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 September 30,
2009
  Commission
File Number 1-32302
  ANTARES PHARMA, INC.
 A
      Delaware Corporation
            IRS
      Employer Identification No.
41-1350192
  250
Phillips Blvd, Suite 290
 Ewing,
New Jersey 08618
  (609)
359-3020
 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 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).
 Yes
[  ]    No [  ]
 
 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.
 
 Large
      accelerated filer [  ]
              Accelerated
      filer [  ]
              Non
      –accelerated filer [  ]
                (do
      not check if a smaller
                reporting
      company)
              Smaller
      reporting company x
 
 Indicate
by check mark whether the registrant is a shell company (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 November 11, 2009, was 81,710,148.
 
 
 
  
  ANTARES
PHARMA, INC.
 
 INDEX
 
 
 
 PAGEPART
      I.
              
              
              FINANCIAL
      INFORMATIONItem
      1.
              
              Financial
      Statements (Unaudited)Consolidated
      Balance Sheets, as of September 30, 2009 and December 31,
    2008
              3Consolidated
      Statements of Operations for the three months and nine months ended
      September 30, 2009 and 2008
              4Consolidated
      Statements of Cash Flows for the nine months ended September 30, 2009 and
      2008
              5Notes
      to Consolidated Financial Statements
              6Item
      2.
              
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
              15Item
      3.
              
              Quantitative
      and Qualitative Disclosures About Market Risk
              24Item
      4.
              
              Controls
      and Procedures
              24PART
      II.
              
              
              OTHER
      INFORMATIONItem
      1A.
              
              Risk
      Factors
              25Item
      6.
              
              Exhibits
              25SIGNATURES
              26
  2
  PART
I – FINANCIAL INFORMATION
 
 Item
1.  FINANCIAL STATEMENTS.
 
 ANTARES
PHARMA, INC.
 CONSOLIDATED
BALANCE SHEETS
 
 
 September
      30,
              
              
              December
      31,2009
              
              
              2008(Unaudited)AssetsCurrent
      Assets:Cash
      and cash equivalents
              
              $
              15,556,291
              
              
              $
              13,096,298Accounts
      receivable, less allowance for doubtful accounts of
$10,000
              
              
              515,260
              
              
              
              1,334,648Inventories
              
              
              326,830
              
              
              
              182,038Deferred
      costs
              
              
              1,883,726
              
              
              
              -Prepaid
      expenses and other current assets
              
              
              218,256
              
              
              
              294,818Total
      current assets
              
              
              18,500,363
              
              
              
              14,907,802Equipment,
      molds, furniture and fixtures, net
              
              
              500,261
              
              
              
              1,788,163Patent
      rights, net
              
              
              709,777
              
              
              
              644,856Goodwill
              
              
              1,095,355
              
              
              
              1,095,355Deferred
      costs
              
              
              408,250
              
              
              
              1,292,090Other
      assets
              
              
              177,697
              
              
              
              183,139Total
      Assets
              
              $
              21,391,703
              
              
              $
              19,911,405Liabilities
      and Stockholders’ EquityCurrent
      Liabilities:Accounts
      payable
              
              $
              1,887,786
              
              
              $
              2,103,493Accrued
      expenses and other liabilities
              
              
              1,743,562
              
              
              
              1,382,306Notes
      payable and capital leases, net of discount of $0 and $121,762,
      respectively
              
              
              44,689
              
              
              
              2,705,070Deferred
      revenue
              
              
              4,643,410
              
              
              
              1,179,820Total
      current liabilities
              
              
              8,319,447
              
              
              
              7,370,689Notes
      payable and capital leases, net of discount of $0 and $32,427,
      respectively
              
              
              40,818
              
              
              
              2,239,550Deferred
      revenue – long term
              
              
              2,102,917
              
              
              
              3,057,901Total
      liabilities
              
              
              10,463,182
              
              
              
              12,668,140Stockholders’
      Equity:Common
      Stock:  $0.01 par; authorized 150,000,000
shares;81,710,148
      and 68,049,666 issued and outstanding atSeptember
      30, 2009 and December 31, 2008, respectively
              
              
              817,101
              
              
              
              680,496Additional
      paid-in capital
              
              
              139,296,954
              
              
              
              127,926,205Accumulated
      deficit
              
              
              (128,475,997
              )
              
              
              (120,591,845
              )Accumulated
      other comprehensive loss
              
              
              (709,537
              )
              
              
              (771,591
              )10,928,521
              
              
              
              7,243,265Total
      Liabilities and Stockholders’ Equity
              
              $
              21,391,703
              
              
              $
              19,911,405
 
 See
accompanying notes to consolidated financial statements.
  3
  ANTARES
PHARMA, INC.
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (UNAUDITED)
 
 
 
 For
      the Three Months Ended
                September
      30,
              
              
              For
      the Nine Months Ended
                September
      30,2009
              
              
              2008
              
              
              2009
              
              
              2008Revenue:Product
      sales
              
              $
              923,155
              
              
              $
              995,710
              
              
              $
              2,915,526
              
              
              $
              2,679,096Development
      revenue
              
              
              382,788
              
              
              
              99,730
              
              
              
              1,362,632
              
              
              
              309,828Licensing
      revenue
              
              
              658,276
              
              
              
              173,451
              
              
              
              1,166,362
              
              
              
              621,745Royalties
              
              
              76,953
              
              
              
              119,691
              
              
              
              284,899
              
              
              
              282,406Total
      revenue
              
              
              2,041,172
              
              
              
              1,388,582
              
              
              
              5,729,419
              
              
              
              3,893,075Cost
      of revenue:Cost
      of product sales
              
              
              510,234
              
              
              
              563,979
              
              
              
              1,478,281
              
              
              
              1,492,021Cost
      of development and licensing revenue
              
              
              701,960
              
              
              
              31,999
              
              
              
              1,066,410
              
              
              
              90,714Total
      cost of revenue
              
              
              1,212,194
              
              
              
              595,978
              
              
              
              2,544,691
              
              
              
              1,582,735Gross
      profit
              
              
              828,978
              
              
              
              792,604
              
              
              
              3,184,728
              
              
              
              2,310,340Operating
      expenses:Research
      and development
              
              
              2,004,921
              
              
              
              2,153,267
              
              
              
              5,956,989
              
              
              
              5,910,753Sales,
      marketing and business development
              
              
              173,797
              
              
              
              347,326
              
              
              
              726,177
              
              
              
              1,352,556General
      and administrative
              
              
              1,262,554
              
              
              
              1,318,597
              
              
              
              3,715,519
              
              
              
              4,641,7653,441,272
              
              
              
              3,819,190
              
              
              
              10,398,685
              
              
              
              11,905,074Operating
      loss
              
              
              (2,612,294
              )
              
              
              (3,026,586
              )
              
              
              (7,213,957
              )
              
              
              (9,594,734
              )Other
      income (expense):Interest
      income
              
              
              951
              
              
              
              95,113
              
              
              
              25,973
              
              
              
              484,442Interest
      expense
              
              
              (270,157
              )
              
              
              (239,255
              )
              
              
              (629,947
              )
              
              
              (797,314
              )Foreign
      exchange gains (losses)
              
              
              (5,532
              )
              
              
              (7,309
              )
              
              
              (33,703
              )
              
              
              1,174Other,
      net
              
              
              (6,802
              )
              
              
              (10,797
              )
              
              
              (32,518
              )
              
              
              (40,870
              )(281,540
              )
              
              
              (162,248
              )
              
              
              (670,195
              )
              
              
              (352,568
              )Net
      loss
              
              $
              (2,893,834
              )
              
              $
              (3,188,834
              )
              
              $
              (7,884,152
              )
              
              $
              (9,947,302
              )Basic
      and diluted net loss per common share
              
              $
              (0.04
              )
              
              $
              (0.05
              )
              
              $
              (0.11
              )
              
              $
              (0.15
              )Basic
      and diluted weighted average common
                shares
      outstanding
              
              
              75,870,525
              
              
              
              67,979,666
              
              
              
              70,702,423
              
              
              
              66,979,848
 
 
 
 
 
 
 
 See
accompanying notes to consolidated financial statements.
   4
 
 ANTARES
PHARMA, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (UNAUDITED)
  
 For
      the Nine Months Ended September 30,2009
                
                2008Cash
      flows from operating activities:Net
      loss
                
                $
                (7,884,152
                )
                
