~Lockshin has~~ ~~served~~Yolles’s onfamiliarity with the ~~Board~~Company ofas ~~Directors~~an incumbent member of the ~~Ruth~~Company’s K.Board ~~Broad~~of ~~Biomedical~~Directors and ~~Research~~as ~~Foundation,~~ a ~~Duke University~~Chairperson ~~support~~of ~~corporation,~~its ~~which~~Audit ~~supports~~Committee ~~basic~~and ~~research~~his ~~related~~knowledge ~~to Alzheimer’s disease~~ and expertise ~~neurodegeneration~~in ~~via~~numerous ~~intramural,~~aspects ~~extramural,~~of ~~and~~managing ~~international~~a ~~grants.~~rapidly-growing ~~Dr. Lockshin~~enterprise, ~~has~~the ~~been a~~Corporate ~~director~~Governance ofand ~~clickNsettle.com,~~Nominating ~~Inc.~~Committee ~~since~~of ~~September 2007.~~the ~~Dr. Lockshin~~Board isof aDirectors ~~co-inventor~~concluded ~~on several~~that UMr.S. ~~patents~~Yolles ~~and~~has ~~applications~~the ~~covering~~requisite ~~pharmaceuticals~~experience, ~~biomaterials~~qualifications, attributes and ~~optics~~skill ~~for~~necessary ~~remote biochemical~~to ~~sensing.~~serve Heas ~~holds~~ a ~~Bachelor’s~~member ~~degree~~of ~~in Life Sciences and a Ph.D. in Biological Chemistry, both from~~ the ~~Massachusetts~~Board ~~Institute~~ of ~~Technology~~Directors.

~~Robert~~Glenn AL. ~~Yolles~~Halpryn, ~~J.D.~~was ~~served~~Chairman asof athe ~~director~~Board and Chief Executive Officer of ~~Winston~~Getting Ready Corporation prior to the Merger. Mr. Halpryn has been a Director of the Company since ~~2002~~the Merger. Mr. Halpryn was a Director of Ivax Diagnostics, Inc., an AMEX listed corporation specializing in the manufacturing and isdistribution of diagnostic products from October 2002 until September 2008. Mr. Halpryn currently serves on the board of directors of Sorrento Therapeutics (OTCBB: SRNE), a ~~retired~~biopharmaceutical ~~partner~~company focused on applying a proprietary technology platform for the discovery and development of human therapeutic antibodies for the ~~international~~treatment ~~law~~of ~~firm~~a ~~Jones~~variety ~~Day~~of disease conditions, Castle Brands, Inc., ~~While~~(AMEX: ROX), a ~~partner~~developer and international marketer of premium branded spirits, heand ~~served~~SearchMedia asHoldings Limited, the ~~chair~~second largest outdoor billboard and in-elevator advertiser in China Mr. Halpryn received a B.S. in Business Administration from the University of Florida. Based on Mr. Halpryn’s familiarity with the ~~Firm~~Company as an incumbent member of the Company’s ~~domestic~~Board of Directors and ~~international~~as ~~finance~~a ~~practices~~Chairperson ~~and,~~of ~~previously~~its Compensation Committee, the ~~co-chair~~Corporate Governance and Nominating Committee of the ~~Firm’s~~Board of Directors ~~corporate~~concluded ~~practice~~that Mr. HeHalpryn ~~received~~has athe ~~B.A.~~requisite experience, qualifications, attributes and ~~J.D.~~skill ~~from~~necessary ~~Northwestern~~to ~~University~~serve as a member of the Board of Directors.

~~Glenn~~Curtis LLockshin, Ph.D. ~~Halpryn~~was isa director of Getting Ready Corporation prior to the Merger. Dr. Lockshin has been a ~~Miami~~Director ~~based~~of ~~private~~the ~~investor~~Company since the Merger. Since ~~December 2008~~2003, Mr Dr. ~~Halpryn~~Lockshin has been an independent pharmaceutical and life sciences consultant, focused on small companies that seek to leverage their technology assets inside healthcare, biotechnology and security sectors. At Sepracor Inc. from 1998 to 2002, as a ~~member~~Scientist, Associate Director, and Director of Discovery Biology & Informatics, Dr. Lockshin was instrumental in establishing the ~~Board~~New Leads program, which delivered novel chemical entities into the preclinical pipeline. In 2002-2003, while Director of Discovery Biology at Beyond Genomics, Inc., Dr. Lockshin co-developed strategies for utilizing proprietary technology platforms in clinical trial optimization and prediction of off-target drug activities. Since 2004, Dr. Lockshin has served on the Board of Directors of ~~Ideation~~the ~~Acquisition~~Ruth ~~Corp~~K. Broad Biomedical Research Foundation, a Duke University support corporation, which supports basic research related to Alzheimer’s disease and neurodegeneration via intramural, extramural, and international grants. From July, 2006 to December, 2006, Dr. Lockshin was a director of Orthodontix, a publicly traded ~~SPAC~~shell company that effected a reverse merger with a biotechnology company, Protalix (~~Special~~AMEX: ~~Purpose~~PLX). ~~Acquisition~~From ~~Corporation)~~September, ~~seeking~~2007 to ~~effect~~September, 2008, Dr. Lockshin was a director of clickNsettle.com, a publicly traded shell company that effected a reverse merger inwith ~~the~~an orthopedic ~~digital~~medical ~~media~~device ~~sector~~company, Cardo Medical, Inc. ~~Since~~ (OTCBB: CDOM). From July 2008 to September, Mr2009, Dr. ~~Halpryn~~Lockshin ~~has~~was ~~been~~a ~~Chairman~~director ~~and President~~ of QuikByte Software, Inc., a publicly traded shell company ~~listed~~that effected a reverse merger with a biopharmaceutical company, Sorrento Therapeutics (OTCBB: SRNE), where he continues to serve as a director. Dr. Lockshin is a co-inventor on several U.S. patents covering pharmaceuticals, biomaterials, and optics for remote biochemical sensing. He holds a Bachelor’s degree in Life Sciences and a Ph.D. in Biological Chemistry, both from the ~~OTC~~Massachusetts ~~Bulletin~~Institute of Technology. Based on Dr. Lockshin’s familiarity with the Company as an incumbent member of the Company’s Board of Directors and his knowledge of the pharmaceutical industry, the Corporate Governance and Nominating Committee of the Board of Directors concluded that Dr. ~~QuikByte~~Lockshin ishas ~~seeking~~the requisite experience, qualifications, attributes and skill necessary to ~~effect~~serve as a ~~merger~~member ~~with an~~of ~~operating~~the ~~company~~Board of Directors.

MrNeal S. Penneys, M.D., Ph.D., is currently a dermatopathologist with AmeriPath, American Laboratories, Fort Lauderdale, Florida. Prior to joining AmeriPath, from 1999-2001 Dr. ~~Halpryn~~Penneys ~~was~~served ~~Chairman~~as Associate Dean, Chief Operating Officer, Saint Louis University Health Sciences Center, and from 1995-1999 as Chairperson, Department of Dermatology, Saint Louis University School of Medicine. Dr. Penneys has served on many Boards, including those of the ~~Board~~audit ~~and~~committee ~~Chief~~of ~~Executive~~the ~~Officer~~American Academy of Dermatology, the ~~Company~~American ~~prior~~Society of Dermatopathology, GenDerm Corporation, DUSA Pharmaceuticals, Inc. (NASDAQ: DUSA) and Sirius Laboratories, Inc. He was a senior consultant to the FDA from ~~Merger~~1989-2006, and from 1985-2004 served on several FDA Advisory Panels including those for Dermatologic Drugs and for Orphan Drugs. MrDr. ~~Halpryn~~Penneys ~~has~~received ~~been~~ a ~~Director~~B.A. offrom Franklin and Marshall College, an M.D. from the ~~Company~~University ~~since~~of Pennsylvania, a Ph.D. from the University ~~Merger~~of Miami, and an M.B.A. Hefrom isSt. ~~Chairman~~Louis University. Based on Dr. Penneys’s familiarity with the Company as an incumbent member of the Company’s ~~Compensation~~Board of Directors and his knowledge of the pharmaceutical industry, the Corporate Governance and Nominating Committee of the Board of Directors concluded that Dr. Penneys has the requisite experience, qualifications, attributes and skill necessary to serve as a member of the Board of Directors.

~~Mr. Halpryn~~Subbarao ~~was Chairman of the Board and Chief Executive Officer of ClickNSettle.com~~Uppaluri, ~~Inc~~Ph.~~, a publicly traded shell company traded on the OTC Bulletin Board from October 2007 until ClickNSettle~~D.~~com~~, ~~Inc~~Dr. ~~merged with Cardo Medical on September~~ ~~2008.~~Uppaluri ~~Cardo~~has ~~Medical~~served isas aSenior ~~Los~~Vice ~~Angeles based~~President ~~company specializing in the manufacturing~~ and ~~distribution of knee, hip and spinal implants~~Chief ~~and~~Financial ~~surgical~~Officer ~~instruments for these procedures. Mr. Halpryn was a director~~ of ~~Ivax~~OPKO ~~Diagnostics,~~ Health Inc., ansince ~~AMEX listed corporation specializing in the manufacturing and distribution of diagnostic products from October~~May ~~2002 until September 2008~~2007. MrDr. ~~Halpryn~~Uppaluri ~~was~~served ~~also~~as athe ~~member of its Audit~~Vice ~~Committee and Chairman of its Compensation Committee. Mr. Halpryn was~~ President ~~of Longfoot Communications~~, aStrategic ~~publicly~~Planning ~~traded~~and ~~shell~~Treasurer ~~company~~of ~~traded~~IVAX ~~on the OTC Bulletin Board~~ from ~~March 2008~~ 1997 until ~~Longfoot Communications merged with Kidville in July~~December ~~2008~~2006. ~~Kidville is a New York based~~ ~~company~~Before ~~which~~joining ~~operates large educational and recreational upscale facilities~~IVAX, ~~catering~~from 1987 to ~~newborns through five-year old children and their families. Mr.~~August ~~Halpryn is Chief Executive Officer and a director of Transworld Investment Corporation (“TIC”)~~1996, ~~serving in such capacity since June 2001~~Dr. ~~TIC is a private company involved in various activities including residential and commercial real estate development and investments in private and public companies. From 1984 to June~~ ~~2001,~~Uppaluri ~~Mr. Halpryn~~was ~~served~~Senior as Vice President~~/Treasurer of TIC. In addition~~, ~~since 1984 Mr. Halpryn has been~~ ~~engaged~~Senior inFinancial ~~real~~Officer ~~estate investment~~ and ~~development activities. Mr. Halpryn was Chairman of the Board and~~ Chief ~~Executive~~Investment Officer ofwith ~~Orthodontix,~~Intercontinental ~~Inc.~~Bank, a ~~public company, from April 2001 until~~ ~~Orthodontix~~publicly ~~merged~~traded ~~with~~commercial ~~Protalix~~bank ~~BioTherapeutics, Inc.~~ in ~~December 2006~~Florida. ~~Protalix~~In ~~is an Israeli biotech company listed on the American Stock Exchange. From 2000 to 2007~~addition, ~~Mr. Halpryn~~he ~~was~~served ~~an investor and the managing member of investor groups that were joint venture partners with one of the largest homebuilders~~ in ~~the~~various ~~United States~~positions, ~~in 26 land acquisition and development projects with~~ ~~total~~including ~~project~~Senior ~~revenues~~Vice ~~of over $1 billion. Currently Mr. Halpryn is the developer of one of the largest properties in Greater Jacksonville~~President, ~~consisting~~Chief ofInvestment ~~1,200~~Officer ~~acres.~~and ~~The property is in the process of being rezoned into mixed use consisting of industrial~~Controller, ~~commercial~~at ~~and residential uses. Since June 1987,~~Peninsula ~~Mr. Halpryn~~Federal ~~has~~Savings ~~been~~& ~~the~~Loan ~~President of and beneficial holder of stock of United Security Corporation~~Association, a ~~broker-dealer~~publicly ~~registered~~traded ~~with~~Florida ~~FINRA.~~S&L, ~~Mr. Halpryn~~from ~~holds a Series~~October 71983 ~~and Series 24~~to ~~principal license~~1987. ~~From~~His ~~April 1988~~prior ~~through June 1998~~employment, ~~Mr. Halpryn~~during ~~was~~1974 ~~Vice~~to ~~Chairman of Central Bank~~1983, aincluded ~~Florida state-chartered bank. Mr. Halpryn was a member of the Bank’s loan committee~~engineering, ~~audit committee,~~marketing and research ~~chairman~~positions ofwith ~~the~~multinational ~~investment~~companies ~~committee.~~and ~~Mr. Halpryn~~research ~~holds~~institutes ~~a Bachelor’s of Science~~ in ~~Business Administration from the University of Florida.~~

2731

~~Neal~~India and S.the ~~Penneys,~~United MStates.~~D.,~~ PhDr.~~D.,~~ Uppaluri is currently aserves ~~dermatopathologist~~on ~~with~~the ~~AmeriPath,~~board ~~American~~of directors of Non-Invasive ~~Laboratories~~Monitoring Systems, ~~Fort~~Inc., ~~Lauderdale~~(OTCBB:NIMU), ~~Florida.~~a ~~Prior~~medical todevice ~~joining~~company, ~~AmeriPath~~Kidville, ~~from 1999-2001 Dr~~Inc. ~~Penneys~~ ~~served~~(OTCBB:KVIL), aswhich ~~Associate~~operates ~~Dean~~large, ~~Chief~~upscale ~~Operating Officer~~facilities, ~~Saint~~catering ~~Louis~~to newborns ~~University~~through ~~Health~~five-year-old ~~Sciences~~children ~~Center,~~ and ~~from~~their ~~1995-1999~~families asand ~~Chairperson,~~offers ~~Department~~a wide range of developmental ~~Dermatology,~~classes ~~Saint~~for ~~Louis~~newborns- ~~University~~5 years ~~School~~old ~~of Medicine.~~and DrCardo Medical, Inc. ~~Penneys~~, ~~has~~an ~~served~~early-stage orthopedic onmedical ~~many~~device ~~Boards~~company specializing in designing, ~~including~~developing ~~those~~and ofmarketing reconstructive ~~the~~joint ~~audit~~devices ~~committee~~and ofspinal ~~the American~~surgical ~~Academy~~devices of(OTCBB:CDOM). ~~Dermatology~~From June 1, ~~the~~2007 to ~~American~~October 30, ~~Society~~2009, Dr. Uppaluri was a director of ~~Dermatopathology,~~Ideation ~~GenDerm~~Acquisition Corporation, ~~and~~a ~~Sirius~~publicly ~~Laboratories,~~traded ~~Inc.~~SPAC He(Special ~~was~~Purpose aAcquisition ~~senior~~Corporation), ~~consultant~~seeking to ~~the~~effect ~~FDA~~a merger ~~from~~in ~~1989-2006,~~the ~~and~~digital ~~from~~media ~~1985-2004 served~~sector. Based on ~~several~~Dr. ~~FDA~~Uppaluri’s ~~Advisory~~familiarity ~~Panels~~with ~~including~~the ~~those~~Company as ~~for~~an ~~Dermatologic~~incumbent ~~Drugs~~member ~~and~~of ~~for~~the ~~Orphan~~Company’s ~~Drugs.~~Board of Directors ~~Dr. Penneys~~and ~~received~~his aknowledge ~~B.A.~~and ~~from~~expertise ~~Franklin~~in ~~and~~the ~~Marshall~~pharmaceutical ~~College~~industry, the aCorporate ~~M.D.~~Governance ~~from~~and Nominating Committee of the ~~University~~Board of Directors ~~Pennsylvania,~~concluded athat PhDr.D. ~~from~~Uppaluri has the ~~University~~requisite ofexperience, ~~Miami~~qualifications, attributes and anskill ~~M.B.A.~~necessary ~~from~~to ~~St.~~serve ~~Louis~~as ~~University~~a member of the Board of Directors.

Subbarao Uppaluri, Ph.D.. has served as a member of our board of directors since September 2008. Dr. Uppaluri has served as Senior Vice President and Chief Financial Officer of OPKO Health Inc. since (NYSE Amex:OPK) May 2007. Dr. Uppaluri served as the Vice President, Strategic Planning and Treasurer of IVAX from 1997 until December 2006. Before joining IVAX, from 1987 to August 1996, Dr. Uppaluri was Senior Vice President, Senior Financial Officer and Chief Investment Officer with Intercontinental Bank, a publicly traded commercial bank in Florida. In addition, he served in various positions, including Senior Vice President, Chief Investment Officer and Controller, at Peninsula Federal Savings & Loan Association, a publicly traded Florida S&L, from October 1983 to 1987. His prior employment, during 1974 to 1983, included engineering, marketing and research positions with multinational companies and research institutes in India and the United States. Dr. Uppaluri currently serves on the board of directors of Ideation Acquisition Corp. (NYSE Amex:IDI), a special purpose acquisition company formed for the purpose of acquiring business in digital media, Kidville, Inc. (OTCBB:KVIL), which operates large, upscale facilities, catering to newborns through five-year-old children and their families and offers a wide range of developmental classes for newborns- 5 years old and Cardo Medical, Inc.(OTCBB:CDOM), an early-stage orthopedic medical device company specializing in designing, developing and marketing reconstructive joint devices and spinal surgical devices, and Non-Invasive Monitoring Systems, Inc., (OTCBB:NIMU), a medical devices company.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our securities to file reports of ownership and changes in ownership with the SEC. Based solely on a review of copies of such forms submitted to the Company, we believe that all persons subject to the requirements of Section 16(a) filed such reports on a timely basis in ~~2008~~2009, except ~~that~~as ~~the~~follows: ~~initial statements~~(1) a ofForm 4 ~~beneficial~~reporting ~~ownership~~an exercise of ~~Form 3~~common stock ofoptions by Dr. Joel Bernstein was filed after the due date; (2) Forms 4, each reporting a grant of common stock options to Joel E. Bernstein, ~~our~~M.D., ~~president~~Scott ~~and~~B. ~~chief~~Phillips, ~~executive~~M.D. ~~officer~~and David Starr, respectively, were filed after the due date; and (3) Forms 4, each reporting a grant of common stock options to Dr. ~~Scott~~Curtis B.Lockshin, ~~Phillips~~Ph.D., ~~our~~Robert ~~Senior~~A. Yolles, ~~Vice~~Glenn ~~President~~L. Halpryn, ~~Scientific~~Subbarao ~~Affairs~~Uppaluri, ~~were each~~Ph.D. ~~filed~~and ~~two~~Neal ~~business~~S. ~~days~~Penneys, M.D., Ph.D., respectively, were filed after the due date.

