UNITED STATES SECURITIES AND EXCHANGE COMMISSION
IRS Employer Identification No. 41-1350192 Large accelerated filer Accelerated filer PAGE PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Consolidated Balance Sheets, as of 3 4 Consolidated Statements of Cash Flows for the 5 6 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Item 3. Item 4. PART II. OTHER INFORMATION Item 1A. Item June 30, December 31, 2009 2008 (Unaudited) Assets Current Assets: Cash and cash equivalents $ 7,037,369 $ 13,096,298 Accounts receivable, less allowance for doubtful accounts of $10,000 880,265 1,334,648 Inventories 307,012 182,038 Prepaid expenses and other current assets 287,617 294,818 Total current assets 8,512,263 14,907,802 Equipment, molds, furniture and fixtures, net 1,712,055 1,788,163 Patent rights, net 681,640 644,856 Goodwill 1,095,355 1,095,355 Deferred costs 1,256,031 1,292,090 Other assets 171,699 183,139 Total Assets $ 13,429,043 $ 19,911,405 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable $ 2,201,508 $ 2,103,493 Accrued expenses and other liabilities 1,357,589 1,382,306 Notes payable and capital leases, net of discount of $77,455 and $121,762, respectively 2,906,486 2,705,070 Deferred revenue 451,795 1,179,820 Total current liabilities 6,917,378 7,370,689 Notes payable and capital leases, net of discount of $5,275 and $32,427, respectively 845,693 2,239,550 Deferred revenue – long term 2,775,374 3,057,901 Total liabilities 10,538,445 12,668,140 Stockholders’ Equity: Common Stock: $0.01 par; authorized 150,000,000 shares; 68,209,458 and 68,049,666 issued and outstanding at June 30, 2009 and December 31, 2008, respectively 682,095 680,496 Additional paid-in capital 128,497,142 127,926,205 Accumulated deficit (125,582,163 ) (120,591,845 ) Accumulated other comprehensive loss (706,476 ) (771,591 ) 2,890,598 7,243,265 Total Liabilities and Stockholders’ Equity $ 13,429,043 $ 19,911,405 For the Three Months Ended For the Six Months Ended 2009 2008 2009 2008 Revenue: Product sales $ 1,168,620 $ 945,017 $ 1,992,371 $ 1,683,386 Development revenue 299,674 106,101 979,844 210,098 Licensing revenue 82,379 225,321 508,086 448,294 Royalties 111,171 113,676 207,946 162,715 Total revenue 1,661,844 1,390,115 3,688,247 2,504,493 Cost of revenue: Cost of product sales 523,931 513,109 968,047 928,042 Cost of development revenue 96,711 21,600 364,450 58,715 Total cost of revenue 620,642 534,709 1,332,497 986,757 Gross profit 1,041,202 855,406 2,355,750 1,517,736 Operating expenses: Research and development 1,745,309 1,791,214 3,952,068 3,757,486 Sales, marketing and business development 216,863 574,566 552,380 1,005,230 General and administrative 1,140,951 1,635,763 2,452,965 3,323,168 3,103,123 4,001,543 6,957,413 8,085,884 Operating loss (2,061,921 ) (3,146,137 ) (4,601,663 ) (6,568,148 ) Other income (expense): Interest income 6,385 143,892 25,022 389,329 Interest expense (164,557 ) (268,791 ) (359,790 ) (558,059 ) Foreign exchange gains (losses) (21,219 ) 23,224 (28,171 ) 8,483 Other, net (12,299 ) (12,958 ) (25,716 ) (30,073 ) (191,690 ) (114,633 ) (388,655 ) (190,320 ) Net loss (2,253,611 ) (3,260,770 ) (4,990,318 ) (6,758,468 ) Basic and diluted net loss per common share $ (0.03 ) $ (0.05 ) $ (0.07 ) $ (0.10 ) Basic and diluted weighted average common 68,101,137 67,320,325 68,075,544 66,474,446 For the Six Months Ended June 30, 2009 2008 Cash flows from operating activities: Net loss $ (4,990,318 ) $ (6,758,468 ) Adjustments to reconcile net loss to net cash used in Depreciation and amortization 114,364 118,569 Stock-based compensation expense 518,867 563,707 Amortization of debt discount and issuance costs 96,521 146,726 Changes in operating assets and liabilities: Accounts receivable 450,566 (132,037 ) Inventories (124,974 ) (36,500 ) Prepaid expenses and other current assets 27,359 312,166 Other assets (6,271 ) (591,840 ) Accounts payable 135,355 1,297,501 Accrued expenses and other current liabilities (11,449 ) (149,761 ) Deferred revenue (964,554 ) 71,616 Net cash used in operating activities (4,754,534 ) (5,158,321 ) Cash flows from investing activities: Proceeds from maturity of short-term investments - 15,061,897 Purchases of equipment, molds, furniture and fixtures (1,081 ) (647,444 ) Additions to patent rights (85,920 ) (51,794 ) Net cash provided by (used in) investing activities (87,001 ) 14,362,659 Cash flows from financing activities: Principal payments on long-term debt (1,260,584 ) (1,128,584 ) Proceeds from exercise of warrants and stock options 53,667 1,319,950 Net cash provided by (used in) financing activities (1,206,917 ) 191,366 Effect of exchange rate changes on cash and cash equivalents (10,477 ) 22,368 Net increase (decrease) in cash and cash equivalents (6,058,929 ) 9,418,072 Cash and cash equivalents: Beginning of period 13,096,298 9,758,924 End of period $ 7,037,369 $ 19,176,996 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. 3. Fair Value of Financial Instruments will expire five years from the date of issuance. Shares Weighted Average Outstanding at December 31, 2008 8,056,656 1.19 Granted 406,927 0.52 Exercised (5,333 ) 0.61 Forfeited (637,273 ) 1.45 Outstanding at June 30, 2009 7,820,977 1.14 6.7 1,008,810 Exercisable at June 30, 2009 5,268,941 1.36 5.5 334,014 June 30, 2009 2008 Risk-free interest rate 1.9 % 3.2 % Annualized volatility 88.0 % 79.0 % Weighted average expected life, in years 5.0 5.0 Expected dividend yield 0.0 % 0.0 % 6. Net Loss Per Share Three Months Ended Six Months Ended 2009 2008 2009 2008 Net loss applicable to common $ (2,253,611 ) $ (3,260,770 ) $ (4,990,318 ) $ (6,758,468 ) Basic and diluted weighted avg 68,101,137 67,320,325 68,075,544 66,474,446 Basic and diluted net loss per $ (0.03 ) $ (0.05 ) $ (0.07 ) $ (0.10 ) June 30, 2009 December 31, 2008 United States of America $ 12,136,277 $ 18,756,418 Switzerland 1,292,766 1,154,987 $ 13,429,043 $ 19,911,405 Three Months Ended Six Months Ended 2009 2008 2009 2008 United States of America $ 886,257 $ 223,389 $ 1,671,011 $ 470,119 Europe 773,203 1,166,726 1,955,938 1,847,625 Other 2,384 - 61,298 186,749 $ 1,661,844 $ 1,390,115 $ 3,688,247 $ 2,504,493 Three Months Ended Six Months Ended 2009 2008 2009 2008 Ferring $ 752,932 $ 1,008,582 $ 1,577,774 $ 1,565,685 Teva 607,694 21,429 861,343 46,429 Population Council 41,448 - 434,690 - Three Months Ended Six Months Ended 2009 2008 2009 2008 Net loss $ (2,253,611 ) $ (3,260,770 ) $ (4,990,318 ) $ (6,758,468 ) Change in cumulative (8,608) 30,780 65,115 (107,984 ) Comprehensive loss $ (2,262,219 ) $ (3,229,990 ) $ (4,925,203 ) $ (6,866,452 ) equipment, all of which is related to an undisclosed, fixed, single-dose, disposable injector product using the Company’s Vibex™ autoinjector platform. 