                $
                (9,947,302
                )Adjustments
      to reconcile net loss to net cash used inoperating
      activities:Depreciation
      and amortization
                
                
                175,706
                
                
                
                180,697Stock-based
      compensation expense
                
                
                884,379
                
                
                
                837,008Amortization
      of debt discount and issuance costs
                
                
                206,519
                
                
                
                211,270Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                823,715
                
                
                
                (311,442
                )Inventories
                
                
                (144,792
                )
                
                
                18,544Prepaid
      expenses and other assets
                
                
                40,274
                
                
                
                303,553Deferred
      costs
                
                
                178,399
                
                
                
                (699,045
                )Accounts
      payable
                
                
                (196,124
                )
                
                
                1,131,629Accrued
      expenses and other current liabilities
                
                
                366,448
                
                
                
                44,876Deferred
      revenue
                
                
                2,534,619
                
                
                
                98,906Net
      cash used in operating activities
                
                
                (3,015,009
                )
                
                
                (8,131,306
                )Cash
      flows from investing activities:Proceeds
      from maturity of short-term investments
                
                
                -
                
                
                
                16,015,057Purchases
      of equipment, molds, furniture and fixtures
                
                
                (1,081
                )
                
                
                (1,327,807
                )Additions
      to patent rights
                
                
                (117,903
                )
                
                
                (83,452
                )Net
      cash provided by (used in) investing activities
                
                
                (118,984
                )
                
                
                14,603,798Cash
      flows from financing activities:Principal
      payments on long-term debt
                
                
                (5,014,390
                )
                
                
                (1,720,083
                )Proceeds
      from sale of common stock
                
                
                10,527,650
                
                
                
                -Proceeds
      from exercise of warrants and stock options
                
                
                95,322
                
                
                
                1,319,950Net
      cash provided by (used in) financing activities
                
                
                5,608,582
                
                
                
                (400,133
                )Effect
      of exchange rate changes on cash and cash equivalents
                
                
                (14,596
                )
                
                
                (2,945
                )Net
      increase in cash and cash equivalents
                
                
                2,459,993
                
                
                
                6,069,414Cash
      and cash equivalents:Beginning
      of period
                
                
                13,096,298
                
                
                
                9,758,924End
      of period
                
                $
                15,556,291
                
                
                $
                15,828,338
 
 See
accompanying notes to consolidated financial statements
  5
 ANTARES
PHARMA, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
  
 
 1.           Description
of Business
 
 Antares
Pharma, Inc. (“Antares,” the “Company” or “we”) is a product development company
committed to improving pharmaceuticals through its patented drug delivery
systems. Antares has multiple development partnerships with leading
pharmaceutical companies. The Company’s products are designed to improve safety
and efficacy profiles by minimizing dosing and reducing side effects while
enabling improved patient compliance. Antares has three validated drug delivery
systems: the ATDTM
Advanced Transdermal Gel Delivery system; subcutaneous injection technology
platforms, including VibexTM
disposable pressure-assisted auto injectors, ValeoTM/Vision®
reusable needle-free injectors, and disposable multi-use pen injectors; and Easy
TecTM oral
disintegrating tablets. Two of the systems have generated FDA-approved
products.
 
 Our
Parenteral Medicines (device) division is located in Minneapolis, Minnesota,
where we develop and manufacture with partners novel pressure-assisted
injectors, with and without needles, which allow patients to self-inject drugs.
We make a reusable, needle-free, spring-action injector device known as the
Medi-Jector VISION®, which is marketed for use with insulin and human growth
hormone (“hGH”).  We have had success in achieving distribution of our
device for use with hGH through licenses to pharmaceutical partners, which has
resulted in continuing market growth and, we believe, a high degree of customer
satisfaction. Distribution of growth hormone injectors occurs in Europe, Japan
and other Asian countries through our pharmaceutical company
relationships.  Recently, our needle-free injector was approved for
use in the U.S. with Tev-Tropin®, which is the brand of hGH sold by our
pharmaceutical partner Teva Pharmaceutical Industries Ltd.
(“Teva”).
 
 We have
also developed variations of the needle-free injector by adding a very small
hidden needle to a pre-filled, single-use disposable injector, called the VibexTM
pressure-assisted autoinjection system. This system is an alternative to the
Medi-Jector Vision® system for use with injectable drugs in unit dose containers
and is suitable for branded and branded generic injectables.  We also
developed a disposable multi-dose pen injector for use with standard multi-dose
cartridges.  We have entered into multiple licenses for these devices
mainly in the U.S. and Canada with Teva.
 
 Our
Pharma division is located in Basel, Switzerland, where we develop
pharmaceutical products utilizing our transdermal systems.  Several
licensing agreements with pharmaceutical companies of various sizes have led to
successful clinical evaluation of our formulations.  In 2006, the
United States Food and Drug Administration (“FDA”) approved our first
transdermal gel with a partner’s drug product for the treatment of vasomotor
symptoms in post-menopausal women.  We are also developing our own
transdermal gel-based products for the market and have initiated a pivotal Phase
III safety and efficacy trial for Anturol®, our oxybutynin transdermal gel
product for overactive bladder.
 
 Our
corporate headquarters is located in Ewing, New Jersey.
 
 
  6
  2.
              Basis
      of Presentation
 
 The
      accompanying unaudited consolidated 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 the Securities and Exchange Commission's 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 consolidated 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, 2008.  Operating
      results for the three and nine month periods ended September 30, 2009, are
      not necessarily indicative of the results that may be expected for the
      year ending December 31, 2009.
 
 The
Financial Accounting Standards Board (“FASB”) sets generally accepted accounting
principles (“GAAP”) that the Company follows to ensure consistent reporting of
its financial condition, results of operations, and cash
flows.   On July 1, 2009, the FASB issued FASB Accounting Standards
CodificationTM,
sometimes referred to as the Codification or ASC.  The Codification is
a reorganization of previous authoritative GAAP, which consisted of thousands of
standards established by a variety of standard setters, into 90 accounting
topics.  The FASB finalized the Codification effective for interim or
annual reporting periods ending on or after September 15, 2009.  The
Codification does not change how the Company accounts for its transactions or
the nature of related disclosures made.  However, when referring to
guidance issued by the FASB the Company will refer to topics in the ASC rather
than prior FASB standards.
 
 3.
              Fair
      Value of Financial Instruments
 
 Cash
equivalents are stated at cost, which approximates fair value.
 
 4.
              Notes
      Payable and Capital Lease
 
 In
September 2009 the Company paid off the remaining principal balance of its
credit facility.   Interest expense related to the credit
facility for the first nine months of 2009 was $620,304, of which $413,785 was
interest paid in cash.  The remaining interest expense of $206,519
consisted of amortization of debt discount and debt issuance costs, of which
$72,400 was the unamortized balance of debt discount and debt issuance costs
when the final payment was made.
 
 In
      2008 and 2007, the Company acquired lab equipment under capital lease
      agreements. The equipment and capital lease obligation were recorded at an
      amount of approximately $100,000 in 2008 and $115,000 in
      2007.  Principal payments of approximately $44,689, $26,770 and
      $14,048 are due in each of the 12-month periods ended September 30, 2010,
      2011 and 2012, respectively.
 
 5.
              Stockholders’
      Equity
 
 Common
      Stock
 
 In July
2009, the Company raised gross proceeds of $8,500,000 in a registered direct
offering through the sale of shares of its common stock and
warrants.  The Company sold a total of 10,625,000 units, each unit
consisting of (i) one share of common stock and (ii) one warrant to
 
 
 7
 
 
 purchase
0.4 of a share of common stock (or a total of 4,250,000 shares), at a purchase
price of $0.80 per unit.  The warrants will be exercisable six months
after issuance at $1.00 per share and will expire five years from the date of
issuance.
 
 In
September 2009, the Company raised gross proceeds of $3,000,000 through the sale
of 2,727,273 units to certain institutional investors, each unit consisting of
(i) one share of common stock and (ii) one warrant to purchase 0.4 of a share of
common stock (or a total of 1,090,909 shares), at a purchase price of $1.10 per
unit. The warrants will be exercisable six months after issuance at $1.15 per
share and will expire five years from the date of issuance.
 
 Warrant
      and stock option exercises in the first nine months of 2009 and 2008
      resulted in proceeds of $95,322 and $1,319,950, respectively, and in the
      issuance of 137,916 and 2,400,000 shares of common stock,
      respectively.
 