Code of Business Conduct and Ethics

The Company has adopted a code of business conduct and ethics within the meaning of Item 406 of Regulation S-K that applies to its officers (including our principal executive officer and principal financial officer) and employees. The code of ethics is posted on the Company’s website at www.winstonlabs.com. The Company shall include on its website any amendments to, or waivers from, a provision of its code of ethics that applies to the Company’s chief executive officer and chief financial officer, or persons performing similar functions, that relate to any element of the code of business conduct and ethics.

Stockholder Communications with the Board of Directors

All stockholder communications must (i) be addressed to the Chief Financial Officer of the Company, Winston Pharmaceuticals, Inc., 100 North Fairway Drive, Suite 134, Vernon Hills, Illinois, 60061, or at the CFO’s internet e-mail address at dstarr@winstonlabs.com, (ii) be in writing either in print or electronic format, (iii) be signed by the stockholder sending the communication, (iv) indicate whether the communication is intended for a specific director(s), the entire Board of Directors, the Nominating and Governance Committee, or all non- management directors, (v) if the communication relates to a stockholder proposal or director nominee, identify the number of shares held by the stockholder, the length of time such shares have been held, and the stockholder’s intention to hold or dispose of such shares, provided that the Board of Directors and the Nominating and Governance Committee will not entertain stockholder proposals or stockholder nominations from stockholders who do not meet the eligibility and procedural criteria for submission of shareholder proposals under SEC Rule 14a-8 of Regulation 14A under the Exchange Act, and (vi) if the communication relates to a director nominee being recommended by the stockholder, must include appropriate biographical information of the candidate.

Upon receipt of a stockholder communication that is compliant with the requirements identified above, the Chief Financial Officer shall promptly deliver such communication to the appropriate board or committee member(s) identified by the stockholder as the intended recipient of such communication by forwarding the communication to either the Chairman of the Board of Directors with a copy to the chief executive officer, the Chairman of the Nominating and Governance Committee, or the non-management directors, as the case may be.

The Chief Financial Officer may, in his sole discretion and acting in good faith, provide copies of any such stockholder communication to any one or more directors and executive officers of the Company, except that in processing any stockholder communication addressed to the non-management directors, the Chief Financial Officer may not copy any member of management in forwarding such communication to such directors.

Audit Committee

The Board of Directors has established an audit committee in accordance with Section 3(a)(58)(A) of the Exchange Act. The Board has designated from among its members Robert A. Yolles, Neal S. Penneys and Subbarao Uppaluri as the members of the Audit Committee. The primary functions of the Audit Committee are to represent and assist the Board of Directors with the oversight of:

• appointing, approving the compensation of, and assessing the independence of the Company’s independent auditors; • overseeing the work of the Company’s independent auditors, including through the receipt and consideration of certain reports from the independent auditors; • reviewing and discussing with management and the independent auditors the Company’s annual and quarterly financial statements and related disclosures; • coordinating the Board of Director’s oversight of the Company’s internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics; • establishing procedures for the receipt and retention of accounting related complaints and concerns; • meeting independently with the Company’s independent auditors and management; and • preparing the audit committee report required by SEC rules.

~~The Board of Directors has determined that Subbarao Uppaluri is an “audit committee financial~~32 ~~expert” as defined in Item 407(d)(5)(ii) of Regulation S-K.~~

	•		reviewing and discussing with management and the independent auditors the Company’s annual and quarterly financial statements and related disclosures;

	•		coordinating the Board of Director’s oversight of the Company’s internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;

	•		establishing procedures for the receipt and retention of accounting related complaints and concerns;

	•		meeting independently with the Company’s independent auditors and management; and

	•		preparing the audit committee report required by SEC rules.

The Board of Directors has determined that Subbarao Uppaluri is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K.

Item 11. Executive Compensation

Summary Compensation Table

The following table sets forth information concerning the compensation paid by Winston Labs and/or the Company, as applicable, during the fiscal years ended December 31, 2009 ~~2008~~ and ~~2007~~2008 to the Company’s Chief Executive Officer, the Company’s former Chief Executive Officer and the next two most highly compensated executive officers whose salary and bonus for the year exceeded $100,000 and who served as an executive officer of each of the respective companies as of, or during the fiscal year ended, December 31, 2009 ~~2008~~ (each, a “Named Executive Officer”).

~~Option~~

Option

All Other

Total

Name and Principal

Salary

~~Awards~~Bonus

~~Bonus~~Awards

Compensation

Position

Year

($)

($)~~(1)~~

($)(1)

($)(2)

($)

Joel E. Bernstein, M.D.

~~2008~~2009

~~242~~265,~~000~~307

—

25218,000

23,~~570~~593

~~290~~506,~~570~~900

President and Chief

~~2007~~2008

~~235~~242,000

3825,~~158~~000

—

1723,~~986~~570

~~291~~290,~~144~~570

Executive Officer of the Company and; Director of Winston

Executive Officer of the Company and; Director of the Company

Scott B. Phillips, M.D.

~~2008~~2009

~~221~~250,000

—

14109,~~500~~000

2022,~~840~~588

~~256~~381,~~340~~588

Senior Vice President,

~~2007~~2008

~~210~~221,000

7314,~~695~~500

—

1620,~~728~~840

~~300~~256,~~423~~340

Scientific Affairs of the Company and: Director of the Company

Scientific Affairs of the Company and; Director of the Company

David Starr, Vice

~~2008~~2009

200,000

—

14163,500

311,~~883~~530

~~218~~375,~~383~~030

President, Chief

~~2007~~2008

~~(3)~~

33200,~~333~~000

—14,500

—

—3,883

33218,~~333~~383

Financial Officer, Secretary of the Company and; Director of Winston

Glenn L. Halpryn (4),

2008

—

Former Chief Executive

2007

—

Officer of the Company; Director of the Company

(1)		Represents ~~the~~aggregate ~~expense~~grant todate ~~Winston~~fair value pursuant to ~~FAS~~ASC ~~123R~~Topic 718 for the respective year for restricted stock options granted as long term incentive pursuant to ~~2007~~the ~~Option~~Company’s Omnibus Incentive Plan. No options were granted to the above officers for fiscal ~~years~~year 2008 ~~and 2007~~.
(2)		Dr. Bernstein, Dr. Phillips and Mr. Starr received additional compensation in ~~2008~~2009 and ~~2007~~2008, comprised of the following components: 401(k) matching contributions in ~~2008~~2009 of $910,~~665~~612, $910,~~405~~000, and $0, respectively and in ~~2007~~2008 ~~in amounts~~ of $79,~~050~~665, $69,~~300~~405, and $0 ~~, respectively~~; insurance premium payments in ~~2008~~2009 in amounts of $1312,~~905~~981, $1112,~~435~~588, and $311,~~883~~530, respectively, and in ~~2007~~2008 in amounts of $1013,~~936~~905, $1011,~~428~~435, and $03,883, respectively.
(3)		David Starr began his employment in November, 2007.
(4)		Mr. Halpryn served as Chief Executive Officer and Director of the Company until the date of the Merger, when he resigned from his executive role. He remains on the board. Mr. Halpryn received no compensation in 2008 or 2007 in connection with his service as an officer.

3033

Outstanding Equity Awards at Fiscal Year-End

The following table provides information regarding exercisable and unexercisable option and stock awards held by the Named Executive Officers as of December 31, ~~2008~~2009.

Number of Securities

Number of

Underlying

Option

Securities

Unexercised Options

Exercise

Expiration

Underlying

Name

(#) Exercisable (1)

Price ($)

Date

Unexercised

Joel E. Bernstein, M.D.

231,670

(2)

0.36

1/12/2009

Options

Option

661,913

0.37

4/6/2010

(#)

Exercise

Expiration

Scott B. Phillips, M.D.

158,859

0.28

5/3/2009

Name

Exercisable

Price ($)

Date

397,148

0.28

10/18/2009

Joel E. Bernstein, M.D.

661,913

0.37

4/6/2010

205,193

0.33

12/10/2012

100,000

1.53

4/7/2019

Scott B. Phillips, M.D.

205,193

0.33

12/10/2012

231,670

0.33

1/12/2014

661,913

0.34

4/6/2015

50,000

1.53

4/7/2019

David Starr

75,000

1.53

4/7/2019

(1)		In conjunction with the Merger, Winston’s Board of Directors voted to accelerate the vesting of all unvested stock options as of October 30, 2007.
(2)		On January 12, 2009, Dr. Joel E. Bernstein exercised 231,670 options.

Narrative Disclosure to Summary Compensation Table; Additional Narrative Disclosure

Employment and Consulting Agreements; Termination, Severance and Change-in-Control Matters

The Company and Winston Labs have entered into certain employment and severance agreements with certain of our Named Executive Officers. Such agreements are summarized below. Such summaries are intended solely as a synopsis of the material terms of such agreements and are qualified in their entirety by the terms and provisions of such agreements.

Joel E. Bernstein, M.D. Employment Agreement

In connection with the Merger, we entered into an employment agreement with Dr. Joel Bernstein, effective on the date of the Merger. The agreement provides that Dr. Bernstein will serve as President and Chief Executive Officer, or Vice Chairman in the event that the Board hires a new Chief Executive, for a term of two years. His base salary under the agreement is $260,000 for the first year of the agreement and $280,000 for the second. Dr. Bernstein will be eligible to receive bonuses in such amounts and in such form as may be determined by the Board if awarded by the Board, as well as medical insurance, life insurance, 401(k) participation and six weeks of vacation annually.

Under the agreement, Dr. Bernstein is allowed to pursue other employment during the period he is employed by us, provided he devotes at least 60% of his working time to us. He has also assigned to Winston Labs all patents relating to pharmaceutical products that he invents following the date of the agreement, except those related to dermatological and ophthalmic products.

The agreement provides that we may terminate Dr. Bernstein for any reason; however, if such termination is not due to Cause, death or Disability, we will be required to pay the following:

• the base salary in effect on the date of termination for the twelve months following termination; • life insurance benefits, to the same extent as provided to similarly situated employees, for the twelve months following termination; • medical insurance continuation coverage under COBRA up to twelve months following termination; and • all benefits not fully vested will vest on the date of termination.

~~• life insurance benefits, to the same extent as provided to similarly situated employees, for the twelve months following termination;~~34

• medical insurance continuation coverage under COBRA up to twelve months following termination; and

• all benefits not fully vested will vest on the date of termination.

Dr. Bernstein will not be entitled to any such compensation or benefits if he breaches any of the covenants in the agreement relating to the protection of confidential information, non-disclosure, non-competition and non-solicitation. He will also not be entitled to any compensation or other benefits under the Agreement if his employment is terminated for Cause.

As used in Dr. Bernstein’s employment agreement, the following terms have the following definitions:

“Cause” means the following: (i) the conviction of Dr. Bernstein of, or the entry of a plea of guilty or nolo contendere by Dr. Bernstein to, any misdemeanor involving moral turpitude or any felony; (ii) fraud, misappropriation or embezzlement by Dr. Bernstein with respect to the Company or any subsidiary or affiliate thereof, including without limitation Winston Labs; (iii) Dr. Bernstein’s willful failure, gross negligence or gross misconduct in the performance of his assigned duties for the Company or any subsidiary or affiliate thereof, ~~including~~ including without limitation Winston Labs; (iv) Dr. Bernstein’s material breach of a fiduciary duty to the Company or any subsidiary or affiliate thereof, including without ~~limitation~~ limitation Winston Labs; (v) any wrongful act or omission of Dr. Bernstein not at the express direction of the Board of Directors of the Company or any subsidiary or affiliate thereof, including without limitation Winston Labs, that reflects materially and adversely on the integrity and reputation for honesty and fair dealing of the Company or any subsidiary or affiliate thereof, including without limitation Winston Labs, or has a material detrimental effect on the Company’s financial condition, position or business, or the financial condition, position or ~~business~~ business of any subsidiary or affiliate thereof, including without limitation Winston Labs; or (vi) the breach by Dr. Bernstein of any material term of his employment agreement (provided that in the case of clauses (iii),(iv),(v) and (vi) (but ~~excluding~~ excluding breaches of Section 6 or 7 (i.e., confidentiality, non-solicitation and non-competition provisions), the Company shall have provided Dr. Bernstein with written notice of the acts, breaches or other events that would otherwise constitute “Cause” thereunder and Dr. Bernstein shall have failed to cure or remedy such acts, breaches or other events within ten (10) days following receipt of such notice, and provided further that the failure of the Company or any subsidiary to achieve any financial objective shall not serve as as the basis for Cause hereunder).

“Disability” means the incapacity of Dr. Bernstein due to physical or mental illness where Dr. Bernstein has been unable to perform his duties during the preceding 90 days, or where said incapacity has been determined to exist or have existed such that he is or was unable to perform his previously assigned duties, and that such incapacity continued, has continued and/or will continue for such period of time for at least 90 days during any consecutive 365 day period by either (i) the liability insurance carrier for the Company or its subsidiaries or (ii) the concurring opinions of two board certified, licensed physicians (as selected one by the Company and one by Dr. Bernstein); provided that Dr. Bernstein shall, within 15 days after the written request of the Company or any ~~subsidiary~~ subsidiary or affiliate thereof, including without limitation Winston Labs, submit to a physical and/or mental examination for purposes of determining Disability.

Scott B. Phillips, M.D. — Severance Agreements

Winston Labs has entered into two separate agreements dated as of October 8, 2003 (the “Phillips Change in Control Agreement”) and January 26, 2006 (the “Phillips Severance Letter”, and collectively with the Change in Control Agreement, the “Phillips Severance Agreements”) with Scott B. Phillips, its Senior Vice President and Chief Scientific Officer, which together outline the terms upon which Dr. Phillips’ employment with Winston Labs may be terminated and the conditions upon which certain severance payments will be made to Dr. Phillips in the event of such termination, including termination of his employment in connection with a change in control of Winston Labs.

Pursuant to the terms of the Phillips Severance Letter, Winston Labs may terminate Dr. Phillips’ employment at any time upon thirty (30) days written notice. Dr. Phillips may terminate his employment with Winston Labs at any time upon fourteen (14) days written notice. If Dr. Phillips’ employment is terminated by Winston Labs, then Dr. Phillips is entitled to receive by reason of such termination his base salary and life insurance benefits in effect at the time of such termination for an additional six (6) months from the termination date. Any COBRA benefits shall begin at the conclusion of such six (6) month period. All other benefits that are not fully vested on the termination date shall cease and be extinguished on such date. If Dr. Phillips terminates his ~~employment~~ employment for any reason, all salary and benefits that are not fully-vested, including any and all unvested bonuses, shall cease and be extinguished on the termination date.

32Pursuant to the terms of the Phillips Change in Control Agreement, in the event Dr. Phillips’ employment with Winston Labs is terminated by Winston Labs following a change in control of Winston Labs, Dr. Phillips shall be entitled to receive the following severance compensation (“Change in Control Severance”): (i) a lump-sum severance payment equal to two times his annual salary at the highest rate in effect at any time prior to such termination, plus incentive pay in an amount not less than the highest incentive, bonus or other cash payment made to Dr. Phillips in addition to his salary in any of the three years immediately preceding the year in which the change in control occurred and (ii) for a period of twenty-four (24) months following the termination date, welfare benefits (but excluding stock option, stock purchase, stock appreciation and similar compensatory benefits) substantially similar to those which Dr. Phillips was entitled to receive immediately prior to the termination date, reduced to the extent comparable welfare benefits are actually received by Dr. Phillips from another employer during such period.

~~Pursuant~~Dr. Phillips toshall ~~the~~also ~~terms~~be ofentitled ~~the~~to ~~Phillips~~receive Change in Control ~~Agreement,~~Severance following a change in ~~the~~control ~~event~~of Winston Labs, if he terminates his employment following: (i) failure by Winston Labs to elect or re-elect Dr. Phillips~~’ employment~~ ~~with~~to ~~Winston~~the isposition ~~terminated~~(or bya ~~Winston~~substantially ~~following~~equivalent position) ahe held immediately prior to the change in control, ofor ~~Winston,~~the removal of Dr. Phillips ~~shall~~as bea ~~entitled~~director toof ~~receive~~Winston ~~the~~Labs ~~following~~if ~~severance~~he ~~compensation~~was ~~(“Change~~a indirector ~~Control~~immediately prior to the ~~Severance”):~~change in control; (iii) a ~~lump-sum~~significant ~~severance~~adverse ~~payment~~change ~~equal~~in tothe ~~two~~nature ~~times~~or ~~his~~scope ~~annual~~of Dr. Phillips’ ~~salary~~duties, ator ~~the~~a ~~highest rate~~reduction in ~~effect~~his atbase ~~any~~pay, ~~time~~incentive ~~prior~~pay toor ~~such~~benefits; ~~termination,~~(iii) a good ~~plus~~faith ~~incentive~~determination ~~pay~~by Dr. Phillips that a change in ancircumstances ~~amount~~(e.g. ~~not~~a ~~less~~change ~~than~~in the ~~highest~~scope ~~incentive,~~of ~~bonus~~business or ~~other~~Dr. Phillips’ ~~cash~~responsibilities) ~~payment~~has ~~made~~occurred tofollowing ~~Dr. Phillips~~a change in ~~addition~~control; to(iv) the ~~his~~liquidation, ~~salary~~dissolution, merger, consolidation, or reorganization inor ~~any~~sale of ~~the~~substantially ~~three~~all ~~years~~of ~~immediately~~Winston ~~preceding~~Labs’s assets, unless the ~~year~~successor inassumes ~~which~~all duties and obligations under the ~~change~~Phillips Change in ~~control~~Control ~~occurred and~~Severance Agreement; (iiv) ~~for~~the relocation ~~a period~~ of ~~twenty-four~~Winston ~~(24) months~~Labs’s ~~following~~principal ~~the~~executive ~~termination~~offices ~~date,~~or ~~welfare~~of ~~benefits~~Dr. Phillips’ principal ~~(but~~location ~~excluding~~of ~~stock~~work ~~option,~~in ~~stock~~excess ~~purchase,~~of ~~stock~~25 ~~appreciation~~miles ~~and~~from ~~similar~~the ~~compensatory~~location ~~benefits) substantially~~thereof ~~similar~~immediately prior to ~~those~~the change ~~which~~in control, or the requirement that Dr. Phillips ~~was~~travel ~~entitled~~away from his office in the course of discharging his duties to ~~receive~~Winston Labs at least 20% more often than was required immediately prior to the ~~termination~~ ~~date,~~change ~~reduced~~in tocontrol; and (vi) the ~~extent~~material ~~comparable~~breach ~~welfare~~of ~~benefits~~the ~~are~~Phillips Change ~~actually~~in ~~received~~Control Agreement by Winston Labs or its successor. Dr. Phillips ~~from~~will ~~another~~not ~~employer~~be entitled ~~during~~to ~~such~~receive ~~period~~Change in Control Severance if his employment is terminated for Cause or due to Dr. Phillips’ death or permanent disability.

