10-K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-K

              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

            [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
               For transition period from __________ to __________

                         Commission file number 0-20945
                                                -------

                              ANTARES PHARMA, INC.
- --------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         Minnesota                                     41-1350192
- -------------------------------          ---------------------------------------
State or other jurisdiction of           (I.R.S. Employer Identification Number)
incorporation or organization

               707 Eagleview Boulevard, Suite 414, Exton, PA 19341
                 (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (610) 458-6200
                                                    --------------

        SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: None

          SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
                          Common Stock, $.01 Par Value

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

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

Aggregate market value of the voting stock held by nonaffiliates of the
registrant as of March 19, 2003, was approximately $2,911,437 (based upon the
last reported sale price of $0.53 per share on March 19, 2003, on the Nasdaq
Small Cap Market).

There were 11,887,506 shares of common stock outstanding as of March 19, 2003.


                                       1




                                     PART I

Item 1.  BUSINESS

General

     On January 31, 2001, Antares Pharma, Inc. ("Antares" or the "Company")
(formerly known as Medi-Ject Corporation) completed a business combination to
acquire the three operating subsidiaries of Permatec Holding AG ("Permatec"),
headquartered in Basel, Switzerland. Upon consummation of the transaction, the
acquired Permatec subsidiaries were renamed Antares Pharma AG, Antares Pharma
IPL AG and Antares Pharma NV. Prior to the closing of the business combination,
the Company did not have sufficient funds to continue operating and had
determined that it was necessary to, among other things, either raise more
capital or merge with another biopharmaceutical company. Medi-Ject was a company
focused on delivery of drugs across the skin using needle- free technology, and
Permatec specialized in delivery of drugs across the skin using transdermal
patch and gel technologies. Given that both groups were focused on delivery of
drugs across the skin, but with a focus on different sectors, it was believed
that a business combination would be attractive to both pharmaceutical partners
and to the Company's shareholders. The transaction was accounted for as a
reverse acquisition, as Permatec's shareholders initially held approximately 67%
of the outstanding stock of Antares. Accordingly, for accounting purposes,
Permatec is deemed to have acquired Antares. Upon completion of the transaction
the Company's name was changed from Medi-Ject Corporation to Antares Pharma,
Inc. The following discussion of the business incorporates the business
combination with Permatec.

     The U.S. operation, located in Minneapolis, Minnesota, develops,
manufactures and markets novel medical devices, called jet injectors or
needle-free injectors, that allow people to self-inject drugs without using a
needle. The Company makes a small re-usable spring-action device and the
attached disposable plastic needle-free syringes to hold the drug. A liquid drug
is drawn up into the needle-free syringe, from a conventional vial containing a
liquid drug formulation, through a small hole at the end of syringe. When the
syringe is held against an appropriate part of the body and the spring is
released, a piston drives the fluid stream into the tissues beneath the skin,
from where the drug is dispersed into systemic circulation. A person may re-arm
the device and repeat the process or attach a new sterile syringe between
injections. Recently the Company has developed variations of the jet injector by
adding a very small hidden needle to a pre-filled, single-use injector as well
as a needle-free pre-filled, single-use injector.

     With the Permatec business combination, Antares is also committed to other
methods of drug delivery such as topical gel formulations. Transdermal gels have
advantages in cost, cosmetic elegance, ease of application and lack of irritancy
compared with better-known transdermal patches and have applications in such
therapeutic markets as hormone replacement therapy, osteoporosis therapy,
cardiovascular therapy, pain management and central nervous system therapy. The
Company intends for this drug delivery method to become a material part of its
business moving forward.

     From inception as a combined business entity, the Company had fifty-three
employees with thirty-five research and development personnel, engineers,
formulation chemists and technicians, engaged in designing and formulating new
products for the pharmaceutical industry. As of March 19, 2003, the Company has
forty-six full-time and two part-time employees.

     The Company was a pioneer in the invention of home needle-free injection
systems in the late 1970s. Prior to that, needle-free injection systems were
powered by large air compressors or were relatively complex and expensive, so
their use was limited to mass vaccination programs by the military or school
health programs or for patients classified as needle phobic. Early injectors
were painful in comparison to today's injectors, and their large size made home
use difficult. The first home insulin injector was five times as heavy as the
current injector, which weighs five ounces. Today's insulin injector sells at a
retail price of $299 compared to $799 eight years ago. The first growth hormone
injector was introduced in Europe in 1994. This was the first success in
achieving distribution through a license to a pharmaceutical manufacturer, and
it has resulted in significant market penetration and a very high degree of
customer satisfaction. Distribution of growth hormone injectors has expanded,
through pharmaceutical company partnerships, to include Japan and other Asian
countries.

     The Swiss operation developed its first topical products in Argentina in
the mid-1990s. This effort resulted in the commercialization of a seven-day
estradiol patch in certain countries of South America in 2000. Over time, the
Argentine research effort moved away from the crowded transdermal patch field
and focused on topical gel formulations, which allow the delivery of estrogens,
progestins, testosterone and other drugs in a gel base without the


                                       2



need for an occlusive or potentially irritating adhesive bandage. The commercial
potential for topical gel therapies is attractive, and several agreements with
pharmaceutical companies have led to the early and successful clinical
evaluation of Antares' formulations. The Argentine operations were moved to
Basel, Switzerland in late 1999.

     The Company operates in the specialized drug delivery sector of the
pharmaceutical industry. Companies in this sector generally bring technology and
know-how in the area of drug formulation and/or delivery devices to
pharmaceutical manufacturers through licensing and development agreements. The
Company views the pharmaceutical and biotechnology company as its primary
customer. The Company has negotiated and executed licensing relationships in the
growth hormone segment (needle-free devices in Europe and Asia), the hormone
replacement segment (transdermal delivery of estradiol in South America) and the
topical hormone gels segment (several development programs in place worldwide
including the United States and Europe). In addition, the Company continues to
market needle-free devices for the home administration of insulin in the U.S.
market though distributors while seeking a partnering relationship with an
insulin manufacturer.

     The Company is a Minnesota corporation incorporated in February 1979.
Corporate offices are located at 707 Eagleview Boulevard, Exton, Pennsylvania
19341; telephone (610) 458-6200. The Company has wholly-owned subsidiaries in
Switzerland (Antares Pharma AG and Antares Pharma IPL AG) and the Netherlands
Antilles (Antares Pharma NV).

Industry Trends

     Based upon previous experience in the industry, the Company believes the
following significant trends in healthcare have important implications for the
growth of the business.

     After a drug loses patent protection, the branded version of the drug often
faces competition from generic alternatives. Often market share may be preserved
by altering the delivery method, e.g., a single daily controlled release dosage
form rather than four pills a day. The Company expects pharmaceutical
manufacturers will continue to seek differentiating delivery characteristics to
defend against generic competition. The altered delivery method may be an
injection device or a novel formulation that offers convenience or improved
dosage schedules. Major companies now focus on life cycle management of their
products to maximize return on investment and often consider phased product
improvement opportunities to maintain competitiveness against other major
companies or generic competition.

     The increasing trend of pharmaceutical companies marketing directly to
consumers, as well as the recent focus on patient rights may encourage the use
of innovative, user-friendly drug delivery. Part of this trend involves offering
patients a wider choice of dosage forms. The Company believes the
patient-friendly attributes of its topical gel and jet injection technologies
meet these market needs.

     The focus on new topical formulations complements the Company's earlier
experience with the new injection methods. The Company envisions its program
with topical gel formulation as second-generation technology, replacing the
older transdermal patch products with more patient-friendly products. Topical
gels will offer the patient more choices and added convenience with no
compromise of efficacy. Although newer, the gel technology is based upon
so-called GRAS ("Generally Recognized as Safe") substances, meaning the
toxicology profiles of the ingredients are known and widely used. This approach
has a major regulatory benefit and may reduce the cost and time of product
development.

     Many drugs, including selected hormones and protein biopharmaceuticals, are
destroyed in the gastrointestinal tract and may only be administered through the
skin, the lung or by injection. Pulmonary delivery is complex and has not yet
been commercialized for therapeutic proteins. Injection remains the mainstay of
protein delivery. Therefore, the growing number of protein biopharmaceuticals
requiring injection may have limited commercial potential if patient compliance
with conventional injection treatment is not optimal. The failure to take all
prescribed injections can lead to increased health complications for the
patient, decreased drug sales for pharmaceutical companies and increased
healthcare costs for our society. In addition, it is becoming increasingly
recognized that conventional syringe needles require special and often costly
disposal methods.

     In addition to the increase in the number of drugs requiring
self-injection, changes in the frequency of insulin injections for the treatment
of diabetes also may contribute to an increase in the number of self-injections.
For many years, standard treatment protocol was for insulin to be administered
once or twice daily for the treatment of diabetes.


                                       3



However, according to recent studies (the Diabetes Control and Complications
Trial), tightly controlling the disease by, among other things, administration
of insulin as many as four to six times a day, can decrease its debilitating
effects. The Company believes that as the benefits of tightly controlling
diabetes become more widely known, the number of insulin injections
self-administered by people with diabetes will increase. The need to increase
the number of insulin injections given per day may also motivate patients with
diabetes to seek an alternative to traditional needles and syringes.

     The importance of vaccines in industrialized and emerging nations is
expanding as the prevalence of infectious diseases increases. New vaccines and
improved routes of administration are the subject of intense research in the
pharmaceutical industry. In the past, the Company had focused only upon the
injection of medication in the home, but in 2000 the Company began to research
the feasibility of using its devices for vaccines and new vaccine ingredients.

     Due to the substantial costs involved, marketing efforts are not currently
focused on drug applications administered by healthcare professionals. Jet
injection systems, however, may be attractive to hospitals, doctors' offices and
clinics, and such applications may be explored in the future. The issues raised
by accidental needle sticks and disposal of used syringes have led to the
development of syringes with sheathed needles as well as the practice of giving
injections through intravenous tubing to reduce the number of contaminated
needles. In 1998, the State of California banned the use of exposed needles in
hospitals and doctors' offices, if alternatives exist, and ten additional states
have adopted similar legislation. In November 2000 the Federal Government issued
guidelines encouraging institutions to replace needles wherever practical. The
Company believes that needle-free injection systems may be attractive to
healthcare professionals as a further means to reduce accidental needle sticks
and the burdens of disposing of contaminated needles. Furthermore, certain
drugs, particularly DNA vaccines, may actually be more effective if delivered by
jet injection, particularly where such injections are given
intradermally/subdermally. The Companies mini-needle technology is capable of
delivering vaccines in this way and discussions are being held with vaccine
companies.

Market Opportunity

     According to industry sources, an estimated 9 to 12 billion needles and
syringes are sold annually worldwide. The Company believes that a significant
portion of these are used for the administration of drugs that could be
delivered using its injectors, but that only a small percentage of people who
self-administer drugs currently use jet injection systems. The Company believes
that this lack of market penetration is due to older examples of needle-free
technology not meeting customer needs owing to cost and performance limitations,
and the small size of the companies directly marketing the technology not being
able to gain a significant "share of voice" in the marketplace. The Company
believes that its technology overcomes limitation of the past and its business
model of working with pharmaceutical company partners will allow for substantial
market penetration. To date neither the Company nor its competitors has achieved
substantial market penetration under this model. However, the Company's largest
customer is a pharmaceutical company (Ferring) and one of the Company's major
competitors, Bioject Medical Technologies, Inc., has a pharmaceutical company
(Serono) as its largest customer.

     Antares' focus is on the market for the delivery of self-administered
injectable drugs. The largest and most mature segments of this market consist of
the delivery of insulin for patients with diabetes and human growth hormone for
children with growth retardation. In the U.S., over 3.2 million people inject
insulin for the treatment of diabetes, resulting in an estimated 2.3 billion
injections annually, and the Company believes that the number of insulin
injections will increase with time as the result of new diabetes management
techniques which recommend more frequent injections. A second attractive market
has developed with growth hormone; children suffering from growth retardation
take daily hormone injections for an average of five years. The number of
children with growth retardation is small relative to diabetes, but most
children are exceptionally needle adverse. The Company's pharmaceutical partner
in Europe has made significant inroads using its injectors in this market, and
the Company expects similar progress in other geographic regions where
partnerships have already been established. Other injectable drugs that are
presently self-administered and may be suitable for injection with the Company's
systems include therapies for the prevention of blood clots and the treatment of
multiple sclerosis, migraine headaches, inflammatory diseases, impotence,
hormone therapy, AIDS and hepatitis. Antares also believes that many injectable
drugs currently under development will be administered by self-injection once
they reach the market. This is supported by the continuing development of
important chronic care products that can only be given by injection, the ongoing
effort to reduce hospital and institutional costs by early patient release, and
the gathering momentum of new classes of drugs that require injection. A
representative list of such drugs introduced in recent years that all require
home injection include Enbrel (Amgen, Wyeth) for treatment of rheumatoid
arthritis, Aranesp (Amgen) for treatment of anemia, Kineret (Amgen) for
rheumatoid arthritis, Forteo (Lilly) for


                                       4



treatment of osteoporosis, Intron-A (Schering Plough) and Roferon (Roche) for
hepatitis C, Lantus (Aventis Pharma) for diabetes, Rebif (Serono) for multiple
sclerosis, and Gonal-F for fertility treatment. The dramatic increase in numbers
of products for self administration by injection and the breadth of therapeutic
areas covered by this partial listing is an exciting representation of the
opportunity for Antares' device portfolio.

     According to one industry publication, worldwide hormone replacement
revenues, the initial focus of the Company's transdermal patch and topical gel
formulation program, was expected to grow to $4.0 billion by 2002. As of 1998,
only 15% of these sales were composed of transdermal delivery systems in the
U.S. Further growth in this sector is likely to be achieved by the use of
testosterone products in both male and female applications. The importance of
gel products containing testosterone for men has been exemplified with the
success of Androgel (R) (Unimed-Solvay) for treatment of male hypogonadism,
where second year sales in the US were greater than $200m. A new market
opportunity also exists with the use of low dose testosterone for treatment of
female sexual dysfunction, a complaint that it is suggested could affect 30-50%
of women. Currently no effective treatments are available for this disorder.
Antares Pharma, along with its US partner BioSante, has testosterone products in
clinical trial for both female and male applications. However, the Company
believes that the industry is shifting away from oral systems, as evidenced in
Europe, more specifically France, the leading country in the use of transdermal
hormone replacement therapy. According to an industry report, 64.8% of treated
menopausal women in France used either patch (44.7%) or gel (20.1%) therapy. It
has also been suggested that the more physiological blood levels achieved when
hormones are delivered across the skin may offer some advantage over oral
therapy. At this time there is no long-term evidence to support this contention.
In the future, products may be formulated to address equally large opportunities
in other sectors of the pharmaceutical industry, including cardiovascular, pain,
infectious diseases, addiction and central nervous system therapies.

Products and Technology

Current Needle-Free Injection Systems

     The Medi-Jector Vision(R) is a small, easy-to-use insulin injector,
introduced in October 1999, replacing the Medi-Jector Choice(R). The Vision
replaced the Choice in the U.S. insulin market in 1999 and 2000, the European
growth hormone market in 2002 and will gradually replace the Choice in the
remaining international growth hormone markets. Each injector model is operated
by first compressing a coil spring mechanism and then filling the attached
disposable plastic syringe from a multi-use medication vial. The proper dosage
is displayed in the dosage window. An injection is given by holding the injector
perpendicular to the skin in a location appropriate for the injection and
pressing the trigger button. Each injector is recommended to be used for two
years, and the needle-free plastic syringes are recommended for a one-week
usage. The U.S. retail price of the Vision insulin device (excluding the
needle-free syringe) is $299. The total annual cost to the end user of
needle-free syringes and related supplies is approximately $250 per year (based
upon an average of two injections per day). Based in part upon the results of
marketing and clinical studies performed by Antares, the Company believes that
injections using an Antares injection system are considered more comfortable and
more discreet than injections using a conventional needle and syringe. The
needle-free syringes used with any of the injector systems do not require
special disposal. Once a needle-free syringe is removed from the device portion
of the system, it cannot pierce the skin; consequently, the risk of
cross-infection from discarded needle-free syringes is reduced significantly
from the risk associated with needles.