 Stock
      Options and Warrants
 
 The
Company accounts for employee stock compensation cost using the fair value
method pursuant to  the Compensation – Stock Compensation Topic of the
FASB Codification (ASC 718), which requires a public entity to measure the cost
of employee services received in exchange for the award of equity instruments
based on the fair value of the award at the date of grant.  The cost
will be recognized over the period during which an employee is required to
provide services in exchange for the award.
 
 The
Company’s 2008 Equity Compensation Plan (the “Plan”) allows for the grant of
options, restricted stock, stock units, stock appreciation rights and/or
performance awards to officers, directors, consultants and
employees.  Under the Plan, the maximum number of shares of stock that
may be granted to any one participant during a calendar year is 1,000,000
shares.  Options to purchase shares of common stock are granted at
exercise prices not less than 100% of the fair market value on the dates of
grant.  The term of the options ranges from three to eleven years and
the options vest in varying periods.  As of September 30, 2009, the
Plan had 1,679,930 shares available for grant.  Stock option exercises
are satisfied through the issuance of new shares.
 
 A summary
of stock option activity under the Plan as of September 30, 2009, and the
changes during the nine month period then ended is as
follows:
 
 Number
      of
                Shares
              
              
              Weighted
                Average
                Exercise
                Price
      ($)
              
              
              Weighted
                Average
                Remaining
                Contractual
                Term
      (Years)
              
              
              Aggregate
                Intrinsic
                Value
      ($)Outstanding
      at December 31, 2008
              
              
              8,056,656
              
              
              
              1.19Granted
              
              
              491,927
              
              
              
              0.60Exercised
              
              
              (57,916
              )
              
              
              0.78Forfeited
              
              
              (671,826
              )
              
              
              1.44Outstanding
      at September 30, 2009
              
              
              7,818,841
              
              
              
              1.13
              
              
              
              6.5
              
              
              
              1,886,368Exercisable
      at September 30, 2009
              
              
              5,655,537
              
              
              
              1.31
              
              
              
              5.5
              
              
              
              881,047
 
 During
the first nine months of 2009 the Company granted options to purchase a total of
491,927 shares of its common stock at exercise prices ranging from $0.47 to
$0.95.  During the first nine months of 2008 the Company granted
options to purchase a total of 1,768,023 shares of its
 
 
 8
 
 
 common
stock at exercise prices ranging from $0.80 to $1.02.   All
options were granted at exercise prices which equaled the fair value of the
Company’s common stock on the dates of the grants.
 
 Total
recognized compensation expense for stock options was approximately $688,000 and
$814,000 for the first nine months of 2009 and 2008, respectively.  As
of September 30, 2009, there was approximately $820,000 of total unrecognized
compensation cost related to nonvested outstanding stock options that is
expected to be recognized over a weighted average period of approximately 1.6
years.
 
 The per
share weighted average fair value of options granted during the first nine
months of 2009 and 2008 was estimated as $0.39 and $0.55, respectively, on the
date of grant using the Black-Scholes option pricing model based on the
assumptions noted in the table below.  Expected volatilities are based
on the historical volatility of the Company’s stock price.  The
weighted average expected life is based on both historical and anticipated
employee behavior.
 
 September
      30,2009
              
              
              2008Risk-free
      interest rate
              
              2.1
              %
              
              3.2
              %Annualized
      volatility
              
              84.0
              %
              
              79.0
              %Weighted
      average expected life, in years
              
              5.0
              
              
              5.0Expected
      dividend yield
              
              0.0
              %
              
              0.0
              %
 
 Warrants
to purchase a total of 18,385,409 shares of common stock were outstanding at
September 30, 2009.  The weighted average exercise price of the
warrants was $1.60.
 
 The
weighted average exercise price of the stock options and warrants outstanding at
September 30, 2009 and 2008 was $1.46 and $1.65, respectively.
 
 Stock
Awards
 
 The
employment agreements with the Company’s Chief Executive Officer, Chief
Financial Officer and other members of executive management include stock-based
incentives under which the executives could be awarded up to approximately
1,380,000 shares of common stock upon the occurrence of various triggering
events.  Of these shares, 75,000 were awarded in the first nine months
of 2009 and 45,454 were awarded prior to 2009.  Compensation expense
of approximately $122,000 was recorded in the first nine months of 2009 in
connection with performance-based awards.
 
 In 2008,
executive officers received stock awards totaling 180,000 shares of common
stock.  The stock awards vest in equal annual installments over a
three-year period.  Expense is recognized on a straight line basis
over the vesting period and is based on the fair value of the stock on the grant
date.  The fair value of the stock awards is determined based on the
number of shares granted and the market price of the Company’s common stock on
the date of grant.  Expense recognized in connection with officer
stock awards was approximately $58,000 and $20,000 in the first nine months of
2009 and 2008, respectively.
   9
 
 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.  Potentially dilutive stock options and warrants excluded from
dilutive loss per share because their effect was anti-dilutive totaled
26,204,250 and 25,211,609 at September 30, 2009 and 2008,
respectively.  The table below discloses the basic and diluted loss
per common share.
 
 Three
      Months Ended
                September
      30,
              
              
              Nine
      Months Ended
                September
      30,2009
              
              
              2008
              
              
              2009
              
              
              2008Net
      loss applicable to commonshares
              
              $
              (2,893,834
              )
              
              $
              (3,188,834
              )
              
              $
              (7,884,152
              )
              
              $
              (9,947,302
              )Basic
      and diluted weighted averagecommon
      shares outstanding
              
              
              75,870,525
              
              
              
              67,979,666
              
              
              
              70,702,423
              
              
              
              66,979,848Basic
      and diluted net loss percommon
      share
              
              $
              (0.04
              )
              
              $
              (0.05
              )
              
              $
              (0.11
              )
              
              $
              (0.15
              )
 
 7.           Industry
Segment and Operations by Geographic Areas
 
 The
Company has one operating segment, drug delivery, which includes the development
of drug delivery transdermal and transmucosal pharmaceutical products and drug
delivery injection devices and supplies.
 
 The
geographic distributions of the Company’s identifiable assets and revenues are
summarized in the following tables:
 
 The
Company has assets located in two countries as follows:
 
 September
      30,
                2009
              
              
              December
      31,
                2008United
      States of America
              
              $
              20,207,189
              
              
              $
              18,756,418Switzerland
              
              
              1,184,514
              
              
              
              1,154,987$
              21,391,703
              
              
              $
              19,911,405
 
 Revenues
by customer location are summarized as follows:
 
 Three
      Months Ended
                September
      30,
              
              
              Nine
      Months Ended
                September
      30,2009
              
              
              2008
              
              
              2009
              
              
              2008United
      States of America
              
              $
              1,477,658
              
              
              $
              199,468
              
              
              $
              3,148,668
              
              
              $
              669,587Europe
              
              
              519,142
              
              
              
              1,079,212
              
              
              
              2,475,080
              
              
              
              2,926,837Other
              
              
              44,372
              
              
              
              109,902
              
              
              
              105,671
              
              
              
              296,651$
              2,041,172
              
              
              $
              1,388,582
              
              
              $
              5,729,419
              
              
              $
              3,893,075
    
 10
 
 Significant
      customers comprising 10% or more of total revenue were as
      follows:
 
 Three
      Months Ended
                September
      30,
              
              Nine
      Months Ended
                September
      30,2009
              
              2008
              
              2009
              
              2008Ferring
      Pharmaceuticals
              
              $
              497,943
              
              
              $
              955,830
              
              
              $
              2,075,717
              
              
              $
              2,521,515Teva
              
              
              1,162,762
              
              
              
              14,285
              
              
              
              2,024,105
              
              
              
              60,714Population
      Council
              
              
              207,553
              
              
              
              -
              
              
              
              642,243
              
              
              
              -
 
 8.           Comprehensive
Loss
  Three
      Months Ended
                  September
      30,
                
                
                Nine
      Months Ended
                  September
      30,2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      loss
                
                $
                (2,893,834
                )
                
                $
                (3,188,834
                )
                
                $
                (7,884,152
                )
                
                $
                (9,947,302
                )Change
      in cumulativetranslation
      adjustment
                
                
                (3,061
                )
                
                
                71,282
                
                
                
                62,054
                
                
                
                (36,702
                )Comprehensive
      loss
                
                $
                (2,896,895
                )
                
                $
                (3,117,552
                )
                
                $
                (7,822,098
                )
                
                $
                (9,984,004
                )
 9.           New
Accounting Pronouncements
  Effective
January 1, 2009, the Company adopted FASB ASC 805, “Business Combinations”
(formerly Statement of Financial Accounting Standards (“SFAS”)
141R).  This establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any noncontrolling interest in the
acquiree and the goodwill acquired in the business combination.  ASC
805 also establishes disclosure requirements to enable the evaluation of the
nature and financial effects of the business combination.  The
Company’s adoption of ASC 805 will apply prospectively to business combinations
completed after January 1, 2009.
 