Dr. Phillips shall also be entitled to receive Change in Control Severance following a change in control of Winston, if he terminates his employment following: (i) failure by Winston to elect or re-elect Dr. Phillips to the position (or a substantially equivalent position) he held immediately prior to the change in control, or the removal of Dr. Phillips as a director of Winston if he was a director immediately prior to the change in control; (ii) a significant adverse change in the nature or scope of Dr. Phillips’ duties, or a reduction in his base pay, incentive pay or benefits; (iii) a good faith determination by Dr. Phillips that a change in circumstances (e.g. a change in the scope of business or Dr. Phillips’ responsibilities) has occurred following a change in control; (iv) the liquidation, dissolution, merger, consolidation, or reorganization or sale of substantially all of Winston’s assets, unless the successor assumes all duties and obligations under the Phillips Change in Control Severance Agreement; (v) the relocation of Winston’s principal executive offices or of Dr. Phillips’ principal location of work in excess of 25 miles from the location thereof immediately prior to the change in control, or the requirement that Dr. Phillips travel away from his office in the course of discharging his duties to Winston at least 20% more often than was required immediately prior to the change in control; and (vi) the material breach of the Phillips Change in Control Agreement by Winston or its successor.

Dr. Phillips will not be entitled to receive Change in Control Severance if his employment is terminated for Cause or due to Dr. Phillips’ death or permanent disability.

As used in the Phillips Change in Control Agreement, “Cause” means:

(i) an intentional act of fraud, embezzlement or theft in connection with Dr. Phillips’ duties or in the course of his employment with Winston Labs or a subsidiary thereof; (ii) intentional wrongful damage to the property of Winston Labs or a subsidiary thereof; (iii) intentional wrongful disclosure of secret processes or confidential information of Winston Labs or a subsidiary thereof; or (iv) intentional wrongful engagement by Dr. Phillips in the management of any business enterprise that engages in substantial and direct competition with Winston Labs and such enterprise’s sales of any product or service competitive with any of Winston Labs’s products or services amounted to 10% of the net sales of such enterprise and of Winston Labs for their respective most recently-completed fiscal years.

(iii) intentional wrongful disclosure of secret processes or confidential information of Winston or a subsidiary thereof; or

(iv) intentional wrongful engagement by Dr. Phillips in the management of any business enterprise that engages in substantial and direct competition with Winston and such enterprise’s sales of any product or service competitive with any of Winston’s products or services amounted to 10% of the net sales of such enterprise and of Winston for their respective most recently-completed fiscal years.

Compensation of Directors

The following table provides information regarding compensation of directors for the ~~year~~ year ended December 31, ~~2008~~2009.

	Fees earned or
	Fees
	Paid in Cash		Stock Awards		Total
	earned or
Name	($)		($)		($)
	Paid in		Option
Robert A. Yolles(1)		3,125		—		3,125
	Cash		Awards		Total
Glenn L. Halpryn(2) (3)		2,450		—		1,200
Name	($)		($)(1)		($)
Alan Jay Weisberg(2)		1,200		—		1,200
Robert A. Yolles		5,000		43,830		48,830
Noah M. Silver(2)		1,200		—		1,200
Glenn L. Halpryn		5,000		43,830		48,830
Curtis Lockshin Ph.D.(2) (3)		2,450		—		1,200
Curtis Lockshin Ph.D.		5,000		40,178		45,178
Neal S. Penneys, M.D., Ph.D. (3)		1,250		—		1,250
Neal S. Penneys, M.D., Ph.D.		5,000		40,178		45,178
Subbarao Uppaluri, Ph.D. (3)		1,250		—		1,250
Subbarao Uppaluri, Ph.D.		5,000		40,178		45,178
Jeffrey Bernstein, Ph.D. (4)		1,875		—		1,875

(1)		Reflects: (i) $1,875 in fees paid to Mr. Yolles service on Winston’s Board of Directors for three fiscal quarters prior to the Merger and (ii) $1,250 in fees for service on the Company’s Board of Directors for one fiscal quarter subsequent to the Merger.
(2)		Reflects $1,200 in fees paid to each of Messrs Halpryn, Weisberg, and Silver, and to Dr. Lockshin, for service on the Company’s Board of Directors for three fiscal quarters prior to the Merger.
(3)		Reflects $1,250 in fees paid to each of Drs. Penneys, Uppaluri, and Lockshin, and to Mr. Halpryn for service on the Company’s Board of Directors for one fiscal quarter subsequent to the Merger.
(4)		Reflects $1,875 in fees paid to Dr. Jeffrey Bernstein the son of Dr. Joel Bernstein for service on Winston’s Board of Directors for three fiscal quarters prior to the Merger.


⁽¹⁾		Represents aggregate grant date fair value pursuant to ASC Topic 718 for the respective year for restricted stock options granted as long term incentive pursuant to the Company’s Omnibus Incentive Plan.

Each of our non-employee directors currently receives $1,250 per quarter. Directors do not receive additional compensation for attendance at meetings. Directors who are also employees do not receive compensation for their service on the Board.

Effective as of the time of our Merger with Winston, Jeffrey Bernstein, Alan Jay Weisberg and Noah M. Silver resigned from the Board of Directors.

Compensation Committee Interlocks and Insider participation; Compensation Committee Report

We are a “smaller reporting company” as defined by Item 10(f)(1) of Regulation S-K and, pursuant to Item 407(g)(2) of Regulation S-K, we are not required to make the disclosures otherwise required by Item 407(e)(4) and (e)(5) of Regulation S-K.

3536

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

~~2008~~2009 Equity Compensation Plan Information

Number of securities

Number of

remaining available for

securities

future issuance under

remaining

Number of securities to

Weighted average

equity compensation

available for

be issued upon exercise

exercise price of

plans (excluding

future issuance

of outstanding options,

outstanding options,

securities reflected in

Number of

Weighted

under

warrants and rights

column (a)

securities to

average

equity

be issued

exercise price

compensation

upon exercise

plans

of outstanding

outstanding

(excluding

options,

securities

warrants and

reflected in

rights

column (a)

(a)

(b)

(c)

Equity compensation plans approved by security holders

—3,041,985

—0.50

—6,666,070

Equity compensation plans not approved by security holders

3,626,731

0.32

5,723,892

~~The Company~~Effective ~~has adopted the 1999 Stock Option Plan~~April 1, ~~as amended~~2009, ~~and~~ the ~~Stock Option~~Company’s ~~Plan~~Board ~~for~~of ~~Non-Employee~~ Directors, asadopted ~~amended, collectively~~ the ~~“Plans.”~~Company’s ~~The~~Omnibus ~~Plans~~Incentive ~~provide~~Plan ~~for~~ (the ~~granting~~“Plan”). ofThe ~~incentive~~Plan ~~stock~~was ~~options~~established toby ~~officers and other employees of the Company~~amending, ~~and~~restating ~~non-qualified stock options to directors~~ and merging ~~consultants of~~ the Company.’s ~~The~~existing ~~total number~~Stock ofOption ~~shares~~Plan ~~of common stock authorized~~ for ~~issuance~~Non-Employee ~~under the Plans is 9~~directors,~~708,055.~~ ~~The options are exercisable at various dates~~ and ~~will~~the ~~expire no more than ten years from their date of grant.~~1999 ~~The~~Stock ~~exercise~~Option ~~price~~Plan ~~and~~(collectively, the ~~duration~~“Prior ofPlans”), ~~each~~with ~~option~~and ~~are~~into ~~determined by~~ the ~~Board of Directors~~Plan. InThe ~~the case~~Plan ~~of incentive stock options, the exercise price may not be less than 100% of the fair market~~was ~~value~~approved ofby the Company’s ~~common~~shareholders ~~stock~~ at the ~~date of grant. For holders of more than 10% of the~~ Company’s ~~total~~annual ~~combined~~meeting ~~voting~~held ~~power~~on of all classes of stock, incentive stock options may not be granted at less than 110% of the fair market value of the Company’s common stock at the date of grant and for a term not to exceed five years. The Company did not grant any options in 2008. In JulyJune ~~2008~~17, ~~446,791 options were forfeited by a past Director of the Company when rights to exercise~~ ~~those options lapsed~~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.

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.

Voting Securities and Principal Stockholders

Prior to the 8-1 reverse stock split described below, our voting securities consisted of our common stock, par value $0.001 per share, of which 440,851,441 shares were outstanding, our Series A Convertible Preferred Stock, of which 101,849 shares were outstanding, and our Series B Convertible Preferred Stock, of which 73,332 shares were outstanding. Each share of preferred stock was convertible into 1,000 shares of common stock. The holders of our voting securities are entitled to one vote for each outstanding share of common stock, including outstanding shares of preferred stock on an as-converted basis, on all matters submitted to our stockholders.

AsOn September 24, 2009, each outstanding share of ~~March~~Company Series 26A Convertible Preferred Stock (12,730) ~~2009~~and Series B Convertible Preferred Stock (9,157) ~~our~~automatically converted ~~voting~~into ~~securities~~1,000 ~~consist~~fully-paid, non-assessable shares of ~~our~~the Company’s common stock, par value $0.001 per share. In addition, ofin ~~which~~connection ~~55,338,034~~with ~~shares~~such ~~are~~conversion, each outstanding, warrant ~~our~~to purchase shares of Series A Convertible Preferred Stock, ofautomatically ~~which~~converted ~~12,730~~into ~~shares~~the ~~are~~right ~~outstanding,~~to ~~and~~acquire ~~our~~1,000 ~~Series B~~shares ~~Convertible~~of ~~Preferred~~Common Stock, ofupon ~~which~~the ~~9,157~~exercise of ~~shares~~such ~~are~~warrant, ~~outstanding.~~at ~~The~~an ~~following~~exercise ~~tables~~price ~~contain~~of ~~information~~$0.39 ~~regarding~~per ~~record~~share ~~ownership~~ of ~~our common~~Common ~~stock as or March 26, 2009 held by:~~Stock.

As of March 1, 2010, our voting securities consist of our common stock, par value $0.001 per share, of which 77,408,893 shares are outstanding. The following tables contain information regarding record ownership of our common stock as or March 1, 2010 held by:

	•		persons who own beneficially more than 5% of our outstanding voting securities,

	•		our directors,

	•		named executive officers, and

	•		all of our directors and officers as a group.

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Management and Directors:	Shares Beneficially Owned (14)		Percentage Ownership
Joel E. Bernstein, M.D.(1)		26,398,432		29.5	%
Joel E. Bernstein, M.D. (1)		26,498,432		29.63	%
Scott B. Phillips, M.D.(2)		2,152,580		2.4	%
Scott B. Phillips, M.D. (2)		1,810,433		2.02	%
David Starr		0		*
David Starr (3)		75,000		*
Curtis Lockshin, Ph.D.		1,250		*
Curtis Lockshin, Ph.D. (4)		28,750		*
Robert A. Yolles(3)		368,663		*
Robert A. Yolles (5)		398,665		*
Glenn L. Halpryn(4)		354,942		*
Glenn L. Halpryn (6)		384,781		*
Neal Penneys, M.D., Ph.D.		411,862		*
Neal Penneys, M.D., Ph.D. (7)		439,362		*
Subbarao Uppaluri, Ph.D.(5)		299,351		*
Subbarao Uppaluri, Ph.D. (8)		326,538		*
All officers and directors As a group (8 people)		29,~~987~~961,~~080~~961		33.651	%

5% Stockholders	Shares Beneficially Owned		Percentage Ownership
Frost Gamma Investments(6), (7)		26,575,429		29.6	%
Frost Gamma Investments (9), (10)		26,574,659		29.72	%
Jeffrey Bernstein(8)		5,165,324		5.7	%
Jeffrey Bernstein (11)		5,170,824		5.78	%
David Bernstein(9)		4,982,129		5.5	%
David Bernstein (12)		4,982,129		5.57	%
Rebecca Zelken(10)		4,983,129		5.5	%
Rebecca Zelken (13)		4,983,829		5.57	%

*		Less than 1%.
(1)		Includes ~~661~~761,913 shares of common stock underlying options. Also includes 12,709,386 shares of common stock that are beneficially owned by Dr. Bernstein’s wife, with respect to which Dr. Bernstein disclaims any beneficial ownership.
(2)		Includes 1,~~654~~148,~~782~~776 shares of common stock underlying options.
(3)		~~Includes~~Represents ~~281~~75,~~313~~000 shares of common stock underlying options. ~~Also includes 4,350 shares of common stock that are beneficially owned by Mr. Yolles’s wife, with respect to which Mr. Yolles disclaims any beneficial ownership.~~
(4)		Includes ~~229~~27,~~161~~500 shares of common stock underlying ~~shares of Series B Convertible Preferred Stock~~options.
(5)		Includes ~~127~~311,~~313~~315 shares of common stock underlying ~~Series~~options. AAlso ~~Convertible~~includes ~~Preferred Stock and 89~~4,~~589~~350 shares of common stock ~~underlying~~that ~~warrants~~are tobeneficially ~~purchase~~owned ~~shares~~by ofMr. ~~Series~~Yolles’s Awife, ~~Convertible~~with ~~Preferred~~respect ~~Stock~~to which Mr. Yolles disclaims any beneficial ownership.
(6)		Includes 1230,~~476,548~~000 shares of common stock underlying shares of Series A Convertible Preferred Stock and 8,779,797 shares of common stock underlying warrants to purchase shares of Series A Convertible Preferred Stock and 4,583,222 shares of common stock underlying shares of Series B Convertible Preferred Stockoptions.
(7)		AsIncludes ~~the sole trustee of the Frost Gamma Investments Trust~~27,500 ~~Dr. Phillip Frost may be deemed the beneficial owner of all~~ shares ~~owned by the trust by virtue~~ of ~~his~~common ~~power~~stock tounderlying ~~vote or direct the vote of such shares or to dispose or direct the disposition of such shares owned by the trust~~options.
(8)		Includes ~~250 and 1~~27,500 shares of common stock ~~that~~underlying ~~are~~options ~~beneficially owned by Mr. Bernstein’s wife~~ and ~~children~~89,589 ~~respectively,~~shares ~~with respect to which, Mr. Bernstein disclaims any beneficial ownership. Jeffrey Bernstein is the son~~ of ~~Dr.~~common ~~Joel~~stock E.underlying ~~Bernstein~~warrants.
(9)		Includes ~~250~~8,779,797 ~~and 500~~ shares of common stock ~~that~~underlying ~~are beneficially owned by Mr~~warrants. ~~Bernstein’s wife and his child, respectively, with respect to which, Mr. Bernstein disclaims any beneficial ownership. David Bernstein is the son of Dr. Joel E. Bernstein.~~
(10)		~~Includes~~As ~~250~~the ~~and~~sole 1trustee of the Frost Gamma Investment Trust,~~500~~ ~~shares~~Dr. ofPhillip ~~common~~Frost ~~stock~~may ~~that~~be ~~are~~deemed ~~beneficially~~the beneficial owner of all shares owned by ~~Mrs.~~the ~~Zelken’s~~trust ~~husband~~by ~~and~~virtue that his ~~children,~~power ~~respectively,~~to ~~with~~vote ~~respect~~or todirect ~~which,~~the ~~Mrs.~~vote ~~Zelken~~of ~~disclaims~~such ~~any~~shares ~~beneficial~~or ~~ownership.~~to ~~Rebecca~~dispose ~~Zelken~~or isdirect the ~~daughter~~disposition of ~~Dr.~~such ~~Joel~~shares E.owned ~~Bernstein~~by the trust.

3739


(11)		Includes 250 and 1,500 shares of common stock that are beneficially owned by Mr. Bernstein’s wife and his children, respectively, with respect to which, Mr. Bernstein disclaims any beneficial ownership. Jeffrey Bernstein is the son of Dr. Joel E. Bernstein.

(12)		Includes 250 and 500 shares of common stock that are beneficially owned by Mr. Bernstein’s wife and his child, respectively, with respect to which, Mr. Bernstein disclaims any beneficial ownership. David Bernstein is the son of Dr. Joel E. Bernstein.

(13)		Includes 950 and 1,500 shares of common stock that are beneficially owned by Mrs. Zelken’s husband and her children, respectively, with respect to which, Mrs. Zelken disclaims any beneficial ownership. Rebecca Zelken is the daughter of Dr. Joel E. Bernstein.

(14)		On February 12, 2010, Pharmaceutical Financial Syndicate, LLC (“PFS”), whose members include Dr. Joel E. Bernstein, the President and Chief Executive Officer and Robert A. Yolles and Neal S. Penneys, directors of the Company, executed a letter of intent (“LOI”) with Frost Gamma Investments Trust, Subbarao Uppaluri, a director of the company, and certain other shareholders of the Company (collectively, the “Frost Group”), to acquire 100% of the Company’s capital stock (the “Acquisition”) beneficially owned by all of the members of the Frost Group consisting of an aggregate of 18,399,271 outstanding shares of common stock and warrants to purchase an aggregate of 8,958,975 shares of common stock (collectively, the “Acquired Securities”). As of the date of this filing, the Acquisition has not taken place and its effect on the shares beneficially owned is not reflected in the table above.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Certain Relationships and Related Person Transactions

PFS Acquisition

On February 12, 2010, Pharmaceutical Financial Syndicate, LLC (“PFS”), whose members include Dr. Joel E. Bernstein, the President and Chief Executive Officer and Robert A. Yolles and Neal S. Penneys, directors of the Company, executed a letter of intent (“LOI”) with Frost Gamma Investments Trust, Subbarao Uppaluri, a director of the company, and certain other shareholders of the Company (collectively, the “Frost Group”), to acquire 100% of the Company’s capital stock (the “Acquisition”) beneficially owned by all of the members of the Frost Group consisting of an aggregate of 18,399,271 outstanding shares of common stock and warrants to purchase an aggregate of 8,958,975 shares of common stock (collectively, the “Acquired Securities”).