New Device Development

     The Company is currently developing three new injector platforms. One
platform, code named the MJ-8, represents a new concept in needle-free delivery,
incorporating a smaller power pack with a self-contained medicinal cartridge.
This device has been designed to compete with cartridge-based pen-like devices,
which use replaceable needles, common in the European insulin market and rapidly
replacing conventional syringes in the U.S. insulin market. A second platform,
referred to as the AJ-1, combines a very low energy power source with a small
hidden needle to offer a totally disposable, single injection system best suited
for high volume doses. A modification of this device is being developed to
deliver vaccines to the very superficial layers of skin, a popular direction of
vaccine research. A third platform, referred to as the MJ-10, is a needle-free
version of the disposable pre-filled injector. This diverse development program
will offer pharmaceutical manufacturers a broad and attractive array of delivery
choices while providing consumers with less expensive and more user-friendly
injectors.


                                       5



     MJ-8 Injector. The Company believes that a continuing major obstacle to
widespread market acceptance of needle-free injection systems has been the lack
of a suitably compact and convenient injector. Although the size and complexity
of injectors has been reduced over the years, further reduction in size is
possible by limiting delivery of a single dose to 0.25ml or less. To this end,
the Company has targeted the insulin market where most people in Europe and a
growing number in the U.S. take several injections daily of 0.10ml to 0.15ml.
Smaller doses require less energy and, therefore, smaller energy sources. The
space conserved by reducing the energy source is used to store a drug cartridge
within the device, adding further user convenience. Prototypes of this platform
were tested in clinical trials starting in the fourth quarter of 2001 and
throughout 2002.

     AJ-1 Injector. The coil springs of the commercial needle-free injectors
limit injection volume to 0.5ml; larger fluid volumes require larger springs and
are, therefore, impractical. Nevertheless, injection volumes of 1.0ml or more
are not uncommon. In 1998, engineers at Antares found that they could greatly
reduce the size of the coil spring by adding a very short, hidden needle
(mini-needle). They concluded that breaking the very outer layers of the skin
with a small needle allows very low energy jet injection. At lower energies, the
device could hold the drug in a small, standard, single-dose glass cartridge.
The Company built and successfully tested a small, pre-filled, totally
disposable mini-needle injector during 1999 and has continued to refine this
platform for the needs of interested pharmaceutical companies. Engineers with
Elan Corporation plc ("Elan"), a drug delivery company based in Ireland,
developed additional proprietary technologies that complement the AJ-1 design,
and in November 1998, the Company licensed the Elan technology for certain
applications.

     MJ-10 Injector. Several needle-free injection companies and pharmaceutical
manufacturers are pursuing needle-free versions of the AJ-1 device with only
limited success. The Company's engineers believe that they have identified
unique opportunities in this field, and the Company is proceeding with product
development in this area.

     The Company expended approximately $939,000, $3,556,000 and $3,654,000 on
research and development efforts during fiscal years 2000, 2001 and 2002,
respectively. Of these amounts, approximately $560,000, $729,000 and $639,000,
respectively, were funded by third-party sponsored development programs and
licensing fees, which were reflected in revenues.

New Formulation Products

     Antares' Combi Gel(TM) product containing estradiol and norethindrone
acetate ("NETA") was licensed to Solvay in Europe in 1999 and has progressed
successfully through Phase II clinical evaluation. Phase III studies may
commence in 2003. In 2000, the Company signed an exclusive agreement with
BioSante, an early stage U.S. pharmaceutical company, who began clinical studies
of four Combi Gel(TM) hormone formulations for commercialization in the U.S. and
other countries.

Patents

     When appropriate, the Company actively seeks protection for its products
and proprietary information by means of U.S. and international patents and
trademarks. With the injection device technology, the Company currently holds 20
patents and has an additional 55 applications pending in the U.S. and other
countries. With the Company's drug formulation technology, it holds five
patents, and an additional 35 applications in various countries are pending. The
patents have expiration dates ranging from 2003 to 2019.

     Some of the Company's technology is developed on its behalf by independent
outside contractors. To protect the rights of its proprietary know-how and
technology, Company policy requires all employees and consultants with access to
proprietary information to execute confidentiality agreements prohibiting the
disclosure of confidential information to anyone outside the Company. These
agreements also require disclosure and assignment to the Company of discoveries
and inventions made by such individuals while devoted to Company-sponsored
activities. Companies with which Antares has entered into development agreements
have the right to certain technology developed in connection with such
agreements.

Manufacturing

     The Company operates a U.S. device manufacturing facility in compliance
with current Quality System Regulations ("QSR") established by the Food and Drug
Administration ("FDA") and by the centralized European regulatory


                                       6



authority (Medical Device Directive). Injector and disposable parts are
manufactured by third-party suppliers and assembled at the facility in
Minneapolis, Minnesota. Quality control and final packaging are performed
on-site. The Company may need to invest in automated assembly equipment if
volume increases in the future.

     On February 22, 2003 the Company entered into a manufacturing agreement
under which all manufacturing and assembly work currently performed by the
Company at its Minneapolis facility will be outsourced to a third party
manufacturer ("Manufacturer"). Under the terms of the agreement, the
Manufacturer will be responsible for procurement of raw materials and
components, inspection of procured materials, production, assembly, testing,
sterilization, labeling, packaging and shipping to the Company's customers. The
manufacturing operations are expected to be transferred to the Manufacturer by
May 2003. The Company will continue to have ultimate responsibility for the
quality of all products, and the Company will be responsible for the release of
all produced products. The agreement has an initial term of two years.

     The Company is obligated, until January 1, 2004, to negotiate with Becton
Dickinson before any other company for exclusive rights to manufacture
disposable plastic components of certain injector systems under certain
conditions. If the Company and Becton Dickinson are unable to agree on the terms
and conditions of an agreement, the Company is free to negotiate with any third
party on terms no more favorable in the aggregate than those that were offered
to Becton Dickinson. The Company pays Becton Dickinson royalties on sales of
plastic components of certain injector systems.

     The Combi Gel(TM) formulations for clinical studies are currently
manufactured by contract under the Company's supervision.

Marketing

     The Company's basic business strategy is to develop and manufacture new
products specific to certain pharmaceutical applications and to market through
the existing distribution systems of pharmaceutical and medical device
companies.

     During 2002, international revenue accounted for 59% of total revenue.
Europe (primarily Germany) accounted for 84% of international revenue with the
remainder coming primarily from Asia. The following two customers accounted for
79% of the Company's worldwide revenue in 2002: Ferring Pharmaceutical NV (49%)
and BioSante Pharmaceuticals, Inc. (30%). Revenue from Ferring resulted from
sales of injection devices and related disposable components. Revenue from
BioSante resulted from license fees, milestone payments and clinical testing
supplies for hormone replacement therapy transdermal gel formulations.

Injection Devices

     The Company markets needle-free injectors for insulin and growth hormone
delivery through pharmaceutical companies and medical products distributors in
over 20 countries. Device and related disposable product sales in 2002 were
approximately $2.4 million. Historical product development alliances, from which
licensing and development fees were obtained, include those with Becton
Dickinson, Schering-Plough Corporation and the Organon division of Akzo Nobel.

     With respect to current injection device selling efforts, the Company's
relationship with Ferring GmbH best reflects this basic strategy. Ferring is
selling human growth hormone throughout Europe with a marketing campaign tied
exclusively to the Antares needle-free delivery system. Ferring has been
successful in establishing a user base of more than 3,000 children for its drug
using the Antares needle-free system. In the Netherlands, where Ferring enjoys
its largest market share, 22% of children taking growth hormone use Antares'
injector. During the past six years, a Japanese pharmaceutical company, JCR, has
distributed small numbers of growth hormone injectors to hospital-based
physicians. In 1999, SciGen Pte Ltd. began distribution in Asia of Antares'
growth hormone injectors along with its drug.


                                       7



     The table below summarizes the Company's current collaborative and
distribution agreements in the injection device sector.

- --------------------------------------------------------------------------------
           Company                                        Market
- --------------------------------------------------------------------------------
Eli Lilly Company .....................       Feasibility and option agreement
                                                      several products
- --------------------------------------------------------------------------------
Pharmacia .............................      AJ1 evaluation and option agreement
                                                         (worldwide)
- --------------------------------------------------------------------------------
Becton Dickinson and Company(1) .......   Manufacturing - Needle-free disposable
                                                    components (worldwide)
- --------------------------------------------------------------------------------
Ferring Pharmaceuticals NV ............                Growth Hormone
                                                          (Europe)
- --------------------------------------------------------------------------------
JCR Pharmaceuticals Co., Ltd. .........                Growth Hormone
                                                           (Japan)
- --------------------------------------------------------------------------------
SciGen Pte Ltd. .......................          Growth Hormone and Insulin
                                                       (Asia/Pacific)
- --------------------------------------------------------------------------------
drugstore.com .........................              Insulin -E-Commerce
                                                       (United States)
- --------------------------------------------------------------------------------
Comar Cardio Technology srl ...........            Insulin - Distribution
                                                           (Italy)
- --------------------------------------------------------------------------------
McKesson Corporation. .................            Insulin - Distribution
                                                       (United States)
- --------------------------------------------------------------------------------
Care Service (Diabetic Express) .......      Insulin - Distribution - E-Commerce
                                                   (United States/Canada)
- --------------------------------------------------------------------------------

(1)  Becton Dickinson has certain manufacturing bid rights to the Company's
     disposable needle-free syringes under certain conditions, until January 1,
     2004.

     Feasibility studies are those in which the Company's collaborative partner
is assessing the potential value of the Company's technology with a specific
product or products. Such studies often include a small fee to the Company, and
the subjects of the studies are often kept confidential for competitive reasons
(as with the Eli Lilly and Company agreement). Generally, any costs incurred in
a feasibility study are borne by the Company's partner. The Company's current
feasibility studies have not provided the Company with substantial revenue. The
goal upon successful completion of a feasibility study is to move to a full
licensing agreement with the partner. All of the Company's feasibility studies
remain in process and have not yet progressed to the licensing agreement stage.

     Distribution agreements are arrangements under which the Company's products
are supplied to end-users through the distributor. The Company provides the
distributor with injection devices, and the distributor often receives a margin
on sales. The Company currently has four distribution agreements under which the
distributors sell the Company's injector devices and related components for use
with insulin. To date, the revenue received from these agreements has been
immaterial.

     Under the Company's growth hormone agreements, the Company sells its
injection devices to partners who manufacture and/or market human growth hormone
directly. The partner then markets the Company's devices with its human growth
hormone. The Company receives benefit from these agreements in the form of
manufacturing margins and royalties on end-sales of the Company's products.

     Under the Company's December 1993 agreement with Ferring, the Company
granted Ferring exclusive rights to use and market, throughout Europe and the
former Soviet Union, the Company's injector device for use with the
administration of human growth hormone. The Company also agreed to supply
Ferring with all of its requirements of injector devices. Under the agreement,
Ferring was required to pay the Company upon the occurrence of certain events,
such as completion of certain clinical studies and receipt of regulatory
approvals. The Company has received all such payments, and currently, the
Company receives payment from Ferring for the supplied injectors. Unless Ferring
exercises its option to renew the agreement for two-year periods, the agreement
will terminate ten years following


                                       8



Ferring's receipt of technical and regulatory approvals to market the Company's
injector devices in France, Germany, Italy and Spain. The last of such approvals
was received December 1996. In 2002, revenue from Ferring accounted for 59% of
the Company's product sales. Revenue from the remaining three growth hormone
agreements accounted for less than 3% of product sales in 2002.

     On January 22, 2003, the Company entered into a License Agreement with
Ferring, under which the Company licensed certain of its intellectual property
and extended the territories available to Ferring for use of certain of the
Company's needle-free injector devices. Specifically, the Company granted to
Ferring an exclusive, perpetual, irrevocable, royalty-bearing license, within a
prescribed manufacturing territory, to manufacture certain of the Company's
needle-free injector devices. The Company granted to Ferring similar
non-exclusive rights outside of the prescribed manufacturing territory. In
addition, the Company granted to Ferring a non-exclusive right to make and have
made the equipment required to manufacture the licensed products, and an
exclusive, perpetual, royalty-free license in a prescribed territory to use and
sell the licensed products.

     The Company also granted to Ferring a right of first offer to obtain an
exclusive worldwide license to manufacture and sell the Company's AJ-1 device
for the treatment of limited medical conditions.

     As consideration for the license grants, Ferring paid the Company
EUR500,000 upon execution of the License Agreement, and paid an additional
EUR1,000,000 on February 24, 2003. Ferring will also pay the Company royalties
for each device manufactured by or on behalf of Ferring, including devices
manufactured by the Company. Beginning on January 1, 2004, EUR500,000 of the
license fee received on February 24, 2003 will be credited against the royalties
owed by Ferring, until such amount is exhausted. These royalty obligations
expire, on a country-by-country basis, when the respective patents for the
products expire, despite the fact that the License Agreement does not itself
expire until the last of such patents expires.

     Over the past few years, the Company has taken several steps to increase
its U.S. insulin injector distribution. As a result, in March 2001, the Company
transferred U.S. distribution to Diabetic Express, a division of Care Services,
Inc. Antares has concluded that the successful distribution of insulin devices
will require additional physician support and the marketing power of a major
insulin manufacturer. However, the Company's current effort will continue
because its devices provide a vital service to certain patients and provide the
Company with considerable information regarding the needs of people required to
self-administer drugs by injection.

Topical Delivery Products

     Over the short term, the majority of revenues generated from topical drug
formulation will be through the fees generated by licensing and development
agreements.

     The following table describes existing pharmaceutical relationships in the
topical delivery sector.



- ------------------------------------------------------------------------------------------------
Pharmaceutical Company
    Partner                   Compound                 Market Segment               Technology
- ------------------------------------------------------------------------------------------------
                                                                        
Solvay                    NETA/Estradiol           Hormone replacement therapy   Combi Gel(TM)
                                                              (Europe)
- ------------------------------------------------------------------------------------------------
Sigmapharma/Novaquimica   Estradiol                Hormone replacement therapy   Gel
                                                             (Brazil)
- ------------------------------------------------------------------------------------------------
BioSante                  Progesterone/Estradiol/  Hormone replacement therapy   Combi Gel(TM)
                          Testosterone                 (U.S., Canada, other
                                                            countries)
- ------------------------------------------------------------------------------------------------
SciTech                   Estradiol/Testosterone   Hormone replacement therapy   Combi Gel(TM)
                                                   (Asia, Australia & Oceania)
- ------------------------------------------------------------------------------------------------
Pharmacia                 Undisclosed                      Undisclosed           Gel
- ------------------------------------------------------------------------------------------------


     The agreements in the table are license agreements under which the
Company's partners are conducting clinical evaluations of the Company's
products. For competitive reasons, the Company's partners usually do not divulge
the exact stage of clinical development. The two major agreements in the topical
delivery sector are with Solvay Pharmaceuticals and BioSante Pharmaceuticals,
Inc. Under the Company's June 1999 agreement with Solvay, the Company granted an
exclusive license to Solvay for the Company's transdermal gel technology for
delivery of an


                                       9



estradiol/progestin combination for hormone replacement therapy. The exclusive
license applies to all countries and territories in the world, except for the
United States, Canada, Japan and Korea. The agreement contains a development
plan under which the Company and Solvay collaborate to bring the product to
market. Solvay must pay the Company a license fee of $5 million in four separate
payments, all of which are due upon completion of various phases of the
development plan. To date, the Company has received $1.5 million of this fee.
Once commercial sale of the product begins, Solvay is required to, on a
quarterly basis, pay the Company a royalty based on a percentage of sales. The
royalty payments will be required for a period of 15 years or when the last
patent for the product expires, whichever is later.