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. our expectations regarding the product development of 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: 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. 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. In $1,720,083. Other research and development costs.In addition to the In May 2009, the FASB issued PART II - OTHER INFORMATION Item 1A. RISK FACTORS. /s/ Paul K. Wotton /s/ Robert F. AppleQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.For the quarterly period ended June 30, 2009QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended September 30, 2009 A Delaware Corporation o[ ]
Yes [ ] No [ ]Yes oNo oooo[ ](do not check if a smallerreporting company)Yes oYes [ ] No xNoxAugustNovember 11, 2009, was 78,834,458.81,710,148.JuneSeptember 30, 2009 and December 31, 2008sixnine months ended JuneSeptember 30, 2009 and 2008142223244.Exhibits 24Item 6.SIGNATURES 2425 September 30, December 31, 2009 2008 (Unaudited) Assets Current Assets: Cash and cash equivalents $ 15,556,291 $ 13,096,298 Accounts receivable, less allowance for doubtful accounts of $10,000 515,260 1,334,648 Inventories 326,830 182,038 Deferred costs 1,883,726 - Prepaid expenses and other current assets 218,256 294,818 Total current assets 18,500,363 14,907,802 Equipment, molds, furniture and fixtures, net 500,261 1,788,163 Patent rights, net 709,777 644,856 Goodwill 1,095,355 1,095,355 Deferred costs 408,250 1,292,090 Other assets 177,697 183,139 Total Assets $ 21,391,703 $ 19,911,405 Liabilities and Stockholders’ Equity Current Liabilities: Accounts payable $ 1,887,786 $ 2,103,493 Accrued expenses and other liabilities 1,743,562 1,382,306 Notes payable and capital leases, net of discount of $0 and $121,762, respectively 44,689 2,705,070 Deferred revenue 4,643,410 1,179,820 Total current liabilities 8,319,447 7,370,689 Notes payable and capital leases, net of discount of $0 and $32,427, respectively 40,818 2,239,550 Deferred revenue – long term 2,102,917 3,057,901 Total liabilities 10,463,182 12,668,140 Stockholders’ Equity: Common Stock: $0.01 par; authorized 150,000,000 shares; 81,710,148 and 68,049,666 issued and outstanding at September 30, 2009 and December 31, 2008, respectively 817,101 680,496 Additional paid-in capital 139,296,954 127,926,205 Accumulated deficit (128,475,997 ) (120,591,845 ) Accumulated other comprehensive loss (709,537 ) (771,591 ) 10,928,521 7,243,265 Total Liabilities and Stockholders’ Equity $ 21,391,703 $ 19,911,405
June 30,
June 30,
shares outstanding 2009 2008 2009 2008 Revenue: Product sales $ 923,155 $ 995,710 $ 2,915,526 $ 2,679,096 Development revenue 382,788 99,730 1,362,632 309,828 Licensing revenue 658,276 173,451 1,166,362 621,745 Royalties 76,953 119,691 284,899 282,406 Total revenue 2,041,172 1,388,582 5,729,419 3,893,075 Cost of revenue: Cost of product sales 510,234 563,979 1,478,281 1,492,021 Cost of development and licensing revenue 701,960 31,999 1,066,410 90,714 Total cost of revenue 1,212,194 595,978 2,544,691 1,582,735 Gross profit 828,978 792,604 3,184,728 2,310,340 Operating expenses: Research and development 2,004,921 2,153,267 5,956,989 5,910,753 Sales, marketing and business development 173,797 347,326 726,177 1,352,556 General and administrative 1,262,554 1,318,597 3,715,519 4,641,765 3,441,272 3,819,190 10,398,685 11,905,074 Operating loss (2,612,294 ) (3,026,586 ) (7,213,957 ) (9,594,734 ) Other income (expense): Interest income 951 95,113 25,973 484,442 Interest expense (270,157 ) (239,255 ) (629,947 ) �� (797,314 ) Foreign exchange gains (losses) (5,532 ) (7,309 ) (33,703 ) 1,174 Other, 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 ) 75,870,525 67,979,666 70,702,423 66,979,848
operating activities: For the Nine Months Ended September 30, 2009 2008 Cash flows from operating activities: Net loss $ (7,884,152 ) $ (9,947,302 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 175,706 180,697 Stock-based compensation expense 884,379 837,008 Amortization of debt discount and issuance costs 206,519 211,270 Changes in operating assets and liabilities: Accounts receivable 823,715 (311,442 ) Inventories (144,792 ) 18,544 Prepaid expenses and other assets 40,274 303,553 Deferred costs 178,399 (699,045 ) Accounts payable (196,124 ) 1,131,629 Accrued expenses and other current liabilities 366,448 44,876 Deferred revenue 2,534,619 98,906 Net cash used in operating activities (3,015,009 ) (8,131,306 ) Cash flows from investing activities: Proceeds from maturity of short-term investments - 16,015,057 Purchases 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 ) 14,603,798 Cash 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 1,319,950 Net 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 6,069,414 Cash and cash equivalents: Beginning of period 13,096,298 9,758,924 End of period $ 15,556,291 $ 15,828,338 1.Description of BusinessAntares”Antares,” the “Company” or the “Company”“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.pressure assistedpressure-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.hormone (“hGH”). We have had success in achieving distribution of our device for use with hGH through licenses to pharmaceutical partners, and itwhich 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 human growth hormonehGH sold by our pharmaceutical partner Teva Pharmaceutical Industries Ltd. (“Teva”).pressure assisted auto injectionpressure-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.Anturol™Anturol®, our oxybutynin transdermal gel product for overactive bladder.2. The corporate headquarters is located in Ewing, New Jersey.2.Basis of Presentationfinancial information and withor annual reporting periods ending on or after September 15, 2009. The Codification does not change how the instructionsCompany accounts for its transactions or the nature of related disclosures made. However, when referring to Form 10-Q and Article 10 