 Effective
January 1, 2009, the Company adopted the provisions of ASC 815, “Derivatives and
Hedging,” that were issued with Emerging Issues Task Force
Issue07-5, “Determining Whether an Instrument (or
Embedded Feature) Is Indexed to an Entity’s Own Stock.”This standard provides that an entity should use a two step
approach to evaluate whether an equity-linked financial instrument (or embedded
feature) is indexed to its own stock, including evaluating the instrument's
contingent exercise and settlement provisions.The
adoption ofthis pronouncement did not
have an impact on the Company’s consolidated financial
statements.
 
 The
Company adopted the provisions of ASC 820-10, “Fair Value Measurements and
Disclosures” (formerly SFAS No. 157), with respect to non-financial assets
and liabilities effective January 1, 2009. This pronouncement defines fair
value, establishes a framework for measuring fair value and expands disclosures
about fair value measurements. The adoption of ASC 820-10 did not have an impact
on the Company’s consolidated financial statements.
 
 In May
2009, the FASB issued ASC 855, “Subsequent Events” (formerly SFAS 165), which
establishes general standards of accounting for, and requires disclosure of,
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. The Company adopted the
provisions of ASC 855 for the quarter ended June 30, 2009. The
adoption of ASC 855 did not have an impact on the Company’s consolidated
financial statements.
   11
  
 In the
third quarter of 2009, the Company elected early adoption of FASB Accounting
Standards Update (“ASU”) 2009-13, “Revenue Arrangements with Multiple
Deliverables.”  ASU 2009-13, which amended FASB ASC 605-25,
“Multiple-Element Arrangements,” is effective for arrangements entered into or
materially modified in fiscal years beginning on or after June 15, 2010, but
allows for early adoption.  ASU 2009-13 requires a vendor to allocate
revenue to each unit of accounting in arrangements involving multiple
deliverables based on the relative selling price of each
deliverable.  It also changes the level of evidence of standalone
selling price required to separate deliverables by allowing a vendor to make its
best estimate of the standalone selling price of deliverables when more
objective evidence of selling price is not available.  The impact of
adopting this pronouncement on the Company’s consolidated financial statements
is discussed in Note 10.
 
 10.           Revenue
Recognition Change
 
 As
discussed in Note 9, the Company elected early adoption of ASU
2009-13.  The Company elected to adopt ASU 2009-13 on a prospective
basis, with retrospective application to January 1, 2009.
 
 During
the third quarter of 2009, the Company amended the License, Development and
Supply Agreement with Teva originally entered into in July of
2006.  Under the terms of the amendment, the Company received a
payment of $4,076,375 from Teva for tooling in process that had a carrying value
of approximately $1,200,000 and for an advance for the design, development and
purchase of additional tooling and automation equipment, all of which is related
to an undisclosed, fixed, single-dose, disposable injector product using the
Company’s VibexTM autoinjector platform.  The changes to the agreement
related to this payment along with various other changes to the original terms
resulted in a material modification to the agreement.  Because the
agreement was materially modified, the accounting was re-evaluated under ASU
2009-13, and the provisions of ASU 2009-13 were applied as if they were
applicable from inception of the agreement.  The re-evaluation
resulted in the agreement being separated into three units of accounting and
resulted in changes to both the method of revenue recognition and the period
over which revenue will be recognized.  Under the new accounting, the
original license fee and milestone payments received will be recognized as
revenue over the development period, the $4,076,375 payment received will be
recognized as revenue as various tools and equipment are completed and
delivered, and revenue during the manufacturing period will be recognized as
devices are sold and royalties are earned.  The accounting literature
applicable at the time of the original agreement required the entire arrangement
to be considered a single unit of accounting.  Therefore, the payments
received and the development costs incurred were being deferred and would have
been recognized from the start of manufacturing through the end of the initial
contract period.  The amendment and adoption of ASU 2009-13 resulted
in the recognition of revenue previously deferred of $434,111 and the
recognition of costs previously deferred of $536,732 recorded on a cumulative
catch-up basis in the third quarter of 2009.  Also, tooling in process
of approximately $1,200,000 sold to Teva was reclassified from equipment, molds,
furniture and fixtures to deferred costs.  Adoption of ASU 2009-13 had
no impact on the accounting for any of the Company’s other revenue arrangements
containing multiple deliverables.
 
 The table
below shows amounts with adoption of ASU 2009-13 as reported in the Company’s
consolidated statements of operations for the three and nine months ended
September 30, 2009 and the amounts as they would have been reported without
adoption of ASU 2009-13.
  12
 Three
      Months Ended
                
                
                Nine
      Months EndedSeptember
      30, 2009
                
                
                September
      30, 2009As
      Reported
                
                
                Without
                
                
                As
      Reported
                
                
                WithoutWith
      Adoption
                
                
                Adoption
                
                
                With
      Adoption
                
                
                AdoptionOf
      ASU 2009-13
                
                
                Of
      ASU 2009-13
                
                
                Of
      ASU 2009-13
                
                
                Of
      ASU 2009-13Development
      revenue
                
                $
                382,788
                
                
                $
                271,677
                
                
                $
                1,362,632
                
                
                $
                1,251,521Licensing
      revenue
                
                
                658,276
                
                
                
                335,276
                
                
                
                1,166,362
                
                
                
                843,362Total
      revenue
                
                
                2,041,172
                
                
                
                1,607,061
                
                
                
                5,729,419
                
                
                
                5,295,308Cost
      of developmentand licensing
      revenue
                
                
                701,960
                
                
                
                165,228
                
                
                
                1,066,410
                
                
                
                529,678Total
      cost of revenue
                
                
                1,212,194
                
                
                
                675,462
                
                
                
                2,544,691
                
                
                
                2,007,959Gross
      profit
                
                
                828,978
                
                
                
                931,599
                
                
                
                3,184,728
                
                
                
                3,287,349Operating
      loss
                
                
                (2,612,294
                )
                
                
                (2,509,673
                )
                
                
                (7,213,957
                )
                
                
                (7,111,336
                )Net
      loss
                
                
                (2,893,834
                )
                
                
                (2,791,213
                )
                
                
                (7,884,152
                )
                
                
                (7,781,531
                )Basic
      and diluted netloss per common
      share
                
                $
                (0.04
                )
                
                $
                (0.04
                )
                
                $
                (0.11
                )
                
                $
                (0.11
                )
 The first
table below shows amounts as reported in the Company’s consolidated statements
of operations for each quarter.  The second table below is presented
to show amounts for the implementation of ASU 2009-13 on January 1,
2009.
 