     In June 2000, the Company granted an exclusive license to BioSante to allow
BioSante to develop and commercialize four of the Company's gel technology
products for use in hormone replacement therapy in the United States, Canada and
other countries. BioSante paid the Company $1 million upon execution of the
agreement and is also required to pay the Company royalty payments once
commercial sales of the products have begun. The royalty payments are based on a
percentage of sales of the products and must be paid for a period of 10 years
following the first commercial sale of the products, or when the last patent for
the products expires, whichever is later. The agreement also provides for
milestone payments to the Company upon the occurrence of certain events related
to regulatory filings and approvals.

Competition

     Competition in the injectable drug delivery market is intensifying. The
Company faces competition from traditional needle syringes, newer pen-like and
sheathed needle syringes and other needle-free injection systems as well as
alternative drug delivery methods including oral, transdermal and pulmonary
delivery systems. Nevertheless, the vast majority of injections are currently
administered using needles. Because injection is typically only used when other
drug delivery methods are not feasible, the needle-free injection systems may be
made obsolete by the development or introduction of drugs or drug delivery
methods which do not require injection for the treatment of conditions the
Company has currently targeted. In addition, because the Company intends to
enter into collaborative arrangements with pharmaceutical companies, the
Company's competitive position will depend upon the competitive position of the
pharmaceutical company with which it collaborates for each drug application.

     Three companies currently sell injectors to the U.S. insulin market.
Antares believes that it retained the largest market share in 2002, and competes
on the basis of device size, price and ease of use. In 1998, Bioject Medical
Technologies, Inc., the manufacturer of a needle-free gas-powered injector,
purchased the insulin injector business of Vitajet, and after some months of
redesign, entered the U.S. insulin injector market. Equidyne, Inc. entered the
worldwide insulin injector market in mid-2000.

     Powderject Pharmaceuticals, plc, a British research company, is developing
a needle-free injection system based upon the principle of injecting a fine dry
powder.Bioject and Powderject compete actively and successfully for licensing
agreements with pharmaceutical manufacturers. Powderject has recently refocused
exclusively on the use of their technology for vaccine delivery.

     The Company expects the needle-free injection market to expand, even though
improvements continue to be made in needle syringes, including syringes with
hidden needles and pen-like needle injectors. The Company expects to compete
with existing needle injection methods as well as new delivery methods yet to be
commercialized. For example, Inhale Therapeutic Systems, Inc.(now Nektar
Therapeutics), in partnership with Pfizer, Inc. and Aventis Pharmaceuticals, is
completing Phase III clinical testing of inhaled insulin which, if successful,
could replace the use of injection for some patients.

     Competition in the formulation sector differs in that the market is
considerably larger, more mature and dominated by much larger companies like
ALZA Corporation and Elan Corporation plc. Other large competitors include
SkyePharma plc and Alkermes, Inc. These companies have substantially greater
capital resources, more experienced research teams, larger facilities and a
broader range of products and technologies. Nevertheless, ALZA and Elan have
focused in recent years on growth through the acquisition and sale of
traditional pharmaceutical products.


                                       10



Government Regulation

     Antares' products and manufacturing operations are subject to extensive
government regulations, both in the United States and abroad. In the United
States, the Food & Drug Administration ("FDA") administers the Federal Food Drug
and Cosmetic Act (the "FDC Act") and has adopted various regulations affecting
the Company's business, including those governing the introduction of new
medical devices, the observation of certain standards and practices with respect
to the manufacturing and labeling of medical devices, the maintenance of certain
records and the reporting of device-related deaths, serious injuries and certain
malfunctions to the FDA. Manufacturing facilities and certain company records
are also subject to FDA inspections. The FDA has broad discretion in enforcing
the FDC Act and the regulations thereunder, and noncompliance can result in a
variety of regulatory steps ranging from warning letters, product detentions,
device alerts or field corrections to mandatory recalls, seizures, injunctive
actions and civil or criminal actions or penalties.

     Drug delivery systems such as injectors may be approved or cleared for sale
as a medical device or may be evaluated as part of the drug approval process in
connection with a new drug application ("NDA") or a Product License Application
("PLA"). Combination drug/device products raise unique scientific, technical and
regulatory issues. The FDA has recently established an Office of Combination
Products to address the challenges associated with the premarket review and
regulation of combination products. New drug/delivery combinations require the
submission of a request for designation for the Office of Combination Products
to determine assignment to the appropriate regulatory center. To the extent
permitted under the FDC Act and current FDA policy, the Company intends to seek
the required approvals and clearance for the use of its new injectors, as
modified for use in specific drug applications under the medical device
provisions, rather than under the new drug provisions, of the FDC Act.

     Products regulated as medical devices may not be commercially distributed
in the United States unless they have been cleared or approved by the FDA,
unless otherwise exempted from the FDC Act and regulations thereunder. There are
two methods for obtaining such clearance or approvals. Under Section 510(k) of
the FDC Act ("510(k) notification"), certain products qualify for a pre-market
notification of the manufacturer's intention to commence marketing the product.
The manufacturer must, among other things, establish in the 510(k) notification
that the product to be marketed is substantially equivalent to another legally
marketed product (that is, that it has the same intended use and that it is as
safe and effective as a legally marketed device and does not raise questions of
safety and effectiveness that are different from those associated with the
legally marketed device). Marketing may commence when the FDA issues a letter
finding substantial equivalence to such a legally marketed device. The FDA may
require, in connection with a 510(k) notification, that it be provided with
animal and/or human test results. If a medical device does not qualify for the
510(k) procedure, the manufacturer must file a pre-market approval ("PMA")
application under Section 515 of the FDC Act. A PMA must show that the device is
safe and effective and is generally a much more complex submission than a 510(k)
notification, typically requiring more extensive pre-filing testing and a longer
FDA review process. The Company believes that injection systems, when indicated
for use with drugs or biologicals approved by the FDA, will be regulated as
medical devices and are eligible for clearance through the 510(k) notification
process. There can be no assurance, however, that the FDA will not require a PMA
in the future.

     In addition to submission when a device is being introduced into the market
for the first time, a 510(k) notification is also required when the manufacturer
makes a change or modification to a previously marketed device that could
significantly affect safety or effectiveness, or where there is a major change
or modification in the intended use or in the manufacture of the device. When
any change or modification is made in a device or its intended use, the
manufacturer is expected to make the initial determination as to whether the
change or modification is of a kind that would necessitate the filing of a new
510(k) notification. The Company has received 510(k) marketing clearance from
the FDA to allow marketing of the Medi-Jector Choice and the Medi-Jector Vision
systems for the delivery of U-100 insulin or human growth hormone. In the future
the Company or its partners will submit 510(k) notifications with regard to
further device design improvements and uses with additional drug therapies.

     If the FDA concludes that any or all of the Company's new injectors must be
handled under the new drug provisions of the FDC Act, substantially greater
regulatory requirements and approval times will be imposed. Use of a modified
new product with a previously unapproved new drug likely will be handled as part
of the NDA for the new drug itself. Under these circumstances, the device
component will be handled as a drug accessory and will be approved, if ever,
only when the NDA itself is approved. The Company's injectors may be required to
be approved as a combination drug/device product under a supplemental NDA for
use with previously approved drugs. Under these circumstances, the Company's
device could be used with the drug only if and when the supplemental NDA is
approved for this purpose. It


                                       11



is possible that, for some or even all drugs, the FDA may take the position that
a drug-specific approval must be obtained through a full NDA or supplemental NDA
before the device may be packaged and sold in combination with a particular
drug.

     To the extent that the Company's modified injectors are packaged with the
drug, as part of a drug delivery system, the entire package is subject to the
requirements for drug/device combination products. These include drug
manufacturing requirements, drug adverse reaction reporting requirements, and
all of the restrictions that apply to drug labeling and advertising. In general,
the drug requirements under the FDC Act are more onerous than medical device
requirements. These requirements could have a substantial adverse impact on the
Company's ability to commercialize its products and its operations.

     In the European Union, a drug delivery device that is an integral
combination with the drug to be delivered is considered part of the medicinal
product and is regulated as a drug. Gels are drug delivery devices which are,
therefore, regulated as drugs and must comply with the requirements described in
the Council Directive 65/65/EEC.

     The FDC Act also regulates quality control and manufacturing procedures by
requiring the Company and its contract manufacturers to demonstrate compliance
with the current Quality System Regulations ("QSR"). The FDA's interpretation
and enforcement of these requirements have been increasingly strict in recent
years and seem likely to be even more stringent in the future. The FDA monitors
compliance with these requirements by requiring manufacturers to register with
the FDA and by conducting periodic FDA inspections of manufacturing facilities.
If the inspector observes conditions that might violate the QSR, the
manufacturer must correct those conditions or explain them satisfactorily.
Failure to adhere to QSR requirements would cause the devices produced to be
considered in violation of the FDA Act and subject to FDA enforcement action
that might include physical removal of the devices from the marketplace.

     The FDA's Medical Device Reporting Regulation requires companies to provide
information to the FDA on the occurrence of any death or serious injuries
alleged to have been associated with the use of their products, as well as any
product malfunction that would likely cause or contribute to a death or serious
injury if the malfunction were to recur. In addition, FDA regulations prohibit a
device from being marketed for unapproved or uncleared indications. If the FDA
believes that a company is not in compliance with these regulations, it could
institute proceedings to detain or seize company products, issue a recall, seek
injunctive relief or assess civil and criminal penalties against the company or
its executive officers, directors or employees.

     The Company is also subject to the Occupational Safety and Health Act
("OSHA") and other federal, state and local laws and regulations relating to
such matters as safe working conditions, manufacturing practices, environmental
protection and disposal of hazardous or potentially hazardous substances.

     Sales of medical devices outside of the U.S. are subject to foreign legal
and regulatory requirements. The Company's transdermal and injection systems
have been approved for sale only in certain foreign jurisdictions. Legal
restrictions on the sale of imported medical devices and products vary from
country to country. The time required to obtain approval by a foreign country
may be longer or shorter than that required for FDA approval, and the
requirements may differ. Antares relies upon the companies marketing its
injectors in foreign countries to obtain the necessary regulatory approvals for
sales of the Company's products in those countries. Generally, products having
an effective 510(k) clearance or PMA may be exported without further FDA
authorization.

     The Company has obtained ISO 9001/EN 46001 qualification for its
manufacturing systems. This certification shows that the Company's procedures
and manufacturing facilities comply with standards for quality assurance, design
capability and manufacturing process control. Such certification, along with
European Medical Device Directive certification, evidences compliance with the
requirements enabling the Company to affix the CE Mark to current products. The
CE Mark denotes conformity with European standards for safety and allows
certified devices to be placed on the market in all European Union ("EU")
countries. Semi-annual audits by the Company's notified body, British Standards
Institute, are required to demonstrate continued compliance.

Forward Looking Statements

     Antares and its representatives may from time to time make written or oral
forward-looking statements with respect to its annual or long-term goals,
including statements contained in its filings with the Securities and Exchange
Commission and in reports to shareholders.


                                       12



     The words or phrases "will likely result," "are expected to," "will
continue to," "is anticipated," "estimate," "project," "may," "should," "plans,"
"believes," "predicts," "intends," "potential" or "continue" or similar
expressions identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. Antares cautions readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made.

     In connection with the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, Antares is identifying the important risk factors
below that could affect its financial performance and could cause its actual
results for future periods to differ materially from any opinions or statements
expressed with respect to future periods in any current statements.

     The Company undertakes no obligation to publicly revise any forward-looking
statements to reflect future events or circumstances.

Risk Factors

You should consider carefully the following information about risks, together
with the other information contained in this prospectus and in the documents
referred to below in "Where You Can Find More Information," before you decide
whether to buy our common stock. Additional risks and uncertainties not known to
us or that we now believe to be not material could also impair our business. If
any of the following risks actually occur, our business, results of operations
and financial condition could suffer significantly. As a result, the market
price of our common stock could decline and you could lose all of your
investment. In this Section, the terms "we" and "our" refer to Antares Pharma,
Inc.

Risks Related to Our Business

We only have sufficient cash to continue operations for two to three weeks

     Our cash position is currently only sufficient to fund working capital
requirements for the next two to three weeks. Moreover, we have no immediate
access to additional capital. While we received a total of EURO1,500,000
(approximately $1,600,000) from Ferring BV in connection with our license
agreement, those funds will not last beyond March 2003. We expect our working
capital needs over the next 12 months to approximate $9.7 million. This amount
consists of approximately $3.4 million for research and development, $500,000
for business development, $300,000 for marketing and sales, $400,000 for
regulatory and quality assurance and $5.1 million for general and administrative
expenses, which is partially offset by approximately $8.0 million of projected
license fees and net product margins. As a result, we continue to seek funds
through additional equity or debt offerings, equity investments by our strategic
partners/customers and divestment of certain non-core technologies. There can be
no assurance that sufficient additional equity or debt financing will be
available. If we cannot obtain financing when needed, or obtain it on favorable
terms, we may be required to curtail development of new drug technologies,
further reduce operating costs through staff reductions or cease operations
altogether. Additionally, even if we are able to raise additional capital and
continue our operations, if our Swiss subsidiaries do not generate sufficient
cash flow on their own or the U.S. parent company is unable to provide funds to
them, and these Swiss subsidiaries are therefore deemed technically insolvent,
Swiss laws may require us to place the balance sheet of the Swiss subsidiaries
into the Swiss courts. Such an action is often a precursor to a bankruptcy
filing, and may be deemed an event of default under our debentures.

     Because of insufficient cash flows, we were also several days late in
satisfying our U.S. operations payroll obligations for January 31, 2003. There
can be no assurance that we will raise additional funds or receive sufficient
monthly revenue payments to prevent this from occurring again.

If we default on the terms of the debentures we recently issued, the debenture
holders will be able to foreclose on their lien on our assets for the amount of
indebtedness we owe them

     We currently have an aggregate of $1,613,255 outstanding principal amount
of our 8% Senior Secured Convertible Debentures and Amended and Restated 8%
Senior Secured Convertible Debentures. These debentures earn interest at a rate
of 8% per annum and mature on March 31, 2004. Interest is payable quarterly, and
the debenture holders have the option of receiving the interest payments in cash
or in shares of our common stock. In the event these debentures are not


                                       13



converted prior to March 31, 2004, we will be required to repay the principal
and any accrued but previously unpaid interest. We do not currently have the
ability to repay the principal on these debentures, nor do we have any assurance
that we will have adequate funds to repay them when they mature. We granted to
the holders of the debentures a security interest in substantially all of our
assets. Therefore, if we default on the terms of the debentures, the debenture
holders will be able to take title to a substantial portion of our assets, up to
the amount of indebtedness we owe them.