ofguidance issued by the Securities and Exchange Commission's Regulation S-X. Accordingly, they do not include all ofFASB the information and footnotes required by accounting principles generally acceptedCompany will refer to topics 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 six-month periods ended June 30, 2009, are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.ASC rather than prior FASB standards.4. Notes Payable and Capital Lease 2007,September 2009 the Company received gross proceeds of $7,500,000 under a credit facility in tranches of $5,000,000 and $2,500,000. The per annum interest rate is 12.7% inpaid off the case of the first tranche and 11% in case of the second tranche. The maturity date (i) with respect to the first tranche is forty-two months from the first funding date and (ii) with respect to the second tranche is thirty-six months from the second funding date. The credit agreement is secured by all personal property of the Company, including all intellectual property. The credit agreement contains certain covenants and provisions, including, without limitation, covenants and provisions that:restrict the Company's ability to create or incur indebtedness (subject to enumerated exceptions);restrict the Company's ability to create or incur certain liens on its property (subject to enumerated exceptions);require the Company to use commercially reasonable efforts to maintain, on a consolidated basis, unrestricted cash and cash equivalents of at least $2,500,000;in certain circumstances, restrict the Company's ability to declare or pay any dividends on any sharesremaining principal balance of its capital stock, purchase or redeem any shares of its capital stock, return any capital to any holder of its equity securities or payment of certain bonuses; andrestrict the Company's ability to make certain investments.Total interestcredit facility. Interest expense related to the credit facility for the first sixnine months of 2009 was $353,168,$620,304, of which $256,649$413,785 was interest paid in cash. The remaining interest expense of $96,519$206,519 consisted of amortization of debt discount and debt issuance costs. 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 connection with the credit facility,July 2009, the Company issued warrants to purchaseraised 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 640,000 shares10,625,000 units, each unit consisting of (i) one share of common stock at an exercise price of $1.25. The fair value of the vested warrants was approximately $505,000, calculated using the Black-Scholes valuation model, and was recorded as an increase(ii) one warrant to equity and a decrease, or discount, to notes payable. The discount is being amortized and recorded as interest expense using the interest method over the term of the credit agreement.Principal payments of $2,930,671 and $805,947 are due in each of the 12 month periods ended June 30, 2010 and 2011, respectively.In 2008 and 2007, the Company acquired lab equipment under capital lease agreements. The equipment and capital lease obligation were recorded at an amountapproximately $100,000 in 2008 and $115,000 in 2007. Principal payments of approximately $53,270, $25,099 and $19,922 are due in each of the 12 month periods ended June 30, 2010, 2011 and 2012, respectively.4.Fair Value of Financial InstrumentsCash equivalents are stated at cost, which approximates fair value. The fair value of notes payable was approximately $3,710,000 as compared to a carrying amount of $3,736,618 at June 30, 2009, estimated using interest rates that may be available to the Company for debt with similar remaining maturities.5.Stockholders’ EquityCommon StockWarrant and stock option exercises in the first six months of 2009 and 2008 resulted in proceeds of $53,667 and $1,319,950, respectively, and in the issuance of 85,333 and 2,400,000 sharesshare of common stock respectively.Stock Options(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 WarrantsWarrant and stock option exercises in the first nine months of 2009 and 2008 resulted in proceeds of $95,322 and $1,319,950, respectively, and in the issuance of 137,916 and 2,400,000 shares of common stock, respectively. Stock Options and Warrants Financial Accounting Standards Board Statementthe Compensation – Stock Compensation Topic of Financial Accounting Standards No. 123R, “Share-Based Payment”the FASB Codification (ASC 718), which requires a public entity to measure the cost of employee services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant. The cost will be recognized over the period during which an employee is required to provide services in exchange for the award.rangeranges from three to eleven years and theythe options vest in varying periods. As of JuneSeptember 30, 2009, this planthe Plan had 1,792,8771,679,930 shares available for grant. Stock option exercises are satisfied through the issuance of new shares.JuneSeptember 30, 2009, and the changes during the six-monthnine month period then ended is as follows:
Number of
Weighted
Average
Exercise
Price ($)
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value ($) Outstanding at December 31, 2008 8,056,656 1.19 Granted 491,927 0.60 Exercised (57,916 ) 0.78 Forfeited (671,826 ) 1.44 Outstanding at September 30, 2009 7,818,841 1.13 6.5 1,886,368 Exercisable at September 30, 2009 5,655,537 1.31 5.5 881,047 sixnine months of 2009 the Company granted options to purchase a total of 406,927491,927 shares of its common stock at exercise prices ranging from $0.47 to $0.53.$0.95. During the first sixnine months of 2008 the Company granted options to purchase a total of 1,368,0231,768,023 shares of its$0.85$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.$466,000$688,000 and $558,000$814,000 for the first sixnine months of 2009 and 2008, respectively. As of JuneSeptember 30, 2009, there was approximately $997,300$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.sixnine months of 2009 and 2008 werewas estimated as $0.36$0.39 and $0.56$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 2008 Risk-free interest rate 2.1 % 3.2 % Annualized volatility 84.0 % 79.0 % Weighted average expected life, in years 5.0 5.0 Expected dividend yield 0.0 % 0.0 % 13,044,50018,385,409 shares of common stock were outstanding at JuneSeptember 30, 2009. The weighted average exercise price of the warrants was $1.84.Potentially dilutive stock options and warrants excluded from dilutive loss per share because their effect was anti-dilutive totaled 20,865,477 and 27,355,585 at June 30, 2009 and 2008, respectively.JuneSeptember 30, 2009 and 2008 was $1.57$1.46 and $1.55,$1.65, respectively.12,50075,000 were awarded in the first sixnine months of 2009 and 45,454 were awarded prior to 2009. Compensation expense of approximately $16,000 and $3,000$122,000 was recorded in the first sixnine months of 2009 and 2008, respectively, in connection with performance basedperformance-based awards.three yearthree-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 $25,000$58,000 and $10,000$20,000 in the first sixnine months of 2009 and 2008, respectively.