Opko License

On September 19, 2007, Winston Labs entered into an exclusive technology license agreement with Opko Ophthalmologics, 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 aLabs a license fee of $100,000 and is required to pay a 10% royalty on sales of the product. 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~~Winston ~~Company~~ Labs agreed to equally share the cost related to manufacturing and clinical supplies of Civamide Nasal solution. During 2009 and 2008, OPKO reimbursed Winston Labs approximately $111,539 and $80,000, respectively for such costs. In addition, the agreement calls for ~~OPKO~~ OPKO to reimburse Winston for certain legal expenses Winston Labs has incurred related to keratoconjunctivitis. In 2009 and 2008, approximately $38,800 and $38,000, respectively, of legal fees were billed to OPKO, of which approximately $7,000 and $38,000 is ~~included~~ included in related party receivable on the Consolidated Balance Sheets as of December 31, 2009 and 2008. Subsequent to December 31, 2009 and 2008, respectively, OPKO paid $7,000 and $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 as of ~~February 23~~December 31, 2009 was the beneficial owner of 52more than 50% of Opko Health’s common stock. As of December 31, 2009, Dr. Frost is also the indirect beneficial owner of ~~735~~26,~~862~~574,659 shares of ~~(1.34%)~~ the Company’s ~~common~~ capital stock, ~~12,476 shares~~on ofa ~~the~~fully ~~Company’s~~diluted ~~Series A~~basis ~~Convertible~~(29.7% ~~Preferred Stock,~~of ~~8,779~~the ~~warrants~~total toissued ~~purchase~~and ~~Series A Convertible~~outstanding ~~Preferred Stock~~shares), including ~~and 4~~8,~~583~~779,797 shares of ~~the~~common ~~Company’s~~stock ~~Series B~~underlying ~~Convertible Preferred Stock~~warrants. Furthermore, Subbarao Uppaluri, Ph.D., a director of the Company and the Senior Vice President — Chief Financial Officer of Opko Health, is the beneficial owner of 82326,~~449~~538 shares ~~(0.15%)~~ of the Company’s ~~common~~capital stock, ~~127 shares~~on ofa ~~the~~fully-diluted ~~Company’s~~basis, ~~Series A~~including ~~Convertible~~27,500 ~~Preferred Stock~~shares ~~and~~of 90common ~~warrants to purchase Series A~~stock ~~Convertible~~underlying ~~Preferred~~options ~~Stock~~ and is89,589 ashares ~~director~~ of ~~the~~common ~~Company~~stock underlying warrants.

Elorac License

On August 14, 2007, Winston Labs entered into an exclusive technology license agreement with Exopharma, Inc., now known as Elorac, Inc. (“Elorac”). Robert Yolles, a director of the Company is also a director of Elorac. In addition, Elorac is an entity that is controlled by Dr. Bernstein, CEO of Winston Labs and 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~~ stated indication of psoriasis of the skin). In exchange, Elorac paid Winston Labs a license fee of of $100,000 and is required to pay a 9% royalty on sales of the product. In addition, the ~~agreement~~ agreement requires 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 ~~and~~ ~~Elorac~~Labs ~~(aka~~and Elorac) mutually terminated the above license agreement. As a result of this mutual termination, Winston Labs paid Elorac $105,000 in November 2007, 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’s Labs expenses ~~such~~ 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. Winston ~~has~~Labs ~~received~~has received approximately $162,977 and $128,323 in 2009 and in 2008, respectively for such services, which are included as a reduction of Winston’s Labs expenses on the Consolidated Statement of Operations. Amounts due from Elorac of $2,601 and $0 as of December 31, 2009 and 2008, respectively, are included in related party receivables in the Company’s Consolidated Balance Sheets.

Gideon Pharmaceuticals, Inc.

~~In November 2005, Winston spun off~~ Gideon Pharmaceuticals, Inc. (“Gideon”). ~~Gideon~~is ~~received certain~~a ~~early-stage~~corporation ~~technologies~~whose ~~not~~chairman ~~being actively developed by Winston,~~ and ~~all Winston~~sole ~~shareholders~~director ~~were~~is ~~offered~~Joel ~~the opportunity to purchase Gideon shares on a pro-rata basis~~E. ~~Not~~Bernstein, ~~all Winston shareholders purchased Gideon shares~~M.D., ~~but~~president ~~overlap~~and inCEO ~~the shareholders~~ of ~~Winston~~the ~~and Gideon is very significant~~Company. Gideon ~~is an independent entity and not a subsidiary of Winston; however, as~~reimburses ~~part of~~ the ~~spin-off~~Company ~~process,~~for ~~Winston~~certain ~~did~~expenses ~~end~~that ~~up purchasing and maintaining a minority stake in Gideon (approximately 10.7% ownership), for~~ the ~~purpose~~Company ofincurs ~~preserving~~on ~~the~~behalf ~~rights~~ of ~~those option holders in Winston prior to the~~ Gideon ~~spin-off~~. ~~In particular, option holders in Winston prior to~~Amounts ~~the~~due ~~spin~~from ~~off of~~ Gideon ~~had, upon exercise~~ of ~~their Winston options~~$12,675 anand ~~opportunity~~$0 toas ~~purchase a pro-rata allotment~~ of ~~Gideon shares. During 2006, Winston undertook certain development projects on behalf of Gideon, which were billed back to Gideon at cost. As of~~ December 31, ~~2006,~~2009 ~~Winston~~and ~~had~~2008, ~~a receivable due from Gideon of $2~~respectively,~~642,~~ ~~which was~~ are included in related party ~~receivables~~receivable on ~~Winston’s balance sheet and was subsequently collected in full in 2007. In October 2007, in connection with~~ the ~~Merger,~~Consolidated ~~Winston’s~~Balance ~~Board of Directors voted to distribute the shares of Gideon owned by Winston on behalf of the Winston option holders on a pro-rata basis to such option holders~~Sheets. ~~As of December~~ ~~31, 2007, Winston had no ownership stake in Gideon.~~

Sirius (DUSA) License

On January 30, 2006, Winston Labs licensed to Sirius Laboratories, Inc., a company founded by Dr. Bernstein, 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~~ purchase of Sirius. This license had been extended until September 30, 2008 by mutual written consent of the parties and the extension provides for continuing of the 25% royalty on net sales but eliminates the minimum royalty and purchase option. This agreement expired on September 30, 2008. Under the technology license agreement, Winston Labs recorded royalty revenue of $~~34,861~~0 and $~~300~~34,~~000~~861 for the years ended December 31, ~~2008~~2009 and ~~2007~~2008, respectively. ~~This~~In July 2008, the Company learned that DUSA had breached a license agreement ~~expired~~with onWinston ~~September~~Labs. Winston Labs initiated arbitration in October 302008 to recover the damages caused by this breach. In June 2009, ~~2008~~DUSA settled this matter by agreeing to pay $75,000 in damages. This settlement is included in other income in the Consolidated Statements of Operations.

Packer’s-Pine Corporation

In 2006 and 2007, Winston Labs assisted Packer’s-Pine Corporation (“Packer’s”) with distribution of certain personal care products and administration. Packer’s is a corporation whose chairman is Dr. Bernstein, president and CEO of the Company and two directors of the Company served on the board of directors of Packer’s. Under this arrangement, Packer’s reimbursed Winston Labs for direct costs. The amount received by Winston from Packer’s as a fee for performing this function amounted to $0 during the years ended December 31, 2008 and 2007. Amounts due from Packer’s of $0 and $5,554 as of December 31, 2008 and 2007, respectively, are included in related party receivables in Winston’s balance sheet. In ~~March~~ 2008, Packer’s merged into Elorac.

~~Consulting Agreement with Jeffrey Bernstein~~41

On September 30, 2007, Dr. Jeffrey Bernstein resigned as Senior Vice President and Chief Operating Officer of Winston, and entered into a consulting agreement with that company, effective as of October 1, 2007. Dr. Bernstein’s responsibilities as set forth in his consulting agreement include assisting with the Merger, interfacing with various of Winston’s service providers, aiding in the completion of audits of Winston’s financial statements for fiscal years 2006 and 2007, and working with Winston’s new Chief Financial Officer, David Starr. Pursuant to the terms of his consulting agreement, Winston agreed to compensate Dr. Bernstein at a rate of $150 per hour. Further, Winston agreed to reimburse Dr. Bernstein for all reasonable out-of-pocket expenses incurred in the course of his services to Winston, including, but not limited to, reasonable expenses related to travel, telephone, postage, and office supplies. The consulting agreement is terminable by either Dr. Jeffrey Bernstein or by Winston upon thirty (30) days notice to the other party. Dr. Jeffrey Bernstein is the son of Dr. Joel E. Bernstein, the President and Chief Executive Officer of the Company. Winston incurred $21,488 and $12,750 of expenses under the consulting agreement for years ended December 31, 2008 and 2007, respectively.

Sales of Stock of Getting Ready Corporation

On December 4, 2006, investors, including Glenn L. Halpryn of Miami, Florida, and Steven Jerry Glauser of Denver, Colorado, purchased an aggregate of 89% of the outstanding common stock of the Company from 45 shareholders for an aggregate purchase price of $636,000. The Company’s former chief executive officer assumed the Company’s liabilities in connection with the sale of his shares. In addition to purchasing the shares, the investors contributed an aggregate of $699,405 in working capital to the Company in exchange for shares of its common stock in a private placement. Following the transaction, the investors then beneficially owned an aggregate of 93.3% of the outstanding shares of the Company.

OnConsulting ~~March 21,~~Agreement ~~2007,~~with ~~the~~Jeffrey ~~Company sold 9,349,777 shares of its restricted common stock to a group~~Bernstein of investors led by Dr. Phillip Frost (the “Frost Investors”). The Frost Investors paid the Company $567,000 for the shares, which amount was approximately equal to the Company’s cash on hand on the purchase date. After the purchase, the Frost Investors beneficially owned 51% of the Company’s outstanding shares. Prior to the Merger, Dr. Frost was the beneficial owner of 5,699,533 shares of Winston Series A Preferred Stock, 4,010,784 warrants to purchase Winston’s Series A Convertible Preferred Stock and 2,093,706 shares of Winston Series B Preferred Stock.

~~Sales~~On September 30, 2007, Dr. Jeffrey Bernstein resigned as Senior Vice President and Chief Operating Officer of Winston ~~Stock~~Labs, and entered into a consulting agreement with that company, effective as of October 1, 2007. Dr. Bernstein’s responsibilities as set forth in his consulting agreement include assisting with the Merger, interfacing with various of Winston Labs’s service providers, aiding in the completion of audits of Winston Labs financial statements for ~~Bioglan~~fiscal ~~Purchasers~~years 2006 and 2007, and working with Winston Labs’s new Chief Financial Officer, David Starr. Pursuant to the terms of his consulting agreement, Winston Labs agreed to compensate Dr. Bernstein at a rate of $150 per hour. Further, Winston Labs agreed to reimburse Dr. Bernstein for all reasonable out-of-pocket expenses incurred in the course of his services to Winston Labs, including, but not limited to, reasonable expenses related to travel, telephone, postage, and office supplies. The consulting agreement is terminable by either Dr. Jeffrey Bernstein or by Winston upon thirty (30) days notice to the other party. Dr. Jeffrey Bernstein is the son of Dr. Joel E. Bernstein, the President and Chief Executive Officer of the Company. Winston incurred $12,213 and $21,488 of expenses under the consulting agreement for years ended December 31, 2009 and 2008, respectively, of which approximately $7,900 was outstanding as of December 31, 2009 and is included in accrued expenses and other current liabilities on the Consolidated Balance Sheets.

In September 2007, Winston purchased all of the then outstanding ownership in Winston from Bioglan for $225,000. Winston also purchased all of the then outstanding ownership in Rodlen from Bioglan for $10,000. Subsequent to this transaction, Rodlen was merged into Winston on September 21, 2007. Both of these purchases were financed by the sale of 385,000 shares of Winston common stock to seven existing stockholders or option holders of Winston for an aggregate purchase price of $346,500, including 55,000 shares purchased by Robert A. Yolles, director of the Company, and 55,000 shares purchased by Carole Bernstein, spouse of Dr. Joel E. Bernstein, President and Chief Executive Officer of the Company.

Independence of Directors

The Board of Directors has determined that the following individuals are independent as as defined by the listing standards of the NYSE Amex Market and the NASDAQ Stock Market: Messrs. Yolles, ~~Penneys~~ and Halpryn and Drs. Lockshin, Penneys and Uppaluri. In reaching this conclusion, the Board of Directors considered family and employment relationships that such directors have with the members of the Board of Directors.

Item 14. Principal Accounting Fees and Services

Pre-Approval Policies and Procedures

Pursuant to its charter, the Audit Committee has the sole authority to select, evaluate and replace the Company’s independent registered public accountants (subject, if applicable, to stockholder ratification). The Audit Committee is directly responsible for the compensation and oversight of the work of the Company’s independent registered public accountants (including resolution of disagreements between management and the Company’s independent registered public accountants regarding financial reporting) for the purpose of preparing or issuing an audit report or related work. The Company’s independent registered public accountants are engaged by, and report directly to, the Audit Committee.

The Audit Committee pre-approves all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by its independent registered public accountants, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act and SEC Rule 2-01(c)(7)(i)(C) of Regulation S-X, all of which are approved by the Audit Committee prior to the completion of the audit. In the event pre-approval for such auditing services and permitted non-audit services cannot be obtained as a result of inherent time constraints in the matter for which such services are required, the Chairman of the Audit Committee has been granted the authority to pre-approve such services provided that the Chairman of the Audit Committee presents for ratification such pre-approval to the Audit Committee at its next scheduled meeting. The Audit Committee has complied with the procedures set forth above, and has otherwise complied with the provisions of its charter.

Audit Fees

The aggregate fees incurred by the Company and its consolidated subsidiaries for fiscal years ended December 31, ~~2008~~2009 and ~~2007~~2008 for professional services rendered by McGladrey & Pullen LLP in connection with (i) the audit of the Company’s annual financial statements, (ii) the ~~review~~ reviews of the financial statements included in the Company’s Quarterly Reports on Form 10-Q for the ~~quarter~~ quarters ended March 31, 2009, June 30, 2009, September 30, 2009 and September 30, 2008 and (iii) a consent issued in connection with the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008, were $~~148~~138,~~125~~062 and $90148,~~000~~125, respectively.

Audit-Related Fees

The Company did not incur fees for fiscal years ended December 31, ~~2008~~2009 and ~~2007 for~~2008 for assurance and related services rendered by McGladrey & Pullen LLP in connection with (i) the performance of the audit or review of the Company’s financial statements, including 401(k) plan audits, (ii) due diligence assistance and (iii) assistance with compliance with Section 404 of the Sarbanes-Oxley Act of 2002.

Tax Fees

The aggregate fees incurred by the Company for fiscal years ended December 31, ~~2008~~ 2009 and ~~2007~~ 2008 for professional services rendered by RSM McGladrey, Inc. for tax compliance, tax advice and tax planning were $5420,~~750~~000 and $054,750, respectively. These services consisted of ~~reviewing~~preparing the Company’s tax returns.

All Other Fees

The Company did not incur any other fees for fiscal years ended December 31, ~~2008~~ 2009 and ~~2007~~ 2008 for services rendered by RSM McGladrey, Inc. or McGladrey & Pullen LLP.

PART IV

Item 15. Exhibits, Financial Statement Schedules

The following are filed as part of this Annual Report on Form 10-K:

(1)	~~(1)~~	Financial Statements: For a list of financial statements which are filed as part of this Form 10-K, See Item 8. Financial Statements and Supplementary Data on Page 28.	~~Financial Statements: For a list of financial statements which are filed as part of this Form 10-K, See Item 8. Financial Statements and Supplementary Data on Page 24.~~
(2)	~~(2)~~	Exhibits	~~Exhibits~~

	2.1			Merger Agreement and Plan of Reorganization dated as of November 13, 2007 by and among Getting Ready Corporation, Winston Laboratories, Inc. and Winston Acquisition Corp. (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated November 13, 2007 and incorporated herein by reference).
	2.2			First Amendment to Merger Agreement and Plan of Reorganization dated as of May 30, 2008 by and among Winston Laboratories, Inc., a Delaware corporation, Getting Ready Corporation, a Delaware corporation, and Winston Acquisition Corp., a Delaware corporation (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated May 30, 2008 and incorporated herein by reference).
	2.3			Second Amendment to Merger Agreement and Plan of Reorganization dated as of June 23, 2008 by and among Winston Laboratories, Inc., a Delaware corporation, Getting Ready Corporation, a Delaware corporation, and Winston Acquisition Corp., a Delaware corporation (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K dated June 23, 2008 and incorporated herein by reference).
	3.1			Certificate of Incorporation (filed as Exhibit 3.1A to the Company’s Registration Statement on Form SB-2 dated September 15, 2004 and incorporated herein by reference).
	3.2			Certificate of Amendment of Certificate of Incorporation (filed as Exhibit 3.1B to the Company’s Registration Statement on Form SB-2 dated September 15, 2004 and incorporated herein by reference).
	3.3			Certificate of Amendment of Certificate of Incorporation (filed as Exhibit 1 to the Company’s Form PRE14C dated December 7, 2007 and incorporated herein by reference).
	3.4			Certificate of Amendment to Certificate of Incorporation (filed as Annex A to the Company’s DEF 14C dated September 22, 2008 and incorporated herein by reference).
	3.5			Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock of Getting Ready Corporation (filed as Exhibit 3.5 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
	3.6			Certificate of Designation, Preferences and Rights of Series B Convertible Preferred Stock of Getting Ready Corporation (filed as Exhibit 3.6 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
	3.7			Certificate of Amendment to Certificate of Incorporation (form of amendment filed in the Company’s DEF 14C dated October 22, 2008 and incorporated herein by reference).
	3.8			Certificate of Amendment to Certificate of Incorporation (form of amendment filed in the Company’s DEF 14C dated November 25, 2008 and incorporated herein by reference).