We have incurred significant losses to date, and for our last fiscal year we
received an opinion from our accountants expressing doubt about our ability to
continue as a going concern

     The report of our independent accountants in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2002, contains an explanatory paragraph
expressing substantial doubt about our ability to continue as a going concern as
a result of recurring losses and negative cash flows from operations. We had
negative working capital of ($11,712) and ($4,188,234) at December 31, 2001 and
2002, respectively. We incurred net losses of ($5,260,387), ($9,499,101) and
($11,608,765) in the fiscal years ended 2000, 2001 and 2002, respectively. In
addition, we have accumulated aggregate net losses from the inception of
business through December 31, 2002, of ($41,165,798).

     The costs for research and product development of our drug delivery
technologies along with marketing and selling expenses and general and
administrative expenses have been the principal causes of our losses. We
reported a net loss for the year ending December 31, 2002, 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, but not limited to, the status of collaborative arrangements, the
progress of research and development programs and the receipt of revenues from
sales of products. Our ability to achieve and/or sustain profitable operations
depends on a number of factors, many of which are beyond our control. These
factors include, but are not limited to, the following:

     o    the demand for our technologies from current and future biotechnology
          and pharmaceutical partners;
     o    our ability to manufacture products efficiently and with the required
          quality;
     o    our ability to increase manufacturing capacity to allow for new
          product introductions;
     o    the level of product competition and of price competition;
     o    our ability to develop additional commercial applications for our
          products;
     o    our ability to obtain regulatory approvals;
     o    our ability to control costs; and
     o    general economic conditions.

We depend on a limited number of customers for the majority of our revenue, and
the loss of any one of these customers could substantially reduce our revenue

     During fiscal 2002, we derived approximately 79% of our revenue from the
following two customers:

     o    Ferring Pharmaceutical NV (approximately 49%)
     o    BioSante Pharmaceuticals, Inc. (approximately 30%)

     The loss of either of these customers would cause revenues to decrease
significantly, increase our continuing losses from operations and, ultimately,
could require us to cease operating. If we cannot broaden our customer base, we
will continue to depend on a few customers for the majority of our revenues. We
may be unable to negotiate favorable business terms with customers that
represent a significant portion of our revenues. If that occurs, our revenues
and gross profits may be insufficient to allow us to achieve and/or sustain
profitability or continue operations.

If we or our third-party manufacturer are unable to supply Ferring BV with our
devices pursuant to our current license agreement with Ferring, Ferring would
own a fully paid up license for certain of our intellectual property

     Pursuant to our license agreement with Ferring BV, we licensed certain of
our intellectual property related to our needle-free injection devices,
including granting a license allowing Ferring to manufacture our devices on its
own for use with its human growth hormone product. This license becomes
effective if we are unable to continue to supply product to Ferring under our
current supply agreement. In accordance with the license agreement, we entered
into a manufacturing agreement with a third party to manufacture our devices for
Ferring. If we or this third party are unable to meet our obligations to supply
Ferring with our devices, Ferring would own a fully paid up license to
manufacture our devices and to use and exploit our intellectual property in
connection with Ferring's human growth hormone product. In


                                       14



such event, we would no longer receive royalty revenues from Ferring, and we
would no longer be able to license such technology to other parties for use in
the field of human growth hormone therapy.

We have limited manufacturing experience and may experience manufacturing
difficulties related to the use of new materials and procedures, which could
increase our production costs and, ultimately, decrease our profits

     Our past assembly, testing and manufacturing experience for certain of our
technologies has involved the assembly of products from machined stainless steel
and composite components in limited quantities. Our planned future drug delivery
technologies necessitate significant changes and additions to our manufacturing
and assembly process to accommodate new components. These systems must be
manufactured in compliance with regulatory requirements, in a timely manner and
in sufficient quantities while maintaining quality and acceptable manufacturing
costs. In the course of these changes and additions to our manufacturing and
production methods, we may encounter difficulties, including problems involving
yields, quality control and assurance, product reliability, manufacturing costs,
existing and new equipment, component supplies and shortages of personnel, any
of which could result in significant delays in production. Additionally, we
recently entered into a manufacturing agreement under which a third party will
assemble certain component parts of our MJ6B and MJ7 devices. There can be no
assurance that this third party manufacturer will be able to meet these
regulatory requirements or our own quality control standards. Therefore, there
can be no assurance that we will be able to successfully produce and manufacture
our drug delivery technology. Any failure to do so would negatively impact our
business, financial condition and results of operations.

Our products have achieved only limited acceptance by patients and physicians,
which continues to have a negative effect on our revenue

     Our business ultimately depends on ultimate patient and physician
acceptance of our needle-free injectors, gels and our other drug delivery
technologies as an alternative to more traditional forms of drug delivery,
including injections using a needle and transdermal patch products. To date, our
device technologies have achieved only limited acceptance from such parties.
Transdermal gels from other companies appear to be gaining increasing
acceptance, but there is no guarantee that this will also be seen with our gel
products when they are commercialized. If our drug delivery technologies are not
accepted in the marketplace, we may be unable to successfully attract additional
marketing partners or directly market and sell our products, which would limit
our ability to generate revenues and to achieve and/or sustain profitability.
The degree of acceptance of our drug delivery systems depends on a number of
factors. These factors include, but are not limited to, the following:

     o    demonstrated clinical efficacy, safety and enhanced patient
          compliance;
     o    cost-effectiveness;
     o    convenience and ease of use of injectors and transdermal gels;
     o    advantages over alternative drug delivery systems or similar products
          from other companies; and
     o    marketing and distribution support.

     Physicians may refuse to prescribe products incorporating our drug delivery
technologies if they believe that the active ingredient is better administered
to a patient using alternative drug delivery technologies, that the time
required to explain use of the technologies to the patient would not be offset
by advantages, or they believe that the delivery method will result in patient
noncompliance. Factors such as patient perceptions that a gel is inconvenient to
apply or that devices do not reproducibly deliver the drug may cause patients to
reject our drug delivery technologies. Because only a limited number of products
incorporating our drug delivery technologies are commercially available, we
cannot yet fully assess the level of market acceptance of our drug delivery
technologies.

If transdermal gels do not achieve market acceptance, we may be unable to
achieve sufficient profits from this technology.

     Because transdermal gels are a newer, less understood method of drug
delivery, our potential consumers have little experience with manufacturing
costs or pricing parameters. Our assumption of higher value may not be shared by
the consumer. To date, transdermal gels have gained successful entry into only a
limited number of markets. There can be no assurance that transdermal gels will
ever gain sufficient market acceptance in those or other markets to achieve
and/or sustain profitable operations.


                                       15



Our injectable depot gel technology may not achieve consumer acceptance and, as
a result, may not result in revenues for our company.

     Although the injectable depot gel research field is active, few products
have reached the market. There is no data indicating that the specific depot gel
formulations we are researching will be accepted. Regulatory compliance and
approvals can take a substantial amount of time due to clinical evaluations that
are required for this type of drug delivery method. There can be no assurance
that injectable gels will ever obtain the necessary regulatory approvals or gain
sufficient market acceptance to achieve and/or sustain profitable operations.

A recent FDA study questioned the safety of hormone replacement therapy for
menopausal women, and our female hormone replacement therapy business may suffer
as a result

     In July 2002, the Federal Drug Administration halted a long-term study
being conducted on oral female hormone replacement therapy (HRT) using a
combination of estradiol and progestin because the study showed an increased
risk of breast cancer, heart disease and blood clots in women taking HRT. The
studies using estradiol alone were not halted. The halted study looked at only
one brand of oral combined HRT, and there is no information on whether other
brands with different levels of hormones would carry the same risks. In January
2003, the FDA announced that it would be requiring new warnings on the labels
for HRT products, and it advised patients to consult with their doctors about
whether to use continuous combined HRT and to limit the period of use to help
manage post-menopausal vasomotor symptoms, not to manage osteoporosis or other
possible longer-term indications. These results and recommendations have had an
impact on the use of HRT, but we cannot predict whether sales will remain at
this reduced level, or whether our own transdermal HRT contracts will continue
as more information on the effects of HRT is released. Additionally, there is no
information at this point regarding whether the transdermal gels that we market
for HRT will be shown to carry the same risks as those found in the study.

We rely on third parties to supply components for our products, and any failure
to retain relationships with these third parties could negatively impact our
ability to manufacture our products

     Certain of our technologies contain a number of customized components
manufactured by various third parties. Regulatory requirements applicable to
medical device and transdermal patch manufacturing can make substitution of
suppliers costly and time-consuming. In the event that we could not obtain
adequate quantities of these customized components from our suppliers, there can
be no assurance that we would be able to access alternative sources of such
components within a reasonable period of time, on acceptable terms or at all.
The unavailability of adequate quantities, the inability to develop alternative
sources, a reduction or interruption in supply or a significant increase in the
price of components could have a material adverse effect on our ability to
manufacture and market our products.

We may be unable to successfully expand into new areas of drug delivery
technology, which could substantially reduce our revenue and negatively impact
our business as a whole

     We intend to continue to enhance our current technologies. Even if enhanced
technologies appear promising during various stages of development, we may not
be able to develop commercial applications for them because

     o    the potential technologies may fail clinical studies;
     o    we may not find a pharmaceutical company to adopt the technologies;
     o    it may be difficult to apply the technologies on a commercial scale;
     o    the technologies may not be economical to market; or
     o    we may not receive necessary regulatory approvals for the potential
          technologies.

     We have not yet completed research and development work or obtained
regulatory approval for any technologies for use with any drugs other than
insulin, human growth hormone and estradiol. There can be no assurance that any
newly developed technologies will ultimately be successful or that unforeseen
difficulties will not occur in research and development, clinical testing,
regulatory submissions and approval, product manufacturing and commercial scale
up, marketing, or product distribution related to any such improved technologies
or new uses. Any such occurrence could materially delay the commercialization of
such improved technologies or new uses or prevent their market introduction
entirely.


                                       16



As health insurance companies and other third-party payors increasingly
challenge the products and services for which they will provide coverage, our
individual consumers may be unable to afford to use our products, which could
substantially reduce our revenues

     Our injector device products are currently sold in the European Community
(EC) and in the United States for use with human growth hormone or insulin. In
the case of human growth hormone, our products are provided to users at no cost
by the drug manufacturer. In the United States the injector products are only
available for use with insulin.

     Although it is impossible for us to identify the amount of sales of our
products that our customers will submit for payment to third-party insurers, at
least some of these sales may be dependent in part on the availability of
adequate reimbursement from these third-party healthcare payors. Currently,
insurance companies and other third-party payors reimburse the cost of certain
technologies on a case-by-case basis and may refuse reimbursement if they do not
perceive benefits to the technologies' use in a particular case. Third-party
payors are increasingly challenging the pricing of medical products and
services, and there can be no assurance that such third-party payors will not in
the future increasingly reject claims for coverage of the cost of certain of our
technologies. Insurance and third party payor practice vary from country to
country, and changes in practices could negatively affect our business if the
cost burden for our technologies were shifted more to the patient. Therefore,
there can be no assurance that adequate levels of reimbursement will be
available to enable us to achieve or maintain market acceptance of our
technologies or maintain price levels sufficient to realize profitable
operations. There is also a possibility of increased government control or
influence over a broad range of healthcare expenditures in the future. Any such
trend could negatively impact the market for our drug delivery technologies.

The loss of any existing licensing agreements or the failure to enter into new
licensing agreements could substantially affect our revenue

     Our business plans require us to enter into license agreements with
pharmaceutical and biotechnology companies covering the development,
manufacture, use and marketing of drug delivery technologies with specific drug
therapies. Under these arrangements, the partner company is to assist us in the
development of systems for such drug therapies and collect or sponsor the
collection of the appropriate data for submission for regulatory approval of the
use of the drug delivery technology with the licensed drug therapy. Our
licensees will also be responsible for distribution and marketing of the
technologies for these drug therapies either worldwide or in specific
territories. We are currently a party to a number of such agreements, all of
which are currently in varying stages of development. Although none of our
collaborative agreements have been terminated for failure to meet milestones, we
may not be able to meet future milestones established in our agreements (such
milestones generally being structured around satisfactory completion of certain
phases of clinical development, regulatory approvals and commercialization of
our product) and thus, would not receive the fees expected from such
arrangements. Moreover, there can be no assurance that we will be successful in
executing additional collaborative agreements or that existing or future
agreements will result in increased sales of our drug delivery technologies. In
such event, our business, results of operations and financial condition could be
adversely affected, and our revenues and gross profits may be insufficient to
allow us to achieve and/or sustain profitability. As a result of our
collaborative agreements, we are dependent upon the development, data collection
and marketing efforts of our licensees. The amount and timing of resources such
licensees devote to these efforts are not within our control, and such licensees
could make material decisions regarding these efforts that could adversely
affect our future financial condition and results of operations. In addition,
factors that adversely impact the introduction and level of sales of any drug
covered by such licensing arrangements, including competition within the
pharmaceutical and medical device industries, the timing of regulatory or other
approvals and intellectual property litigation, may also negatively affect sales
of our drug delivery technology.

The failure of any of our third party licensees to develop, obtain regulatory
approvals for, market, distribute and sell our products could substantially
reduce our revenue

     Pharmaceutical company partners help us develop, obtain regulatory
approvals for, manufacture and sell our products. If one or more of these
pharmaceutical company partners fail to pursue the development or marketing of
the products as planned, our revenues and gross profits may not reach
expectations or may decline. We may not be able to control the timing and other
aspects of the development of products because pharmaceutical company partners
may have priorities that differ from ours. Therefore, commercialization of
products under development may be delayed unexpectedly. We do not intend to have
a direct marketing channel to consumers for our drug delivery technologies
except through current distributor agreements in the United States for our
insulin delivery device. Therefore, the success


                                       17



of the marketing organizations of the pharmaceutical company partners, as well
as the level of priority assigned to the marketing of the products by these
entities, which may differ from our priorities, will determine the success of
the products incorporating our technologies. Competition in this market could
also force us to reduce the prices of our technologies below currently planned
levels, which could adversely affect our revenues and future profitability.

We face increasing competition, and our business could suffer if we are unable
to effectively compete with our competitor's technology

     Additional competitors in the needle-free injector market, some with
greater resources and experience than us, may enter the market, as there is an
increasing recognition of a need for less invasive methods of injecting drugs.
Similarly, several companies are competing in the transdermal gel market. Our
success depends, in part, upon maintaining a competitive position in the
development of products and technologies in a rapidly evolving field. If we
cannot maintain competitive products and technologies, our current and potential
pharmaceutical company partners may choose to adopt the drug delivery
technologies of our competitors. Drug delivery companies that compete with our
technologies include Bioject Medical Technologies, Inc., Equidyne Corporation,
Bentley Pharmaceuticals, Inc., Cellegy Pharmaceuticals, Inc., Laboratoires
Besins-Iscovesco, MacroChem Corporation, NexMed, Inc. and Novavax, Inc., along
with other companies. We also compete generally with other drug delivery,
biotechnology and pharmaceutical companies engaged in the development of
alternative drug delivery technologies or new drug research and testing. Many of
these competitors have substantially greater financial, technological,
manufacturing, marketing, managerial and research and development resources and
experience than we do, and, therefore, represent significant competition.

     In general, injection is used only with drugs for which other drug delivery
methods are not possible, in particular with biopharmaceutical proteins (drugs
derived from living organisms, such as insulin and human growth hormone) that
cannot currently be delivered orally, transdermally (through the skin) or
pulmonarily (through the lungs). Transdermal patches and gels are also used for
drugs that cannot be delivered orally or where oral delivery has other
limitations (such as high first pass drug metabolism). Many companies, both
large and small, are engaged in research and development efforts on less
invasive methods of delivering drugs that cannot be taken orally. The successful
development and commercial introduction of such a non-injection technique would
likely have a material adverse effect on our business, financial condition,
results of operations and general prospects.