June 30,
June 30,
shares
common shares outstanding
common share7.Industry Segment and Operations by Geographic Areas 2009 2008 2009 2008 Net loss applicable to common shares $ (2,893,834 ) $ (3,188,834 ) $ (7,884,152 ) $ (9,947,302 ) Basic and diluted weighted average common shares outstanding 75,870,525 67,979,666 70,702,423 66,979,848 Basic and diluted net loss per common share $ (0.04 ) $ (0.05 ) $ (0.11 ) $ (0.15 ) United States of America $ 20,207,189 $ 18,756,418 Switzerland 1,184,514 1,154,987 $ 21,391,703 $ 19,911,405
June 30,
June 30,Significant customers comprising 10% or more of total revenue were as follows:
June 30,
June 30, 2009 2008 2009 2008 United States of America $ 1,477,658 $ 199,468 $ 3,148,668 $ 669,587 Europe 519,142 1,079,212 2,475,080 2,926,837 Other 44,372 109,902 105,671 296,651 $ 2,041,172 $ 1,388,582 $ 5,729,419 $ 3,893,075 8.Comprehensive Loss
June 30,
June 30,
translation adjustment9.New Accounting Pronouncements 2009 2008 2009 2008 Ferring Pharmaceuticals $ 497,943 $ 955,830 $ 2,075,717 $ 2,521,515 Teva 1,162,762 14,285 2,024,105 60,714 Population Council 207,553 - 642,243 - 2009 2008 2009 2008 Net loss $ (2,893,834 ) $ (3,188,834 ) $ (7,884,152 ) $ (9,947,302 ) Change in cumulative (3,061 ) 71,282 62,054 (36,702 ) Comprehensive loss $ (2,896,895 ) $ (3,117,552 ) $ (7,822,098 ) $ (9,984,004 ) No. 141R (revised 2007), “Business Combinations” (“SFAS 141R”SFAS”) 141R). SFAS 141RThis 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. SFAS 141RASC 805 also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. The Company’s adoption of SFAS 141RASC 805 will apply prospectively to business combinations completed after January 1, 2009.Effective January 1, 2009, the Company adopted the required provisions of FASB Staff Position No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”). FSP142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets.” This guidance will be applied prospectively to intangible assets acquired on or after January 1, 2009. The adoption of FSP 142-3 had no impact on the Company’s consolidated financial statements.(“EITF”) Issue No. 07-1, “Accounting for Collaborative Arrangements” (“EITF 07-1”). EITF 07-1 provides guidance on how to determine whether an arrangement constitutes a collaborative arrangement, how costs incurred and revenue generated on sales to third parties should be reported by the participants in a collaborative arrangement, how payments made between participants in a collaborative arrangement should be characterized, and what participants should disclose in the notes to the financial statements about a collaborative arrangement. The adoption of EITF 07-1 had no impact on the Company’s consolidated financial statements.In June 2008, the FASB issued EITF EITF 07-5This 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. EITF 07-5 was effective as of January 1, 2009. The adoption of EITF 07-5this pronouncement did not have a materialan impact on the Company’s consolidated financial statements.FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” (“FSP 157-2”) delayed the effective date of the application ofASC 820-10, “Fair Value Measurements and Disclosures” (formerly SFAS No. 157157), with respect to fiscal years beginning after November 15, 2008, for all nonfinancialnon-financial assets and nonfinancial liabilities that are recognized or disclosed ateffective January 1, 2009. This pronouncement defines fair value, in the financial statements onestablishes a non-recurring basis.framework for measuring fair value and expands disclosures about fair value measurements. The adoption of FSP 157-2 had noASC 820-10 did not have an impact on the Company’s consolidated financial statements.In April 2009 the Financial Accounting Standards Board (“FASB”) issued Staff Position No. FAS 107-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP 107-1”). FSP 107-1 expands the fair value disclosures required for all financial instruments within the scope of Statement of Financial Accounting Standards (“SFAS”) No. 107 to include interim periods. The Company adopted the provisions of FSP 107-1 for the quarter ended June 30, 2009. The adoption of FSP 107-1 is disclosed in Note 4 of the accompanying consolidated financial statements.Statement No. 165,ASC 855, “Subsequent Events” (“FAS 165”)(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 FAS 165ASC 855 for the quarter ended June 30, 2009. The adoption of FAS 165ASC 855 did not have an impact on the Company’s consolidated financial statements.Junethe third quarter of 2009, the FASB issued SFAS No. 168, “TheCompany elected early adoption of FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles — A Replacement ofUpdate (“ASU”) 2009-13, “Revenue Arrangements with Multiple Deliverables.” ASU 2009-13, which amended FASB Statement No. 162” (“SFAS 168”). SFAS 168 establishes the “FASB Accounting Standard Codification™ASC 605-25, “Multiple-Element Arrangements,” (“Codification”) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles in the United States. All guidance contained in the Codification carries an equal level of authority. On the effective date of SFAS 168, the Codification will supersede all then-existing non-SEC accounting and reportingstandards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative. SFAS 168 is effective for financial statements issuedarrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, but allows for interim and annual periods ending after September 15, 2009.