---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

# FORM 10-Q

QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

# For the quarterly
period ended June 30, 2005

Commission File Number
0-20945

# ANTARES PHARMA, INC.

A Delaware Corporation                                          IRS Employer ID No. 41-1350192

707 Eagleview
Boulevard, Suite 414 Exton, Pennsylvania 19341

(610) 458-6200

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Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes   X   No

Indicate by check mark whether the
 registrant  is an  accelerated  filer (as defined in Rule 12b-2 of the Exchange  Act).
 Yes      No X

The number of shares outstanding of
the Registrants Common Stock, $.01 par value, as of August 10, 2005, was 41,993,606.

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1

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# ANTARES PHARMA, INC.

# INDEX

|                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | PAGE                  
|-------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------
|PART I.        
         ITEM 1
               
               
               
               
         ITEM 2
         ITEM 3
         ITEM 4
PART II. | FINANCIAL INFORMATION         Financial Statements (Unaudited)



         Consolidated Balance Sheets, as of June 30, 2005 and December 31, 2004
         Consolidated Statements of Operations for the three months and six months ended June 30, 2005 and 2004
         Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004
         Notes to Consolidated Financial Statements
         Management's Discussion and Analysis of Financial Condition and Results of Operations
         Quantitative and Qualitative Disclosures About Market Risk
         Controls and Procedures
         OTHER INFORMATION                                                     
         SIGNATURES | 3
4
5
6
12
17
17
19
20

2

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# ANTARES PHARMA, INC. CONSOLIDATED BALANCE
SHEETS (UNAUDITED)

|                                                                                               | June 30,
2005 | December 31,
2004
|---------------------------------------------------------------------------------------------- | ------------- | -----------------
|Assets                                                                                         |               |                  
|Current Assets:                                                                                |               |                  
|Cash  and cash equivalents                                                                     |               |                  
|Short-term investments                                                                         |               |                  
|Accounts receivable, net of allowances of $21,000 and  $22,500, respectively                   |               |                  
|Other receivables                                                                              |               |                  
|Inventories                                                                                    |               |                  
|Prepaid expenses and other assets                                                              |               |                  
|                                                                                               |               |                  
|Total current assets                                                                           |               |                  
|                                                                                               |               |                  
|Equipment, furniture and fixtures, net                                                         |               |                  
|Patent rights, net                                                                             |               |                  
|Goodwill                                                                                       |               |                  
|Other assets                                                                                   |               |                  
|                                                                                               |               |                  
|Total Assets                                                                                   |               |                  
|                                                                                               |               |                  
|Liabilities and Stockholders' Equity                                                           |               |                  
|Current Liabilities:                                                                           |               |                  
|Accounts payable                                                                               |               |                  
|Accrued expenses and other liabilities                                                         |               |                  
|Deferred revenue                                                                               |               |                  
|                                                                                               |               |                  
|Total current liabilities                                                                      |               |                  
|                                                                                               |               |                  
|Deferred revenue - long term                                                                   |               |                  
|                                                                                               |               |                  
|Total liabilities                                                                              |               |                  
|                                                                                               |               |                  
|Stockholders' Equity:                                                                          |               |                  
|Series A Convertible Preferred Stock:  $0.01 par; authorized 10,000 shares; 1,500 issued and   |               |                  
|outstanding at December 31, 2004                                                               |               |                  
|Series D Convertible Preferred Stock:  $0.01 par; authorized 245,000 shares; 33,588 and 63,588 |               |                  
|issued and outstanding at June 30, 2005 and December 31, 2004, respectively                    |               |                  
|Common Stock:  $0.01 par; authorized 100,000,000 shares; 41,993,606 and 40,418,406 issued      |               |                  
|and outstanding at June 30, 2005 and December 31, 2004, respectively                           |               |                  
|Additional paid-in capital                                                                     |               |                  
|Prepaid license discount                                                                       |               |                  
|Accumulated deficit                                                                            |               |                  
|Deferred compensation                                                                          |               |                  
|Accumulated other comprehensive loss                                                           |               |                  
|                                                                                               |               |                  
|                                                                                               |               |                  
|                                                                                               |               |                  
|Total Liabilities and Stockholders' Equity                                                     |               |                  
|                                                                                               |               |                  

See
accompanying notes to consolidated financial statements.

3

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# ANTARES PHARMA, INC. CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)