     Competitors may succeed in developing competing technologies or obtaining
governmental approval for products before we do. Competitors' products may gain
market acceptance more rapidly than our products, or may be priced more
favorably than our products. Developments by competitors may render our
products, or potential products, noncompetitive or obsolete.

If we are unable to raise additional capital to continue operating, we may be
unable to realize the value we have attributed to our goodwill, patents and
intellectual property

     Currently, our most valuable assets on our balance sheet are our goodwill
from the acquisition of Medi-Ject of $1,095,355, and patents and intellectual
property of $2,157,174 related to our devices and transdermal gels. We have
valued these assets in accordance with generally accepted accounting principles.
If we are not able to raise additional capital to continue our operations, we
may be unable to continue licensing these patents, and would not receive any
additional revenue from them. Additionally, we may be required to sell our
patents and intellectual property to a third party. In such event, the purchase
price we receive may be substantially lower than the value we have attributed to
them in our financial statements.

We have applied for, and have received, several patents, and we may be unable to
protect our intellectual property, which would negatively affect our ability to
compete

     Our success depends, in part, on our ability to obtain and enforce patents
for our products, processes and technologies and to preserve our trade secrets
and other proprietary information. If we cannot do so, our competitors may
exploit our innovations and deprive us of the ability to realize revenues and
profits from our developments.

     Currently, we have been granted 25 patents in the United States and 30
patents in other countries. We have also made application for a total of 90
patents, both in the United States and other countries. Any patent applications
we may have made or may make relating to our potential products, processes and
technologies may not result in patents being issued. Our current patents may not
be valid or enforceable and may not protect us against competitors that
challenge


                                       18



our patents, obtain patents that may have an adverse effect on our ability to
conduct business or are able to circumvent our patents. Further, we may not have
the necessary financial resources to enforce our patents.

     To protect our trade secrets and proprietary technologies and processes, we
rely, in part, on confidentiality agreements with employees, consultants and
advisors. These agreements may not provide adequate protection for our trade
secrets and other proprietary information in the event of any unauthorized use
or disclosure, or if others lawfully develop the information.

Others may bring infringement claims against us, which could be time-consuming
and expensive to defend

     Third parties may claim that the manufacture, use or sale of our drug
delivery technologies infringe their patent rights. If such claims are asserted,
we may have to seek licenses, defend infringement actions or challenge the
validity of those patents in court. If we cannot obtain required licenses, are
found liable for infringement or are not able to have these patents declared
invalid, we may be liable for significant monetary damages, encounter
significant delays in bringing products to market or be precluded from
participating in the manufacture, use or sale of products or methods of drug
delivery covered by the patents of others. We may not have identified, or be
able to identify in the future, United States or foreign patents that pose a
risk of potential infringement claims.

     Additionally, the drugs to which our drug delivery technologies are applied
are generally the property of the pharmaceutical companies. Those drugs may be
the subject of patents or patent applications and other forms of protection
owned by the pharmaceutical companies or third parties. If those patents or
other forms of protection expire, become ineffective or are subject to the
control of third parties, sales of the drugs by the collaborating pharmaceutical
company may be restricted or may cease. Our revenues, in that event, may
decline.

We may incur significant costs seeking approval for our products, which could
delay the realization of revenue and, ultimately, decrease our revenues from
such products

     The design, development, testing, manufacturing and marketing of
pharmaceutical compounds, medical nutrition and diagnostic products and medical
devices are subject to regulation by governmental authorities, including the FDA
and comparable regulatory authorities in other countries. The approval process
is generally lengthy, expensive and subject to unanticipated delays. Currently,
we, along with our partners, are actively pursuing marketing approval for a
number of products from regulatory authorities in other countries and anticipate
seeking regulatory approval from the FDA for products developed pursuant to our
agreement with BioSante. Our revenue and profit will depend, in part, on the
successful introduction and marketing of some or all of such products by our
partners or us. There can be no assurance as to when or whether such approvals
from regulatory authorities will be received.

     Applicants for FDA approval often must submit extensive clinical data and
supporting information to the FDA. Varying interpretations of the data obtained
from pre-clinical and clinical testing could delay, limit or prevent regulatory
approval of a drug product. Changes in FDA approval policy during the
development period, or changes in regulatory review for each submitted new drug
application also may cause delays or rejection of an approval. Even if the FDA
approves a product, the approval may limit the uses or "indications" for which a
product may be marketed, or may require further studies. The FDA also can
withdraw product clearances and approvals for failure to comply with regulatory
requirements or if unforeseen problems follow initial marketing.

     In other jurisdictions, we, and the pharmaceutical companies with whom we
are developing technologies, must obtain required regulatory approvals from
regulatory agencies and comply with extensive regulations regarding safety and
quality. If approvals to market the products are delayed, if we fail to receive
these approvals, or if we lose previously received approvals, our revenues would
be reduced. We may not be able to obtain all necessary regulatory approvals. We
may be required to incur significant costs in obtaining or maintaining
regulatory approvals.


                                       19



Our business could be harmed if we fail to comply with regulatory requirements
and, as a result, are subject to sanctions

     If we, or pharmaceutical companies with whom we are developing
technologies, fail to comply with applicable regulatory requirements, the
pharmaceutical companies, and we, may be subject to sanctions, including the
following:

     o    warning letters;
     o    fines;
     o    product seizures or recalls;
     o    injunctions;
     o    refusals to permit products to be imported into or exported out of the
          applicable regulatory jurisdiction;
     o    total or partial suspension of production;
     o    withdrawals of previously approved marketing applications; or
     o    criminal rosecutions.

Our revenues may be limited if the marketing claims asserted about our products
are not approved

     Once a drug product is approved by the FDA, the Division of Drug Marketing,
Advertising and Communication, the FDA's marketing surveillance department
within the Center for Drugs, must approve marketing claims asserted by our
pharmaceutical company partners. If a pharmaceutical company partner fails to
obtain from the Division of Drug Marketing acceptable marketing claims for a
product incorporating our drug technologies, our revenues from that product may
be limited. Marketing claims are the basis for a product's labeling, advertising
and promotion. The claims the pharmaceutical company partners are asserting
about our drug delivery technologies, or the drug product itself, may not be
approved by the Division of Drug Marketing.

Product liability claims related to participation in clinical trials or the use
or misuse of our products could prove to be costly to defend and could harm our
business reputation

     The testing, manufacturing and marketing of products utilizing our drug
delivery technologies may expose us to potential product liability and other
claims resulting from their use. If any such claims against us are successful,
we may be required to make significant compensation payments. Any
indemnification that we have obtained, or may obtain, from contract research
organizations or pharmaceutical companies conducting human clinical trials on
our behalf may not protect us from product liability claims or from the costs of
related litigation. Similarly, any indemnification we have obtained, or may
obtain, from pharmaceutical companies with whom we are developing drug delivery
technologies may not protect us from product liability claims from the consumers
of those products or from the costs of related litigation. If we are subject to
a product liability claim, our product liability insurance may not reimburse us,
or may not be sufficient to reimburse us, for any expenses or losses that may
have been suffered. A successful product liability claim against us, if not
covered by, or if in excess of the product liability insurance, may require us
to make significant compensation payments, which would be reflected as expenses
on our statement of operations. As the result either of adverse claim experience
or of medical device or insurance industry trends, we may in the future have
difficulty in obtaining product liability insurance or be forced to pay very
high premiums, and there can be no assurance that insurance coverage will
continue to be available on commercially reasonable terms or at all.

Our business may suffer if we lose certain key officers or employees

     The success of our business is materially dependent upon the continued
services of certain of our key officers and employees. The loss of such key
personnel could have a material adverse effect on our business, operating
results or financial condition. There can be no assurance that we will be
successful in retaining key personnel.


                                       20



We are involved in many international markets, and this subjects us to
additional business risks

     We have offices and a research facility in Basel, Switzerland, and we also
license and distribute our products in the European Community and the United
States. These geographic localities provide economically and politically stable
environments in which to operate. However, in the future, we intend to introduce
products through partnerships in other countries. As we expand our geographic
market, we fill face additional ongoing complexity to our business and may
encounter the following additional risks:

     o    increased complexity and costs of managing international operations;
     o    protectionist laws and business practices that favor local companies;
     o    dependence on local vendors;
     o    multiple, conflicting and changing governmental laws and regulations;
     o    difficulties in enforcing our legal rights;
     o    reduced or limited protections of intellectual property rights; and
     o    political and economic instability.

     A significant portion of our international revenues is denominated in
foreign currencies. An increase in the value of the U.S. dollar relative to
these currencies may make our products more expensive and, thus, less
competitive in foreign markets.

Future Terrorist Attacks Could Substantially Harm Our Business

     On September 11, 2001, the United States was the target of terrorist
attacks of unprecedented scope. The U.S. government and media agencies were also
subject to subsequent acts of terrorism through the distribution of anthrax
through the mail. Such attacks and the U.S. government's ongoing response may
lead to further acts of terrorism, bio-terrorism and financial and economic
instability. The precise effects of these attacks, future attacks or the U.S.
government's response to the same are difficult to determine, but they could
have an adverse effect on our business, profitability and financial condition.

Risks Related to our Common Stock

We recently received a notice from Nasdaq regarding our failure to comply with
Nasdaq's listing standards, and our stock will be delisted by Nasdaq if our
stock price does not significantly improve by the end of May 2003 or if our net
equity does not meet Nasdaq's continued listing standards.

     Our stock is currently traded on the Nasdaq SmallCap Market. Under Nasdaq's
listing maintenance standards, if the closing bid price of a company's common
stock remains under $1.00 per share for 30 consecutive trading days, Nasdaq will
issue a deficiency notice to that company. On November 29, 2002, we received
such a notice from Nasdaq. Pursuant to Nasdaq's notice, we have 180 days, or
until May 28, 2003, for our closing bid price to reach $1.00 per share for a
minimum of ten consecutive trading days, or our stock will be delisted.

     In order to avoid a delisting of our common stock, we may be required to
take various measures including effecting a reverse split of our common price
for our common stock. The history of similar stock split combinations for a
company in like circumstances is often not positive. There is no assurance that
the market price per share of our common stock following a reverse stock split
will either exceed or remain in excess of the $1.00 minimum bid price as
required by Nasdaq. Furthermore, the liquidity of our common stock could be
adversely affected by the reduced number of shares that would be outstanding
after a reverse stock split.

     Even if we are able to improve our stock price to regain compliance, the
Nasdaq rules also state that for continued inclusion, we must meet one of three
financial tests, which are having stockholders' equity of $2.5 million, market
value of listed securities of $35 million or net income from operations of
$500,000. As of March 19, 2003, we do not meet any of the above requirements. In
the event we do not improve our stock price to regain compliance, Nasdaq will
determine whether we meet the initial listing criteria for the SmallCap market,
which generally include financial requirements more stringent than those listed
above for continued inclusion on Nasdaq. If we meet the initial listing
criteria, Nasdaq will grant us an additional 180 days to demonstrate compliance.
However, as of March 19, 2003, we do not meet any of these requirements.


                                       21



     If our stock is delisted and thus no longer eligible for quotation on the
Nasdaq SmallCap Market, it may trade in the over-the-counter market, which is
viewed by most investors as a less desirable and less liquid marketplace. The
loss of our listing on the Nasdaq SmallCap Market would also complicate
compliance with state blue-sky laws. Furthermore, our ability to raise
additional capital would be severely impaired. As a result of these factors, the
value of the common stock could decline significantly. Finally, the failure of
our stock to be listed on the Nasdaq SmallCap Market would constitute a breach
of the covenants we made pursuant to the sale of our 8% debentures, and,
therefore, would constitute an event of default under the debentures and allow
the debenture holders to declare the debentures immediately due and payable. In
such event, we would be required to pay to the debenture holders 130% of the
outstanding principal.

All decisions affecting our company are under the control of a single
shareholder who currently owns a majority of the voting power of our common
stock, and this could lower the price of our common stock

     As a result of our reverse business combination with Permatec in January
2001, Permatec Holding AG and its controlling shareholder, Dr. Jacques Gonella
own a majority of (currently approximately 53%) the outstanding shares of our
common stock. Because of Permatec's and Dr. Gonella's control of the Company,
investors will be unable to affect or change the management or the direction of
the Company. As a result, some investors may be unwilling to purchase our common
stock. If the demand for our common stock is reduced because of Permatec's and
Dr. Gonella's control of the Company, the price of our common stock could be
materially depressed.

     Additionally, as a result of our recent debt restructuring, we issued
convertible debentures and warrants to Xmark Fund, Ltd., Xmark Fund, L.P. and
SDS Merchant Fund, LP. These debentures and warrants could ultimately be
converted into or exercised for an aggregate of 6,159,011 shares of our common
stock. In such event, these funds would own in excess of 34% of our common
stock.

     Because the parties described above either currently own or could
potentially own a large portion of our stock, they will be able to generally
determine the outcome of all corporate actions requiring shareholder approval.
As a result, these parties will be in a position to control all matters
affecting our company, including decisions as to our corporate direction and
policies; future issuances of our common stock or other securities; our
incurrence of debt; amendments to our articles of incorporation and bylaws;
payment of dividends on our common stock; and acquisitions, sales of our assets,
mergers or similar transactions, including transactions involving a change of
control.

Sales of our common stock by our officers and directors may lower the market
price of our common stock

     As of March 19, 2003, our officers and directors beneficially owned an
aggregate of 6,821,942 shares (or approximately 55%) of our common stock,
including stock options exercisable within 60 days. If our officers and
directors, or other shareholders, sell a substantial amount of our common stock,
it could cause the market price of our common stock to decrease and could hamper
our ability to raise capital through the sale of our equity securities.

Sales of our common stock by the holders of the 8% debentures and warrant
holders may lower the market price of our common stock

     As of March 19, 2003, $1,613,255 principal amount of 8% debentures were
issued and outstanding. Based on the current conversion price of $.50 per share,
the debentures are convertible into an aggregate of 3,226,511 shares of common
stock. The holders of the 8% debentures also hold warrants exercisable for up to
2,932,500 shares of our common stock. Purchasers of common stock could therefore
experience substantial dilution of their investment upon conversion of the
debentures or exercise of the warrants. The debentures and warrants are not
registered and may be sold only if registered under the Securities Act of 1933,
as amended, or sold in accordance with an applicable exemption from
registration, such as Rule 144. Certain of the shares of common stock into which
the debentures may be converted are currently registered and may be sold without
restriction. The remaining shares of common stock into which the debentures and
warrants may be converted or exercised are being registered pursuant to a
registration statement to be filed in the near future.

     As of March 19, 2003, 6,159,011 shares of common stock were reserved for
issuance upon conversion of the debentures and exercise of the warrants. As of
March 19, 2003, there were 11,887,506 shares of common stock outstanding. Of
these outstanding shares, 5,054,483 shares were freely tradable without
restriction under the Securities Act of 1933, as amended, unless held by
affiliates.


                                       22



We do not expect to pay dividends in the foreseeable future

     We intend to retain all earnings in the foreseeable future for our
continued growth and, thus, do not expect to declare or pay any cash dividends
in the foreseeable future.

Anti-takeover effects of certain by-law provisions and Minnesota law could
discourage, delay or prevent a change in control

     Our articles of incorporation and bylaws along with Minnesota law could
discourage, delay or prevent persons from acquiring or attempting to acquire us.
Our articles of incorporation authorize our board of directors, without action
by our shareholders, to designate and issue preferred stock in one or more
series, with such rights, preferences and privileges as the board of directors
shall determine. In addition, our bylaws grant our board of directors the
authority to adopt, amend or repeal all or any of our bylaws, subject to the
power of the shareholders to change or repeal the bylaws. In addition, our
bylaws limit who may call meetings of our shareholders.