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 adoptionimpact of SFAS 168 will not have an impactadopting this pronouncement on the Company’s consolidated financial statements.10.Subsequent EventsIn Julyraised gross proceeds of $8,500,000amended the License, Development and Supply Agreement with Teva originally entered into 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 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 5 years from the date of issuance.In July of 2009,2006. Under the terms of the amendment, the Company received a payment of $4,076,375 from Teva for tooling in the amount of approximately $4,000,000 in connection with an amendment to a License, Development and Supply Agreement signed in July 2006. Teva purchased tooling from the Companyprocess that had a carrying value of approximately $1,200,000 and paid the Company infor an advance for the design, development and purchase of additional tooling and automation equipment.Company believes thatchanges to the recent equity financing,agreement related to this payment along with various other changes to the recent paymentoriginal 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 Tevainception of the agreement. The re-evaluation resulted in the agreement being separated into three units of accounting and projected product sales, product development,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 revenues,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 will provide sufficient fundsare earned. The accounting literature applicable at the time of the original agreement required the entire arrangement to supportbe 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. Three Months Ended Nine Months Ended September 30, 2009 September 30, 2009 As Reported Without As Reported Without With Adoption Adoption With Adoption Adoption Of ASU 2009-13 Of ASU 2009-13 Of ASU 2009-13 Of ASU 2009-13 Development revenue $ 382,788 $ 271,677 $ 1,362,632 $ 1,251,521 Licensing revenue 658,276 335,276 1,166,362 843,362 Total revenue 2,041,172 1,607,061 5,729,419 5,295,308 Cost of development 701,960 165,228 1,066,410 529,678 Total cost of revenue 1,212,194 675,462 2,544,691 2,007,959 Gross profit 828,978 931,599 3,184,728 3,287,349 Operating 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 net $ (0.04 ) $ (0.04 ) $ (0.11 ) $ (0.11 ) Three Months Ended Six Months Ended March 31, June 30, June 30, 2009 2009 2009 Development revenue $ 680,170 $ 299,674 $ 979,844 Licensing revenue 425,707 82,379 508,086 Total revenue 2,026,403 1,661,844 3,688,247 Cost of development and licensing revenue 267,739 96,711 364,450 Total cost of revenue 711,855 620,642 1,332,497 Gross profit 1,314,548 1,041,202 2,355,750 Operating loss (2,539,742 ) (2,061,921 ) (4,601,663 ) Net loss (2,736,707 ) (2,253,611 ) (4,990,318 ) Basic and diluted net loss per common share $ (0.04 ) $ (0.03 ) $ (0.07 ) Three Months Ended Six Months Ended March 31, June 30, June 30, 2009 2009 2009 Development revenue $ 746,837 $ 321,896 $ 1,068,733 Licensing revenue 697,707 107,879 805,586 Total revenue 2,365,070 1,709,566 4,074,636 Cost of development and licensing revenue 645,054 175,235 820,289 Total cost of revenue 1,089,170 699,166 1,788,336 Gross profit 1,275,900 1,010,400 2,286,300 Operating loss (2,578,390 ) (2,092,723 ) (4,671,113 ) Net loss (2,775,355 ) (2,284,413 ) (5,059,768 ) Basic and diluted net loss per common share $ (0.04 ) $ (0.03 ) $ (0.07 ) least the next 12 months.August 13,November 12, 2009, the date of filing of this 10-Q.the impact of new accounting pronouncements;· •· AnturolTMAnturol®;our expectations regarding continued product development with Teva Pharmaceutical Industries, Ltd.;· our expectations regarding continued product development with Teva; · our plans regarding potential manufacturing and marketing partners; our plans regarding potential manufacturing and marketing partners;· our future cash flow; our future cash flow and our ability to service or repay our existing debt;· 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. our expectations regarding a net loss for the year ending December 31, 2009;the risks that our recurring losses, negative cash flows and inability to raise additional capital could threaten our ability to continue as a going concern; andour ability to raise additional financing, reduce expenses or generate funds in light of our current and projected level of operations and general economic conditions.· 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; 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;· 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 obtain additional financing, reduce expenses or generate funds when necessary;· our inability to effectively market our services or obtain and maintain arrangements with our customers, partners and manufacturers. our inability to attract and retain key personnel; andour inability to effectively market our services or obtain and maintain arrangements with our customers, partners and manufacturers.read 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.pressure assisted auto injectorpressure-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 auto injectorpressure-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.Pharmaceutical Industries, Ltd. (“Teva”) for use in undisclosed fields and territories. On June 29, 2009, we announced with Teva 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.$4,990,318$7,884,152 for the six-monthnine month period ended JuneSeptember 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.WeOther than with respect to the revenue recognition critical accounting policy described below, we have made no changes to these policies during the six-monthnine month period ended JuneSeptember 30, 2009.SixNine Months Ended JuneSeptember 30, 2009 and 2008sixnine months ended JuneSeptember 30, 2009 were $1,661,844$2,041,172 and $3,688,247,$5,729,419, respectively, compared to revenues for the same prior-year periods of $1,390,115$1,388,582 and $2,504,493. $3,893,075, respectively.increased to $1,168,620was $923,155 and $1,992,371$2,915,526 in the three and sixnine months ended JuneSeptember 30, 2009 compared to $945,017$995,710 and $1,683,386$2,679,096 in the three and sixnine months ended JuneSeptember 30, 2008. The increases were primarilydecrease in the quarter was mainly due to initiala decrease in sales of needle-free injection devices and