|                                                             | For the Three Months Ended June
30, | For the Six Months Ended
June 30,
|------------------------------------------------------------ | ----------------------------------- | ---------------------------------
|
|Revenues:                                                    |                                     |                                  
|Product sales                                                |                                     |                                  
|Development revenue                                          |                                     |                                  
|Licensing fees                                               |                                     |                                  
|Royalties                                                    |                                     |                                  
|                                                             |                                     |                                  
|Total revenues                                               |                                     |                                  
|                                                             |                                     |                                  
|Cost of revenues:                                            |                                     |                                  
|Cost of product sales                                        |                                     |                                  
|Cost of development revenue                                  |                                     |                                  
|                                                             |                                     |                                  
|Total cost of revenues                                       |                                     |                                  
|                                                             |                                     |                                  
|Gross profit                                                 |                                     |                                  
|                                                             |                                     |                                  
|Operating expenses:                                          |                                     |                                  
|Research and development                                     |                                     |                                  
|Sales, marketing and business development                    |                                     |                                  
|General and administrative                                   |                                     |                                  
|                                                             |                                     |                                  
|                                                             |                                     |                                  
|                                                             |                                     |                                  
|Operating loss                                               |                                     |                                  
|                                                             |                                     |                                  
|Other income (expense):                                      |                                     |                                  
|Interest income                                              |                                     |                                  
|Interest expense                                             |                                     |                                  
|Foreign exchange losses                                      |                                     |                                  
|Other, net                                                   |                                     |                                  
|                                                             |                                     |                                  
|                                                             |                                     |                                  
|                                                             |                                     |                                  
|Net loss                                                     |                                     |                                  
|                                                             |                                     |                                  
|Preferred stock dividends                                    |                                     |                                  
|                                                             |                                     |                                  
|Net loss applicable to common shares                         |                                     |                                  
|                                                             |                                     |                                  
|Basic and diluted net loss per common share                  |                                     |                                  
|                                                             |                                     |                                  
|Basic and diluted weighted average common shares outstanding |                                     |                                  
|                                                             |                                     |                                  

See
accompanying notes to consolidated financial statements.

4

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# ANTARES PHARMA, INC. CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)

|                                                                            | For the Six Months Ended
June 30,
|--------------------------------------------------------------------------- | ---------------------------------
|
|Cash flows from operating activities:                                       |                                  
|Net loss                                                                    |                                  
|Adjustments to reconcile net loss to net cash used in operating activities: |                                  
|Depreciation and amortization                                               |                                  
|Noncash interest expense                                                    |                                  
|Stock-based compensation expense                                            |                                  
|Amortization of prepaid license discount                                    |                                  
|Changes in operating assets and liabilities:                                |                                  
|Accounts receivable                                                         |                                  
|Other receivables                                                           |                                  
|Inventories                                                                 |                                  
|Prepaid expenses and other assets                                           |                                  
|Other assets                                                                |                                  
|Accounts payable                                                            |                                  
|Accrued expenses and other                                                  |                                  
|Deferred revenue                                                            |                                  
|Due to related parties                                                      |                                  
|                                                                            |                                  
|Net cash used in operating activities                                       |                                  
|                                                                            |                                  
|Cash flows from investing activities:                                       |                                  
|Purchases of equipment, furniture and fixtures                              |                                  
|Purchase of short-term investments                                          |                                  
|Proceeds from maturity of short-term investments                            |                                  
|Additions to patent rights                                                  |                                  
|                                                                            |                                  
|Net cash provided by (used in) investing activities                         |                                  
|                                                                            |                                  
|Cash flows from financing activities:                                       |                                  
|Proceeds from sales of common stock, net                                    |                                  
|Proceeds from exercise of warrants                                          |                                  
|Principal payments on capital lease obligations                             |                                  
|Payment of preferred stock dividends                                        |                                  
|                                                                            |                                  
|Net cash provided by financing activities                                   |                                  
|                                                                            |                                  
|Effect of exchange rate changes on cash and cash equivalents                |                                  
|                                                                            |                                  
|Net increase in cash and cash equivalents                                   |                                  
|Cash and cash equivalents:                                                  |                                  
|Beginning of period                                                         |                                  
|                                                                            |                                  
|End of period                                                               |                                  
|                                                                            |                                  
|Cash paid during the period for interest                                    |                                  

See
accompanying notes to consolidated financial statements.

5

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# ANTARES PHARMA, INC. NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) June 30, 2005 and 2004

|1. | Basis of Presentation
|-- | ---------------------

| | The
accompanying unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. The accompanying financial
statements and notes should be read in conjunction with the Companys Annual Report
on Form 10-K for the year ended December 31, 2004. Operating results for the three and
six-month periods ended June 30, 2005, are not necessarily indicative of the results that
may be expected for the year ending December 31, 2005.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Stock
Based Compensation
| | ------------------------

| | The
Company applies Accounting Principles Board, Opinion 25, Accounting for Stock Issued to
Employees, and related interpretations in accounting for stock plans. Accordingly,
compensation expense has been recognized for restricted stock granted to employees, as
discussed in Note 4, but has not been recognized for employee stock options other than the
intrinsic value of options when the exercise price of the options was below their fair
value on the date of grant. In September 2003 the Company issued stock options to
employees at $1.77 per share when the fair value of the stock was $2.20 per share. In the
first six months of 2005 and 2004 the Company recognized compensation expense of $82,566
and $85,058, respectively, in connection with the employee stock options granted in
September 2003. Had compensation cost been determined based on the fair value at the grant
date for stock options under SFAS No. 123, Accounting and Disclosure of Stock-Based
Compensation, the net loss applicable to common shares and loss per common share would
have increased to the pro-forma amounts shown below:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             | Three Months Ended June 30, | Six Months Ended June 30,
|-------------------------------------------- | --------------------------- | -------------------------
|
|Net loss applicable to common shares:        |                             |                          
|As reported                                  |                             |                          
|Intrinsic value of stock options granted     |                             |                          
|Fair-value method compensation expense       |                             |                          
|                                             |                             |                          
|Pro forma                                    |                             |                          
|                                             |                             |                          
|Basic and diluted net loss per common share: |                             |                          
|As reported                                  |                             |                          
|Intrinsic value of stock options granted     |                             |                          
|Fair-value method compensation expense       |                             |                          
|                                             |                             |                          
|Pro forma                                    |                             |                          
|                                             |                             |                          