 Amounts
as reported:
 
 Three
      Months Ended
              
              
              Six
      Months EndedMarch
      31,
              
              
              June
      30,
              
              
              June
      30,2009
              
              
              2009
              
              
              2009Development
      revenue
              
              $
              680,170
              
              
              $
              299,674
              
              
              $
              979,844Licensing
      revenue
              
              
              425,707
              
              
              
              82,379
              
              
              
              508,086Total
      revenue
              
              
              2,026,403
              
              
              
              1,661,844
              
              
              
              3,688,247Cost
      of development and licensing revenue
              
              
              267,739
              
              
              
              96,711
              
              
              
              364,450Total
      cost of revenue
              
              
              711,855
              
              
              
              620,642
              
              
              
              1,332,497Gross
      profit
              
              
              1,314,548
              
              
              
              1,041,202
              
              
              
              2,355,750Operating
      loss
              
              
              (2,539,742
              )
              
              
              (2,061,921
              )
              
              
              (4,601,663
              )Net
      loss
              
              
              (2,736,707
              )
              
              
              (2,253,611
              )
              
              
              (4,990,318
              )Basic
      and diluted netloss
      per common share
              
              $
              (0.04
              )
              
              $
              (0.03
              )
              
              $
              (0.07
              )
 
 Amounts
upon adoption of ASU 2009-13 on January 1, 2009:
 
 Three
      Months Ended
              
              
              Six
      Months EndedMarch
      31,
              
              
              June
      30,
              
              
              June
      30,2009
              
              
              2009
              
              
              2009Development
      revenue
              
              $
              746,837
              
              
              $
              321,896
              
              
              $
              1,068,733Licensing
      revenue
              
              
              697,707
              
              
              
              107,879
              
              
              
              805,586Total
      revenue
              
              
              2,365,070
              
              
              
              1,709,566
              
              
              
              4,074,636Cost
      of development and licensing revenue
              
              
              645,054
              
              
              
              175,235
              
              
              
              820,289Total
      cost of revenue
              
              
              1,089,170
              
              
              
              699,166
              
              
              
              1,788,336Gross
      profit
              
              
              1,275,900
              
              
              
              1,010,400
              
              
              
              2,286,300Operating
      loss
              
              
              (2,578,390
              )
              
              
              (2,092,723
              )
              
              
              (4,671,113
              )Net
      loss
              
              
              (2,775,355
              )
              
              
              (2,284,413
              )
              
              
              (5,059,768
              )Basic
      and diluted netloss
      per common share
              
              $
              (0.04
              )
              
              $
              (0.03
              )
              
              $
              (0.07
              )
 
 
 13
 11.           Subsequent
Events
  On
November 6, 2009, the Company entered into an Asset Purchase Agreement (the
“Purchase Agreement”) with Ferring Allschwil AG (“Ferring”).  Pursuant
to the terms and conditions of the Purchase Agreement, Ferring will purchase
from the Company all of the assets, including equipment, fixtures, fittings and
inventory, located at the Company’s research and development facility located in
Allschwil, Switzerland (the “Facility”).  Further pursuant to the
terms and conditions of the Purchase Agreement, Ferring will assume the
contractual obligations related to the Facility, including the real property
lease for the Facility, and will continue to employ the employees working at the
Facility.
 
 Also on
November 6, 2009, in tandem with the execution of the Purchase Agreement, the
Company entered into an Exclusive License Agreement with Ferring, which
agreement relates to a license under Antares’ patents and transfer of know-how
for its transdermal gel technology for certain pharmaceutical
products.
 The
Company evaluated all subsequent events through November 12, 2009, the date of
filing of this 10-Q.
 
  14
  Item
2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
 
 Forward-Looking
Statements
 
 Management’s
discussion and analysis of the significant changes in the consolidated results
of operations, financial condition and cash flows of the Company is set forth
below.  Certain statements in this report may be considered to be
“forward-looking statements” as that term is defined in the U.S. Private
Securities Litigation Reform Act of 1995, such as statements that include the
words “expect,” “estimate,” “project,” “anticipate,” “should,” “intend,”
“probability,” “risk,” “target,” “objective” and other words and terms of
similar meaning in connection with any discussion of, among other things, future
operating or financial performance, strategic initiatives and business
strategies, regulatory or competitive environments, our intellectual property
and product development.  In particular, these forward-looking
statements include, among others, statements about:
 
 ·
              the
      impact of new accounting
pronouncements;
 
 ·
              our
      expectations regarding the product development of
  Anturol®;
 
 ·
              our
      expectations regarding continued product development with
      Teva;
 
 ·
              our
      plans regarding potential manufacturing and marketing
      partners;
 
 ·
              our
      future cash flow;
 
 ·
              our
      expectations regarding a net loss for the year ending December 31,
      2009;
 
 ·
              our
      ability to raise additional financing, reduce expenses or generate funds
      in light of our current and projected level of operations and general
      economic conditions.
 
 The words
“may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,”
“continue,” and similar expressions may identify forward-looking statements, but
the absence of these words does not necessarily mean that a statement is not
forward-looking.  Forward-looking statements involve known and unknown
risks, uncertainties and achievements, and other factors that may cause our or
our industry’s actual results, levels of activity, performance, or achievements
to be materially different from the information expressed or implied by these
forward-looking statements.  While we believe that we have a
reasonable basis for each forward-looking statement contained in this report, we
caution you that these statements are based on a combination of facts and
factors currently known by us and projections of the future about which we
cannot be certain.  Many factors may affect our ability to achieve our
objectives, including:
 
 ·
              our
      inability to compete successfully against new and existing competitors or
      to leverage our marketing capabilities and our research and development
      capabilities;
 
 ·
              delays
      in product introduction and marketing or interruptions in
      supply;
 
 ·
              a
      decrease in business from our major customers and
  partners;
 
 ·
              adverse
      economic and political conditions;
    15
 
 ·
              our
      inability to obtain additional financing, reduce expenses or generate
      funds when necessary;
 
 ·
              our
      inability to attract and retain key personnel;
  and
 
 ·
              our
      inability to effectively market our services or obtain and maintain
      arrangements with our customers, partners and
    manufacturers.
 
 In
addition, you should refer to the “Risk Factors” section of our Annual Report on
Form 10-K for the year ended December 31, 2008 for a discussion of other factors
that may cause our actual results to differ materially from those described by
our forward-looking statements.  As a result of these factors, we
cannot assure you that the forward-looking statements contained in this report
will prove to be accurate and, if our forward-looking statements prove to be
inaccurate, the inaccuracy may be material.
 
 We
encourage readers of this report to understand forward-looking statements to be
strategic objectives rather than absolute targets of future
performance.  Forward-looking statements speak only as of the date
they are made.  We do not intend to update publicly any
forward-looking statements to reflect circumstances or events that occur after
the date the forward-looking statements are made or to reflect the occurrence of
unanticipated events except as required by law.  In light of the
significant uncertainties in these forward-looking statements, you should not
regard these statements as a representation or warranty by us or any other
person that we will achieve our objectives and plans in any specified time
frame, if at all.
 
 The
following discussion and analysis, the purpose of which is to provide investors
and others with information that we believe to be necessary for an understanding
of our financial condition, changes in financial condition and results of
operations, should be read in conjunction with the financial statements, notes
and other information contained in this report.
 
 Overview
 
 We
develop, produce and market pharmaceutical delivery products, including
transdermal gels, oral disintegrating tablets and reusable needle-free and
disposable pressure-assisted autoinjector and pen injector systems. In addition,
we have several products and compound formulations under
development.  We have operating facilities in the U.S. and
Switzerland.  Our U.S. operation manufactures and markets reusable
needle-free injection devices and related disposables, and develops disposable
pressure-assisted autoinjector and pen injector systems. These operations,
including all development and some U.S. administrative activities, are located
in Minneapolis, Minnesota.  We also have operations located in Basel,
Switzerland, which consist of administration and facilities for the development
of transdermal gels and oral disintegrating tablet products.  Our
Swiss operations focus principally on research, development and
commercialization of pharmaceutical products and include a number of license
agreements with pharmaceutical companies for the application of its drug
delivery systems.  Our corporate offices are located in Ewing, New
Jersey.
 
 We
operate as a product development/drug delivery 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 to
pharmaceutical product marketers through licensing and development agreements
while actively pursuing development of their own products.  We
currently view pharmaceutical and biotechnology companies as our primary
customers.  We have negotiated and executed licensing relationships in
the growth hormone segment (reusable needle-free devices in the U.S., Europe and
Asia) and the transdermal gels segment (several development programs in place
worldwide, including the U.S.
 
 
 16
 
 and
Europe).  In addition, we continue to support existing customers of
our reusable needle-free devices for the home or alternate site administration
of insulin in the U.S. market through distributors and have licensed both
disposable auto and pen injection devices to Teva for use in undisclosed fields
and territories.  On June 29, 2009, we announced that Teva received
approval of a Supplemental New Drug Application which added “needle-free
injection” to its Tev-Tropin® brand human growth hormone drug
label.  Teva will market our needle-free device as the Tev-Tropin Tjet
Injector system.
 
 In the
third quarter of 2009, we raised gross proceeds of $11,500,000 through the sale
of shares of our common stock and warrants.  We used approximately
$3,000,000 of these proceeds to pay off the remaining balance of our credit
facility.  We also received a payment of $4,076,375 from Teva for
tooling in process that had a carrying value of approximately $1,200,000 and for
an advance for the design, development and purchase of additional tooling and
automation equipment, all of which is related to an undisclosed, fixed,
single-dose, disposable injector product using the Company’s VibexTM autoinjector
platform.
 