     As a public corporation, we are prohibited by the Minnesota Business
Corporation Act, except under certain specified circumstances, from engaging in
any merger, significant sale of stock or assets or business combination with any
shareholder or group of shareholders who own at least 10% of our common stock.

Employees

     As of March 19, 2003, Antares employed 28 full-time and one part-time
employees in Minnesota and Pennsylvania, and the subsidiaries employed 18
full-time and one part-time employees in Switzerland. None of the Company's
employees are represented by any labor union or other collective bargaining
unit. The Company believes that its relations with its employees are good.

                      EXECUTIVE OFFICERS OF THE REGISTRANT

               Name                Age                 Position
               ----                ---                 --------

      Roger G. Harrison, Ph.D. ...  55    Chief Executive Officer, President and
                                          Director

      Lawrence Christian .........  60    Chief Financial Officer, Secretary and
                                          Vice President - Finance

      Dario Carrara, Ph.D. .......  39    Managing Director - Formulations Group

      Peter Sadowski, Ph.D. ......  55    Vice President - Devices Group


     Roger G. Harrison, Ph.D., joined Antares Pharma as Chief Executive Officer,
President and a member of the Company's Board of Directors in March 2001. Prior
to that time, Dr. Harrison was Director of Alliance Management at Eli Lilly and
Company. In this role he helped to create a renewed focus on generating value
from corporate alliances as part of the company's core business strategy. In his
25-years at Eli Lilly and Company, his roles also included Global Product Team
Leader and Director, Development Projects Management and Technology Development
and Planning. He is the author of twelve publications, has contributed to four
books and holds nine patents. Dr. Harrison earned a Ph.D. in organic chemistry
and a B.Sc. in chemistry from Leeds University in the United Kingdom and
conducted postdoctoral research work at Zurich University in Switzerland.

     Lawrence Christian is currently Chief Financial Officer, Secretary and Vice
President - Finance. He joined the Company in March 1999 as Vice President,
Finance & Administration, Chief Financial Officer and Secretary. Mr. Christian
took early retirement from 3M after a 16-year career. Since 1996 Mr. Christian
had been with 3M as Financial Director - World-Wide Corporate R&D and Government
Contracts and was involved in organizing new business venture units and
commercialization of new technologies. Prior to 1996 Mr. Christian served as
Financial Manager - Government Contracts, European Controller and Division
Controller within 3M. Prior to joining 3M in 1982, Mr. Christian was Vice
President/CFO of APC Industries, Inc., a closely-held telecommunications
manufacturing company in Texas.


                                       23



     Dario Carrara, Ph.D. is currently Managing Director - Formulations Group,
located in Basel, Switzerland. He served as General Manager of Permatec's
Argentinean subsidiary from 1995 until its liquidation in 2000. Prior to joining
Permatec, Dr. Carrara worked as Pharmaceutical Technology Manager for
Laboratorios Beta, a pharmaceutical laboratory in Argentina that ranks among the
top ten pharmaceutical companies in Argentina, between 1986 and 1995. Dr.
Carrara has extensive experience in developing transdermal drug delivery
devices. He earned a double degree in Pharmacy and Biochemistry, as well as a
Ph.D. in Pharmaceutical Technology from the University of Buenos Aires.

     Peter Sadowski, Ph.D., is currently Vice President - Devices Group, located
in Minneapolis, Minnesota. He joined the Company in March 1994 as Vice
President, Product Development. He was promoted to Executive Vice President and
Chief Technology Officer in 1999. From October 1992 to February 1994, Dr.
Sadowski served as Manager, Product Development for GalaGen, Inc., a
biopharmaceutical company. From 1988 to 1992, he was Vice President, Research
and Development for American Biosystems, Inc., a medical device company. Dr.
Sadowski holds a Ph.D. in microbiology.

Liability Insurance

     The Company's business entails the risk of product liability claims.
Although the Company has not experienced any material product liability claims
to date, any such claims could have a material adverse impact on its business.
The Company maintains product liability insurance with coverage of $1 million
per occurrence and an annual aggregate maximum of $5 million. The Company
evaluates its insurance requirements on an ongoing basis.

Item 2.  DESCRIPTION OF PROPERTY.

     The Company leases approximately 3,000 square feet of office space in
Exton, Pennsylvania for its corporate headquarters facility. The lease will
terminate in November 2004. The Company believes this facility will be
sufficient to meet its Exton requirements through the lease period.

     The Company leases approximately 23,000 square feet of office,
manufacturing and warehouse space in Plymouth, a suburb of Minneapolis,
Minnesota. The lease will terminate in April 2004. As discussed in Note 16 to
the Consolidated Financial Statements, in February 2003 the Company entered into
a manufacturing agreement under which all manufacturing and assembly work
currently performed by the Company at its Minneapolis facility will be
outsourced to a third party manufacturer. The transition of the manufacturing
operations is expected to be complete by May of 2003, after which the Company
will have substantially reduced its facility space requirements. The Company is
currently exploring options for decreasing its leased square footage. However,
there can be no assurance the Company will be successful in finding smaller
space and obtaining a release from the current lease before its expiration in
April 2004, and even if a smaller space is found and the Company is released
from the current lease, moving costs will likely offset some or all of the
savings realized from the reduced rent in 2003.

     The Company also leases approximately 1,000 square meters of facilities in
Basel, Switzerland, with 600 square meters of formulation and analytical
laboratories. The lease will terminate in September 2008. The Company believes
the facilities will be sufficient to meet its Switzerland requirements through
the lease period.

Item 3.  LEGAL PROCEEDINGS

     The Company is not a party to any material legal proceedings.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matters were submitted to a vote of shareholders during the quarter
ended December 31, 2002.


                                       24



                                     PART II

Item 5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.

     The Company's Common Stock has traded on the Nasdaq Small Cap Market of the
Nasdaq Stock Market since March 8, 1999. Prior to that time, the Common Stock
traded on the Nasdaq National Market of the Nasdaq Stock Market. The Company's
Common Stock is traded under the symbol ANTR. The following table sets forth the
per share high and low sales prices of the Company's Common Stock for each
quarterly period during the two most recent fiscal years. Sale prices are as
reported by the Nasdaq Stock Market.

                                                    High              Low
                                                    ----              ---
    2001:
      First Quarter ...........................   $ 5.000           $ 2.250
      Second Quarter ..........................     5.650             2.880
      Third Quarter ...........................     4.300             1.590
      Fourth Quarter ..........................     4.050             1.900

    2002:
      First Quarter ...........................     5.000             2.780
      Second Quarter ..........................     5.000             2.650
      Third Quarter ...........................     4.750             1.100
      Fourth Quarter ..........................     1.830             0.290

Common Shareholders

     As of March 19, 2003, the Company had 113 holders of record of its common
stock, with another estimated 3,115 shareholders whose stock is held in nominee
name.

Dividends

     The Company has not paid or declared any cash dividends on its common stock
during the past six years. The Company has no intention of paying cash dividends
in the foreseeable future on common stock. The Company is obligated to pay
semi-annual dividends on Series A Convertible Preferred Stock ("Series A") at an
annual rate of 10%, payable on May 10 and November 10 each year. In addition to
the stated 10% dividend, the Company is also obligated to pay foreign tax
withholding on the dividend payment, if paid in cash, which equates to an
effective dividend rate of 14.2%. Such foreign tax withholding payments have
been reflected as dividends, when paid in cash, since they are non-recoverable.
The Series A agreement has a provision which allows the Company to pay the
dividend by issuance of the same stock when funds are not available. The Company
has exercised this provision for the last seven dividend payments.

Sales of Unregistered Securities

     On February 5, 2001 Antares issued 1,194,537 shares of common stock for
$7,000,000, and on March 5, 2001, the Company issued 511,945 shares of common
stock for $3,000,000 in connection with a private placement of Units. Each Unit,
at a price of $23.44, consisted of (i) four shares of Antares common stock,
$0.01 par value, and (ii) a warrant to purchase one share of Antares common
stock. Each of the four warrants, to purchase in the aggregate 426,621 shares of
common stock, issued in the private placement is exercisable for a period of
five years at an exercise price of $7.03. The proceeds from the sale of these
securities have been primarily used for working capital. There was no
underwriter involved and no fees were paid to any other parties, except legal
and accounting fees, in connection with this transaction. These securities were
exempt from registration because they were issued to four accredited investors
in a private placement in reliance on Rule 506 of Regulation D under the
Securities Act of 1933.

     Roger G. Harrison, Ph.D., was appointed to the position of Chief Executive
Officer of Antares Pharma, Inc., effective March 12, 2001. In accordance with
the terms of the employment agreement with Dr. Harrison, 48,000 restricted
shares of common stock were granted to him on April 12, 2001, 30 days after
commencement of employment and 40,000 restricted shares of common stock were
granted to him on March 12, 2002, his first anniversary with the Company. These
securities were exempt from registration under Section 4(2) of the Securities
Act of 1933.


                                       25




     During the second quarter of 2002 the Company issued 80,000 shares of fully
vested common stock valued at $283,000 to two consultants for services to be
performed in connection with equity advisory and investor relations. Of the
80,000 shares issued, 20,000 were issued as compensation directly related to the
closing on July 12, 2002 of $2,000,000 of the Company's 10% convertible
debentures (described below). These securities were exempt from registration
under Section 4(2) of the Securities Act of 1933.

     On June 10, 2002 the principal balance of $2,000,000 and accrued interest
of $36,550 under a term note agreement with the Company's majority shareholder,
Dr. Jacques Gonella, was converted into 509,137 shares of common stock at $4.00
per share. The securities were exempt from registration under Section 4(2) of
the Securities Act of 1933.

     On July 12, 2002 the Company entered into a Securities Purchase Agreement
(the "Agreement") for the sale and purchase of up to $2,000,000 aggregate
principal amount of the Company's 10% convertible debentures. The debentures are
convertible into shares of the Company's common stock at a conversion price
which is the lower of $2.50 or 75% of the average of the three lowest intraday
prices of the Company's common stock, as reported on the Nasdaq SmallCap Market.
Within 15 days of the closing, the Company was obligated to file a registration
statement with the Securities and Exchange Commission to register the shares
issuable upon conversion of the debentures. Under the terms of the Agreement,
the Company received $700,000 upon closing of the transaction on July 12, 2002,
an additional $700,000 after the Company filed the registration statement on
July 19, 2002 to register the shares issuable upon conversion of the debentures,
and $600,000 when such registration statement was declared effective, October
10, 2002. As the per share conversion price of the debentures was substantially
lower than the market price of the common stock on the date the debentures were
sold, the Company recorded a debt issuance discount of $1,720,000 in 2002 for
the intrinsic value of the beneficial in-the-money conversion feature of the
debentures. As of February 7, 2003, $581,000 of the debentures had been
converted into 1,777,992 shares of common stock. These securities were exempt
from registration because they were issued to eight accredited investors in a
private placement in reliance on Rule 506 of Regulation D under the Securities
Act of 1933.

     On February 7, 2003, the Company completed a restructuring of its 10%
debentures previously sold to four primary investors. Specifically, as part of
this restructuring, on January 24, 2003 and January 31, 2003, the Company
borrowed an aggregate of $621,025 from Xmark Funds. The Company used the
proceeds of these borrowings to repurchase $476,825 principal amount of the 10%
debentures previously sold to the two original 10% debenture holders who had
converted $536,000 of principal into common stock. This purchase price included
accrued interest of $12,825 and a repurchase premium of $144,200. As additional
repurchase compensation, the Company issued warrants to one of the two original
10% debenture holders and paid $5,000, in lieu of warrants, to the other.
Thereafter, in exchange for the surrender and cancellation of the promissory
notes, the Company issued to the Xmark Funds 8% Senior Secured Convertible
Debentures in the same principal amount of the promissory notes. The Company
intends to pay cash for interest in the amount of $679 that accrued on the
promissory notes. The Company also exchanged Amended and Restated 8% Senior
Secured Convertible Debentures for the remaining outstanding principal and
accrued interest of $955,000 and $37,230, respectively, of the original 10%
debentures. The aggregate principal amount of the 8% debentures is $1,613,255.
All of the 8% debentures contain substantially the same terms as the 10%
debentures, except that the 8% debentures include a fixed conversion price of
$.50 per share and an interest rate of 8% per annum. The 8% debentures are due
March 31, 2004. The Company granted a senior security interest in substantially
all of its assets to the holders of the 8% debentures. If all remaining
debentures were converted at the $0.50 conversion price, a total of 3,226,511
shares would be issued, which would result in substantial dilution to current
shareholders. In connection with this restructuring, the Company also issued to
the holders of the 8% debentures five-year warrants to purchase an aggregate of
2,932,500 shares of the Company's common stock at an exercise price of $0.55 per
share. The warrants are redeemable at the option of the Company upon the
achievement of certain milestones set forth in the warrants.

     The Company granted the holders of the 8% debentures customary demand and
piggyback registration rights with respect to the shares of its common stock
issuable upon conversion of the same or upon exercise of the warrants. These
registration rights are substantially similar to the registration rights granted
to the original holders of the 10% debentures.

     During the fourth quarter of 2002 the Company issued 38,810 shares of fully
vested common stock valued at $21,300 to two consultants for services to be
performed in connection with equity advisory and media consulting agreements.
These securities were exempt from registration under Section 4(2) of the
Securities Act of 1933.


                                       26



Item 6.  SELECTED FINANCIAL DATA

                             SELECTED FINANCIAL DATA
                      (In thousands, except per share data)



                                                                          At December 31,
                                                      --------------------------------------------------------
                                                        1998        1999        2000        2001        2002
                                                      --------    --------    --------    --------    --------
                                                                                       
Balance Sheet Data:
     Cash and cash equivalents ....................   $    492    $    675    $    243    $  1,965    $    268
     Working capital (deficit) ....................       (109)       (569)     (2,440)        (12)     (4,643)
     Total assets .................................      2,671       2,284       6,975      11,128       6,409
     Long-term liabilities, less current maturities      7,918      10,099      17,732         106          31
     Accumulated deficit ..........................     (8,037)    (12,004)    (17,264)    (29,457)    (41,166)

     Total shareholders' equity (deficit) .........   $ (6,518)   $ (9,347)   $(13,862)   $  7,468    $    655





                                                                     Year Ended December 31,
                                                      --------------------------------------------------------
                                                        1998        1999        2000        2001        2002
                                                      --------    --------    --------    --------    --------
                                                                                       
Statement of Operations Data:
     Sales ........................................   $   --      $   --      $   --      $  2,770    $  3,357
     Licensing and product development ............         68       1,348         560         729         639
     Contract research with related parties .......        179           4        --          --          --
                                                      --------    --------    --------    --------    --------
       Revenues ...................................        247       1,352         560       3,499       3,996
                                                      --------    --------    --------    --------    --------
     Cost of sales ................................       --          --          --         1,863       2,574
     Research and development (3) .................      1,750       1,647         939       4,504       3,654
     Sales and marketing ..........................        179         213       1,157       1,343         798
     General and administrative ...................      2,431       3,221       2,102       5,359       5,232
     Goodwill impairment loss .....................       --          --          --          --         2,000
                                                      --------    --------    --------    --------    --------
       Operating expenses .........................      4,360       5,081       4,198      11,206      11,684
                                                      --------    --------    --------    --------    --------
     Net operating loss ...........................     (4,113)     (3,729)     (3,638)     (9,570)    (10,262)
     Net other income (expense) ...................       (124)       (159)       (562)         73      (1,346)
     Income tax expense ...........................        (33)        (79)         (1)         (2)         (1)
                                                      --------    --------    --------    --------    --------
     Loss before cumulative effect of change in
        accounting principle ......................     (4,270)     (3,967)     (4,201)     (9,499)    (11,609)
     Cumulative effect of change in accounting
        principle .................................       --          --        (1,059)       --          --
                                                      --------    --------    --------    --------    --------
     Net loss .....................................     (4,270)     (3,967)     (5,260)     (9,499)    (11,609)
     In-the-money conversion feature-preferred
        stock dividend ............................       --          --          --        (5,314)       --
     Preferred stock dividends ....................       --          --          --          (100)       (100)
                                                      --------    --------    --------    --------    --------
     Net loss applicable to common shares .........   $ (4,270)   $ (3,967)   $ (5,260)   $(14,913)   $(11,709)
                                                      ========    ========    ========    ========    ========

Net loss per common share (1), (2) ................   $   (.99)   $   (.92)   $  (1.22)   $  (1.76)   $  (1.22)
                                                      ========    ========    ========    ========    ========

Weighted average number of
     common shares ................................      4,321       4,325       4,326       8,495       9,618
                                                      ========    ========    ========    ========    ========

(1)  Basic and diluted loss per share amounts are identical as the effect of
     potential common shares is anti-dilutive.
(2)  The Company has not paid any dividends on its Common Stock since inception.
(3)  In 2001 the Company recorded a non-cash write-off of acquired in-process
     research and development of $948,000. In 2002 the Company recorded a
     non-cash patent impairment charge of $435,035

On March 18, 2003, the Company filed an amended 10-Q/A for the three and nine
months ended September 30, 2002. The amendment was filed in connection with a
restatement regarding how the Company initially recorded interest expense for
the in-the-money conversion feature of the Company's 10% debentures.