6

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# ANTARES PHARMA, INC. NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) June 30, 2005 and 2004

|2. | Going Concern
|-- | -------------

| | The
accompanying financial statements have been prepared on a going-concern basis, which
contemplates the realization of assets and the satisfaction of liabilities and other
commitments in the normal course of business. The Company had working capital of
$3,990,562 and $8,489,253 at June 30, 2005 and December 31, 2004, respectively, and has
had net losses and negative cash flows from operating activities since inception.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company expects to report a net loss for the year ending December 31, 2005, as development
and marketing costs related to bringing future generations of products to market continue.
Long-term capital requirements will depend on numerous factors including the status of
collaborative arrangements, the progress of research and development programs and the
receipt of revenues from sales of products.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys cash position is currently sufficient to fund operations only through the
end of 2005. The Company does not currently have any bank credit lines. If the Company
does need additional financing and is unable to obtain such financing when needed, or
obtain it on favorable terms, the Company may be required to curtail development of new
drug technologies, limit expansion of operations or accept financing terms that are not as
attractive as the Company may desire and the Companys ability to execute its
business plan and remain a going concern may be significantly impaired.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
financial statements do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and classification of liabilities
that might be necessary if the Company is unable to continue as a going concern.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Inventories
|-- | -----------

| | Inventories
consist of the following:
| | -------------------------------------

|               | June 30,
2005 | December 31,
2004
|-------------- | ------------- | -----------------
|Raw material   |               |                  
|Finished goods |               |                  
|               |               |                  
|               |               |                  
|               |               |                  

|4. | Product Warranty
|-- | ----------------

| | The
Company recognizes the estimated cost of warranty obligations at the time the products are
shipped based on historical claims incurred by the Company. Actual warranty claim costs
could differ from these estimates. Warranty liability activity is as follows:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|     | Balance at
Beginning of
Year | Warranty
Provisions | Warranty
Claims | Balance at
June 30
|---- | ---------------------------- | ------------------- | --------------- | ------------------
|2005 |                              |                     | $               | 30,000            
|2004 |                              |                     | $               | 50,000            

7

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# ANTARES PHARMA, INC. NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) June 30, 2005 and 2004

|5. | Stockholders
Equity
|-- | --------------------

| | Common
Stock, Options and Warrants
| | ----------------------------------

| | Warrant
exercises during the first six months of 2005 and 2004 resulted in proceeds of $61,700 and
$847,500, respectively, and in the issuance of 75,200 and 2,980,500 shares of common
stock, respectively.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the first six months of 2005 the Company granted options to purchase a total of 225,000
shares of its common stock. Members of the Companys board of directors received
options to purchase 120,000 shares of common stock at an exercise price of $1.40 per
share; James Hattersley, hired as Vice-President of Corporate Business Development during
the first quarter, received options to purchase 65,000 shares of common stock at an
exercise price of $1.32 per share; and Jack Stover, Chief Executive Officer of the
Company, received options to purchase 40,000 shares of common stock at an exercise price
of $1.21 per share. All options were granted at an exercise price that equaled the fair
value of the Companys common stock on the date of the grant.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the six-month period ended June 30, 2004 the Company received net proceeds of $13,753,400
in three private placements of its common stock. A total of 15,120,000 shares of common
stock were sold to investors at a price of $1.00 per share. The Company also issued to the
investors five-year warrants to purchase an aggregate of 5,039,994 shares of common stock
at an exercise price of $1.25 per share. Additionally, warrants for the purchase of
1,612,000 shares of common stock at an exercise price of $1.00 per share were issued to
the placement agent as a commission.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the first six months of 2004 the Company recognized expense of $33,500 in connection with
the issuance of 30,000 shares of common stock to a consultant as compensation for
services.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the first six months of 2004 the Company issued warrants to purchase 400,000 shares of the
Companys common stock at an exercise price of $1.18 per share as compensation to
non-employees for professional services. The Company recognized expense of $254,997 in
2004 in connection with these warrants.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the first quarter of 2004 the Company granted to members of the Companys board of
directors options to purchase 101,500 shares of its common stock at exercise prices
ranging from $1.06 to $1.45.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Preferred
Stock Conversions
| | ---------------------------

| | In
June 2005, 30,000 shares of Series D Preferred Stock were converted into 300,000 shares of
common stock. Also in June 2005, all 1,500 outstanding shares of Series A Preferred Stock
were converted into 1,200,000 shares of common stock.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