4143

3.4		Certificate of Amendment to Certificate of Incorporation (filed as Annex A to the Company’s DEF 14C dated September 22, 2008 and incorporated herein by reference).
3.9		By-laws (filed as Exhibit 3.7 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
3.5		Certificate of Designation, Preferences and Rights of Series A Convertible Preferred Stock of Getting Ready Corporation (filed as Exhibit 3.5 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
3.6		Certificate of Designation, Preferences and Rights of Series B Convertible Preferred Stock of Getting Ready Corporation (filed as Exhibit 3.6 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
3.7		By-laws (filed as Exhibit 3.7 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
4.1		Form of Common Stock Certificate (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
4.2		Form of Warrant to Purchase Series A Convertible Preferred Stock (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
4.3		Form of Lockup Agreement (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
10.1	+	License Agreement dated October 30, 2008 by and between Winston Laboratories, Inc. and sanofi-aventis Canada Inc. (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference).
10.2		Voting Agreement dated as of September 25, 2008 between Getting Ready Corporation and certain stockholders of the Company (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
10.3		Employment Agreement dated as of September 25, 2008 between Getting Ready Corporation and Joel E. Bernstein, M.D (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
10.4		Secrecy, Invention and Non-Competition Agreement dated as of October 5, 2007 by and between Winston Laboratories, Inc. and Joel E. Bernstein, M.D. (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
10.5		Employment Letter Agreement dated October 3, 2007 between Winston Laboratories, Inc. and David Starr (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
10.6		Secrecy, Invention and Non-Competition Agreement dated as of October 3, 2007 by and between Winston Laboratories, Inc. and David Starr (filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
10.7		Severance Agreement dated as of October 8, 2003 between Winston Laboratories, Inc. and Scott B. Phillips, M.D. (filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
10.8		General Severance Letter Agreement dated January 26, 2006 between Winston Laboratories, Inc. and Scott B. Phillips, M.D. (filed as Exhibit 10.7 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
10.9		Secrecy, Invention and Non-Competition Agreement dated as of October 5, 2007 by and between Winston Laboratories, Inc. and Scott B. Phillips, M.D. (filed as Exhibit 10.8 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
10.10		Consultation Agreement dated September 30, 2007 between Winston Laboratories, Inc. and Jeffrey R. Bernstein, Ph.D. (filed as Exhibit 10.9 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
10.11		Winston Pharmaceuticals Inc. Omnibus Inventive Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated April 17, 2009 and incorporated herein by reference).
10.12		Form of Nonqualified Stock Option Agreement (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K dated April 17, 2009 and incorporated herein by reference).
10.13		Form of Nonqualified Stock Option Agreement (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 and incorporated herein by reference).

4244

10.9		Secrecy, Invention and Non-Competition Agreement dated as of October 5, 2007 by and between Winston Laboratories, Inc. and Scott B. Phillips, M.D. (filed as Exhibit 10.8 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
10.14		Letter of Intent Between Pharmaceutical Financial Syndicate, LLC, Frost Gamma Investments Trust, Subbarao Uppaluri, Steven D. Rubin and Jane Hsiao, Ph.D. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 12, 2010 and incorporated herein by reference).
10.10		Consultation Agreement dated September 30, 2007 between Winston Laboratories, Inc. and Jeffrey R. Bernstein, Ph.D. (filed as Exhibit 10.9 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
10.11		Winston Laboratories, Inc. 1999 Stock Option Plan (filed as Exhibit 10.10 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
10.12		Winston Laboratories, Inc. Stock Option Plan for Non-Employee Directors (filed as Exhibit 10.11 to the Company’s Current Report on Form 8-K as filed with the SEC on October 1, 2008 and incorporated herein by reference).
21.1	*	Subsidiaries of Winston Pharmaceuticals, Inc.
31.1	*	Certification of the Company’s President and Chief Executive Officer, Joel E. Bernstein, M.D., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	*	Certification of the Company’s Vice President and Chief Financial Officer, David Starr, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	*	Certification of the Company’s President and Chief Executive Officer, Joel E. Bernstein, M.D., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	*	Certification of the Company’s Vice President and Chief Financial Officer, David Starr, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		filed herewith.

+		Portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934, amended, and the omitted material has been separately filed with the Securities and Exchange Commission.

4345

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: March 27, 2009	Winston Pharmaceuticals, Inc.
Dated: March 5, 2010		Winston Pharmaceuticals, Inc.
	By:	/s/ Joel E. Bernstein
		(Registrant)
		Joel E. Bernstein, M.D.
		By:	/s/ Joel E. Bernstein Joel E. Bernstein, M.D.
		~~President and Chief Executive Officer~~	President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Dated: March 27, 2009		/s/ Joel E. Bernstein
Dated: March 5, 2010		/s/ Joel E. Bernstein Joel E. Bernstein
		Joel E. Bernstein
		President, Chief Executive Officer
		and Chairman of the Board
		(Principal Executive Officer)
Dated: March 27, 2009		/s/ David Starr
Dated: March 5, 2010		/s/ David Starr David Starr
		David Starr
		Vice President, Chief Financial Officer
		(Principal Accounting Officer
		(Principal Accounting Officer and
		and Principal Financial Officer)
		Principal Financial Officer)
Dated: March 27, 2009		/s/ Glenn L. Halpryn
Dated: March 5, 2010		/s/ Robert A. Yolles Robert A. Yolles
		Glenn L. Halpryn
		Director, Chairman of the Board
		Director
Dated: March 27, 2009		/s/ Curtis Lockshin
		Curtis Lockshin
		Director
Dated: March 27, 2009		/s/ Neal S. Penneys
		Neal S. Penneys
		Director
Dated: March 27, 2009		/s/ Scott B. Phillips
		Scott B. Phillips, M.D.
		Senior Vice President,
		Clinical Affairs and Director
Dated: March 27, 2009		/s/ Subbarao Uppaluri
		Subbarao Uppaluri
		Director
Dated: March 27, 2009		/s/ Robert A. Yolles
		Robert A. Yolles
		Director

4446


Dated: March 5, 2010		/s/ Glenn L. Halpryn Glenn L. Halpryn
		Director

Dated: March 5, 2010		/s/ Curtis Lockshin Curtis Lockshin
		Director

Dated: March 5, 2010		/s/ Neal S. Penneys Neal S. Penneys
		Director

Dated: March 5, 2010		/s/ Scott B. Phillips Scott B. Phillips, M.D.
		Senior Vice President,
		Clinical Affairs and Director

Dated: March 5, 2010		/s/ Subbarao Uppaluri Subbarao Uppaluri
		Director

Index to Financial Statements

Winston Pharmaceuticals, Inc. and Subsidiaries

	Page
Audited Financial Statements as of and for the Years Ended December 31, 2008 and 2007
Audited Financial Statements as of and for the Years Ended December 31, 2009 and 2008
Report of Independent Registered Public Accounting Firm	F-2	~~F-2~~
Consolidated Balance Sheets	F-3	~~F-3~~
Consolidated Statements of Operations	F-4	~~F-4~~
Consolidated Statements of Stockholders’ Equity	F-5	~~F-5~~
Consolidated Statements of Cash Flows	F-6	~~F-6~~
Notes to Consolidated Financial Statements	F-7	~~F-7~~

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Winston Pharmaceuticals, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Winston Pharmaceuticals, Inc. and Subsidiaries (the “Company”) as of December 31, ~~2008~~2009 and ~~2007~~2008, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these ~~financial~~ financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Winston Pharmaceuticals, Inc. and Subsidiaries as of December 31, ~~2008~~2009 and ~~2007~~2008, and the results of their operations and their cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

We were not engaged to examine management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2008~~2009, included in the accompanying Controls and Procedures and, accordingly, we do not express an opinion thereon.

~~Chicago~~The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the ~~Illinois~~Company has suffered significant recurring losses from operations and cash reserves ~~March~~have fallen below recent cash flows from operations. This raises substantial doubt about ~~26,~~the ~~2009~~Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ McGladrey & Pullen, LLP Chicago, Illinois
March 5, 2010

F-2

Winston Pharmaceuticals, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, ~~2008~~2009 AND ~~2007~~2008

	December 31, 2008			December 31, 2007
	December 31,			December 31,
	2009			2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	51,~~626~~562,~~913~~848		$	45,~~481~~626,~~611~~913
Accounts receivable		1715,~~498~~653			5017,~~000~~498
Related party receivable		3822,~~142~~395			1438,~~785~~142
Prepaid and other current assets		6843,~~465~~944			868,~~073~~465
Total current assets		51,~~751~~644,~~018~~840			45,~~554~~751,~~469~~018
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $161,907 at December 31, 2008 and $157,161 at December 31, 2007		18,823			8,966
EQUIPMENT, net of accumulated depreciation of $141,433 at December 31, 2009 and $161,907 at December 31, 2008		13,760			18,823
INTANGIBLE ASSETS, NET		2117,~~540~~455			2321,~~714~~540
OTHER ASSETS		—			4,314
TOTAL ASSETS	$	1,676,055		$	5,791,381
TOTAL ASSETS	$	5,791,381		$	4,591,463
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	1724,~~052,730~~140		$	~~491~~1,~~560~~058,980
Accrued expenses and other current liabilities		~~239~~146,~~861~~638		$	~~254~~233,~~250~~611
Unearned revenue — current portion		1316,~~266,825~~706			—1,266,825
Total current liabilities		21,~~559~~187,~~416~~484			~~745~~2,~~810~~559,416
Unearned revenue — long-term portion		~~316,706~~—			—316,706
Total liabilities		21,~~876~~187,~~122~~484			~~745~~2,~~810~~876,122
Commitments and Contingencies
Series A, Convertible Preferred Stock, 12,731 shares issued and outstanding at December 31, 2007		—			4,805,352
Stockholders’ equity
Preferred Stock, $.001 par value, 250,000,000 shares authorized
Series A, Convertible 12,730 shares issued and outstanding at December 31, 2008		13			—
Series A, Convertible 0 and 12,730 shares issued and outstanding at December 31, 2009 and at December 31, 2008, respectively		—			13
Series B, Convertible 9,157 and 0 shares issued and outstanding at December 31, 2008 and December 31, 2007		9			—
Series B, Convertible 0 and 9,157 shares issued and outstanding at December 31, 2009 and December 31, 2008, respectively		—			9
Common stock, $.001 par value, 900,000,000 shares authorized 55,106,364 and 52,814,818 shares issued and outstanding at December 31, 2008 and at December 31, 2007		55,106			52,814
Common stock, $.001 par value, 900,000,000 shares authorized 77,408,893 and 55,106,364 shares issued and outstanding at December 31, 2009 and December 31, 2008, respectively		77,409			55,106
Additional paid-in capital		49,~~587~~794,~~913~~260			4049,~~573~~587,~~523~~913
Accumulated deficit		(4649,~~727~~383,~~782~~098	)		(4146,~~586~~727,~~036~~782	)
Total stockholders’ equity (deficit)		2,915,259			(959,699	)
Total stockholders’ equity		488,571			2,915,259
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	51,~~791~~676,~~381~~055		$	45,~~591~~791,~~463~~381

See accompanying notes

F-3

Winston Pharmaceuticals, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, ~~2008~~2009 and ~~2007~~2008

	2008			2007
	2009			2008
REVENUE
License revenue	$	~~316~~1,~~706~~266,825		$	~~500~~316,~~000~~706
Royalty revenue		~~135~~127,~~836~~762			~~300~~135,~~000~~836
		452,542			800,000
		1,394,587			452,542
EXPENSES
Research and development		32,~~496~~062,~~150~~933			13,~~853~~496,~~501~~150
General and administrative		2,~~182~~063,~~012~~879			12,~~366~~182,~~401~~012
Depreciation and amortization		89,~~651~~007			108,~~087~~651
Total operating expenses		54,~~686~~135,~~813~~819			35,~~229~~686,~~989~~813
Loss from operations		(52,~~234~~741,~~271~~232	)		(25,~~429~~234,~~989~~271	)
Interest income		9010,~~614~~487			4290,~~733~~614
Other income		175,~~911~~429			41,~~199~~911
		92,525			46,932
		85,916			92,525
Loss before income taxes		(52,~~141~~655,~~746~~316	)		(25,~~383~~141,~~057~~746	)
Income Taxes
Current		—			—
Deferred		—			—
		—			—
NET LOSS	$	(52,~~141~~655,~~746~~316	)	$	(25,~~383~~141,~~057~~746	)
Loss per share, basic and diluted	$	(0.1004	)	$	(0.0410	)
Weighted average number of shares outstanding basic and diluted		5361,~~422~~258,~~158~~364			5453,~~472~~422,~~002~~158

See accompanying notes

F-4

Winston Pharmaceuticals, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Years Ended December 31, ~~2008~~2009 and ~~2007~~2008

																			Additional						Total
	Common Stock						Preferred Stock A						Preferred Stock B						Paid-in			Accumulated			Stockholders’
	Shares			Amount			Shares			Amount			Shares			Amount			Capital			Deficit			Equity (Deficit)
Balance at January 1, 2007, adjusted to reflect the effect of the reverse merger on September 25, 2008 and the 8 to 1 stock split on December 15, 2008		55,126,196		$	55,125			—			—			—			—		$	39,985,908		$	(39,202,979	)	$	838,054
Balance at January 1, 2008		52,814,818		$	52,814			—			—			—			—		$	40,573,523		$	(41,586,036	)	$	(959,699	)
Issuance of common stock		849,455			850															345,650						346,500
Reclassification of Series A Convertible Preferred Stock (net of cost of $194,648)								12,731		$	13									4,805,339						4,805,352
Purchase and cancellation of common stock		(3,518,266	)		(3,518	)														(221,482	)					(225,000	)
Repurchase of Bioglan Shares in Subsidiary and Elimination of Minority Interest																				173,920						173,920
Issuance of common stock upon exercise of stock options		357,433			357															124,023						124,380
Compensation with respect to employee and non-employee stock option grants																				165,504						165,504
Net loss																							(2,383,057	)	$	(2,383,057	)
Balance at December 31, 2007		52,814,818			52,814			—			—			—			—			40,573,523			(41,586,036	)	$	(959,699	)
Reclassification of Series A Convertible Preferred Stock (net of costs of $194,648)								12,731		$	13									4,805,339						4,805,352
Issuance of Series B Convertible Preferred Shares (net of cost of $3,211)														9,166		$	9			3,996,780						3,996,789
Merger with Getting Ready Corporation (net of cost of $250,000)		2,291,612			2,292															233,615						235,907
Redemption of fractional shares		(66	)					(1	)					(9	)					(21,344	)					(21,344	)
Net loss																						$	(5,141,746	)		(5,141,746	)
Balance at December 31, 2008		55,106,364		$	55,106			12,730		$	13			9,157		$	9		$	49,587,913		$	(46,727,782	)	$	2,915,259
Issuance of common stock upon exercise of stock options		415,529			416															134,014						134,430
Conversion of Series A Convertible Preferred Shares and Series B Convertible Preferred Shares to common shares		21,887,000			21,887			(12,730	)		(13	)		(9,157	)		(9	)		(21,865	)					—
Compensation with respect to employee and non-employee stock option grants																				94,198						94,198
Net loss																						$	(2,655,316	)		(2,655,316	)
Balance at December 31, 2009		77,408,893		$	77,409			—		$	—			—		$	—		$	49,794,260		$	(49,383,098	)	$	488,571

See accompanying notes

F-5

Winston Pharmaceuticals, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, ~~2008~~2009 and ~~2007~~2008

	2008			2007
	2009			2008
Cash flows from operating activities
Net loss	$	(52,~~141~~655,~~746~~316	)	$	(25,~~383~~141,~~057~~746	)
Depreciation and amortization		89,~~651~~007			108,~~086~~651
Stock option expense for non-employee directors and employees		—94,198			~~165,504~~—
Changes in:
Accounts receivable		917,~~145~~592			229,~~568~~145
Prepaid and other current assets		~~(51~~24,~~552~~521	)		36(51,~~626~~552	)
Other assets		~~4,314~~—			304,~~596~~314
Unearned revenue		(1,~~583~~266,~~531~~825	)		—1,583,531
Accounts payable		~~561~~(334,~~170~~840	)		~~219~~554,~~114~~920
Accrued expenses and other current liabilities		(3586,~~733~~973	)		26(29,~~597~~483	)
Net cash used in operating activities		(34,~~062~~198,~~220~~636	)		(13,~~871~~062,~~966~~220	)
Cash flows from investing activities
Purchase of minority interest in subsidiary		—			(10,000	)
Proceeds from sale of trademarks		1,154			—
Purchases of property, plant and equipment		(14,604	)		—
Purchases of equipment		(738	)		(14,604	)
Purchases of intangibles		(~~1,730~~275	)		—(1,730	)
Net cash used in by investing activities		(16,334	)		(10,000	)
Net cash provided by (used in) investing activities		141			(16,334	)
Cash flows from financing activities
Purchase and cancellation of common stock		—			(225,000	)
Issuance of common stock upon exercise of stock options		134,430			—
Issuance of common stock		—			346,500
Issuance of preferred stock, net of costs		—			3,996,789
Issuance of common stock upon exercise of stock options		—			124,380
Cash received upon consummation of merger		—			477,067
Issuance of preferred stock, net of costs		3,996,789			4,805,352
Cost incurred in connection with merger		—			(250,000	)
Cash received upon consummation of merger		477,067			—
Net cash provided by financing activities		134,430			4,223,856
Cost incurred in connection with merger		(250,000	)		—
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(4,064,065	)		1,145,302
Net cash provided by financing activities		4,223,856			5,051,232
Cash and cash equivalents at beginning of year		5,626,913			4,481,611
NET INCREASE IN CASH AND CASH EQUIVALENTS		1,145,302			3,169,266
Cash and cash equivalents at end of year	$	1,562,848		$	5,626,913
Cash and cash equivalents at beginning of year		4,481,611			1,312,345
Cash and cash equivalents at end of year	$	5,626,913		$	4,481,611
Supplemental disclosures of cash flow information
Interest paid	$	—		$	—
Income taxes paid	$	—		$	—
Supplemental disclosures of non-cash investing and financing information
Repurchase and elimination of minority interest in subsidiary	$	—		$	173,920
Accrual for redemption of fractional shares	$	—		$	21,344
Accrual for redemption of fractional shares	$	21,344		$	—

The Merger ~~between~~transaction among Getting Ready Corporation, Winston Acquisition Corp. and Winston Laboratories, Inc. was consummated on September 25, 2008. The Merger was accounted for as a “reverse merger,” since as a result of the Merger the shareholders of Winston own 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. The Merger resulted in additional ~~equity~~ equity of $235,907 (net of $250,000 of transaction costs). For further information, please refer to Note 1.

See accompanying notes

F-6

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, ~~2008~~2000 and ~~2007~~2008

NOTE 1 — COMPANY FORMATION, BACKGROUND AND ~~BACKGROUND~~ABILITY TO CONTINUE AS A GOING CONCERN

Organization

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.

Winston Laboratories, Inc. (“Winston Labs”) is the successor to a research and development partnership, Cisco Ltd. (“Cisco”) formed in 1992 to develop a specific novel neuroactive compound, civamide. Civamide was discovered and patented by Joel E. Bernstein, M.D., the managing general partner of Cisco and subsequently, the founder and CEO of Winston Labs. In 1997, Cisco became Winston Laboratories LLC, which in 1998 became a C Corporation. Winston Labs’ initial operating funds came from a rights offering in 1997 and a private equity placement in 1998. In 1999, Winston Labs sold approximately 19% of its common stock to Bioglan Pharma Plc (“Bioglan”) for $25 million; Bioglan’s stake was subsequently reduced below 7% when it did not participate in a 2004 Winston Labs rights offering. In September 2007, Winston Labs purchased all of the then outstanding ownership in Winston Labs from Bioglan for $225,000. Subsequent to this transaction, all of the then purchased shares were retired.