disposable componentsto Ferring, which was partially offset by sales to Teva in anticipation ofconnection with Teva’s launch of our Tjet needle-free device with their human growth hormonehGH 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. also increased in the three and sixnine month periods ended September 30, 2009 to $299,674$382,788 and $979,844 in 2009$1,362,632 compared to $106,101$99,730 and $210,098$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 increases weredevelopment revenue in 2009 related primarily due 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, and auto injector technologies. Licensing revenue decreased in the three month period to $82,379 in 2009 from $225,321 in 2008. The decrease was due primarily to the termination of a license agreement related to our oral disintegrating tablet technologyand autoinjector technologies. The licensing revenue increase in the first quarter of 2009 under which revenue was being recognized in 2008.Licensing revenue increased in the six month period to $508,086 in 2009 from $448,294 in 2008 primarily due to recognitionthe 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 first quarter ofnine month periods ended September 30, 2009 of approximately $338,000 ofand 2008 included revenue recognized in connection with a previously deferred license fee related to our oral disintegrating tablet technologytechnology. 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.areis related to reusable needle freeneedle-free injector devices and disposable components. For the three and sixnine month periods ended JuneSeptember 30, 2009, cost of product sales was $523,931$510,234 and $968,047,$1,478,281, respectively, compared to $513,109$563,979 and $928,042$1,492,021 for the same periods of the prior year. 45%55% and 54%57% in three monththree-month periods ended JuneSeptember 30, 2009 and 2008, respectively, and was 49%51% and 55%56% for the sixnine month periods ended JuneSeptember 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 periods included a write-down of inventory of approximately $55,000.CostIn 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 32%61% and 20%32% for the secondthird quarters of 2009 and 2008, respectively, and was 37%40% and 28%29% for the six-monthnine month periods ended JuneSeptember 30, 2009 and 2008.2008, 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.While we are typically engaged in research and development activities involving each of our drug delivery platforms, overOver 75% of our total research and development expenses in each period were generated in connection with projects related to transdermal gel products, primarily AnturolTMthe Phase III study of Anturol®. The balance of our research and development expenses are related primarily to development of our disposable Vibex™ autoinjector platform. Research and development expenses were $1,745,309$2,004,921 and $3,952,068$5,956,989 in the three and six-monthnine month periods ended JuneSeptember 30, 2009, respectively, compared to $1,791,214$2,153,267 and $3,757,486$5,910,753 in the same periods of the prior year. The increase in the first half of 2009 compared to the same period of 2008 was due primarily to the Phase III study of AnturolTM.$216,863$173,797 and $552,380$726,177 for the three and six-monthnine month periods ended JuneSeptember 30, 2009, respectively, compared to $574,566$347,326 and $1,005,230$1,352,556 in the same periods of the prior year periods.year. The decreases in each period were primarily due to reductions in payroll costs associated with headcount reductions and decreases in consulting fees.$1,140,951$1,262,554 and $2,452,965$3,715,519 in the three and six-monthnine month periods ended JuneSeptember 30, 2009, respectively, compared to $1,635,763$1,318,597 and $3,323,168$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.$191,690$281,540 and $388,655$670,195 in the three and six-monthnine month periods ended JuneSeptember 30, 2009, respectively, compared to expense of $114,633$162,248 and $190,320$352,568 in the same periods of the prior year. The increases were due primarily to decreases in interest income of $137,507$94,162 in the three-month period and $364,307$458,469 in the six-monthnine month period due to both a reduction in funds available for investment and a reduction in market interest rates received on invested funds. The impactIn the third quarter of the decreases in interest income was partially offset by decreases in2009 a total of $129,907 of interest expense was recognized in connection with the retirement of $104,234our credit facility. Excluding the interest related to the retirement of our credit facility, interest expense decreased $99,005 and $297,274 in the three-month periodthree and $198,269 innine month periods ended September 30, 2009 as compared to the six-month periodthree and nine month periods ended September 30, 2008 due primarily due to a lower notes payablecredit facility principal balance.first halfthird quarter of 2009, we received net proceeds of $53,667 in connection with exercises of warrants and options to purchase shares$10,527,650 through the sale of our common stock which resulted in the issuance of 85,333 shares of our common stock. In 2008, we received proceeds of $1,319,950 in connection with exercises ofand warrants to purchase shares of our common stock, which resulted in the issuance of 2,400,000 shares of our common stock.In 2007, we borrowed $7,500,000 under a note payable in two tranches of $5,000,000 and $2,500,000. The total remaining principal balance was $3,736,618 at June 30, 2009. The per annum interest rate under the note payable is 12.7% for the first tranche and 11% for the second tranche. The maturity dates under the note payable are (i) 42 months from the first funding date for the first tranche, and (ii) 36 months from the second funding date for the second tranche. We have scheduled debt payments of $2,930,671 and $805,947 for the 12 month periods ending June 30, 2010 and 2011. The amount payable under the note is secured by all of our personal property, including all intellectual property. The credit agreement governing the note payable contains certain covenants and provisions, including, without limitation, covenants and provisions that:restrict our ability to create or incur indebtedness (subject to enumerated exceptions);restrict our ability to create or incur certain liens on our property (subject to enumerated exceptions);in certain circumstances, require us to maintain, on a consolidated basis, unrestricted cash and cash equivalents of at least $2,500,000;in certain circumstances, restrict our ability to declare or pay any dividends on any shares of our capital stock, purchase or redeem any shares of our capital stock, return any capital to any holder of our equity securities or payment of certain bonuses; andrestrict our ability to make certain investments.Onseparate transactions. In July 29, 2009, we closed on a registered direct offering in which 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 5five years from the date of issuance.Index 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.JulySeptember 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.the Companywe received a payment from Teva in the amount of approximately $4,000,000$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.financing,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 theNet Cash Used in Operating Activities$4,754,534$3,015,009 and $5,158,321$8,131,306 for the six-monthnine month periods ended JuneSeptember 30, 2009 and 2008, respectively. Although the lossThe decrease in the first half of 2009 was $1,768,150 less than the loss in the first half of 2008, the cash used in operating activities was only $403,787 lessprimarily due to receipt of $4,076,375 from Teva in the third quarter of 2009 thanthat 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 due primarily toof $2,063,150, partially offset by differences between years in the changes in operating assets and liabilities. Inliabiltities. Excluding the payment from Teva, the 2009 changes in operating assets and liabilities resulted in a use of cash of $493,968,$473,836, while in 2008 changes in operating assets and liabilities resulted in a source of cash of $771,145.$587,021. The 2009 use of cash was driven primarily by a decrease in deferred revenue of $964,554$1,541,756, partially offset by a decrease in accounts receivable of $450,566$823,715, while the 2008 source of cash was driven primarily by an increase in accounts payable of $1,297,501$1,131,629, partially offset by an increase in other assetsdeferred costs of $591,840.$699,045.Net Cash Provided by (Used in) Investing Activities$87,001$118,984 in the first halfnine months of 2009, which consisted primarily of additions to patent rights and purchases of equipment, molds, furniture and fixtures.rights. Net cash provided by investing activities was $14,362,659$14,603,798 in the first halfnine months of 2008, which consisted of proceeds from maturity of short-term investments of $15,061,897$16,015,057 that were partially offset by cash used for purchases of equipment of $647,444$1,327,807 and patent rights of $51,794.$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 production equipment related to commercial device deals.fixtures.Net cash Provided by (Used in) Financing Activitieshalfnine months of 2009, net cash used inprovided by financing activities of $1,206,917$5,608,582 consisted of principal payments on long-term debtproceeds from the sale of $1,260,584common stock of $10,527,650 and proceeds from exercise of warrants and stock options of $53,667.$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 halfnine months of 2008, net cash provided byused in financing activities of $191,366$400,133 consisted of proceeds from the exercise of warrants of $1,319,950, less principal payments on long-term debt of $1,128,584.AnturolTMAnturol® and device development projects.AnturolTMAnturol®. We are currently evaluating AnturolTMAnturol® for the treatment of overactive bladder (“OAB”). In the fourth quarter of 2007 we initiated a Phase III pivotal trial designed toevaluateto evaluate the efficacy of AnturolTMAnturolTMAnturol® manufacturing development. We have contracted with Patheon, Inc. (“Patheon”), a manufacturing development company, to supply clinical quantities of Anturol™Anturol® and to develop a commercial manufacturing process for AnturolTMAnturol®. With Patheon, we have completed limited commercial scale up activities associated with AnturolTMAnturol® manufacturing. As of JuneSeptember 30, 2009, we have incurred total external costs of approximately $10,400,000$11,700,000 in connection with our AnturolTMAnturol® research and development, of which approximately $2,700,000$4,000,000 was incurred in the sixnine months ended JuneSeptember 30, 2009. We intend to seek a marketing partner to help fund the development of AnturolTMAnturol® and to complete the Phase III trial. To date, we have not entered into an agreement with a marketing partner. However, in Julythe third quarter of 2009, we raised gross proceeds of $8,500,000 in a registered direct offering$11,500,000 through the sale of shares of our common stock and warrants. Because of the additional funding received, we will continue the AnturolTMAnturol® development program and expect total expenses for Anturol® to be approximately $5,000,000 in 2009. Although the Phase III program for AnturolTMAnturol® 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.pressure assisted auto injectorspressure-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 auto injectorspressure-assisted autoinjectors are designed to deliver drugs by injection from single dosesingle-dose prefilled syringes. The auto injectorsautoinjectors 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 JuneSeptember 30, 2009, we have incurred total external costs of approximately $2,400,000$4,100,000 in connection with research and development activities associated with our auto and pen injectors, of which approximately $140,000$700,000 was incurred in the sixnine months ended JuneSeptember 30, 2009. As of JuneSeptember 30, 2009, $1,300,000approximately $3,000,000 of the total costs haveof $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 an 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 approximately $4,000,000$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 Vibex™ 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.AnturolTMAnturol® project and Teva relatedTeva-related device development projects, we incur direct costs in connection with other research and development projects$1,300,000$2,000,000 for the sixnine months ended JuneSeptember 30, 2009.Statement of Financial Accounting Standards No. 141R (revised 2007),ASC 805, “Business Combinations” (“(formerly SFAS 141R”)141R). SFAS 141RThis 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. SFAS 141RASC 805 also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. Our adoptionAdoption of SFAS 141RASC 805 will apply prospectively to any business combinations completed after January 1, 2009.Effective January 1, 2009, we adopted the required provisions of FASB Staff Position No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets.” This guidance will be applied prospectively to our intangible assets acquired on or after January 1, 2009. The adoption of FSP 142-3 had no impact on our consolidated financial statements.