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# ANTARES PHARMA, INC. NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) June 30, 2005 and 2004

|5. | Stockholders
Equity (Continued)
|-- | --------------------------------

| | Stock-Based
Compensation to Chief Executive Officer
| | ---------------------------------------------------

| | Jack
E. Stover was appointed President and Chief Operating Officer on July 22, 2004, and was
appointed Chief Executive Officer on September 1, 2004, upon the resignation of Roger G.
Harrison, Ph.D. The terms of the employment agreement with Mr. Stover included the
issuance of options to purchase 500,000 shares of common stock at $0.70 per share and an
additional issuance of options to purchase 40,000 shares of common stock at $1.21 per
share in January of 2005, with all options vesting over four years. The employment
agreement also included the issuance of 100,000 shares of common stock, of which 50,000
shares vested immediately and the remaining 50,000 shares will become fully vested on the
first anniversary of his employment. The Company recorded compensation expense of $35,000
related to the shares with immediate vesting and deferred compensation expense of $35,000
related to the shares vesting over one year. The amounts recorded were based on the market
value of the stock on the measurement date. The deferred compensation expense is being
recognized ratably over the one-year vesting period. Compensation expense of $17,500 was
recognized in connection with these shares during the six-month period ended June 30,
2005. Mr. Stover can earn up to an additional 459,999 shares of common stock upon the
occurrence of various triggering events. The Company will begin recognizing expense in
connection with these additional shares when it becomes probable that a triggering event
will be reached.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Roger
G. Harrison, Ph.D., was appointed Chief Executive Officer of Antares Pharma, Inc.,
effective March 12, 2001. Under the terms of the employment agreement with Dr. Harrison,
the Company issued 88,000 restricted shares of common stock with a three-year vesting
period that became fully vested on March 12, 2004. The Company had recorded deferred
compensation expense of $341,000, the aggregate market value of the 88,000 shares at the
measurement date.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Compensation expense was recognized ratably over the three-year vesting period.  Compensation

expense
of $23,688 was recognized in connection with these shares during the six-month period
ended June 30, 2004. Dr. Harrison resigned as Chief Executive Officer effective September
1, 2004, and on that date entered into an agreement with the Company under which he has
provided consulting services.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

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# ANTARES PHARMA, INC. NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) June 30, 2005 and 2004

|6. | Net Loss Per Share
|-- | ------------------

| | Basic
loss per common share is computed by dividing net loss applicable to common stockholders
by the weighted-average number of common shares outstanding for the period. Diluted loss
per common share reflects the potential dilution from the exercise or conversion of
securities into common stock. The table below discloses the basic and diluted loss per
share.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                            | Three Months Ended
June 30, | Six Months Ended
June 30,
|------------------------------------------- | --------------------------- | -------------------------
|
|Net loss applicable to common shares        |                             |                          
|Basic and diluted weighted avg common       |                             |                          
|shares outstanding                          |                             |                          
|                                            |                             |                          
|Basic and diluted net loss per common share |                             |                          
|                                            |                             |                          

| | Potentially
dilutive stock options and warrants excluded from dilutive loss per share because their
effect was anti-dilutive totaled 20,401,391 and 19,587,700 at June 30, 2005 and 2004,
respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
weighted average exercise price of the stock options and warrants outstanding at June 30,
2005 and 2004 was $1.49 and $1.51, respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------

|7. | Industry Segment and
Operations by Geographic Areas
|-- | ---------------------------------------------------

| | The
Company is primarily engaged in development of drug delivery transdermal and transmucosal
pharmaceutical products and drug delivery injection devices and supplies. These operations
are considered to be one segment. The geographic distributions of the Companys
identifiable assets and revenues are summarized in the following tables:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has operating assets located in two countries as follows:
| | ---------------------------------------------------------------------

|                         | June 30,
2005 | December 31,
2004
|------------------------ | ------------- | -----------------
|Switzerland              |               |                  
|United States of America |               |                  
|                         |               |                  
|                         |               |                  
|                         |               |                  

10

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# ANTARES PHARMA, INC. NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) June 30, 2005 and 2004

|7. | Industry Segment and
Operations by Geographic Areas (Continued)
|-- | ---------------------------------------------------------------

| | Revenues
by customer location are summarized as follows:
| | --------------------------------------------------------

|                         | Three Months Ended
June 30, | Six Months Ended
June 30,
|------------------------ | --------------------------- | -------------------------
|
|United States of America |                             |                          
|Europe                   |                             |                          
|Other                    |                             |                          
|                         |                             |                          
|                         |                             |                          
|                         |                             |                          

| | The
following summarizes significant customers comprising 10% or more of total revenue for the
three months and six months ended June 30:
| | -----------------------------------------------------------------------------------------------------------------------------------------

|                     | Three Months Ended
June 30, | Six Months Ended
June 30,
|-------------------- | --------------------------- | -------------------------
|
|Ferring              |                             |                          
|Solvay               |                             |                          
|Diabetic Care Center |                             |                          
|JCR Pharmaceuticals  |                             |                          

|8. | Comprehensive Loss
|-- | ------------------

|                                            | Three Months Ended
June 30, | Six Months Ended
June 30,
|------------------------------------------- | --------------------------- | -------------------------
|
|Net loss                                    |                             |                          
|Change in cumulative translation adjustment |                             |                          
|                                            |                             |                          
|Comprehensive loss                          |                             |                          
|                                            |                             |                          