 We
incurred a net loss of $7,884,152 for the nine month period ended September 30,
2009 and we expect to report a net loss for the year ending December 31,
2009.  We have not historically generated sufficient revenue to
provide the cash needed to support our operations, and we have continued to
operate primarily by raising capital and incurring debt.  Capital
requirements will depend on numerous factors, including the status of
collaborative arrangements and payments received under such arrangements, the
progress of research and development programs, the receipt of revenues from
sales of products and royalties and the ability to control costs.
 
 Results
of Operations
 
 Critical
Accounting Policies
 
 We have
identified certain of our significant accounting policies that we consider
particularly important to the portrayal of our results of operations and
financial position and which may require the application of a higher level of
judgment by management and, as a result, are subject to an inherent level of
uncertainty.  These policies are characterized as “critical accounting
policies” and address revenue recognition, valuation of long-lived and
intangible assets and goodwill and accounting for debt and equity instruments,
as more fully described under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in our Annual Report on Form 10-K for the
year ended December 31, 2008.  Other than with respect to the revenue
recognition critical accounting policy described below, we have made no changes
to these policies during the nine month period ended September 30,
2009.
 
 Revenue
Recognition
 
 In the
third quarter of 2009, we elected early adoption of FASB ASU 2009-13, “Revenue
Arrangements with Multiple Deliverables.”  ASU 2009-13, which amended
FASB ASC 605-25, “Multiple-Element Arrangements,” is effective for arrangements
entered into or materially modified in fiscal years beginning on or after June
15, 2010, but allows for early adoption.  ASU 2009-13 requires a
vendor to allocate revenue to each unit of accounting in arrangements involving
multiple deliverables based on the relative selling price of each
deliverable.  It also changes the level of evidence of standalone
selling price required to separate deliverables by allowing a vendor to make its
best estimate of the standalone selling price of deliverables when more
objective evidence of selling price is not available.  As discussed
further in Note 10 to our consolidated financial statements, adoption of this
accounting pronouncement resulted in the recognition of revenue previously
deferred of $434,111 and recognition of costs previously
 
 
 17
 
 deferred
of $536,732.  As a result of adoption of ASU 2009-13, deferred
revenues and deferred costs associated with one of our License, Development and
Supply Agreements with Teva will be recognized as revenues and expenses earlier
than would otherwise have occurred.  We also expect revenues and
expenses generated in connection with future multiple element arrangements will
often be recognized over shorter periods than would have occurred prior to
adoption of ASU 2009-13.
 
 Three
and Nine Months Ended September 30, 2009 and 2008
 
 Revenues
 
 Total
revenues for the three and nine months ended September 30, 2009 were $2,041,172
and $5,729,419, respectively, compared to revenues for the same prior-year
periods of $1,388,582 and $3,893,075, respectively.
 
 Product
revenue was $923,155 and $2,915,526 in the three and nine months ended September
30, 2009 compared to $995,710 and $2,679,096 in the three and nine months ended
September 30, 2008.  The decrease in the quarter was mainly due to a
decrease in sales to Ferring, which was partially offset by sales to Teva in
connection with Teva’s launch of our Tjet needle-free device with their hGH
Tev-Tropin®.  In the year-to-date period the sales to Teva more than
offset the decrease in sales to Ferring, resulting in an increase in product
sales in 2009 compared to 2008 (see Note 7 to the consolidated financial
statements).  We believe Ferring sales fluctuations from quarter to
quarter and the decrease from the prior year are driven mainly by Ferring
inventory management practices and we expect product sales to Ferring to
normalize in the first quarter of 2010.
 
 Development
revenue increased in the three and nine month periods ended September 30, 2009
to $382,788 and $1,362,632 compared to $99,730 and $309,828 in the same periods
of the prior year.  Licensing revenue increased in the three and nine
month periods ended September 30, 2009 to $658,276 and $1,166,362 from $173,451
and $621,745 in the same periods of the prior year.  In the third
quarter of 2009, $111,111 of development revenue and $323,000 of licensing
revenue recognized had been previously deferred and represents a portion of
payments received from Teva under a License, Development and Supply Agreement
for a product utilizing our autoinjector technology.  This revenue was
recognized as a result of adopting a new revenue recognition accounting
standard, as described in Note 10 to the consolidated financial
statements.  The development revenue in 2009 related primarily to
transdermal gel development work for Population Council and autoinjector
development work for Teva.  The development revenue in 2008 was
generated from projects related to our transdermal gel, oral disintegrating
tablet and autoinjector technologies.  The licensing revenue increase
in the quarter was primarily due to the revenue recognized after adoption of the
new accounting standard and to a milestone payment received from Teva in
connection with Teva’s launch of our Tjet needle-free device with their hGH
Tev-Tropin®.  The licensing revenue for the nine month periods ended
September 30, 2009 and 2008 included revenue recognized in connection with a
previously deferred license fee related to our oral disintegrating tablet
technology.  In the first quarter of 2009, approximately $338,000 of
this previously deferred license fee was recognized after the customer
terminated the agreement due to technical challenges with their drug
molecule.
 
 Cost
of Revenues
 
 The cost
of product sales is related to reusable needle-free injector devices and
disposable components.  For the three and nine month periods ended
September 30, 2009, cost of product sales was $510,234 and $1,478,281,
respectively, compared to $563,979 and $1,492,021 for the same periods of the
prior year.
 
  18
 
 Cost of
product sales as a percentage of product sales was 55% and 57% in three-month
periods ended September 30, 2009 and 2008, respectively, and was 51% and 56% for
the nine month periods ended September 30, 2009 and 2008,
respectively.  Cost of product sales as a percentage of product sales
was lower in 2009 than in 2008 mainly as a result of higher average selling
prices in 2009 as compared to 2008.  In addition, the nine month
period ended September 30, 2008 included a write-down of inventory of
approximately $55,000.
 
 The cost
of development revenue consists of labor costs, direct external costs and an
allocation of certain overhead expenses based on actual costs and time spent in
revenue-generating activities. In the third quarter of 2009, we recognized
$536,732 of previously deferred development costs related to a License,
Development and Supply Agreement with Teva for a product utilizing our
autoinjector technology.  These costs were recognized after adoption
of the new revenue recognition accounting standard, as described in Note 10 to
our consolidated financial statements.  Development costs that were
being deferred in connection with the Teva agreement were related to both
licensing and development revenue that had been deferred.  Excluding
the development costs and revenue recognized in the third quarter related to the
accounting change, cost of development revenue as a percentage of development
revenue was 61% and 32% for the third quarters of 2009 and 2008, respectively,
and was 40% and 29% for the nine month periods ended September 30, 2009 and
2008, respectively.  The increases in each period were due mainly to
development projects in 2009 that have a higher rate of direct external costs
than the development projects in 2008 and to an increase in the overhead
allocation rate used in 2009 compared to the rate used in 2008.
 
 Research
and Development
 
 The
majority of research and development expenses consist of external costs for
studies and analysis activities, design work and prototype
development.  Over 75% of our total research and development expenses
in each period were generated in connection with projects related to transdermal
gel products, primarily the Phase III study of Anturol®.  The balance
of our research and development expenses are related primarily to development of
our disposable VibexTM autoinjector platform.  Research and development
expenses were $2,004,921 and $5,956,989 in the three and nine month periods
ended September 30, 2009, respectively, compared to $2,153,267 and $5,910,753 in
the same periods of the prior year.
 
 Sales,
Marketing and Business Development
 
 Sales,
marketing and business development expenses totaled $173,797 and $726,177 for
the three and nine month periods ended September 30, 2009, respectively,
compared to $347,326 and $1,352,556 in the same periods of the prior
year.  The decreases in each period were primarily due to reductions
in payroll costs associated with headcount reductions and decreases in
consulting fees.
 