(“EITF”) Issue No. 07-1, “Accounting for Collaborative Arrangements” (“EITF 07-1”). EITF 07-1 provides guidance on how to determine whether an arrangement constitutes a collaborative arrangement, how costs incurred and revenue generated on sales to third parties should be reported by the participants in a collaborative arrangement, how payments made between participants in a collaborative arrangement should be characterized, and what participants should disclose in the notes to the financial statements about a collaborative arrangement. The adoption of EITF 07-1 had no impact on our consolidated financial statements.In June 2008, the FASB issued EITF 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock.” EITF 07-5This 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. EITF 07-5 was effective as of January 1, 2009. The adoption of EITF 07-5this pronouncement did not have a materialan impact on our consolidated financial statements.TheFASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” (“FSP 157-2”) delayed the effective date of the application ofASC 820-10, “Fair Value Measurements and Disclosures” (formerly SFAS No. 157157), with respect to fiscal years beginning after November 15, 2008, for all nonfinancialnon-financial assets and nonfinancial liabilities that are recognized or disclosed ateffective January 1, 2009. This pronouncement defines fair value, in the financial statements onestablishes a non-recurring basis.framework for measuring fair value and expands disclosures about fair value measurements. The adoption of FSP 157-2 had noASC 820-10 did not have an impact on our consolidated financial statements.In April 2009, the Financial Accounting Standards Board (“FASB”) issued Staff Position No. FAS 107-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP 107-1”). FSP 107-1 expands the fair value disclosures required for all financial instruments within the scope of Statement of Financial Accounting Standards No. 107 to include interim periods. We adopted the provisions of FSP 107-1 for the quarter ended June 30, 2009. The adoption of FSP 107-1 did not have a material impact on our consolidated financial statements.Statement No. 165,ASC 855, “Subsequent Events” (“FAS 165”)(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 FAS 165ASC 855 for the quarter ended June 30, 2009. The adoption of FAS 165ASC 855 did not have a materialan impact on our consolidated financial statements.Junethe third quarter of 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles — A Replacementwe elected early adoption of FASB Statement No. 162” (“SFAS 168”). SFAS 168 establishes the “FASB Accounting Standard Codification™ASU 2009-13, “Revenue Arrangements with Multiple Deliverables.” (“Codification”) as the source of authoritative accounting principles recognized by theASU 2009-13, which amended FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles in the United States. All guidance contained in the Codification carries an equal level of authority. On the effective date of SFAS 168, the Codification will supersede all then-existing non-SEC accounting and reporting standards. All other nongrandfathered non-SEC accounting literature not included in the Codification will become nonauthoritative. SFAS 168ASC 605-25, “Multiple-Element Arrangements,” is effective for financial statements issuedarrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, but allows for interim and annual periods ending after September 15, 2009.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 adoptionimpact of SFAS 168 will not have a material impact onadopting this pronouncement is discussed in Note 10 to our consolidated financial statements.Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.sixnine month period ended JuneSeptember 30, 2009 was not material.Item 4.CONTROLS AND PROCEDURES.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 4.Submission of MattersIn addition to a Vote of Security Holders.On May 15, 2009, the Company held an annual meeting of its stockholders. The following items were voted on at the meeting:Anton G. Gueth was elected to the Company’s board of directors to serve until the 2012 annual meeting. With respect to the election of Mr. Gueth to the board of directors, there were 44,984,235 votes cast in favor of the election and 2,295,165 votes withheld. The terms of office of each of Dr. Jacques Gonella, Thomas J. Garrity, Dr. Rajesh C. Shrotriya, Dr. Paul K. Wotton and Dr. Leonard S. Jacob also continued after the meeting.The stockholders ratified the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2009. There were 43,166,671 votes for the proposal, 4,004,127 votes against the proposal, 108,602 abstentions and zero broker non-votes.Item 6.Exhibits.(a)Exhibit IndexExhibit No.DescriptionItem 6. 31.1(a) Exhibit Index Exhibit No. 4.1 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. Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.31.231.2 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. Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.32.132.1 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. Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended.32.232.2 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. SIGNATURES ANTARES PHARMA, INC.August 13,ANTARES PHARMA, INC. November 12, 2009 Dr. Paul K. WottonPresident and Chief Executive OfficerAugust 13,Dr. Paul K. Wotton President and Chief Executive Officer November 12, 2009 Robert F. Apple Robert F. AppleExecutive Vice President and Chief Financial Officer