                                       27



Item  7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

General

     In July 2000, Medi-Ject Corporation, now known as Antares Pharma, Inc.
("Antares' or the "Company") entered into a Purchase Agreement with Permatec
Holding AG to purchase three subsidiaries from Permatec. Pursuant to the
Purchase Agreement, Antares purchased all of the outstanding shares of each
subsidiary. As consideration for the transaction, Antares issued 2,900,000
shares of Antares common stock to Permatec (the "Share Transaction"). The Share
Transaction was consummated on January 31, 2001, and was accounted for as a
reverse acquisition because Permatec held approximately 67% of the outstanding
common stock of Antares immediately after the Share Transaction. Effective with
the consummation of the Share Transaction the financial statements and related
disclosures for all periods that were previously reported as Medi-Ject's were
replaced with the Permatec financial statements and disclosures.

     The Medi-Ject operations, which were acquired by Permatec, consisted
primarily of the development, marketing and sale of needle-free injection
devices and disposables. These operations, including all manufacturing and
substantially all administrative activities, are located in Minneapolis,
Minnesota and are referred to below as Antares/Minnesota. The Permatec
operations are located primarily in Basel, Switzerland and consist of
administration and facilities for the research and development of transdermal
and transmucosal drug delivery products. Permatec's operations have historically
been focused on research and development. Permatec has signed a number of
license agreements with pharmaceutical companies for the application of its drug
delivery systems. Permatec generated revenue starting in 1999 with the
recognition of license revenues and commenced the sale of licensed products in
2000. Permatec's operations are referred to below as Antares/Switzerland.

     In December 2001, the Company opened its new corporate headquarters in
Exton, Pennsylvania. The Company's headquarters were formerly located in its
Minneapolis, Minnesota, facility. After the move to Exton, the Minneapolis
location has maintained research facilities and many of the administrative
functions. Certain executives have relocated to the Exton office, while most
other employees have remained at the Company's research facilities in
Minneapolis and Basel, Switzerland.

     The Company has been taking steps recently to reduce its operating costs.
In December 2002 the Company reduced its workforce by approximately 10 employees
and in 2003 the Company expects to reduce its workforce by an additional 5 to 10
employees at its Minneapolis location in connection with a plan to outsource its
manufacturing operations. As a result of the headcount reductions, the Company
expects the decrease in expenses to be in the range of approximately $800,000 to
$1,000,000 annually. The transition of the manufacturing operations is expected
to be complete by May of 2003, after which the Company will have substantially
reduced its facility space requirements. The Company is currently exploring
options for decreasing its leased square footage. However, there can be no
assurance the Company will be successful in finding smaller space and obtaining
a release from the current lease before its expiration in April 2004, and even
if a smaller space is found and the Company is released from the current lease,
moving costs will likely offset some or all of the savings realized from the
reduced rent in 2003.

     On November 29, 2002, Nasdaq notified the Company that its stock had closed
below the minimum $1.00 per share requirement for continued listing on the
SmallCap Market. As of November 28, 2002, the Company's stock had traded at a
price below $1.00 per share for 30 consecutive days. Accordingly, the Company
has been provided 180 calendar days or until May 28, 2003 to regain compliance.
In order to achieve compliance, the bid price of the Company's common stock must
close at $1.00 per share or more for a minimum of ten consecutive trading days.
The Company has the ability under its Articles of Incorporation and Minnesota
law, without shareholder approval, to effect a reverse stock split thereby
reducing the number of shares outstanding and, in essence, increasing the price
of the common stock. Even if the Company were able to improve its stock price to
regain compliance, the Nasdaq rules also state that for continued inclusion on
the listing, the Company must meet one of three financial tests, which are
having stockholders' equity of $2,500,000, market value of listed securities of
$35,000,000, or net income from operations of $500,000. As of December 31, 2002,
the Company does not meet any of the financial requirements for continued
listing on the Nasdaq SmallCap Market. In the event the Company is unable to
improve its stock price to regain compliance, Nasdaq will determine whether the
Company meets the initial listing criteria for the SmallCap Market, which is
having stockholders' equity of $5,000,000, market value of listed securities of
$50,000,000, or net income from continuing operations of $750,000. If the
Company meets the initial listing criteria, Nasdaq will grant the Company an
additional 180 days to demonstrate compliance. As of December 31, 2002, the
Company does not meet any of the financial requirements for initial listing on
the Nasdaq SmallCap Market. If the Company's stock were to be delisted, it would
constitute an event


                                       28



of default under the newly restructured 8% debentures, and they would become due
and payable at 130% of the outstanding principal and accrued interest.

     The Company entered into a License Agreement, dated January 22, 2003, with
Ferring BV ("Ferring"), under which the Company licensed certain of its
intellectual property and extended the territories available to Ferring for use
of certain of the Company's needle-free injector devices. Specifically, the
Company granted to Ferring an exclusive, perpetual, irrevocable, royalty-bearing
license, within a prescribed manufacturing territory, to manufacture certain of
the Company's needle-free injector devices. The Company granted to Ferring
similar non-exclusive rights outside of the prescribed manufacturing territory.
In addition, the Company granted to Ferring a non-exclusive right to make and
have made the equipment required to manufacture the licensed products, and an
exclusive, perpetual, royalty-free license in a prescribed territory to use and
sell the licensed products. The Company also granted to Ferring a right of first
offer to obtain an exclusive worldwide license to manufacture and sell the
Company's AJ-1 device for the treatment of limited medical conditions.

     As consideration for the license grants, Ferring paid the Company
EUR500,000 upon execution of the License Agreement, and paid an additional
EUR1,000,000 on February 24, 2003. Ferring will also pay the Company royalties
for each device manufactured by or on behalf of Ferring, including devices
manufactured by the Company. Beginning on January 1, 2004, EUR500,000 of the
license fee received on February 24, 2003, will be credited against the
royalties owed by Ferring, until such amount is exhausted. These royalty
obligations expire, on a country-by-country basis, when the respective patents
for the products expire, despite the fact that the License Agreement does not
itself expire until the last of such patents expires.

     The Company also agreed that it would enter into a third party supply
agreement to supply sufficient licensed products to meet the Company's
obligations to Ferring under the License Agreement and under the parties'
existing supply agreement. Accordingly the Company entered into a manufacturing
agreement in February 2003, which agreement is described in Note 16 to the
Consolidated Financial Statements.

     The Company expects to report a net loss for the year ending December 31,
2003, 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 and the receipt of revenues from
sales of products.

Results of Operations

Critical Accounting Policies

     In preparing the financial statements in conformity with accounting
principles generally accepted in the United States of America, management must
make decisions which impact reported amounts and related disclosures. Such
decisions include the selection of the appropriate accounting principles to be
applied and the assumptions on which to base accounting estimates. In reaching
such decisions, management applies judgment based on its understanding and
analysis of relevant circumstances. Note 1 to the financial statements provides
a summary of the significant accounting policies followed in the preparation of
the financial statements. The following accounting policies are considered by
management to be the most critical to the presentation of the consolidated
financial statements because they require the most difficult, subjective and
complex judgments.

     Revenue Recognition

     The majority of the Company's revenue relates to product sales for which
revenue is recognized upon shipment, with limited judgment required related to
product returns. Licensing revenue recognition requires management to estimate
effective terms of agreements and identify points at which performance is met
under the contracts such that the revenue earnings process is complete. Revenue
related to up-front, time-based and performance-based payments is recognized
over the entire contract performance period. For major licensing contracts, this
results in the deferral of significant revenue amounts ($1,859,288 at December
31, 2002) where non-refundable cash payments have been received, but the revenue
is not immediately recognized due to the long-term nature of the respective
agreements. Subsequent factors affecting the initial estimate of the effective
terms of agreements could either increase or decrease the period over which the
deferred revenue is recognized.


                                       29



     Inventory Reserves

     The Company records reserves for inventory shrinkage and for potentially
excess, obsolete and slow moving inventory. The amounts of these reserves are
based upon inventory levels, expected product lives and forecasted sales demand.
Although management believes the likelihood to be relatively low, results could
be materially different if demand for the Company's products decreased because
of economic or competitive conditions, or if products became obsolete because of
technical advancements in the industry or by the Company. The Company has
recorded inventory reserves of $105,000 and $50,000 at December 31, 2001 and
2002, respectively.

     Valuation of Long-Lived and Intangible Assets and Goodwill

     Long-lived assets, including patents, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured
by a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.

     In July 2001, the Financial Accounting Standards Board issued SFAS 141,
"Business Combinations," and SFAS 142, "Goodwill and Other Intangible Assets."
SFAS 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. SFAS 142 changes the
accounting for goodwill from an amortization method to an impairment-only
approach. Thus, amortization of goodwill, including goodwill recorded in past
business combinations, ceased upon adoption of that Statement. The Company
adopted SFAS 142 in the first quarter of fiscal 2002 and, accordingly, evaluated
its existing intangible assets and goodwill that were acquired in the Share
Transaction. The Company concluded that $1,935,588 representing the unamortized
portion of the amount allocated to other intangible assets on the date of
adoption should be classified as goodwill as these intangible assets did not
meet the definition for separate accounting under SFAS 142. These amounts were
previously classified as workforce, ISO certification and clinical studies with
unamortized balances of $510,413, $271,588 and $1,153,587, respectively, at
December 31, 2001. Upon adoption of SFAS 142, the Company reassessed the useful
lives and residual values of all intangible assets acquired in purchase business
combinations, and determined that there were no amortization period adjustments
necessary.

     The Company adopted SFAS 141 during 2001 and adopted SFAS 142 effective
January 1, 2002. As of the date of adoption of SFAS 142, after reclassification
of other intangible assets as goodwill, the Company had approximately $3,095,355
of unamortized goodwill subject to the transition provisions of SFAS 141 and
142, all related to the Minnesota operations reporting unit.

     In connection with the transitional goodwill impairment evaluation, SFAS
142 required the Company to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. To accomplish
this, the Company determined the fair value of the Minnesota operations and
compared it to the carrying amount. As of January 1, 2002, the fair value of the
Minnesota operations exceeded its carrying amount, and therefore there was no
indication that the goodwill was impaired. Accordingly, the Company was not
required to perform the second step of the transitional impairment test. Due to
a significant decline in the Company's stock price in the fourth quarter of 2002
and concerns about the continued existence of the Company due to continued net
losses and negative cash flows from operations, another review was completed as
of December 31, 2002. After the first step of the impairment test was performed,
there was an indication that the carrying amount of the Minnesota operations
exceeded its fair value, which required that the second step be performed. Fair
value was determined using the expected present value of future cash flows. In
the second step, the Company was required to compare the implied fair value of
the goodwill, determined by allocating the fair value of the Minnesota
operations to all of its assets (recognized and unrecognized) and liabilities
(in a manner similar to a purchase price allocation), to its carrying amount,
both of which were measured as of December 31, 2002. After completion of the
second step, the Company recorded a goodwill impairment charge of $2,000,000 in
the fourth quarter of 2002.


                                       30



     For the three years ended December 31, 2000, 2001 and 2002, the goodwill
amortization, adjusted net loss and basic and diluted loss per share are as
follows:



                                                               December 31,
                                              -------------------------------------------
                                                  2000          2001            2002
                                              ------------  --------------  -------------
                                                                   
     Net loss applicable to common shares
       as reported ........................   $(5,260,387)  $(14,913,226)   $(11,708,765)
     Addback goodwill amortization ........       177,963        464,434              --
                                              ------------  --------------  -------------
     Adjusted net loss ....................   $(5,082,424)  $(14,448,792)   $(11,708,765)
                                              ============  ==============  =============

     Basic and diluted loss per share:
         Net loss as reported .............   $    (1.22)   $     (1.76)    $     (1.22)
         Goodwill amortization ............         0.04           0.06               --
                                              ------------  --------------  -------------
      Adjusted net loss per share .........   $    (1.18)   $     (1.70)    $     (1.22)
                                              ============  ==============  =============


     The Company's goodwill impairment analysis as of December 31, 2002
indicated that the Company's goodwill might be impaired which required the
Company to assess the recoverability of its capitalized patent portfolio costs
as of December 31, 2002. As a result of this analysis, the Company recognized an
impairment charge of $435,035 in research and development expenses for the year
ended December 31, 2002. The analysis of patent costs was performed by
management based on values provided through third-party corporate development
activities. After the impairment charge, the gross carrying amount and
accumulated amortization of patents, which are the only intangible assets of the
Company subject to amortization, was $2,603,262 and $446,088, respectively, at
December 31, 2002. The Company's estimated aggregate amortization expense for
the next five years is $174,000 in 2003 through 2006, and $140,000 in 2007.

     Goodwill arising from the purchase of minority ownership interests in 1996
was amortized on a straight-line basis over a period of five years. Prior to the
adoption of SFAS 142, goodwill arising from the Share Transaction described in
Note 3 to the Consolidated Financial Statements was being amortized on a
straight-line basis over a period of ten years and the Company periodically
estimated the future undiscounted cash flows to which goodwill relates to ensure
that the carrying value of goodwill had not been impaired. To the extent the
Company's undiscounted cash flows were less than the carrying amount of
goodwill, the Company would have recognized an impairment charge.

     Foreign Currency Translation

     Revenues of the subsidiaries are denominated in U.S. dollars, and any
required funding of the subsidiaries is provided by the U.S. parent. However,
nearly all operating expenses, including labor, materials, leasing arrangements
and other operating costs, are denominated in Swiss Francs. Additionally, bank
accounts are denominated in Swiss Francs, there is a low volume of intercompany
transactions and there is not an extensive interrelationship between the
operations of the subsidiaries and the parent company. As such, under Financial
Accounting Standards Board Statement No. 52, "Foreign Currency Translation," the
Company has determined that the Swiss Franc is the functional currency for its
three subsidiaries. The reporting currency for the Company is the United States
Dollar ("USD"). The financial statements of the Company's three subsidiaries are
translated into USD for consolidation purposes. All assets and liabilities are
translated using period-end exchange rates and statements of operations items
are translated using average exchange rates for the period. The resulting
translation adjustments are recorded as a separate component of shareholders'
equity. Foreign currency transaction gains and losses are included in the
statements of operations. The Company recorded in comprehensive loss a loss on
foreign currency translation of $379,940 and $122,897 for 2001 and 2002,
respectively, and a gain on foreign currency translation of $681,523 in 2000. In
2002, the USD weakened against the Swiss Franc, causing the translated loss from
the subsidiaries to increase compared to what it would have been in prior years.
The Company estimates that the weakening of the USD against the Swiss Franc in
2002 compared to 2001 resulted in an increase in the consolidated net loss of
approximately $250,000.