 General
and Administrative
 
 General
and administrative expenses totaled $1,262,554 and $3,715,519 in the three and
nine month periods ended September 30, 2009, respectively, compared to
$1,318,597 and $4,641,765 in the same periods of the prior year. The decreases
in each period were due mainly to decreases in payroll and patent related
expenses.
   19
 
 Other
Income (Expense)
 
 Other
expense was $281,540 and $670,195 in the three and nine month periods ended
September 30, 2009, respectively, compared to expense of $162,248 and $352,568
in the same periods of the prior year. The increases were due primarily to
decreases in interest income of $94,162 in the three-month period and $458,469
in the nine month period due to both a reduction in funds available for
investment and a reduction in market interest rates received on invested
funds.  In the third quarter of 2009 a total of $129,907 of interest
expense was recognized in connection with the retirement of our credit
facility.  Excluding the interest related to the retirement of our
credit facility, interest expense decreased $99,005 and $297,274 in the three
and nine month periods ended September 30, 2009 as compared to the three and
nine month periods ended September 30, 2008 due primarily to a lower credit
facility principal balance.
 
 Liquidity
and Capital Resources
 
 We have
not historically generated, and do not currently generate, sufficient revenue to
provide the cash needed to support our operations and we have continued to
operate primarily by raising capital and incurring debt.
  In the
third quarter of 2009, we received net proceeds of $10,527,650 through the sale
of our common stock and warrants in two separate transactions.  In
July 2009, we raised gross proceeds of $8,500,000 through the sale of shares of
our common stock and warrants.  We sold a total of 10,625,000 units,
each unit consisting of (i) one share of common stock and (ii) one warrant to
purchase 0.4 of a share of common stock (or a total of 4,250,000 shares), at a
purchase price of $0.80 per unit. The warrants will be exercisable six months
after issuance at $1.00 per share and will expire five years from the date of
issuance. In September 2009, we raised gross proceeds of $3,000,000 through the
sale of 2,727,273 units to certain institutional investors, each unit consisting
of (i) one share of common stock and (ii) one warrant to purchase 0.4 of a share
of common stock (or a total of 1,090,909 shares), at a purchase price of $1.10
per unit. The warrants will be exercisable six months after issuance at $1.15
per share and will expire five years from the date of issuance.
 
 In
September 2009, we used proceeds from the second sale of common stock to pay off
the remaining principal balance of our credit facility, making a final payment
of $2,932,907.
 
 In the
third quarter of 2009, we received a payment from Teva in the amount of
$4,076,375 in connection with an amendment to a License, Development and Supply
Agreement signed in July 2006.  Teva purchased tooling in process from
the Company that had a carrying value of approximately $1,200,000 and paid the
Company in advance for the design, development and purchase of additional
tooling and automation equipment.
 
 In
addition, in the first nine months of 2009 we received proceeds of $95,322 in
connection with exercises of warrants and options to purchase shares of our
common stock, which resulted in the issuance of 137,916 shares of our common
stock.  In 2008, we received proceeds of $1,319,950 in connection with
exercises of warrants to purchase shares of our common stock, which resulted in
the issuance of 2,400,000 shares of our common stock.
 
 We
believe that the recent equity financings, the recent payment from Teva and
projected product sales, product development, license revenues, milestone
payments and royalties will provide sufficient funds to support operations for
at least the next 12 months.  We do not currently have any bank credit
lines.  In the
 
 
 20
 
 future,
if we need additional financing and are unable to obtain such financing when
needed, or obtain it on favorable terms, we may be required to curtail
development of new products, limit expansion of operations or accept financing
terms that are not as attractive as we may desire.
 
 Cash
Flows
 
 Net Cash Used in Operating
Activities
 
 Net cash
used in operating activities was $3,015,009 and $8,131,306 for the nine month
periods ended September 30, 2009 and 2008, respectively.  The decrease
in cash used in operating activities was primarily due to receipt of $4,076,375
from Teva in the third quarter of 2009 that was recorded as deferred revenue at
September 30, 2009, and a reduction in the loss for the first nine months of
2009 compared to the first nine months of 2008 of $2,063,150, partially offset
by differences between years in the changes in operating assets and
liabiltities.  Excluding the payment from Teva, the 2009 changes in
operating assets and liabilities resulted in a use of cash of $473,836, while in
2008 changes in operating assets and liabilities resulted in a source of cash of
$587,021.  The 2009 use of cash was driven primarily by a decrease in
deferred revenue of $1,541,756, partially offset by a decrease in accounts
receivable of $823,715, while the 2008 source of cash was driven primarily by an
increase in accounts payable of $1,131,629, partially offset by an increase in
deferred costs of $699,045.
 
 Net Cash Provided by (Used in)
Investing Activities
 
 Net cash
used in investing activities was $118,984 in the first nine months of 2009,
which consisted primarily of additions to patent rights.  Net cash
provided by investing activities was $14,603,798 in the first nine months of
2008, which consisted of proceeds from maturity of short-term investments of
$16,015,057 that were partially offset by cash used for purchases of equipment
of $1,327,807 and patent rights of $83,452.  The equipment purchases
in 2008 consisted primarily of tooling in process that was sold to Teva in the
third quarter of 2009.  In the third quarter of 2009, tooling in
process of approximately $1,200,000 was reclassified to development costs from
equipment, molds, furniture and fixtures.
 
 Net Cash Provided by (Used in)
Financing Activities
 
 In the
first nine months of 2009, net cash provided by financing activities of
$5,608,582 consisted of proceeds from the sale of common stock of $10,527,650
and proceeds from exercise of warrants and stock options of $95,322 less
principal payments on long-term debt of $5,014,390.  The principal
payments on long-term debt included a final payment of $2,875,399 made in
September 2009 when we used a portion of the proceeds from the sale of common
stock and warrants to pay off the remaining balance of our credit
facility.  In the first nine months of 2008, net cash used in
financing activities of $400,133 consisted of proceeds from the exercise of
warrants of $1,319,950, less principal payments on long-term debt of
$1,720,083.
 
 Research
and Development Programs
 
 Our
current research and development activities are primarily related to Anturol®
and device development projects.
 
 Anturol®.  We are
currently evaluating Anturol® for the treatment of overactive bladder
(“OAB”).  In the fourth quarter of 2007 we initiated a Phase III
pivotal trial designed toevaluate the efficacy of
 
 
 21
 
 Anturol®
when administered topically once daily for 12 weeks in patients predominantly
with urge incontinence episodes. The randomized, double-blind, parallel,
placebo-controlled, multi-center trial is expected to involve 600 patients (200
per arm) using two dose strengths (selected from the Phase II clinical trial)
versus a placebo. Enrollment expanded to approximately sixty centers throughout
the United States in 2009.  In addition to the Phase III trial, we
have incurred significant costs related to Anturol® manufacturing
development.  We have contracted with Patheon, Inc. (“Patheon”), a
manufacturing development company, to supply clinical quantities of Anturol® and
to develop a commercial manufacturing process for Anturol®.  With
Patheon, we have completed limited commercial scale up activities associated
with Anturol® manufacturing.  As of September 30, 2009, we have
incurred total external costs of approximately $11,700,000 in connection with
our Anturol® research and development, of which approximately $4,000,000 was
incurred in the nine months ended September 30, 2009.  We intend to
seek a marketing partner to help fund the development of Anturol® and to
complete the Phase III trial.  To date, we have not entered into an
agreement with a marketing partner.  However, in the third quarter of
2009, we raised gross proceeds of $11,500,000 through the sale of shares of our
common stock and warrants.  Because of the additional funding
received, we will continue the Anturol® development program and expect total
expenses for Anturol® to be approximately $5,000,000 in
2009.  Although the Phase III program for Anturol® will continue, the
rate of progress of the program will be determined by the level of expenditures,
which may be affected by the timing of engaging a marketing
partner.  If we cannot find a marketing partner, we may not have the
resources to complete the development program and may have to delay or stop
enrollment in the trial.
 
