UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2005

Commission File Number 0-20945

ANTARES PHARMA, INC.

A Delaware Corporation                                          IRS Employer ID No. 41-1350192

707 Eagleview Boulevard, Suite 414
Exton, Pennsylvania
19341

(610) 458-6200

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

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

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

1

ANTARES PHARMA, INC.

INDEX

		PAGE
PART I.          ITEM 1                                                                          ITEM 2          ITEM 3          ITEM 4 PART II.	FINANCIAL INFORMATION          Financial Statements (Unaudited)          Consolidated Balance Sheets, as of June 30, 2005 and December 31, 2004          Consolidated Statements of Operations for the three months and six months ended June 30, 2005 and 2004          Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004          Notes to Consolidated Financial Statements          Management's Discussion and Analysis of Financial Condition and Results of Operations          Quantitative and Qualitative Disclosures About Market Risk          Controls and Procedures          OTHER INFORMATION          SIGNATURES	3 4 5 6 12 17 17 19 20

2

ANTARES PHARMA, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

	June 30, 2005			December 31, 2004
Assets
Current Assets:
Cash and cash equivalents	$	2,840,499		$	1,652,408
Short-term investments		1,997,713			7,971,625
Accounts receivable, net of allowances of $21,000 and $22,500, respectively		185,231			277,606
Other receivables		132,095			64,359
Inventories		77,874			92,344
Prepaid expenses and other assets		233,878			81,009
Total current assets		5,467,290			10,139,351
Equipment, furniture and fixtures, net		548,044			611,920
Patent rights, net		852,684			947,459
Goodwill		1,095,355			1,095,355
Other assets		357,633			383,518
Total Assets	$	8,321,006		$	13,177,603
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	429,062		$	476,509
Accrued expenses and other liabilities		555,982			626,583
Deferred revenue		491,684			547,006
Total current liabilities		1,476,728			1,650,098
Deferred revenue - long term		2,992,335			3,338,666
Total liabilities		4,469,063			4,988,764
Stockholders' Equity:
Series A Convertible Preferred Stock: $0.01 par; authorized 10,000 shares; 1,500 issued and
outstanding at December 31, 2004		—			15
Series D Convertible Preferred Stock: $0.01 par; authorized 245,000 shares; 33,588 and 63,588
issued and outstanding at June 30, 2005 and December 31, 2004, respectively		336			636
Common Stock: $0.01 par; authorized 100,000,000 shares; 41,993,606 and 40,418,406 issued
and outstanding at June 30, 2005 and December 31, 2004, respectively		419,937			404,184
Additional paid-in capital		94,394,934			94,479,402
Prepaid license discount		(2,600,303	)		(2,698,427	)
Accumulated deficit		(87,225,752	)		(82,575,151	)
Deferred compensation		(534,970	)		(759,342	)
Accumulated other comprehensive loss		(602,239	)		(662,478	)
		3,851,943			8,188,839
Total Liabilities and Stockholders' Equity	$	8,321,006		$	13,177,603

See accompanying notes to consolidated financial statements.

3

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

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2005			2004			2005			2004
Revenues:
Product sales	$	386,982		$	434,910		$	793,235		$	906,356
Development revenue		34,710			69,654			82,616			144,962
Licensing fees		56,421			168,803			137,007			329,165
Royalties		14,312			18,013			33,952			36,718
Total revenues		492,425			691,380			1,046,810			1,417,201
Cost of revenues:
Cost of product sales		261,909			359,283			544,537			704,091
Cost of development revenue		6,416			43,517			31,276			44,192
Total cost of revenues		268,325			402,800			575,813			748,283
Gross profit		224,100			288,580			470,997			668,918
Operating expenses:
Research and development		1,083,465			603,990			2,049,586			1,267,963
Sales, marketing and business development		354,258			124,281			641,002			234,333
General and administrative		1,132,616			1,273,263			2,427,941			2,702,438
		2,570,339			2,001,534			5,118,529			4,204,734
Operating loss		(2,346,239	)		(1,712,954	)		(4,647,532	)		(3,535,816	)
Other income (expense):
Interest income		36,726			32,943			79,294			45,612
Interest expense		—			(965	)		—			(79,084	)
Foreign exchange losses		(16,969	)		(9,273	)		(29,754	)		(10,740	)
Other, net		(1,247	)		(337	)		(2,609	)		(4,985	)
		18,510			22,368			46,931			(49,197	)
Net loss		(2,327,729	)		(1,690,586	)		(4,600,601	)		(3,585,013	)
Preferred stock dividends		(50,000	)		(71,429	)		(50,000	)		(71,429	)
Net loss applicable to common shares	$	(2,377,729	)	$	(1,762,015	)	$	(4,650,601	)	$	(3,656,442	)
Basic and diluted net loss per common share	$	(0.06	)	$	(0.05	)	$	(0.11	)	$	(0.11	)
Basic and diluted weighted average common shares outstanding		40,539,760			37,943,664			40,499,032			33,285,470

See accompanying notes to consolidated financial statements.