In 2000, Winston Labs established a subsidiary, Rodlen Laboratories, Inc. (“Rodlen,” ~~formerly~~ formerly Oncovir Corporation), approximately 18% of which was sold to Bioglan for $13.3 million in 2001. In 2002, Bioglan’s stake in Rodlen was reduced below 3% as a result of Bioglan’s election not to participate in a Rodlen rights offering. The proceeds of this rights offering were used to acquire the Zostrix® line of over-the-counter topical analgesics. Rodlen marketed the Zostrix® product line until July 2005, when it sold the product to Hi-Tech Pharmacal Co. (“Hi-Tech”). In October 2004, Rodlen launched another topical analgesic, Axsain® , which it promoted to physicians and other health-care professionals. In June 2005, based on disappointing sales, Rodlen sharply ~~reduced~~ reduced promotion of the Axsain® product and in March 2006, Rodlen discontinued selling this product altogether. In February 2007, Rodlen licensed certain technology underlying the Axsain® product to Hi-Tech (Note 4). Rodlen operated as a “virtual company” with no employees of its own. In September 2007, Winston Labs purchased all of the then outstanding ownership in Rodlen from Bioglan for $10,000. Subsequent to this transaction, all of the then purchased shares were retired. On September 21, 2007, Rodlen was merged into Winston Labs.

In 2005, Winston Labs established a wholly owned UK subsidiary, Winston Laboratories Limited (“UK Ltd.”). UK Ltd. was established for the purposes of conducting work with European drug regulatory authorities, who typically require a European entity. UK Ltd. has no employees or material assets.

Effective November 13, 2007, Getting Ready Corporation (“GRC”), entered into a definitive Merger Agreement and Plan of Reorganization (the “Merger Agreement”) with Winston Labs., and Winston Acquisition Corp., a Delaware corporation (“Merger Sub”), which was a wholly-owned subsidiary of GRC. Pursuant to the Merger Agreement, on September 25, 2008, Winston Labs merged with and into Merger Sub and became a wholly-owned subsidiary of GRC (the “Merger”). At the closing of the Merger (the numbers of shares discussed in this note reflects the number of shares prior to the 8-for-1 reverse stock split that took place on December 15, 2008):

	•		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, 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 GRC’s common stock, par value $0.001 per share (at an exchange ratio of 17.65101 shares of GRC common stock per share of Winston Labs common stock), 101,849 shares of the GRC’s Series A and 73,332 shares of the GRC’s Series B Preferred Stock (at an exchange ratio of .01751238 shares of GRC preferred stock per share of Winston Labs’ preferred stock);
	•		GRC assumed Winston Labs’ stock option plans;

	•		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, 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 GRC’s common stock, par value $0.001 per share (at an exchange ratio of 17.65101 shares of GRC common stock per share of Winston Labs common stock), 101,849 shares of the GRC’s Series A and 73,332 shares of the GRC’s Series B Preferred Stock (at an exchange ratio of .01751238 shares of GRC preferred stock per share of Winston Labs’ preferred stock);

	•		GRC assumed Winston Labs’ stock option plans;

	•		Winston Labs’ outstanding 1,643,750 options to purchase 1,643,750 shares of Winston Labs’ common stock were converted to options to purchase 29,013,848 shares of GRC’s common stock; and

	•		all outstanding warrants to purchase Winston Labs Series A Preferred Stock were assumed by GRC and converted into the right to acquire, expiring November 13, 2012, upon the exercise of such warrants, an aggregate of 71,672 shares of GRC’s Series A Preferred Stock at a price per share of $49.09.

F-7

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	•		Winston Labs’ outstanding 1,643,750 options to purchase 1,643,750 shares of Winston Labs’ common stock were converted to options to purchase 29,013,848 shares of GRC’s common stock; and
	•		all outstanding warrants to purchase Winston Labs Series A Preferred Stock were assumed by GRC and converted into the right to acquire, expiring November 13, 2012, upon the exercise of such warrants, an aggregate of 71,672 shares of GRC’s Series A Preferred Stock at a price per share of $49.09.

Prior to the closing of the Merger, GRC had 18,332,896 shares of common stock issued and outstanding and, subsequent to the Merger, GRC had 440,851,441 shares of common stock issued and outstanding. GRC had no shares of Series A or Series B Preferred Stock outstanding prior to the Merger.

Winston Labs was the accounting acquirer in the merger which was accounted for as a ~~reverse~~ reverse merger ~~between~~among Winston Labs, Merger Sub and GRC (a public shell company). For accounting purposes, Winston Labs has been treated as the continuing registrant. As a result, all post merger comparative historical financial statements filed by the Company will be those of Winston Labs. Further, Winston Labs’ historical stockholders’ equity prior to the merger has been retroactively restated (recapitalized) for the equivalent number of shares received in the reverse merger. Earnings and loss per share calculations have also been retroactively restated to give effect to the recapitalization for all periods presented. Lastly, the merger ~~between~~involving Winston Labs and GRC has been accounted for as a capital transaction equivalent to the issuance of capital stock by Winston ~~Labs~~ Labs for the net monetary assets of GRC. Upon completion of the Merger, GRC changed its name to to Winston Pharmaceuticals, Inc.

The Company has incurred significant losses from operations since its inception and expects losses to continue for the foreseeable future. The Company’s success depends primarily on the development and regulatory approval of its product candidates. From inception through December 31, 2009, the Company has incurred cumulative net losses of $49.4 million. Net losses may continue for at least the next several years as the company proceeds with the development of its product candidates and programs. The size of these losses will depend on the receipt of revenue from its products candidates and programs, if any, and on the level of the Company’s expenses. To achieve profitable operations, the Company must successfully identify, develop, partner and/or commercialize its product candidates and programs. Product candidates developed by the Company will require approval of the U.S. Food and Drug Administration (FDA) or a foreign regulatory authority prior to commercial sales. The regulatory approval process is expensive, time consuming and uncertain, and any denial or delay of approval could have a material adverse effect on the Company’s ability to become profitable or continue operations. Even if approved, the Company’s product candidates may not achieve market acceptance and could face competition.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements for the year ended December 31, 2009 do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

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 Topic 105, the Company has updated references to GAAP in its financial statements issued for the period ended December 31, 2009. The adoption of ASC Topic 105 did no have a material impact on the Company’s financial position, results of operations or cash flows.

NOTE 2 — SUMMARY OF ACCOUNTING POLICIES

Reverse Stock Split

On December 15, 2008, the Company effected a 1-for-8 reverse split of its common and preferred stock. Except where otherwise noted, all common stock and preferred stock share and per share amounts have been retroactively restated to reflect the reverse stock split in the accompanying consolidated financial statements and notes for all periods presented. A $21,344 accrual related to a payout for fractional shares in connection with the reverse stock split is included in accrued expenses and other current liabilities in the Consolidated Balance Sheet as of December 31, 2008.

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of Winston Labs and its Subsidiaries, UK Ltd. and Rodlen, as of and for the years ended December 31, 2008 and 2007 and the accounts of GRC from September 25, 2008 through December 31, 2008. All intercompany balances and transactions have been eliminated.

Use of Estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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. Included in cash and cash equivalents is a $3.5 million certificate of deposit (COD), which carried an annual interest rate of 2.3% and matured on February 12, 2009 and approximately $1.9 million in a U.S. Treasury mutual fund. It is the Company’s policy to include investments in mutual funds at $1 carrying value as a cash equivalent.

F-8

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of Winston Labs and its Subsidiaries, UK Ltd., as of and for the years ended December 31, 2009 and 2008 and the accounts of GRC from September 25, 2008 through December 31, 2008. All intercompany balances and transactions have been eliminated.

Use of Estimates

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. Included in cash and cash equivalents at December 31, 2008 is approximately $1.9 million in a U.S. Treasury mutual fund. There are no cash equivalents as of December 31, 2009. It is the Company’s policy to include investments in mutual funds with a $1 carrying value as a cash equivalent.

Accounts Receivable

Accounts receivable are carried at original amount due less an estimate made for ~~doubtful~~ doubtful accounts. Accounts outstanding longer than the payment terms are considered past due. The Company determines its allowances by considering a number of factors, including the length of time trade accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, projected returns based on historical trends and anticipated events at particular customers, and the condition of the general economy and industry as a whole. The Company writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. The allowance for doubtful accounts was $0 at December 31, ~~2008~~2009 and ~~2007~~2008, respectively.

~~Property and~~ Equipment

~~Property~~Equipment ~~and equipment~~ consists primarily of furniture and office equipment with estimated ~~lives~~ lives of 3-7 years. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives, principally on an ~~accelerated~~ accelerated basis.

Impairment of Long-Lived Assets

The Company accounts for long-lived assets in accordance with ~~the~~ASC ~~provisions~~Topic ~~of FAS No. 144~~350, ~~Accounting for the Impairment or Disposal of Long~~Intangibles-~~Lived~~Goodwill ~~Assets~~and Other. ~~This~~The ~~Statement requires that~~ long-lived assets beare being reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Fair Value of Financial Instruments

The carrying amounts of financial instruments, including cash and cash equivalents, ~~accounts~~ ~~receivable,~~ accounts ~~payable~~receivable and ~~accrued~~accounts ~~expenses~~payable approximate fair value due to the short term maturity of these instruments.

~~The~~ASC ~~Company~~Topic ~~adopted SFAS 157~~820, “Fair Value Measurements and Disclosures,” orprovides ~~SFAS~~a ~~157~~framework onfor measuring ~~January 1~~fair value of assets and liabilities in accordance with GAAP, ~~2008.~~and ~~SFAS~~establishes a ~~157~~three-tier ~~defines~~ fair value hierarchy, ~~establishes~~which aprioritizes ~~framework~~the ~~for~~inputs used in measuring fair value. inThese ~~accordance~~tiers ~~with~~include: ~~GAAP~~Level 1, defined as observable inputs such as quoted prices ~~and~~in ~~expands~~active ~~disclosures~~markets; ~~about~~Level ~~fair~~2, ~~value~~defined ~~measurements.~~as ~~The~~inputs ~~adoption~~other ofthan ~~SFAS~~quoted ~~157~~prices ~~did~~in ~~not~~active ~~have~~markets that aare either directly or indirectly observable; and Level 3, defined as unobservable ~~material~~inputs ~~impact~~in onwhich ~~the~~little ~~Company’s~~or ~~fair~~no ~~value~~market ~~measurements~~data exists, therefore requiring an entity to develop its own assumptions.

SFAS 157 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.

F-9

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company’s financial assets measured at fair value on a recurring basis, subject to the disclosure requirements of ~~SFAS~~ASC ~~157~~Topic 820, are as follows:

Fair Value Measurements at December 31, 2008

Quoted Prices in

Significant

Quoted

Active Markets

Other

Significant

Prices in

Active

Significant

Markets

Other

Significant

for Identical

Observable

Unobservable

Assets

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~~ the Consolidated Balance Sheet as of December 31, 2008. The Company did not have any financial assets measured at fair value on a recurring basis, subject to the disclosure requirements of ASC Topic 820 as of December 31, 2009.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”). SFAS No. 159 permits companies to elect to follow fair value accounting for certain financial assets and liabilities in an effort to mitigate volatility in earnings without having to apply complex hedge accounting provisions. The standard also establishes presentation and disclosure requirements designed to facilitate comparison between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The adoption of SFAS 159 did not have any impact on the Company’s results of operations, financial position or cash flows.

Revenue recognition

Certain sales transactions include multiple deliverables. The Company allocates amounts to separate elements in multiple element arrangements in accordance with the FASB’s Emerging Issues Task Force (“EITF”) Issue No. 00-21 (“EITF 00-21”), “ Accounting for Revenue Arrangements with Multiple Deliverables .” Revenues are allocated to a delivered product or service when all of the following criteria are met: (1) the delivered item has value to the customer on a standalone basis; (2) there is objective and reliable evidence of the fair value of the undelivered item; and (3) if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in the Company’s control. The Company uses the relative fair values of the separate deliverables to allocate revenue. For arrangements with multiple elements that are separated, the Company recognizes revenues in accordance with Topic 13.

F-10

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Certain sales transactions include multiple deliverables. The Company allocates amounts to separate elements in multiple element arrangements in accordance with ASC Topic 605, Revenue Recognition. Revenues are allocated to a delivered product or service when all of the following criteria are met: (1) the delivered item has value to the customer on a standalone basis; (2) there is objective and reliable evidence of the fair value of the undelivered item; and (3) if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in the Company’s control. The Company uses the relative fair values of the separate deliverables to allocate revenue. For arrangements with multiple elements that are separated, the Company recognizes revenues in accordance with Topic 13.

Multiple Element Arrangements

The Company has arrangements whereby it delivers to the customer multiple elements ~~including~~ including technology and/or services. Such arrangements have generally included some combination of the following: licensed rights to technology, patented products, compounds, data and other intellectual property; and research and development services. In ~~accordance~~The ~~with EITF 00-21, the~~ Company analyzes its multiple element arrangements to determine whether the elements can be separated. The Company performs its analysis at the inception of the arrangement and as each product or service is delivered. If a product or service is not separable, the combined deliverables will be accounted for as a single unit of accounting.

When a delivered element meets the criteria for separation ~~in accordance with EITF 00-21~~, the Company allocates amounts based upon the relative fair values of each element. The Company determines the fair value of a separate deliverable using the price it charges other customers when it it sells that product or service separately; however, if the Company does not sell the product or service separately, it uses third-party evidence of fair value. The Company considers licensed rights or technology to have standalone value to its customers if it or others have sold such rights or technology separately or its customers can sell such rights or technology separately without the need for the Company’s continuing involvement.

Non-refundable, up-front fees that are not contingent on any future performance by the Company, and require no consequential continuing involvement on its part, are recognized as revenue when the license term commences and the licensed data, technology and/or compound is delivered. Such deliverables may include physical quantities of compounds, design of the compounds and structure-activity relationships, the conceptual framework and mechanism of action, and rights to the patents or patents pending for such compounds. The Company defers recognition of non-refundable upfront fees if it has continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable fee has no utility to the licensee that is separate and independent of the Company’s performance under the other elements of the arrangement. In addition, if the Company has required continuing involvement through research and development services that are related to its proprietary know-how and expertise of the delivered technology, or can only be performed by the Company, then such up-front fees are deferred and recognized over the period of continuing involvement. Under the license agreement with sanofi-aventis Canada, Inc. (Note 4), the obligation period was not contractually defined in relation to the $1.9 million upfront fee. Under the circumstances, management exercised judgment in estimating the period of time over which certain deliverables will be provided to enable the licensee to utilize the license, which was determined to be 18 months. The estimated period of 18 months was primarily determined based on management’s estimate of the maximum amount of time it would take the Canadian regulatory authorities to approve the Company’s new drug submission (NDS).

Research Services Arrangements. Revenues from research services are recognized during the period in which the services are performed and are based upon the number of full-time-equivalent personnel working on the specific project at the agreed-upon rate. Reimbursements from collaborative partners for agreed upon direct costs including direct materials and outsourced services, or subcontracted, pre-clinical studies are classified as revenues in accordance with ~~EITF Issue~~ASC ~~No. 99-19,~~Topic ~~“Reporting Revenue Gross as a Principal versus Net as an Agent~~ 605,” and recognized in the period the reimbursable expenses are incurred. Payments received in advance are deferred until the research services are performed or costs are incurred.

F-11

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Research and Development Expenses

InThe ~~June 2007,~~guidance ~~the~~in ~~FASB~~ASC ~~ratified~~Topic ~~a consensus opinion reached by the EITF on EITF Issue 07-3~~730, ~~“Accounting~~ ~~for Nonrefundable Advance Payments for Goods or Services Received for Use in Future~~ Research and Development, ~~Activities” (“EITF 07-3”). The guidance in EITF 07-3~~ requires usthe toCompany ~~defer~~to defer and capitalize nonrefundable advance payments made for goods or services to be used in research and development activities until the goods have been delivered or the related services have been performed. If the goods are no longer expected to be delivered or the services are no longer expected to be performed, wethe Company would be required to expense the related capitalized advance payments. EITF 07-3 is effective for fiscal years beginning after December 15, 2007 and is to be applied prospectively to new contracts entered into on or after the commencement of that fiscal year. Early adoption is not permitted. Retrospective application of EITF 07-3 also is not permitted. The Company adopted EITF 07-3 effective January 1, 2008, and the adoption had no effect on its financial position, results of operations or cash flows and consequently had no material effect on its financial statements.

Acquired contractual rights. Payments to acquire contractual rights to a licensed ~~technology~~ technology or drug candidate are expensed as incurred when there is uncertainty in receiving future economic benefits from the acquired contractual rights. WeThe ~~consider~~Company considers the future economic benefits from the acquired contractual rights to a drug candidate to be uncertain until such drug candidate is approved by the FDA or when other significant risk factors are abated.

Research and development costs totaled $32,~~496~~062,~~150~~933 and $13,~~853~~496,~~501~~150 in ~~2008~~2009 and ~~2007~~2008, respectively.

Stock-Based Compensation

InASC ~~December 2004~~Topic 718, ~~the~~Stock ~~Financial Accounting Standards Board (“FASB”) issued Statement No. 123 (revised 2004)~~Compensation, ~~“Share-Based Payment” (“SFAS 123(R)”). SFAS 123(R)~~ requires that the compensation cost relating to share-based payment transactions be recognized in financial statements, based on the fair value of the instruments issued. ~~SFAS~~ASC ~~123(R)~~Topic 718 covers a wide range of share-based compensation including stock options, restricted stock, performance-based awards, share appreciation rights and employee share purchase plans. SFAS 123(R) replaces Statement No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation,” and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees.” As originally issued in 1995, SFAS 123 established as preferable the fair-value-based method of accounting for share-based payment transactions. However, SFAS 123 permitted entities to continue to apply the guidance in Opinion No. 25, with appropriate footnote disclosure. Prior to January 1, 2006, the ~~Company~~ Company accounted for stock-based compensation arrangements using the intrinsic value ~~method in accordance~~ ~~with the provisions of APB Opinion No~~method. ~~25 and in compliance with the disclosure provisions of SFAS~~ ~~123.~~

~~The~~Income ~~Company adopted SFAS 123(R) as of January 1, 2006. Since the Company had previously used~~Taxes the minimum value method for recognition and disclosure, SFAS 123(R) has been applied prospectively for 2006. Hence, new awards of options, as well as any options modified, repurchased, or canceled after January 1, 2006 are accounted for under the provisions of SFAS 123(R), whereas awards outstanding before that date continue to be accounted for using the accounting provisions originally applied to these awards.