11

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|ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

# Overview

The Company develops, produces and
markets pharmaceutical delivery products, including transdermal gels, oral fast melting
tablets and reusable needle-free and disposable mini-needle injector systems. In addition,
the Company has several products and compound formulations under development. The Company
has operating facilities in the U.S. and Switzerland. The U.S. operation develops reusable
needle-free and disposable mini-needle injector systems and manufactures and markets
reusable needle-free injection devices and related disposables. These operations,
including all manufacturing and some U.S. administrative activities, are located in
Minneapolis, Minnesota and are referred to as Antares/Minnesota. The Company also has
operations located in Basel, Switzerland, which consists of administration and facilities
for the research and development of transdermal gels and oral fast melt tablet products.
The Swiss operations, referred to as Antares/Switzerland, focus on research, development
and commercialization. Antares/Switzerland has signed a number of license agreements with
pharmaceutical companies for the application of its drug delivery systems and began
generating revenue in 1999 with the recognition of license revenues. The Companys
corporate offices are located in Exton, Pennsylvania (near Philadelphia).

The Company operates as a specialty
pharmaceutical company in the broader pharmaceutical industry. Companies in this sector
generally bring technology and know-how in the area of drug formulation and/or delivery
devices to pharmaceutical product marketers through licensing and development agreements
while actively pursuing development of their own products. The Company currently views
pharmaceutical and biotechnology companies as primary customers. The Company has
negotiated and executed licensing relationships in the growth hormone segment (reusable
needle-free devices in Europe and Asia) and the transdermal hormone gels segment (several
development programs in place worldwide, including the United States and Europe). In
addition, the Company continues to market reusable needle-free devices for the home or
alternate site administration of insulin in the U.S. through distributors, and has
licensed its reusable needle-free technology in the fields of diabetes and obesity to Eli
Lilly and Company on a worldwide basis.

The Company is reporting a net loss
of $4,600,601 for the six-month period ended June 30, 2005 and expects to report a net
loss for the year ending December 31, 2005, as marketing and development costs related to
bringing future generations of products to market continue. Long-term capital requirements
will depend on numerous factors, including the status of collaborative arrangements, the
progress of research and development programs, the receipt of revenues from sales of
products and the ability to control costs.

12

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# Results of Operations

Critical Accounting
Policies

The Company has identified certain of
its significant accounting policies that it considers particularly important to the
portrayal of the Companys results of operations and financial position and which may
require the application of a higher level of judgment by the Companys management,
and as a result are subject to an inherent level of uncertainty. These are characterized
as critical accounting policies and address revenue recognition, foreign
currency translation, valuation of long-lived and intangible assets and goodwill and
accounting for debt and equity instruments, each more fully described under
Managements Discussion and Analysis of Financial Condition and Results of
Operations in the Companys Annual Report on Form 10-K for the year ended
December 31, 2004. The Company has made no changes to these policies during 2005.

Three and Six Months
Ended June 30, 2005 and 2004

Revenues

Total revenues for the three and six
months ended June 30, 2005 were $492,425 and $1,046,810, respectively, compared to
revenues for the same prior-year periods of $691,380 and $1,417,201, respectively. The
decreases in the second quarter of $198,955, or 29%, and in the first half of $370,391, or
26%, were primarily due to decreases in product sales of $47,928 and $113,121,
respectively, development revenue of $34,944 and $62,346, respectively, and licensing fees
of $112,382 and $192,158, respectively.

The product sales decrease was
primarily due to a decrease in sales of the Medi-Jector Vision device and disposable
components to the Companys major European customer who had acquired sufficient
disposable products in prior periods. Development revenue decreased for the three months
and six months ended June 30, 2005 as compared to the prior-year periods primarily due to
development fees related to an agreement that originated and ended in 2004 and changes to
the Companys strategy that reduced the emphasis on licensing early stage technology.
Licensing fees decreased mainly due to amortizing remaining deferred revenue over longer
periods of time for accounting purposes as a result of increasing the estimated revenue
recognition periods of certain existing license agreements.

Cost of Sales

The cost of product sales are related
to injection devices and disposable products. Cost of product sales as a percentage of
product sales decreased to 68% in the second quarter of 2005 from 83% for the second
quarter of 2004, and decreased to 69% for the first six months of 2005 from 78% for the
first six months of 2004. The decrease in the second quarter and first half of 2005 cost
of sales percentage was mainly due to a decrease in cost of most products resulting from a
reduction in allocable overhead expenses, primarily tool based depreciation and other
manufacturing efficiencies. In addition, the first six months of 2004 included a
write-down for excess inventory related to disposable components used with older injector
device models.

