Note

–

Liquidity Risks and Management

’s Plans

As of

June 30, 2017,

we had cash and cash equivalents of

$2.5

million, current liabilities of

$25.4

million (including

$12.5

million of long-term debt, current portion) and

$12.5

million of long-term debt, non-current portion.

Total long-term debt of

$25

million is with affiliates of Deerfield Management, L.P. (Deerfield), who hold a security interest in substantially all of our assets (Deerfield Loan).

We expect to continue to incur significant losses and require significant additional capital to

further advance our AEROSURF clinical development program, support our operations and meet our debt service obligations for the next several years, and we do

not

have sufficient existing cash and cash equivalents for at least the next year following the date that these financial statements are issued. These conditions raise substantial doubt about our ability to continue as a going concern within

one

year after the date that these financial statements are issued.

potentially alleviate the conditions that raise substantial doubt about our ability to continue as a going concern, management plans to seek additional capital through the following: (i) all or a combination of strategic transactions, and other potential alliances and collaborations focused on markets outside the U.S., as well as potential combinations (including by merger or acquisition) or other corporate transactions; and (ii) through public or private equity offerings. However, there can be

assurance that these alternatives will be available, or if available, that we will be able to raise sufficient capital through such transactions. If we are unable to raise the required capital, we will

not

have sufficient cash resources and liquidity to fund our business operations for at least the next year following the date that these financial statements are issued. Accordingly, management has concluded that substantial doubt exists with respect to our ability to continue as a going concern through

one

year after the issuance of these financial statements.

In connection with the License Agreement with Lee

’s that we announced in

June 2017 (

see

, “– Note

– The Company and Description of Business”), we received an upfront license fee of

$1.0

million in

July 2017

and also are eligible to receive up to

$35.8

million in contingent clinical, regulatory and commercialization milestone payments, and royalties at an escalating high single digit to mid-teens percentage across all products. In addition, Lee’s will be responsible for all development costs in the licensed territory. In addition to the License Agreement, Lee’s also invested

million in our

February 2017

private placement offering.

Under a Loan Agreement dated as of

August 14, 2017,

Lee

’s agreed to lend us up to a potential

$3.9

million (Lee’s Loan) that will be funded in Lee’s sole discretion in

three

equal installments on

August 15,

September 10

and

October 10, 2017,

and will be used to support our AEROSURF development activities and sustain our operations through

October 31, 2017,

while we negotiate a potential share purchase agreement (Share Purchase) and related agreements. The Lee’s Loan will accrue interest at a rate of

12%

per annum. We received the initial installment of

$1.3

million from Lee's on

August 15, 2017.

Under the Share Purchase as currently contemplated, but subject to further negotiation, Lee’s would invest

$10

million and acquire a controlling interest in our Company. The outstanding principal balance of the Lee’s Loan would be applied to the Share Purchase and the Lee’s Loan would be discharged in full at the closing. In addition, to facilitate the Share Purchase, we are negotiating with Deerfield to restructure the Deerfield Loan (Loan Restructuring), effective as of the closing of the Share Purchase. Under the Loan Restructuring as currently contemplated, but subject to further negotiation, the notes issued in connection with the Deerfield Loan would be retired in exchange for (i)

$2.5

million of cash paid out of the proceeds of the Share Purchase, (ii) a number of newly-issued shares of our common stock equal to

of our outstanding common stock on a fully-diluted basis (to be defined) as of the closing date, and (iii) future regulatory and commercial milestones related to the development and commercialization of AEROSURF potentially totaling

$15

million. (S

, “– Note

– Subsequent Events”).

While we believe that we w

ill be able to reach agreement with Lee’s and Deerfield and close the Share Purchase and Loan Restructuring, there can be

assurance that we will be successful. At this time, we do

not

have an alternative source of funding available, such that, if we are unable to complete these transactions for any reason on or before

October 31, 2017,

may

be forced to curtail all of our activities and, ultimately, cease operations. In addition, if we are unable to finalize and close the Loan Restructuring and thereafter fail to make any required payment under the Deerfield Loan, or fail to comply with any commitments contained in the Deerfield Loan documents, Deerfield would be able to declare a default under the Deerfield Loan agreement, accelerate our payment obligations under all or a portion of our indebtedness, and, since we have pledged substantially all of our assets to secure the Deerfield Loan, foreclose on our assets, which could significantly diminish the market value and marketability of our assets and common stock and render us unable to continue as a going concern.