4

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

	For the Six Months Ended June 30,
	2005			2004
Cash flows from operating activities:
Net loss	$	(4,600,601	)	$	(3,585,013	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		173,839			318,259
Noncash interest expense		—			75,388
Stock-based compensation expense		93,644			410,494
Amortization of prepaid license discount		98,125			98,125
Changes in operating assets and liabilities:
Accounts receivable		92,334			260,432
Other receivables		(147,692	)		(104,043	)
Inventories		14,470			125,186
Prepaid expenses and other assets		(156,186	)		(189,747	)
Other assets		10,942			(44,400	)
Accounts payable		(23,643	)		61,865
Accrued expenses and other		(53,056	)		(72,773	)
Deferred revenue		(271,979	)		(364,205	)
Due to related parties		—			(143,361	)
Net cash used in operating activities		(4,769,803	)		(3,153,793	)
Cash flows from investing activities:
Purchases of equipment, furniture and fixtures		(76,604	)		(105,640	)
Purchase of short-term investments		(5,955,789	)		(9,961,386	)
Proceeds from maturity of short-term investments		12,000,000			—
Additions to patent rights		—			(104,170	)
Net cash provided by (used in) investing activities		5,967,607			(10,171,196	)
Cash flows from financing activities:
Proceeds from sales of common stock, net		—			13,753,400
Proceeds from exercise of warrants		61,700			847,500
Principal payments on capital lease obligations		—			(25,502	)
Payment of preferred stock dividends		(50,000	)		(21,429	)
Net cash provided by financing activities		11,700			14,553,969
Effect of exchange rate changes on cash and cash equivalents		(21,413	)		12,506
Net increase in cash and cash equivalents		1,188,091			1,241,486
Cash and cash equivalents:
Beginning of period		1,652,408			1,928,815
End of period	$	2,840,499		$	3,170,301
Cash paid during the period for interest	$	—		$	3,696

See accompanying notes to consolidated financial statements.

5

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

1. Basis of Presentation

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

Stock Based Compensation

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Net loss applicable to common shares:
As reported	$	(2,377,729	)	$	(1,762,015	)	$	(4,650,601	)	$	(3,656,442	)
Intrinsic value of stock options granted		41,268			42,193			82,566			85,058
Fair-value method compensation expense		(313,744	)		(245,434	)		(638,209	)		(512,270	)
Pro forma	$	(2,650,205	)	$	(1,965,256	)	$	(5,206,244	)	$	(4,083,654	)
Basic and diluted net loss per common share:
As reported	$	(0.06	)	$	(0.05	)	$	(0.11	)	$	(0.11	)
Intrinsic value of stock options granted		—			—			—			—
Fair-value method compensation expense		(0.01	)		—			(0.02	)		(0.01	)
Pro forma	$	(0.07	)	$	(0.05	)	$	(0.13	)	$	(0.12	)

6

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

2. Going Concern

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

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

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

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

3. Inventories

Inventories consist of the following:

	June 30, 2005		December 31, 2004
Raw material	$	20,591	$	32,335
Finished goods		57,283		60,009
	$	77,874	$	92,344

4. Product Warranty

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

	Balance at Beginning of Year		Warranty Provisions		Warranty Claims		Balance at June 30
2005	$	30,000	$	5,871	$	5,871	$	30,000
2004	$	50,000	$	1,714	$	1,714	$	50,000

7

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

5. Stockholders’ Equity

Common Stock, Options and Warrants

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

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

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

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

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

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

Preferred Stock Conversions

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

8

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

5. Stockholders’ Equity (Continued)

Stock-Based Compensation to Chief Executive Officer

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

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

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

9

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

6. Net Loss Per Share

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Net loss applicable to common shares	$	(2,377,729	)	$	(1,762,015	)	$	(4,650,601	)	$	(3,656,442	)
Basic and diluted weighted avg common
shares outstanding		40,539,760			37,943,664			40,499,032			33,285,470
Basic and diluted net loss per common share	$	(0.06	)	$	(0.05	)	$	(0.11	)	$	(0.11	)

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

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

7. Industry Segment and Operations by Geographic Areas

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

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

	June 30, 2005		December 31, 2004
Switzerland	$	810,079	$	1,022,485
United States of America		7,510,927		12,155,118
	$	8,321,006	$	13,177,603

10

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

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

Revenues by customer location are summarized as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2005		2004		2005		2004
United States of America	$	83,183	$	112,747	$	188,106	$	229,071
Europe		276,116		462,089		654,957		1,033,720
Other		133,126		116,544		203,747		154,410
	$	492,425	$	691,380	$	1,046,810	$	1,417,201

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2005		2004		2005		2004
Ferring	$	239,752	$	278,960	$	569,803	$	671,152
Solvay		31,048		81,486		81,855		163,955
Diabetic Care Center		49,224		42,607		96,508		83,080
JCR Pharmaceuticals		74,984		84,314		90,484		86,189

8. Comprehensive Loss

	Three Months Ended June 30,						Six Months Ended June 30,
	2005			2004			2005			2004
Net loss	$	(2,327,729	)	$	(1,690,586	)	$	(4,600,601	)	$	(3,585,013	)
Change in cumulative translation adjustment		34,835			(10,824	)		60,239			3,843
Comprehensive loss	$	(2,292,894	)	$	(1,701,410	)	$	(4,540,362	)	$	(3,581,170	)

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

Overview

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

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

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

12

Results of Operations

Critical Accounting Policies

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

Three and Six Months Ended June 30, 2005 and 2004

Revenues

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

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

Cost of Sales

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

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

13

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

Research and Development

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

Sales, Marketing and Business Development

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

General and Administrative

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

Other Income (Expense)

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

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Net Loss Per Common Share

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

Liquidity and Capital Resources

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

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

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

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

Cash Flows

      Operating Activities

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

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

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

      Investing Activities

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

      Financing Activities

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

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

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New Accounting Pronouncements

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures.

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

Internal Control over Financial Reporting.

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

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

Cautionary Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

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

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

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PART II — OTHER INFORMATION

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

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

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

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

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

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

Item 6. Exhibits

(a) Exhibits

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

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

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SIGNATURES

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

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

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