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.

ASC Topic 740, Income Taxes, 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 Topic 740 provides 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 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, 2009, which statutes expire in 2010-2013. As of December 31, 2009 and December 31, 2008, the Company has no liability for unrecognized tax benefits. 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 years ended December 31, 2009 and 2008.

F-12

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

In conjunction with the Merger Agreement, the Company’s Board of Directors voted to accelerate the vesting of all unvested stock options as of October 30, 2007. Accordingly, the compensation expense associated with the acceleration of these stock options has been accounted for under FAS 123(R) and reflected in the statement of operations for the year ended December 31, 2007. There were no options granted in 2008.

Income Taxes

In July 2006, the FASB issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes. FIN 48 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. FIN 48 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, 2005 to December 31, 2008, which statutes expire in 2009-2012. As of December 31, 2008, the Company has no liability for unrecognized tax benefits. The adoption and implementation of FIN 48 had no effect on the Company’s results of operations, net loss or basic and diluted loss per share for the year ended December 31, 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 years ended December 31, 2008.

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

In connection with the $5 million Series A Convertible Preferred Stock issuance, in the event that the Merger was not consummated at a certain date, certain holders of the Series A Convertible Preferred investment had the right, at their election, to cause Winston Labs to repurchase its shares of Series A Convertible Preferred Stock at a price equal to $.8597 per share (“the put option”). The put option was cancelled by mutual agreement of the holders of the Series A Convertible Preferred Stock and Winston Labs in June, 2008. In accordance with the provisions of FAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, and to conform to the public reporting requirements, the Series A Convertible Preferred Stock as of December 31, 2007 is presented in the mezzanine section of the accompanying balance sheet. Subsequent to the Merger, the Series A Convertible Preferred Stock was reclassified to the Equity section of the accompanying balance sheet.

Certain other 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.

Segment Information

Subsequent Events

In May 2009, the FASB issued ASC Topic 855, Subsequent Events, which established general accounting standards and disclosure for subsequent events. The Company adopted ASC Topic 855 during the second quarter of 2009. In accordance with ASC Topic 855, the Company has evaluated subsequent events through the date and time the financial statements were issued.

Recent Accounting Pronouncements

In December 2007, the FASB issued a new standard on Business Combinations which is part of ASC Topic 805. This Statement provides greater consistency in the accounting and financial reporting for business combinations. ASC Topic 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 year ended December 31, 2009.

In December 2007, the FASB issued ASC Topic 810, Noncontrolling Interests in Consolidated Financial Statements (“ASC Topic 810”). ASC Topic 810 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 Topic 810 on January 1, 2009. The adoption of ASC Topic 810 had no effect on the Company’s results of operations, net loss or basic diluted loss per share for the year ended December 31, 2009.

In March 2008, the FASB issued a new pronouncement 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 Topic 815 and how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows. The Company adopted this new pronouncement 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 year ended December 31, 2009.

In June 2008, the FASB ratified a new pronouncement on Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock. This new pronouncement 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 this new pronouncement did not have a material effect on the Company’s financial position, results of operations, or cash flow.

In June 2009, the FASB issued a new pronouncement relating to “Amendments to variable interest entities (VIE)”, which changes the approach to determining the primary beneficiary of a 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 this new pronouncement is not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

F-13

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~Recent~~In ~~Accounting~~October 2009, ~~Pronouncements~~the FASB issued ASU 2009-13, Revenue Recognition (Topic 605)- Multiple-Deliverable Revenue Arrangements, which amends ASC 605, Revenue Recognition, to require companies to allocate revenue in multiple-element arrangements based on an element’s estimated selling price if vendor-specific or other third-party evidence of value is not available. ASU 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Earlier application is permitted. The Company is currently evaluating both the timing and the impact of the pending adoption of the ASU on its consolidated financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R), “Business Combinations” (FAS 141(R)). This Statement provides greater consistency in the accounting and financial reporting for business combinations. FAS 141(R) establishes new 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. This standard is effective for the beginning of the Company’s first fiscal year beginning after December 15, 2008. FAS 141(R) will have a significant impact on the accounting for any of the Company’s future business combinations after the effective date and will impact financial statements both on the acquisition date and subsequent periods.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (FAS 160). FAS 160 amends Accounting Research Bulletin No. 51, “Consolidated Financial Statements”, to establish 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. FAS 160 is effective for the beginning of the Company’s first fiscal year beginning after December 15, 2008, and requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. Management does not expect the adoption of this standard to have a material impact on the Company’s financial position or results of operations.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133” (or SFAS 161). This statement revises 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 SFAS 133 and how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows. SFAS 161 will be effective in the first quarter of fiscal 2009. Management is currently evaluating the impact of adopting SFAS 161 and does not anticipate a material effect on the Company’s financial position or results of operations.

In April 2008, the FASB issued Staff Position (FSP) No. FAS 142-3 “Determination of the Useful Life of Intangible Assets” (FSP FAS 142-3). FSP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years and should be applied prospectively to intangible assets acquired after the effective date. Early adoption is not permitted. FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives for intangible assets and should be applied to all intangible assets recognized as of, and subsequent to the effective date. The impact of FSP FAS 142-3 will depend on the size and nature of acquisitions on or after January 1, 2009.

In June 2008, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 07-5, “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock” (EITF 07-5). EITF 07-5 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 Company is currently evaluating the impact the adoption of EITF 07-5 will have on its financial position, results of operations, or cash flow.

F-14

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 3 — EARNINGS PER SHARE

Basic EPS is computed by dividing income (loss) attributable to common stockholders by the weighted average number of commons 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 conversion of convertible preferred shares and the exercise of stock options and warrants and unvested shares granted to employees.

	Fiscal 2008			Fiscal 2007
	Fiscal 2009			Fiscal 2008
Denominator:
Weighted average common shares outstanding — basic and diluted		5361,~~422~~258,~~158~~364			5453,~~472~~422,~~002~~158
Loss per common share — basic and diluted	$	(0.1004	)	$	(0.0410	)

The Company’s Basic EPS and Diluted EPS is identical as inclusion of the incremental common shares attributable upon conversion of convertible preferred shares and the exercise of stock options and warrants and unvested shares granted to employees would have been anti-dilutive.

NOTE 4 — TECHNOLOGY LICENSE AGREEMENTS

In January 2006, the Company entered into a technology license agreement with Sirius Laboratories, Inc. (“Sirius”). Several large stockholders in the Company had significant ~~stock~~ stock holdings in Sirius until March 10, 2006, when Sirius was acquired by DUSA Pharmaceuticals, Inc. Two officers of the Company served on Sirius’ board of directors but resigned their directorships in 2007. Under the terms of the license agreement, the Company granted Sirius an exclusive license to the proprietary rights of certain products (first marketed as Micanol® and then later as Psoriatec®) containing the active pharmaceutical ingredient, anthralin. The agreement provided for minimum annual royalties of $300,000 through February, 2008 and an option to purchase all rights to the product for $750,000. In January 2008, the license agreement was extended until September 30, 2008 by mutual consent and the extension and provides for a continuation of the 25% royalty on net sales, but eliminates the minimum royalty and the purchase option. Under the technology license agreement, the Company recorded royalty revenue of $~~34,861~~0 and $~~300~~34,~~000~~ 861 for the years ended December 31, ~~2008~~2009 and ~~2007~~2008, respectively. ~~The~~In July 2008, the Company learned that DUSA had breached a ~~receivable~~license ~~due~~agreement ~~from~~with ~~Sirius~~Winston ofLabs. ~~$50,000~~Winston Labs asinitiated ofarbitration ~~December~~in October ~~31,~~2008 ~~2007~~to recover the damages caused by this breach. In June 2009, ~~which~~DUSA ~~was~~settled ~~subsequently~~this ~~collected~~matter by agreeing to pay $75,000 in ~~2008~~damages. ~~and~~This settlement is included in ~~accounts receivable~~other onincome in the Consolidated ~~Balance~~Statements ~~Sheet as~~ of ~~December 31, 2007~~Operations.

In February 2007, Rodlen licensed a patent and certain other technology to Hi-Tech ~~Pharmacal~~ Pharmacal Co. (“Hi-Tech”) for cash consideration of two payments totaling $300,000, as well as a 10% royalty on net sales of products sold by Hi-Tech that utilize the intellectual property licensed from Rodlen for the remaining life of the related patent, reducing to 5% of net sales for four years following the expiration of the patent. ~~The~~In 2009 and in 2008, the Company recorded ~~license~~$127,762 ~~revenues~~and $100,975 of royalties under this ~~agreement~~ ofagreement. ~~$300~~On October 30,~~000~~ ~~for~~2009, the ~~year~~Company ~~ended~~received ~~December 31,~~communication ~~2007~~from Hi-Tech that it has discontinued the sale of the product as defined in the license agreement. InAs ~~2008~~a result, the Company ~~recorded~~does ~~$100,975~~not of expect to receive any more royalties ~~under~~from ~~this~~Hi-Tech ~~agreement~~in the future.

On August 14, 2007, the Company entered into an exclusive technology license agreement with Exopharma, Inc., now known as Elorac, Inc. (“Elorac”) an entity that is majority owned by the CEO of the Company and his affiliates (see Note 5). Under the terms of the license agreement, the Company granted Elorac an exclusive license to the proprietary rights of certain products (£ 0.025% ~~civamide~~ Civamide with the stated indication of psoriasis of the skin). In exchange, Elorac paid the Company a license fee of $100,000 and was required to pay a 9% royalty on sales of the product. In addition, the agreement required Elorac to pay the Company 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 and Elorac mutually terminated the above license agreement. As a result of this mutual termination, Winston paid Elorac $105,000 in exchange for Winston retaining all the property rights under the agreement.

F-1514

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On October 2730, 2008, ~~Winston~~the Company and ~~Elorac~~sanofi-aventis ~~mutually~~Canada ~~terminated~~Inc. entered into a licensing agreement for the ~~above~~Canadian ~~license~~rights to Civamide, Winston’s transient receptor potential vanilloid (TRPV-1) modulator in formulations for topical application. Under the terms of the agreement, sanofi-aventis Canada Inc. Asowns the rights to develop, manufacture and commercialize Civamide Cream in Canada along with a second generation ~~result~~cream that is currently in development. In return for granting sanofi-aventis Canada Inc. the Canadian rights, Winston received an upfront payment of ~~this~~$1.9 million ~~mutual~~(US) and ~~termination~~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 ~~paid~~is recognizing ~~Elorac~~the upfront payment of $~~105~~1.9 million over 18 months. As such approximately $1,267,000 and $316,000 has been recognized as revenue in ~~exchange~~2009 ~~for~~and ~~Winston~~in ~~retaining~~2008, respectively, ~~all~~with the ~~property~~remainder ~~rights~~being ~~under~~treated as unearned revenue on the ~~agreement~~Consolidated Balance Sheet as of December 31, 2009.

On October 30, 2008, the Company and sanofi-aventis Canada Inc. entered into a licensing agreement for the Canadian rights to Winston’s 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 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 is recognizing the upfront payment of $1.9 million over 18 months. As such approximately $316,000 has been recognized as revenue in 2008, with the remainder being treated as unearned revenue on the Consolidated Balance Sheet as of December 31, 2008.

NOTE 5 — RELATED-PARTY TRANSACTIONS

InElorac ~~2006 and 2007, the Company assisted Packer’s-Pine Corporation (“Packer’s”) with distribution of certain personal care products and administration. Packers~~ is aan ~~corporation~~entity ~~whose~~controlled ~~chairman~~by ~~is Joel E~~Dr. Bernstein, ~~M.D., president and~~ CEO of ~~the~~Winston ~~Company,~~Labs and ~~two directors of~~ the ~~Company~~ ~~served on the board of directors of Packer’s~~Company. ~~Under~~In ~~this arrangement~~addition, ~~Packer’s~~Robert ~~reimbursed the~~Yolles, ~~Company for direct costs. The amount received by the Company from Packer’s as~~ a ~~fee~~director ~~for performing~~of ~~this function amounted to $0 during~~ the ~~years ended December 31~~Company, ~~2008~~is ~~and 2007. Amounts~~also ~~due~~a ~~from~~director ~~Packer’s~~ of ~~$0 and $5,554 as of December 31, 2008 and 2007, respectively, are included in related party receivables in the Company’s balance sheet. In March 2007, Packer’s merged into~~ Elorac. Since inception, Elorac has been located in the same offices as Winston and therefore has shared in certain of Winston’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. Winston ~~has~~ received ~~approximately~~$162,977 and $128,323 in 2009 and in 2008 for such services, which are included as a reduction of Winston’s expenses on the Consolidated Statement of Operations. Amounts due from Elorac of $2,601 and $0 as of December 31, 2009 and 2008, respectively, are included in related party receivables in the Company’s Balance Sheet. On February 28, 2009 Elorac purchased certain trademarks from the Company for approximately $1,154.

~~In November 2005, Winston spun off~~ Gideon Pharmaceuticals, Inc. (“Gideon”). ~~Gideon~~is ~~received certain~~a ~~early-stage~~corporation ~~technologies~~whose ~~not~~chairman ~~being actively developed by Winston,~~ and ~~all Winston~~sole ~~shareholders~~director ~~were~~is ~~offered~~Joel ~~the opportunity to purchase Gideon shares on a pro-rata basis~~E. ~~Not~~Bernstein, ~~all Winston shareholders purchased Gideon shares~~M.D., ~~but~~president ~~overlap~~and inCEO ~~the shareholders~~ of ~~Winston~~the ~~and Gideon is very significant~~Company. Gideon ~~is an independent entity and not a subsidiary of Winston; however, as~~reimburses ~~part of~~ the ~~spin-off~~Company ~~process,~~for ~~Winston~~certain ~~did~~expenses ~~end~~that ~~up purchasing and maintaining a minority stake in Gideon (approximately 10.7% ownership), for~~ the ~~purpose~~Company ofincurs ~~preserving~~on ~~the~~behalf ~~rights~~ of ~~those option holders in Winston prior to the~~ Gideon ~~spin-off~~. InAmounts ~~particular, option holders in Winston prior to~~due ~~the~~from ~~spin off of~~ Gideon ~~had, upon exercise~~ of ~~their Winston options~~$12,675 anand ~~opportunity~~$0 toas ~~purchase a pro-rata allotment~~ of ~~Gideon shares. In October~~December ~~2007~~31, in2009 ~~connection~~and ~~with~~2008, ~~the Merger~~respectively, ~~Winston’s~~are ~~Board~~included ofin ~~Directors~~related ~~voted~~party toreceivable ~~distribute the shares of Gideon owned by the Company~~ on ~~behalf of~~ the ~~Winston~~ ~~option~~Consolidated ~~holders~~Balance ~~on a pro-rata basis to such option holders~~Sheets. ~~As of December 31, 2007,~~ ~~Winston had no ownership stake in Gideon.~~

FOn September 19, 2007, Winston Labs entered into an exclusive technology license agreement with Opko Ophthalmologists, LLC, (“OPKO”). The CEO and Chairman of OPKO is also the indirect beneficial owner of 26,574,659 shares of the Company’s capital stock on a fully diluted basis (29.7% of the total issued and outstanding shares), including 8,779,797 shares of common stock underlying warrants. Furthermore, Subbarao Uppaluri, Ph.D., a director of the Company and the Senior Vice President — Chief Financial Officer of Opko Health, is the beneficial owner of 326,538 shares of the Company’s capital stock on a fully-16diluted basis, including 27,500 shares of common stock underlying options and 89,589 shares of common stock underlying warrants. 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 product. 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. Under the terms of the agreement, OPKO and Winston Labs agreed to equally share the cost related to manufacturing and clinical supplies of Civamide Nasal Spray. During 2008, OPKO reimbursed Winston Labs approximately $80,000 for such costs. In addition, the agreement calls for OPKO to reimburse Winston Labs for certain legal expenses Winston Labs has incurred related to keratoconjunctivitis. In each of 2009 and 2008, approximately $38,800 and $38,000, respectively, of legal fees were billed to OPKO, of which approximately $7,000 and $38,000 were outstanding as of December 31, 2009 and 2008, respectively, and are included in related party receivable on the Consolidated Balance Sheets. Subsequent to December 31, 2009 and 2008, respectively, OPKO paid $7,000 and $38,000 of the balance due.

F-15

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On September 1930, 2007, ~~the~~Dr. Jeffrey ~~Company~~Bernstein ~~entered~~resigned ~~into~~as anSenior ~~exclusive~~Vice ~~technology~~President ~~license agreement with~~and ~~Opko~~Chief ~~Ophthalmologists,~~Operating ~~LLC,~~Officer ~~(“OPKO”).~~of ~~The~~Winston ~~CEO~~ and ~~Chairman~~entered ofinto ~~OPKO~~a isconsulting ~~also~~agreement anwith ~~investor in the~~Winston, ~~Company’s~~effective ~~Series A~~as ~~and~~of ~~Series~~October B1, ~~Convertible Preferred Stock Offering (Note 11)~~2007. ~~Under~~Pursuant to the terms of ~~the~~ ~~license~~his consulting agreement, Winston ~~the~~agreed ~~Company~~to ~~granted~~compensate ~~OPKO~~Dr. Bernstein anat ~~exclusive~~a ~~license~~rate toof ~~the~~$150 ~~proprietary~~per ~~rights~~hour. ofFurther, Winston ~~certain~~agreed ~~products~~to ~~(pharmaceutical~~reimburse ~~compositions~~Dr. Bernstein orfor ~~preparations~~all ~~containing~~reasonable ~~the~~out-of-pocket ~~active~~expenses ~~ingredient civamide~~incurred in ~~formulations~~the ~~suitable~~course ~~for~~of ~~use~~his services into ~~the~~Winston, ~~therapeutic~~including, orbut ~~preventative~~not ~~treatment~~limited ~~of ophthalmic~~to, ~~conditions~~reasonable inexpenses ~~humans).~~related Into travel, ~~exchange~~telephone, ~~OPKO~~postage, ~~paid~~and ~~the~~office ~~Company~~supplies. aThe ~~license~~consulting ~~fee~~agreement ofis ~~$100,000 and~~terminable isby ~~required~~either toDr. Jeffrey ~~pay~~Bernstein aor ~~10%~~by ~~royalty~~Winston onupon ~~sales~~thirty of(30) days ~~the~~notice ~~product.~~to ~~In addition,~~ the ~~agreement~~other ~~requires~~party. ~~OPKO~~Dr. Jeffrey toBernstein ~~pay~~is the ~~Company~~son aof ~~non-refundable~~Dr. Joel ~~payment~~E. ~~of $5~~Bernstein,~~000,000~~ ~~upon~~the ~~approval~~President ~~of a~~and ~~Marketing~~Chief ~~Authorization~~Executive byOfficer ~~OPKO~~of on the ~~product~~Company ~~described~~and inis the ~~agreement.~~beneficial ~~Under~~owner ~~the terms~~ of ~~the agreement~~5,165,324 ~~OPKO~~shares ~~and~~ of the Company’s ~~agreed~~capital tostock ~~equally~~on ~~share~~a ~~the~~fully ~~cost~~diluted ~~related~~basis to(5.7% ~~manufacturing~~of ~~and clinical~~the ~~supplies~~total ofissued ~~Civamide~~and outstanding ~~Nasal solution~~shares). ~~During~~Winston ~~2008~~incurred $12,213 ~~OPKO~~and ~~reimbursed Winston approximately~~ $8021,~~000~~488 ~~for~~of ~~such~~expenses ~~costs.~~under ~~In addition,~~ the consulting agreement ~~calls~~ for ~~OPKO~~years toended ~~reimburse~~December 31, ~~Winston~~2009 ~~for~~and ~~certain legal expenses Winston has incurred related to keratoconjunctivitis. In~~ 2008, ~~approximately $38~~respectively,~~000~~ of ~~legal~~which approximately ~~fees were billed to OPKO~~$7,900 ~~all~~was ~~of which were~~ outstanding as of December 31, ~~2008~~ 2009 and ~~are~~is included in ~~related~~accrued expenses ~~party~~and ~~receivable~~other current liabilities on the Consolidated Balance Sheets ~~at December 31, 2008~~. ~~Subsequent to December 31, 2008, OPKO paid $38,000 of the balance due.~~

Each of the Company’s non-employee directors currently receives $1,250 per quarter. Directors do not receive additional compensation for attendance of meetings. Directors who are also employees do not receive compensation for this service on the Board. As of December 31, 2009 and 2008, respectively, $18,750 and $6,250, respectively, was due to the Company’s non-employee directors, which is included in the accounts payable on the Consolidated Balance Sheets.