Moreover, e

ven if we are successful in completing these transactions, we will continue to require significant additional capital to support our research and development activities going forward, including the AEROSURF development program, and our operations.

As of

August 15, 2017,

after receipt of the initial advance under the Lee's Loan, we had cash and cash equivalents of

$2.9

million and believe that, assuming receipt of the

two

additional installments under the Lee's Loan, and before any additional financings, we will have sufficient cash resources to fund our operations through

November 2017.

These financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business, and do

not

include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Our ability to secure the needed capital through equity financings and other similar transactions is subject to regulatory and other constraints discussed in this Quarterly Report on Form

-Q and we cannot be certain that we will be able to raise a sufficient amount when needed, if at all, on favorable terms or otherwise. In the event that we cannot raise sufficient capital, we

may

be forced to consider

transactions on less-than-favorable terms, or limit or cease our development activities. If we are unable to raise the required capital, we

may

be forced to curtail all of our activities and, ultimately, cease operations. Even if we are able to raise sufficient capital, such financings

may

only be available on unattractive terms, or result in significant dilution of stockholders’ interests and, in such event, the market price of our common stock

may

decline.

In addition, our ability to secure additional capital at a time when we would like or require

may

be affected by the following factors: (i)

our common stock is currently

trading on the OTCQB

Market (OTCQB), which is operated by OTC Markets Group Inc., under the symbol “WINT” and

may

experience periods of illiquidity; (ii)

our common stock is currently considered a “penny stock,” such that brokers are required to adhere to more stringent market rules, which could result in reduced trading activity and trading levels in our common stock and limited or

analyst coverage; (iii) we are

longer eligible to use a Form S-

registration statement; (iv) we are

longer able to use our ATM Program; (v) our stockholders

may

not

approve proposals to increase the number of shares of common stock authorized under our Amended and Restated Certificate of Incorporation, as amended, which could impair our ability to conduct equity financings or enter into certain strategic transactions; (vi) our stockholders

may

not

approve, to the extent required under Delaware law, strategic transactions (mergers and acquisitions) recommended by our Board; (vii) our capital structure, which currently consists of common stock, convertible preferred stock, pre-funded warrants and warrants to purchase common stock, and

$25

million of debt,

may

make it difficult to conduct equity-based financings; and (viii) negative conditions in the broader financial and geopolitical markets. In light of the foregoing restrictions, we will be required to seek other methods of completing primary offerings, including, for example, under a registration statement on Form S-

the preparation and maintenance of which would be more time-consuming and costly, and private placements, potentially with registration rights or priced at a discount to the market value of our stock, or other transactions, any of which could result in substantial equity dilution of stockholders’ interests.

We have from time to time collaborated with research organizations and universities to assess the potential utility of our KL

surfactant in studies funded in part through non-dilutive grants issued by U.S. Government-sponsored drug development programs, including grants in support of initiatives related to our AEROSURF clinical development program. In late

May 2017,

we announced that we have been awarded

$0.9

million under a previously announced Phase II Small Business Innovation Research Grant (SBIR) valued at up to

$2.6

million from the National Heart, Lung, and Blood Institute (NHLBI) of the National Institutes of Health (NIH) to support the AEROSURF phase

clinical trial. We also have received from time to time grants that support medical and biodefense-related initiatives under programs that encourage private sector development of medical countermeasures against chemical, biological, radiological and nuclear terrorism threat agents, and pandemic influenza, and provide a mechanism for federal acquisition of such countermeasures. Although there can be

assurance, we expect to pursue potential additional funding opportunities as they arise and expect that we

may

qualify for similar programs in the future.

As of

June 30, 2017,

we had outstanding

2.9

million pre-funded warrants issued in a

July 2015

public offering, of which the entire exercise price was prepaid upon issuance, and

6,213

convertible preferred shares issued in the

February 2017

private placement offering

Each preferred share

is convertible into

1,000

shares of common stock. Upon exercise of the pre-funded warrants and conversion of the convertible preferred shares, we would issue common shares to the holders and receive

additional proceeds.

As of

August 15, 2017,

2.5

million pre-funded warrants and

3,203

convertible preferred shares, convertible into

3.2

million shares of common stock, remained outstanding

In addition, as of

June 30, 2017,

there were

120

million shares of common stock and

million shares of preferred stock authorized under our Amended and Restated Certificate of Incorporation, as amended, and approximately

85.7

million shares of common stock and approximately

million shares of preferred stock available for issuance and

not

otherwise reserved.