The cost of development revenue
consists of labor costs, direct external costs and an allocation of certain research and
development expenses. Cost of development revenue as a percentage of development revenue
was 18% and 38%, respectively, for the three and six-month periods ended June 30, 2005,
and for the same periods of the prior year were 62% and 30%, respectively. The decrease in
the second quarter of 2005 as compared to 2004 was primarily due to a year-to-date expense
allocation made in the

13

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second quarter of 2004 that included expenses related to both the
first and second quarters of 2004. The cost of development revenue as a percentage of
development revenue for the 2005 six-month period was significantly impacted by a one-time
development arrangement that generated approximately $18,000 of revenue at a very small
gross margin.

Research and Development

Research and development expenses
totaled $1,083,465 and $2,049,586 in the three and six-month periods ended June 30, 2005,
respectively, compared to $603,990 and $1,267,963 in the same prior-year periods. The
increases in the second quarter and first half of 2005 compared to the same periods of
2004 were primarily due to development projects related to transdermal gels and oral fast
melt tablet products and consisted mainly of increases in external costs for studies and
analysis work around platform validation and proof-of-concept work.

Sales, Marketing and
Business Development

Sales, marketing and business
development expenses totaled $354,258 and $641,002 in the three and six-month periods
ended June 30, 2005, respectively, compared to $124,281 and $234,333 in the same
prior-year periods. The increases in the current year three and six-month periods as
compared to the prior-year periods of $229,977, or 185%, and $406,669, or 174%,
respectively, are primarily due to increases in payroll and travel expenses resulting from
the hiring of a vice president of corporate business development during the first six
months of 2005 and the utilization of consultants for various business development
projects and marketing related clinical studies.

General and Administrative

General and administrative expenses
totaled $1,132,616 and $2,427,941 in the three and six-month periods ended June 30, 2005,
respectively, compared to $1,273,263 and $2,702,438 in the same periods of the prior year.
The decrease of $140,647, or 11%, in the second quarter of 2005 and the decrease of
$274,497, or 10%, in the first six months of 2005 as compared to the same periods in 2004
were due primarily to decreases in professional services and legal fees, partially offset
by increases in directors costs.

Other Income (Expense)

Net other income (expense) decreased
to $18,510 of income in the second quarter of 2005 from income of $22,368 in the second
quarter of 2004, and changed to income of $46,931 for the first six months of 2005 from
$(49,197) of expense in 2004. The decrease in the second quarter is primarily due to the
foreign exchange losses in 2005 of $(16,969) compared to $(9,273) in 2004, partially
offset by interest income that increased by $3,783 to $36,726 in 2005 from $32,943 in
2004. In the first half of 2005 compared to 2004 foreign exchange losses increased to
$(29,754) from $(10,740), interest income increased by $33,682 to $79,294 from $45,612,
and interest expense decreased to zero from $(79,084). The foreign exchange losses
increased mainly as a result of the strengthening U.S. dollar against the Swiss Franc and
Euro. The interest income increases were due primarily to higher interest rates in 2005
than in 2004. The interest expense decrease in the six-month period was mainly due to
expense of $75,388 recognized in 2004 in connection with warrants originally issued to
convertible debenture holders that were exercised at a discounted exercise price.

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Net Loss Per Common Share

The net loss per common share for the
three and six-month periods ended June 30, 2005 of $0.06 and $0.11, respectively, were
basically unchanged from the net loss per common share of $0.05 and $0.11, respectively,
for the same prior-year periods. The larger losses in each of the 2005 periods were spread
across a slightly higher number of weighted average shares outstanding, resulting in a
$0.01 increase in the net loss per share for the quarter and no change for the six-month
period. The increase in weighted average shares outstanding was mainly due to the private
placement that occurred in the first quarter of 2004.

# Liquidity and Capital
Resources

The Company has not historically, and
does not currently, generate enough revenue to provide the cash needed to support its
operations, and has continued to operate primarily by raising capital and issuing debt. In
order to better position the Company to take advantage of potential growth opportunities
and to fund future operations, the Company raised additional capital in the first half of
2004. The Company received net proceeds of $13,753,400 in three private placements of its
common stock in which a total of 15,120,000 shares of common stock were sold at a price of
$1.00 per share. During the first six months of 2004 the Company also received proceeds of
$847,500 in connection with the exercise of warrants for 2,980,500 shares of common stock.
During the first six months of 2005 the Company received proceeds of $61,700 in connection
with the exercise of warrants for 75,200 shares of common stock.

Total cash and cash equivalents and
short-term investments at June 30, 2005 were $4,838,212 compared to $9,624,033 at December
31, 2004. This decrease resulted primarily from funding operating activities in the first
half of 2005. If the net cash burn continues at this rate, the Companys cash and
investment reserves will be sufficient to fund operations only through the end of 2005.

The Company does not currently have
any bank credit lines. If the Company does need additional financing and is unable to
obtain such financing when needed, or obtain it on favorable terms, the Company may be
required to curtail development of new drug technologies, limit expansion of operations or
accept financing terms that are not as attractive as the Company may desire and the
Companys ability to execute its business plan and remain a going concern may be
significantly impaired.