 Device Development
Projects.  We are engaged in research and development
activities related to our VibexTM disposable pressure-assisted autoinjectors and
our disposable pen injectors.  We have signed license agreements with
Teva for our VibexTM
system for two undisclosed products and for our pen injector device for two
undisclosed products.  Our pressure-assisted autoinjectors are
designed to deliver drugs by injection from single-dose prefilled
syringes.  The autoinjectors are in the advanced commercial stage of
development.  The disposable pen injector device is designed to
deliver drugs by injection through needles from multi-dose
cartridges.  The disposable pen is in the early stage of development
where devices are being evaluated in clinical studies.  Our
development programs consist of determination of the device design, development
of prototype tooling, production of prototype devices for testing and clinical
studies, performance of clinical studies, and development of commercial tooling
and assembly.  As of September 30, 2009, we have incurred total
external costs of approximately $4,100,000 in connection with research and
development activities associated with our auto and pen injectors, of which
approximately $700,000 was incurred in the nine months ended September 30,
2009.  As of September 30, 2009, approximately $3,000,000 of the total
costs of $4,100,000 had been deferred, of which approximately $700,000 has been
recognized as expense and $2,300,000 remains deferred.  This remaining
deferred balance will be recognized as expense over the same period as the
related deferred revenue will be recognized.  The development
timelines of the auto and pen injectors related to the Teva products are
controlled by Teva.  We expect development related to the Teva
products to continue in 2009, but the timing and extent of near-term future
development will be dependent on certain decisions made by Teva.  We
recently received a payment from Teva in the amount of $4,076,375 in connection
with an amendment to a License, Development and Supply Agreement signed in July
2006 related to an undisclosed, fixed, single-dose, disposable injector product
using our VibexTM autoinjector platform. Although this payment and certain
upfront and milestone payments have been received from Teva, there have been no
commercial sales, timelines have been extended and there can be no assurance
that there ever will be commercial sales or future milestone payments under
these agreements.
 
 Other research and development
costs.  In addition to the Anturol® project and Teva-related
device development projects, we incur direct costs in connection with other
research and development projects
 
 
 22
 
 related
to our technologies and indirect costs that include salaries, administrative and
other overhead costs of managing research and development
projects.  Total other research and development costs were
approximately $2,000,000 for the nine months ended September 30,
2009.
 
 Off-Balance
Sheet Arrangements
 
 We do not
have any off-balance sheet arrangements, including any arrangements with any
structured finance, special purpose or variable interest entities.
 
 NEW
ACCOUNTING PRONOUNCEMENTS
 
 Effective
January 1, 2009, we adopted FASB ASC 805, “Business Combinations” (formerly SFAS
141R).  This establishes principles and requirements for how an
acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any noncontrolling interest in the
acquiree and the goodwill acquired in the business combination.  ASC
805 also establishes disclosure requirements to enable the evaluation of the
nature and financial effects of the business combination.  Adoption of
ASC 805 will apply prospectively to business combinations completed after
January 1, 2009.
 
 Effective
January 1, 2009, we adopted the provisions of ASC 815, “Derivatives and Hedging”
that were issued with Emerging Issues Task Force Issue 07-5, “Determining
Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own
Stock.”  This provides that an entity should use a two step approach to
evaluate whether an equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the instrument's contingent
exercise and settlement provisions.  The adoption of this pronouncement did
not have an impact on our consolidated financial statements.
 
 We
adopted the provisions of ASC 820-10, “Fair Value Measurements and Disclosures”
(formerly SFAS No. 157), with respect to non-financial assets and
liabilities effective January 1, 2009. This pronouncement defines fair
value, establishes a framework for measuring fair value and expands disclosures
about fair value measurements. The adoption of ASC 820-10 did not have an impact
on our consolidated financial statements.
 
 In May
2009, the FASB issued ASC 855, “Subsequent Events” (formerly SFAS 165), which
establishes general standards of accounting for, and requires disclosure of,
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. We adopted the provisions of ASC
855 for the quarter ended June 30, 2009. The adoption of ASC 855 did
not have an impact on our consolidated financial statements.
 
 In the
third quarter of 2009, we elected early adoption of FASB ASU 2009-13, “Revenue
Arrangements with Multiple Deliverables.”  ASU 2009-13, which amended
FASB ASC 605-25, “Multiple-Element Arrangements,” is effective for arrangements
entered into or materially modified in fiscal years beginning on or after June
15, 2010, but allows for early adoption.  ASU 2009-13 requires a
vendor to allocate revenue to each unit of accounting in arrangements involving
multiple deliverables based on the relative selling price of each
deliverable.  It also changes the level of evidence of standalone
selling price required to separate deliverables by allowing a vendor to make its
best estimate of the standalone selling price of deliverables when more
objective evidence of selling price is not available.  The impact of
adopting this pronouncement is discussed in Note 10 to our consolidated
financial statements.
   23
  
 Item
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.
 
 Our
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 our
subsidiaries in Switzerland are translated into U.S. dollars for
consolidation.  Our exposure to foreign exchange rate fluctuations
also arises from transferring funds to our Swiss subsidiaries in Swiss
Francs.  In addition, we have exposure to exchange rate fluctuations
between the Euro and the U.S. dollar in connection with the licensing agreement
entered into in January 2003 with Ferring, which established pricing in Euros
for products sold under the supply agreement and for all
royalties.  In March 2007, we amended our 2003 agreement with Ferring,
to establish prices in U.S. dollars rather than Euros for certain products and
effectively reducing our exchange rate risk.  Most of our sales and
licensing fees are denominated in U.S. dollars, thereby significantly mitigating
the risk of exchange rate fluctuations on trade receivables. We do not currently
use derivative financial instruments to hedge against exchange rate
risk.  Because exposure increases as intercompany balances grow, we
will continue to evaluate the need to initiate hedging programs to mitigate the
impact of foreign exchange rate fluctuations on intercompany
balances.  The effect of foreign exchange rate fluctuations on our
financial results for the nine month period ended September 30, 2009 was not
material.
 
 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 the Company’s disclosure controls and procedures as of the
end of the period covered by this report have been designed and are functioning
effectively to provide reasonable assurance that the information required to be
disclosed by the Company in reports filed under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission’s rules and is
accumulated and communicated to management, including the Company’s principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.
 
 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.
 
 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 is also 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
 
 
 24
 
 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.
 
 PART
II - OTHER INFORMATION
 
 Item
      1A.
              RISK
      FACTORS.In
      addition to the other information contained in this report, you should
      carefully consider the risk factors discussed in Part I, “Item
      1A.  Risk Factors” in our Annual Report on Form 10-K for the
      year ended December 31, 2008, which could materially affect our business,
      financial condition or future results.  The risks described in
      our Annual Report on Form 10-K are not the only risks facing
      us.  Additional risks and uncertainties not currently known to
      us or that we currently deem to be immaterial also may materially
      adversely affect our business, financial condition and/or operating
      results.
 
 Item
      6.
              EXHIBITS.(a)
              
              Exhibit
      IndexExhibit No.
              
              Description4.1
              
              Form
      of Warrant to Purchase Common Stock (Incorporated by reference to Exhibit
      4.1 of the registrant’s Current Report on Form 8-K filed on July 24,
      2009).4.2
              
              Form
      of Warrant to Purchase Common Stock (Incorporated by reference to Exhibit
      4.1 of the registrant’s Current Report on Form 8-K filed on September 18,
      2009).10.1
              
              Placement
      Agent Agreement, dated July 23, 2009, between Antares Pharma, Inc., Cowen
      and Company, LLC, Oppenheimer & Co., Inc. and Ladenburg Thalman &
      Co. Inc. (Incorporated by reference to Exhibit 10.1 of the registrant’s
      Current Report on Form 8-K filed on July 24, 2009).10.2
              
              Form
      of Subscription Agreement, by and between Antares Pharma, Inc. and the
      investor party thereto (Incorporated by reference to Exhibit 10.2 of the
      registrant’s Current Report on Form 8-K filed on July 24,
      2009).10.3
              
              Form
      of Subscription Agreement, by and between Antares Pharma, Inc. and the
      investor party thereto (Incorporated by reference to Exhibit 10.1 of the
      registrant’s Current Report on Form 8-K filed on September 18,
      2009).31.1
              
              Certificate
      of the Chief Executive Officer of Antares Pharma, Inc. required by
      Rule 13a-14(a) under the Securities Exchange Act of 1934, as
      amended.31.2
              
              Certificate
      of the Chief Financial Officer of Antares Pharma, Inc. required by
      Rule 13a-14(a) under the Securities Exchange Act of 1934, as
      amended.32.1
              
              Certificate
      of the Chief Executive Officer of Antares Pharma, Inc. required by
      Rule 13a-14(b) under the Securities Exchange Act of 1934, as
      amended.32.2
              
              Certificate
      of the Chief Financial Officer of Antares Pharma, Inc. required by
      Rule 13a-14(b) under the Securities Exchange Act of 1934, as
      amended.
 
  25
  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.November
      12, 2009
              
              /s/
      Paul K. WottonDr.
      Paul K. WottonPresident
      and Chief Executive OfficerNovember
      12, 2009
              
              /s/
      Robert F. AppleRobert
      F. AppleExecutive
      Vice President and Chief Financial Officer
 26