NOTE 6 — INTANGIBLE ASSETS

Intangible assets consist of ~~both~~ intangible assets with finite ~~and indefinite~~ useful lives. As of December 31, ~~2008~~2009 and ~~2007~~2008, intangible assets were as follows:

	2008			2007
	2009			2008
Patents and trademarks	$	4241,~~305~~426		$	4042,~~575~~305
Less: accumulated amortization		(2023,~~765~~971	)		(1620,~~861~~765	)
	$	2117,~~540~~455		$	2321,~~714~~540

Future annual amortization expense at December 31, ~~2008~~2009 is as follows:

2009	$	3,206
2010	$	2,766
2010		2,766
2011		2,678
2012		2,678
2013		2,678
Thereafter		5,134
2014		2,678
	$	21,540
Thereafter		3,977
	$	17,455

Weighted average amortization period for the Company’s intangible asset is approximately 10 years. Amortization expense related to amortizable intangible assets was approximately $3,200 and $4,000 for each of ~~2008~~2009 and ~~2007~~2008, respectively.

F-1716

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 7 — INCOME TAXES

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:

	2008			2007
	2009			2008
Tax benefit at U.S. federal statutory rate	$	(1903,~~748,~~000	)	$	(~~810~~1,748,000	)
State tax benefit, net of federal benefit		(~~248~~128,000	)		(~~115~~248,000	)
Change in valuation allowance		21,~~180~~132,000			12,~~020~~180,000
Permanent differences		1,000			1,000
Research and development credits		(~~179~~104,000	)		(~~105~~179,000	)
Other, net		(62,000	)		9(6,000	)
Income tax expense (benefit)	$	—		$	—

The Company’s deferred taxes consist of the following at December 31, ~~2008~~2009 and ~~2007~~2008:

	2008			2007
	2009			2008
Deferred tax assets
Net operating loss carryforward	$	1618,~~929~~604,000		$	1416,~~701~~929,000
Research and development credits		1,~~379~~483,000			1,~~200~~379,000
Intangible		1,~~446~~261,000			1,~~642~~446,000
Unearned revenue		~~615~~123,000			—615,000
Property and equipment		2223,000			22,000
Accruals		146,000			314,000
Other		67104,000			67,000
Total deferred tax assets		2021,~~472~~604,000			1720,~~635~~472,000
Valuation allowance for deferred tax assets		(2021,~~472~~604,000	)		(1720,~~635~~472,000	)
Deferred taxes, net	$	—		$	—

At December 31, ~~2008~~2009, the Company had Federal and state net operating loss carryforwards of approximately $4147,~~918~~927,000 which ~~begins~~begin expiring in 2018, unless previously utilized. In addition, the Company has federal and state net operating loss carryforwards of approximately $1,692,000, that originated from GRC prior to the merger, that has substantial limitations on its use and ~~begins~~ begin expiring in 2026. Pursuant to Internal Revenue Code Sections 382 and 383, certain substantial changes in the Company’s ownership may limit the amount of the net operating loss carryforwards, which could be utilized to offset future taxable income and income tax liabilities. The Company also had Federal research and development credit carryforwards of approximately $1,~~379~~483,000. The Company has provided a valuation allowance for the full amount of its net deferred ~~tax~~ tax assets since realization of any future benefit from deductible temporary differences, net operating loss and tax credit carryforwards is uncertain.

~~NOTE 8 — STOCK OPTION PLAN~~F-17

The Company has adopted the 1999 Stock Option Plan, as amended (the “1999 Plan”), and the Stock Option Plan for Non-Employee Directors, as amended (the “Director Plan”), collectively the “Plans.” The Plans provide for the granting of incentive stock options to officers and other employees of the Company, and non-qualified stock options to directors and consultants of the Company. The total number of shares of common stock authorized for issuance under the Plans is 9,708,055. The options are exercisable at various dates and will expire no more than ten years from their date of grant. The exercise price and the duration of each option are determined by the Board of Directors. In the case of incentive stock options, the exercise price may not be less than 100% of the fair market value of the Company’s common stock at the date of grant. For holders of more than 10% of the Company’s total combined voting power of all classes of stock, incentive stock options may not be granted at less than 110% of the fair market value of the Company’s common stock at the date of grant and for a term not to exceed five years.

F-18

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 8 — STOCK OPTION PLAN

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.

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.

The Company did not grant any options in 2008. In July 2008, 446,791 options were forfeited by a past Director of the Company when rights to exercise those options lapsed.

~~SFAS~~ASC ~~123(R)~~Topic 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option pricing model and to recognize this expense. Stock-based compensation expense recognized for the years ended December 31, ~~2008~~2009 and 2008 ~~2007~~ was $094,198 and $~~165~~0,~~504,~~ respectively, and is included in general and administrative expenses in the statement of operations. ~~Approximately $137,000 of the 2007 compensation expense relates to the acceleration of vesting all unvested stock options for five employees in conjunction with the Merger.~~ This expense was calculated based on the Black-Scholes single-option pricing model, using the following assumptions:

	2007
	2009
Expected dividend yield	0.00%	~~0.00%~~
Expected stock price volatility	76.57%	~~75.00%~~
Risk-free interest rate range	1.87% – 2.36%	~~4.20% – 4.71%~~
Expected life of options (years)	56.755 years
Fair value of options granted	$1.43 – $2.14

~~The risk~~F-~~free interest rate is based on the implied yield available on U.S. treasury~~18 zero-coupon issues with an equivalent remaining term. Since the Company does not have sufficient historical experience on which to estimate expected term, the simplified method was used to generate the expected option life. Using the simplified method, the expected term is calculated by taking the average of the vesting term and the original contractual term. In a similar manner, the Company does not have a history of stock price volatility, so it identified five appropriate comparables for use as a benchmark. These comparables (three public companies and two private companies that filed for and later executed initial public offerings) are in the same industry (specialty pharmaceuticals) and focused on development of the same types of products (pain control and central nervous system) as the Company. To generate the estimated stock price volatility shown above, a weighted average of the five comparable companies’ expected volatility (which ranged from 56% to 88%) was employed for a period equal to the expected life of the options.

F-19

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The ~~following~~risk-free ~~table~~interest ~~summarizes~~rate ~~stock~~is based on the implied yield available on U.S. treasury zero-coupon issues with an equivalent remaining term. Since the Company does not have sufficient historical experience on which to estimate expected term, the simplified method was used to generate the expected option ~~activity~~life. ~~under~~Using the ~~Plans~~simplified ~~during~~method, the expected ~~years~~term ~~ended~~is calculated by taking the average of the vesting term and the original ~~December 31~~contractual term. In a similar manner, ~~2008~~the Company does not have a history of stock price volatility, so it identified nine appropriate comparables for use as a benchmark. These comparables (all publically traded companies) are in the same industry (specialty pharmaceuticals) and ~~2007:~~focused on development of the same types of products (pain control and central nervous system) as the Company. To generate the estimated stock price volatility shown above, a weighted average of the nine comparable companies’ expected volatility (which ranged from 71% to 82%) was employed for a period equal to the expected life of the options.

										Weighted
				Weighted-		Weighted-				Average
				Average		Average		Aggregate		Remaining
				Exercise		Grant Date		Intrinsic		Contractual
	Shares			Price		Fair Value		Value		Life
Options at December 31, 2006		5,599,231		$	0.34
Granted		66,191			0.34	$	0.23
Exercised		(357,433	)		0.35
Forfeitures		(1,234,468	)		0.34
Options at December 31, 2007		4,073,522		$	0.34
Granted		—			—	$	—
Exercised		—			—
Forfeitures		(446,791	)	$	0.32
Options at December 31, 2008		3,626,731		$	0.34			$	16,186,071		3.44

The following table summarizes stock option activity under the Plans during the years ended December 31, 2009 and 2008:

All of the outstanding options at December 31, 2008 were exercisable. Total unrecognized compensation cost for stock options as of December 31, 2008 was $0. 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 $4.80 at December 31, 2008. The aggregate intrinsic value of options outstanding and exercisable during 2008 is $16,186,071. Cash proceeds received from the exercise of options for 2007 was $124,380. The total intrinsic value of options exercised during 2007 was $1,200. The realized tax benefit from stock options and other share-based payments for 2007 was $0, based on the Company’s election of the “with and without” approach.


										Weighted
				Weighted-		Weighted-				Average
				Average		Average		Aggregate		Remaining
				Exercise		Grant Date		Intrinsic		Contractual
	Shares			Price		Fair Value		Value		Life
Options at December 31, 2007		4,073,522		$	0.34
Granted		—		$	—	$	—


Exercised		—		$	—
Forfeitures		(446,791	)	$	0.32


Options at December 31, 2008		3,626,731		$	0.34
Granted		409,500		$	1.47	$	1.89


Exercised		(415,529	)	$	0.32
Forfeitures		(578,717	)	$	0.28


Options at December 31, 2009		3,041,985		$	0.50			$	—		4.20

OnThere ~~January 12~~is $678,615 ~~2009~~in unrecognized compensation expense to be recognized over remaining weighted average period of 4.4 years. The aggregate intrinsic value in the table above is before income taxes, based on the fair value of a ~~director~~share of the Company’s common ~~exercised~~stock ~~231~~of $0.28 at December 31,~~670~~ 2009. The aggregate intrinsic value of options outstanding atand exercisable during 2009 was $0.36 ~~for~~Cash proceeds received from the exercise of options for 2009 was approximately $83134,000. The total intrinsic value of options exercised during 2009 was approximately $1,349,067. As of December 31, 2009 there were 2,632,485 exercisable options. The realized tax benefit from stock options and other share-based payments for 2009 was $0, based on the Company’s election of the “with and without” approach.

~~NOTE~~On 9January 12, ~~— 401(k)~~2009, ~~PLAN~~an executive of the Company exercised 231,670 options at $0.36 for approximately $83,000. In March, 2009, 198,574 options were forfeited by a past director of the Company when rights to exercise those options lapsed. On May 1, 2009, an executive of the Company exercised 158,859 options at an exercise price of $0.28 for approximately $44,000. On October 16, 2009, an executive of the Company exercised 25,000 options at an exercise price of $0.28 for approximately $7,000 and forfeited the remaining 372,147 options that expired on October 18, 2009. In addition 7,996 options were forfeited in 2009 by past employees of the Company when rights to exercise those options lapsed.

~~The Company has adopted a qualified employee savings and retirement plan under Section 401(k) of the U.S. Internal Revenue Code (the “401(k) Plan”). All of the Company’s full~~F-~~time employees~~19 are eligible to participate in the 401(k) Plan by enrolling in the 401(k) Plan and electing to reduce their current compensation by up to the statutorily prescribed annual limit, and having the amount of the reduction contributed to the 401(k) Plan. The Company may also make discretionary matching contributions to the 401(k) Plan for employees. The Company made discretionary matching contributions to the 401(k) Plan of $40,449 and $28,023 in 2008 and 2007, respectively.

F-20

Winston Pharmaceuticals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

NOTE 9 — 401(k) PLAN

The Company has adopted a qualified employee savings and retirement plan under Section 401(k) of the U.S. Internal Revenue Code (the “401(k) Plan”). All of the Company’s full-time employees are eligible to participate in the 401(k) Plan by enrolling in the 401(k) Plan and electing to reduce their current compensation by up to the statutorily prescribed annual limit, and having the amount of the reduction contributed to the 401(k) Plan. The Company may also make discretionary matching contributions to the 401(k) Plan for employees. The Company made discretionary matching contributions to the 401(k) Plan of $54,602 and $40,449 in 2009 and 2008, respectively.

NOTE 10 — COMMITMENTS AND CONTINGENCIES

The Company leases its facilities on a month-to-month basis and certain equipment under operating leases that expire ~~through~~ in 2010 and require payments totaling approximately $3,000. ~~Future~~Rental ~~minimum~~expense ~~operating~~for ~~lease~~the ~~payments~~years atended December 31, 2009 and 2008, ~~are~~was as$93,944 ~~follows:~~and $120,649, respectively.

2009			13,224
2010			2,708

Rental expense for the years ended December 31, 2008 and 2007 was $120,649 and $123,121, respectively.

NOTE 11 — PREFERRED STOCK AND WARRANTS

In connection with the Merger ~~discussed~~on ~~in Note 1, as of December~~September 3125, 2008, the Company ~~has~~ issued ~~and outstanding 12~~101,~~730~~ 849 shares of its Series A Convertible Preferred Stock, par value $.001 per share (“Series A Preferred Stock”), and 973,~~157~~332 shares of its Series B Convertible Preferred Stock., ~~The~~par value ~~terms~~$.001 ofper ~~the~~share (“Series ~~A and Series~~ B ~~Convertible~~ Preferred Stock”). ~~include~~Following ~~payment~~a of1-for-8 ~~dividends~~reverse onsplit ~~this preferred stock if~~ of the Company’s ~~pays~~common ~~dividends on~~and ~~its~~preferred ~~common~~ stock ~~(based~~on ~~upon~~December 15, ~~the~~2008, ~~number~~12,730 of shares of ~~common~~its Series A ~~stock~~Preferred ~~into~~Stock ~~which~~and ~~each~~9,157 ~~share~~shares of ~~preferred~~ ~~stock~~its ~~may~~Series B bePreferred ~~converted).~~Stock ~~Liquidation~~were ~~distributions~~issued and ~~distributions other than cash~~ ~~will~~outstanding. beIn ~~made on all shares~~addition, ~~preferred~~the orSeries A ~~common,~~Preferred onStock ashareholders ~~pro~~also ~~rata~~hold ~~basis.~~warrants ~~The~~to purchase ~~voting~~an ~~rights~~aggregate of ~~these preferred~~an ~~shares~~additional ~~are~~8,959 ~~equal~~shares toof ~~one~~the ~~vote~~Company’s ~~for~~Series A ~~each~~Convertible Preferred ~~share~~Stock ofat ~~common~~a ~~stock~~price ~~into~~of ~~which~~$392.72. ~~each~~The ~~preferred share~~warrants isexpire ~~convertible.~~on ~~Each~~November 13, of2012 ~~these~~and ~~preferred~~have certain ~~shares~~adjustment ~~may~~provisions beas ~~converted~~defined atin the ~~option~~related ofwarrant ~~the~~agreements. ~~holder~~On ~~after~~September 24, ~~the~~2009, ~~effective~~each ~~time~~outstanding share of ~~the~~Company ~~Merger,~~Series A Preferred Stock and Series B ~~will~~Preferred beStock automatically converted into 1,000 fully-paid, non-assessable shares of the Company’s common stock, ~~(subject~~par tovalue ~~adjustment~~$.001 ~~for~~per ~~stock~~share ~~splits,~~(“Common ~~stock~~Stock”). ~~dividends~~In addition, ~~combinations~~in connection with such conversion, each outstanding warrant to purchase shares ~~recapitalizations,~~of ~~reorganizations,~~Series A ~~reclassifications~~Preferred orStock ~~other~~automatically ~~similar~~converted ~~events)~~into ~~approximately~~the ~~one~~right to acquire 1,000 ~~year~~shares ~~after~~of ~~issuance~~Common ~~(September 25~~Stock upon the exercise of such warrant, ~~2009)~~at an exercise price of $0.39 per share of Common Stock.

~~In addition, the Series A shareholders also hold warrants to purchase an aggregate of an additional~~F-20 8,959 shares of the Company’s Series A convertible Preferred Stock at a price per share of $392.72. The warrants expire on November 13, 2012 and have certain adjustment provisions as defined in the related warrant agreements.

F-21

EXHIBIT INDEX

Exhibit
Number		Description	~~Description~~
	21.1	*	Subsidiaries of Winston Pharmaceuticals, Inc.
21.1*		Subsidiaries of Winston Pharmaceuticals, Inc.
	31.1	*	Certification of the Company’s President and Chief Executive Officer, Joel E. Bernstein, M.D., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.1*		Certification of the Company’s President and Chief Executive Officer, Joel E. Bernstein, M.D., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31.2	*	Certification of the Company’s Vice President and Chief Financial Officer, David Starr, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of the Company’s Vice President and Chief Financial Officer, David Starr, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32.1	*	Certification of the Company’s President and Chief Executive Officer, Joel E. Bernstein, M.D., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of the Company’s President and Chief Executive Officer, Joel E. Bernstein, M.D., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32.2	*	Certification of the Company’s Vice President and Chief Financial Officer, David Starr, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of the Company’s Vice President and Chief Financial Officer, David Starr, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


*		filed herewith.

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Filing Compare · Winston Pharmaceuticals, Inc.