The financial statements do not
include any adjustments relating to the recoverability and classification of recorded
asset amounts or the amounts and classification of liabilities that might be necessary if
the Company is unable to continue as a going concern.

Cash Flows

Operating
Activities

Net cash used in operating activities
increased to $4,769,803 for the first six months of 2005 from $3,153,793 for the first six
months of 2004, a change of $1,616,010. This increase in cash used was due to an increase
in net loss net of noncash expenses of $1,552,246 in 2005 compared to 2004 and an increase
in cash used for operating assets and liabilities of $63,764 in 2005 compared to 2004.

Noncash expenses decreased by
$536,658 to $365,608 in the first six months of 2005 compared to $902,266 in the first six
months of 2004. The decrease was due to decreases in depreciation and amortization of
$144,420, noncash interest expense of $75,388 and stock-based compensation expense of
$316,850.

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In the first half of 2005 the cash
used to acquire assets and reduce liabilities exceeded the cash provided by the sale or
collection of assets and increases in liabilities by $534,810. This net use of cash was
comprised mainly of increases in other receivables and prepaid expenses of $147,692 and
$156,186, respectively, and a decrease in deferred revenue of $271,979, partially offset
by a decrease in accounts receivable of $92,334. The decrease in deferred revenue is due
to amortization of previously deferred amounts that exceeded new amounts received and
deferred under license or development agreements. The decrease in accounts receivable
resulted primarily from the timing of collections versus billings. In the first half of
2004 the cash used to acquire assets and reduce liabilities exceeded the cash provided by
the sale or collection of assets and increases in liabilities by $471,046. The main
reasons for this were increases in other receivables and prepaid expenses of $104,043 and
$189,747, respectively, and decreases in accrued expenses, deferred revenue, due to
related parties and other assets of $72,773, $364,205, $143,361 and $44,400, respectively,
partially offset by decreases in accounts receivable and inventory of $260,432 and
$125,186, respectively, and an increase in accounts payable of $61,865. The decrease in
deferred revenue of $364,205 is due to amortization of previously deferred amounts that
exceeded new amounts received and deferred under license or development agreements. The
decrease in amounts due to related parties was mainly the result of the payment of amounts
due to a consulting company owned by the Companys largest stockholder for services
rendered in 2003. The decrease in accounts receivable resulted primarily from the timing
of collections versus billings. The decrease in inventory is mainly the result of the
timing of purchases of finished goods from the third-party supplier versus shipments to
customers. At the end of 2003 the Company had a large amount of finished goods in
inventory that was shipped to a customer in early January 2004, while the same level of
finished goods inventory did not exist at June 30, 2004.

Investing
Activities

In the first six months of 2005
investing activities resulted in an increase in cash and cash equivalents of $5,967,607.
This increase was due to proceeds from the maturity of short-term investments of
$12,000,000, partially offset by purchases of short-term investments of $5,955,789 and
purchases of equipment, furniture and fixtures of $76,604. Investing activities in the
first six months of 2004 resulted in a decrease in cash and cash equivalents of
$10,171,196. This was due to the purchase of short-term debt securities in the amount of
$9,961,386 after receiving proceeds from the private placement of common stock in the
first quarter, along with purchases of equipment, furniture and fixtures that totaled
$105,640 and expenditures for patent acquisition and development of $104,170.

Financing
Activities

Net cash provided by financing
activities decreased to $11,700 in the first six months of 2005 from $14,553,969 in the
first six months of 2004. In 2005 proceeds of $61,700 from the exercise of warrants was
partially offset by a $50,000 preferred stock dividend payment. The cash provided in 2004
was due primarily to net proceeds of $13,753,400 related to private placements of common
stock in the first quarter of 2004. Cash was also generated in the first half of 2004 from
proceeds from exercise of warrants of $847,500 and was reduced by principal payments on
capital lease obligations of $25,502 and payment of preferred stock dividends of $21,429.

On June 30, 2005 all 1,500 shares of
Series A Convertible Preferred Stock were converted into 1,200,000 shares of common stock
at a conversion price of $1.25 per share. The preferred stock dividends paid in 2005 and
2004 were related to these preferred shares.

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# New Accounting
Pronouncements

In December 2004, the FASB issued
FASB Statement No. 123R, Share-Based Payment.Among other items, the standard
requires that the compensation cost relating to share-based payment transactions be
recognized in the consolidated statement of operations. Note 1 to the Consolidated
Financial Statements contains pro forma disclosures regarding the effect on net loss
and net loss per share as if the fair value method of accounting for stock-based
compensation had been applied.   The new standard was originally effective for
the first interim or annual reporting period that begins after June 15, 2005. 
However, the SEC has deferred the effective date of Statement 123R to allow companies to
implement the new standard at the beginning of their next fiscal year. The Company expects
to implement the new standard beginning with the first quarter of 2006, and to use the
modified prospective transition method. Under this method, awards that are granted,
modified, or settled after the date of adoption will be measured and accounted for in
accordance with Statement 123R, and unvested equity awards granted prior to the effective
date will continue to be accounted for in accordance with Statement 123 as they have been
for purposes of pro forma disclosures, except that amounts will be recognized in the
statement of operations.

|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

The Companys primary market
risk exposure is foreign exchange rate fluctuations of the Swiss Franc to the U.S. dollar
as the financial position and operating results of the Companys subsidiaries in
Switzerland are translated into U.S. dollars for consolidation. The Companys
exposure to foreign exchange rate fluctuations also arises from transferring funds to its
Swiss subsidiaries in Swiss Francs. The Company also has exposure to exchange rate
fluctuations between the Euro and the U.S. dollar. The licensing agreement entered into in
January 2003 with Ferring established pricing in Euros for products sold under the supply
agreement and for all royalties. The effect of foreign exchange rate fluctuations on the
Companys financial results for the three and six-month periods ended June 30, 2005
and 2004 was not material. The Company does not currently use derivative financial
instruments to hedge against exchange rate risk.

|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Disclosure Controls and
Procedures.

The Companys management, with
the participation of the Companys Chief Executive Officer and Chief Financial
Officer, has evaluated the effectiveness of the Companys disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) as of the end of the period covered by this report.
Based on such evaluation, the Companys Chief Executive Officer and Chief Financial
Officer have concluded that, as of the end of such period, the Companys disclosure
controls and procedures are effective.

Internal Control over
Financial Reporting.

There have not been any changes in
the Companys internal control over financial reporting during the fiscal quarter to
which this report relates that have materially affected, or are reasonably likely to
materially affect, the Companys internal control over financial reporting.

17

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A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within the Company have been detected. The design
of any system of controls also is based in part upon certain assumptions about the
likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions; over time, control may
become inadequate because of changes in conditions, or the degree of compliance with the
policies or procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur and not be
detected.

# Cautionary Statement for
Purposes of the Safe Harbor Provisions of the Private Securities Litigation
Reform Act of 1995

Certain statements in this Quarterly
Report on Form 10-Q are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. When used in this Quarterly Report on
Form 10-Q, the words may, should, expects,
plans, anticipates, believes, estimates,
predicts, intends, potential or continue
and similar expressions are generally intended to identify forward-looking statements.
Because these forward-looking statements involve risks and uncertainties, actual results
could differ materially from those expressed or implied by these forward-looking
statements. These statements are only predictions. Although the Company believes that the
expectations reflected in the forward-looking statements are reasonable, it cannot
guarantee future results, levels of activity, performance and/or achievements.

Forward-looking statements represent
the Companys expectations or beliefs concerning future events, including statements
regarding the Companys current cash situation, need for additional capital, ability
to continue operations, whether the Company will be successful in entering into new
strategic relationships, the Companys ability to attract and retain customers, the
Companys ability to adapt to changing technologies, the impact of competition and
pricing pressures from actual and potential competitors with greater financial resources,
the Companys ability to hire and retain competent employees, the Companys
ability to protect and reuse its intellectual property, changes in general economic
conditions, and other factors identified in the Companys filings with the Securities
and Exchange Commission. The Company disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information, future
events or otherwise.

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# PART II  OTHER
INFORMATION

|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

| | On
April 28, 2005, the Company held an annual meeting of its shareholders. The following
items were voted on at the meeting:
| | ----------------------------------------------------------------------------------------------------------------------------

| |  | Dr. Paul Wotton was elected to the Companys board of directors to serve until the
2008 annual meeting. There were 32,579,178 votes in favor of the proposal, zero votes
against the proposal, 60,010 abstentions and zero broker non-votes.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The shareholders approved the change in the state of incorporation from the State of
Minnesota to the State of Delaware. There were 14,304,753 votes for the proposal, 301,937
votes against the proposal, 36,140 abstentions and 17,996,358 broker non-votes.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The shareholders ratified the appointment of KPMG LLP as the Companys independent
registered public accounting firm for the fiscal year ending December 31, 2005. There were
32,047,863 votes for the proposal, 248,985 votes against the proposal, 342,340 abstentions
and zero broker non-votes.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The shareholders approved the proposal to transact other business that may properly come
before the meeting. There were 32,258,356 votes for the proposal, 335,856 votes against
the proposal, 44,976 abstentions and zero broker non-votes.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 6. | Exhibits
|------- | --------

|(a) | Exhibits
|--- | --------

|Exhibit No. | Description                          
|----------- | -------------------------------------
|10.69       | Development Supply Agreement*        
|31.1        | Section 302 CEO Certification        
|31.2        | Section 302 CFO Certification        
|32.0        | Section 906 CEO and CFO Certification

|* | The redacted portions of Exhibit 10.69 have been filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment dated August 15,
2005.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SIGNATURES

Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunto duly authorized

|                |                                                                                                                 
|--------------- | ----------------------------------------------------------------------------------------------------------------
|                | ANTARES PHARMA, INC.                                                                                            
|August 15, 2005 | /s/ Jack E. Stover
Jack E. Stover.
President and Chief Executive Officer                                        
|August 15, 2005 | /s/ Lawrence M. Christian

Lawrence M. Christian
Vice President - Finance, Secretary and
Chief Financial Officer

20