Years Ended December 31, 2000, 2001 and 2002

Revenues

     Revenues increased by 525% from $560,043 in 2000 to $3,498,524 in 2001, and
increased $497,237 to $3,995,761 in 2002, or 14%. The increase in 2001 revenues
over 2000 was largely due to commencement of product sales in 2001. In 2001,
Antares realized product sales of $2,769,591 of which $1,776,159 and $993,432,
respectively, were attributable to the Antares/Minnesota and Antares/Switzerland
operations. The increase in 2002 resulted primarily from increased product sales
due to increased sales of injector devices to one of the Company's major
customers, Ferring, in connection with the launch of the Medi-Ject Vision
("MJ7") device into new markets. In 2002, product sales totaled $3,357,128, of
which $2,393,591 and $963,537, respectively, were attributable to the
Antares/Minnesota and Antares/Switzerland operations.


                                       31



     Antares/Minnesota product sales include sales of injector devices, related
parts, disposable components, and repairs. In 2001, after the acquisition of
Antares/Minnesota on January 31, 2001, and in 2002, a total of 2,326 and 4,966
devices, respectively, were sold at an average price of approximately $245 per
unit in both years. Sales of disposable components in 2001 and 2002 totaled
$1,039,196 and $1,033,635, respectively. Antares/Switzerland product sales
include sales of topical gel and transdermal patch drug delivery products. The
gel product sales were made to licensees in connection with clinical studies and
other development activities under license agreements.

     Effective January 1, 2000, the Company adopted the cumulative deferral
method of accounting which substantially altered the timing under which the
Company recognizes its licensing revenue. Accordingly, the Company deferred
recognition of $1,059,622 of previously recognized license milestone payments.
For the years ended December 31, 2000, 2001 and 2002, the Company recognized
$277,200, $267,180 and $139,311, respectively, of license revenues that were
deferred at January 1, 2000, as a result of the adoption of the cumulative
deferral method. Development revenues recognized during 2000 were $387,807 and
license fees were $172,236.

     Licensing and product development revenue increased in 2001 by $168,890 to
$728,933, primarily due to a $150,000 payment received by Antares/Minnesota
under a research agreement. The research agreement was effective in April 2000,
had an original term of 2 years and contained potential milestone payments. The
$150,000 payment related to the Company's completion of various milestones
related to the design and evaluation of materials for pre-filled needle-free
syringes. The Company had no further obligations under the agreement following
the achievement of this milestone. Therefore, the $150,000 payment was
recognized as revenue in 2002 upon completion of the milestones.

     In 2002 licensing and product development revenue decreased by $90,300
compared to 2001. A portion of the decrease in 2002 compared to 2001 was due to
approximately $244,000 of revenue recognized in 2001 on contracts that ended in
2001, which was partially offset by $175,000 recognized in 2002 on contracts
beginning and ending in 2002. Revenue recognized in 2002 was approximately
$80,000 less than 2001 due to the extension of revenue recognition periods for
certain contracts. Approximately $25,000 of the decrease from 2001 was due to
contracts that existed for a full year in 2001 but ended in 2002, offset by an
increase in 2002 of approximately $46,000 due to contracts that existed for only
a partial year in 2001 but a full year in 2002. In 2002 there was an increase
over 2001 of approximately $52,000 due to revenue recognized on milestone
payments received in 2002. In addition, commissions expense related to licensing
and product development contracts was approximately $15,000 higher in 2002 than
in 2001.

Cost of Sales

     The costs of product sales are primarily related to injection devices and
disposable products. Cost of sales as a percentage of product sales was 67% and
77% in 2001 and 2002, respectively. In the third quarter of 2002 the Company
recorded a charge of $140,000, or 4% of product sales, representing the
estimated costs associated with retrieving and proactively reworking or
replacing certain injection devices to prevent a potential premature wearing
discovered during routine ongoing product testing. The remainder of the increase
in 2002 was due to approximately $282,000 of inventory write-offs and inventory
reserve adjustments in the first quarter related to the launch of the
Medi-Jector Vision(R) ("MJ7") device into new markets. Approximately $171,000 of
this amount related to a disposable component found to have a design defect,
which was immediately corrected. The remaining $111,000 of inventory written off
was due to a production problem encountered in connection with another
disposable component. The Company incurred only minor additional expenses
associated with testing and making the required production modifications. In
February 2003 the Company entered into a manufacturing agreement under which all
manufacturing and assembly work currently performed in the Company's Minneapolis
facility will be outsourced. The transition of the manufacturing operations is
expected to be complete by May of 2003. The Company anticipates the outsourcing
of the manufacturing operations will eliminate excess capacity issues and will
stabilize product costs, resulting in more consistent gross margins in the
future.

Research and Development

     Research and development expenses, excluding the write-off of acquired
in-process research and development in 2001, increased by 279% from $938,562 in
2000 to $3,555,874 in 2001 and increased to $3,654,333 in 2002, an increase of
3%. The 2001 increase is primarily due to research employee additions at
Antares/Switzerland for increased research activities and research costs of
$2,191,999 incurred by Antares/Minnesota after January 31, 2001. The increase in
2002 from 2001 is primarily due to the 2002 patent impairment charge of
$435,035, recorded after the Company's annual goodwill impairment analysis
indicated that the Company's goodwill might be impaired which required the
Company to assess the recoverability of its capitalized patent portfolio costs
as of December 31, 2002. The 2002 patent impairment charge was offset by the
2001 write off of certain molds and tooling totaling approximately $400,000
after a determination was made by management that these developmental molds
would not be used in future


                                       32



production. Increases in 2002 in payroll costs from research employee additions
at Antares/Switzerland were offset by decreases in depreciation and amortization
and clinical costs.

In-Process Research and Development

     In connection with the business combination with Permatec, the Company
acquired in-process research and development ("IPR&D") projects having an
estimated fair value of $948,000, which had not yet reached technological
feasibility and had no alternative future use. Accordingly, the $948,000 was
immediately expensed in the consolidated statement of operations. The fair value
of in-process research and development was determined using discounted
forecasted cash flows directly related to the products expected to result from
the research and development projects. The discount rates used in the valuation
take into account the stage of completion and the risks surrounding the
successful development and commercialization of each of the purchased in-process
technology projects that were valued. The weighted-average discount rate used in
calculating the present value of the in-process technology was 65%. Projects
included in the valuation were all within the injection technology area, which
covers injection technology as it pertains to pre-filled needle-free syringes,
mini-needle devices, single-shot disposable devices and reusable needle-free
devices. The Company's valuation of IPR&D identified development costs and
overhead expenses only by technology area, and not by project. The IPR&D
projects were approximately 10%-40% complete at the time of acquisition.

     The nature of the efforts to develop the acquired in-process research and
development into commercially viable products consists principally of planning,
designing, and testing activities necessary to determine that the product can
meet market expectations, including functionality, technical and performance
requirements and specifications. The Company expects that the products
incorporating the acquired technology will generally be completed and begin to
generate cash flows over the 24 to 48 month period after any such acquisition
provided an agreement has been reached with a partner to market the product to
the public. Management estimates that it will cost approximately $27 million to
complete IPR&D over the next nine years. The risks of not completing development
within a reasonable period of time and the impact from development delays are
discussed more fully in the Company's risk factors, beginning on page 13 of this
annual report. The Company's funding for all IPR&D expenses will come from the
receipt of licensing fees, milestone payments and possible divestment of some of
its non-core technology. If these receipts are insufficient to cover funding
needs, the Company will consider raising additional amounts through equity
investments from existing business partners and/or funding opportunities in the
private or capital markets. All IPR&D efforts existing as of the beginning of
2001 are currently continuing. The projections the Company used in evaluating
IPR&D are still applicable, and the Company expects to begin realizing the
benefits from IPR&D in 2003. The efforts pertaining to the IPR&D projects will
be completed over the next several years, in conjunction with management's
judgment of market conditions and availability of investment funds, with
benefits estimated to accrue through 2009.

Sales and Marketing

     Sales and marketing expenses increased 16% from $1,157,066 in 2000 to
$1,343,628 in 2001 and decreased $545,973, or 41%, to $797,655 in 2002. The 2001
increase is due primarily to the addition of Antares/Minnesota expenses after
January 31, 2001, partially offset by a decrease of approximately $1,000,000 in
outside marketing travel and consulting expenses in Antares/Switzerland
resulting from a management decision to reduce utilization of outside consulting
services. The 2002 decrease is primarily due to a management decision to further
reduce utilization of outside consultants and to reduce product promotion
programs.

General and Administrative

     General and administrative expenses increased 155% from $2,101,749 in 2000
to $5,358,606 in 2001 and decreased $126,217, or 2%, to $5,232,389 in 2002. The
2001 increase is primarily due to the addition of Antares/Minnesota general and
administrative costs after January 31, 2001, partially offset by a $266,790
decrease in Antares/Switzerland restructuring costs. The 2002 decrease was
primarily due to reductions in travel expenses, expenses related to the business
combination on January 31, 2001, and amortization expense of $207,000 due to the
adoption of SFAS 142, partially offset by increased expenses due to the opening
of the corporate office in Exton, PA in December of 2001.

     The Company recorded $266,790 of restructuring expenses during 2000. Such
expenses were in connection with the dissolution of Permatec Laboratorios
(Permatec Argentina), and the related closure of the Company's research and
development facility in Argentina and the dissolution of Permatec France and the
related termination of employees


                                       33



associated with the Company's business development, patent administration,
project management and administrative functions in France. The Company recorded
all restructuring charges incurred during the year ended December 31, 2000, as
general and administrative expenses.

     The restructuring charges incurred during the year ended December 31, 2000
included involuntary severance benefits of $178,257 for two employees of the
Company's French operations resulting from an arbitration settlement finalized
in March 2000. During 1999, at the time the original restructuring plan was
formulated, management was unable to estimate the severance benefit for these
two employees. In connection with the restructuring activities, which commenced
in 1999, approximately 25 employees were terminated, 13 of which received
involuntary severance benefits.

     As a result of management's ongoing review of the restructuring activities
related to the dissolution of Permatec France and Permatec Argentina, which
commenced in 1999, the Company recorded charges of approximately $17,000 related
to the write-off of certain equipment which was to be disposed of via scrap at
its French subsidiary in the year ended December 31, 2000. Accordingly, the
Company adjusted the carrying value of the equipment to zero, resulting in an
impairment charge of $17,000. The Company also incurred restructuring related
expenses of $71,533 in the year ended December 31, 2000 related to certain other
incremental costs of exiting its facilities including legal and consulting fees
and lease termination costs.

     The Company undertook these restructuring actions as part of an effort to
reduce costs and to centralize developmental and administrative functions in
Switzerland. These restructuring programs are now complete. The following table
provides a summary of the Company's restructuring provision activity:



                                                         Asset     Facilities,
                                       Severance &    Impairment     Legal &
                                         Benefits     (non-cash)      Other        Total
                                       -----------    ----------   -----------  ---------
                                                                    
    Balance December 31, 1999 .......    179,288            --       101,528      280,816
      2000 restructuring expenses ...    178,257        17,000        71,533      266,790
      Amount utilized in 2000 .......   (357,545)      (17,000)     (173,061)    (547,606)
                                       ---------      --------     ---------    ---------
    Balance December 31, 2000 .......  $      --      $     --     $      --    $      --
                                       =========      ========     =========    =========


Goodwill Impairment Loss

The Company had no impairment losses in 2000 or 2001, but recorded a $2,000,000
impairment loss in the fourth quarter of 2002 related to the Minnesota
operations reporting unit.

Other Income (Expense)

     Other income (expense), net, increased from ($562,200) of expense in 2000
to income of $73,464 in 2001, and changed to ($1,345,765) of expense in 2002.
The change in other income (expense), net, in 2001 from 2000 was primarily due
to increased interest income of $221,524 resulting from interest earned on funds
received in the private placement of equity, decreased interest expense of
$301,380 due to the conversion of shareholder loans to equity on January 31,
2001 in connection with the Share Transaction, and a reduction of $112,760 in
foreign exchange losses and other expenses. The change of ($1,419,229) from
income in 2001 to expense in 2002 resulted primarily from increased interest
expense of $1,196,603. This increase was primarily due to an increase in
interest expense of $828,813 due to accretion of a debt issuance discount of
$1,720,000 recorded in 2002 for the intrinsic value of the beneficial
in-the-money conversion feature of the Company's 10% convertible debentures sold
in July of 2002, as the per share conversion price of the debentures into common
stock was substantially lower than the market price of the common stock on the
date of the debenture purchase agreement. In addition, other interest expense in
2002 increased by $367,790 over 2001 due primarily to $317,335 of amortization
of deferred financing costs related to the 10% debentures and to interest on
borrowings of $2,700,000 in 2002 from the Company's majority shareholder. . In
June of 2002 the Company's majority shareholder converted $2,000,000 of debt
plus accrued interest of $36,550 into common stock, and from June through
December of 2002 loaned the Company an additional $700,000. Interest expense for
2001 of $100,837 resulted primarily from interest expense on outstanding notes
incurred by Antares/Switzerland in January 2001 prior to the business
combination. In 2002 interest income decreased by $209,066 compared to 2001 due
to lower average cash balances in 2002 compared to 2001. As discussed in Note 5
to the Consolidated Financial Statements, the Company completed a restructuring
of the 10% debentures in February 2003. As a result of the debenture
restructuring, approximately $300,000 will be recognized as interest expense in
the first quarter of 2003, which represents the portion of the deferred
financing costs of $454,910 at December 31, 2002 that had not been amortized to
interest expense or recorded to additional-paid-in-capital as an offset against
net proceeds upon conversion of the debentures to common stock. Additionally, as
a result of the debenture restructuring, approximately $700,000 will be
recognized as expense in


                                       34



the first quarter of 2003, which represents the unamortized debt issuance
discount related to the intrinsic value of the beneficial in-the-money
conversion feature of the 10% debentures.

Liquidity and Capital Resources

Operating Activities

     Cash used in operating activities was $3,362,568, $7,999,042 and $5,553,766
for the years ended December 31, 2000, 2001 and 2002, respectively. This was the
result of net losses of $5,260,387, $9,499,101 and $11,608,765 in 2000, 2001 and
2002, respectively, adjusted by noncash expenses and changes in operating assets
and liabilities.

     Net noncash expenses of $448,430 in 2000 were mainly due to depreciation
and amortization of $392,847 and stock-based compensation expense of $64,583.
Noncash expenses totaled $2,854,628 in 2001, consisting primarily of
depreciation and amortization of $1,324,539 and the write-off of in-process
research and development and tooling-in-process costs of $948,000 and $404,811,
respectively. The increases over 2000 result primarily from the addition of
Antares/Minnesota. The noncash expenses of $4,878,602 in 2002 consisted
primarily of goodwill impairment loss of $2,000,000, patent rights impairment
loss of $435,035, depreciation and amortization of $907,131, amortization of
deferred financing costs of $1,146,148, and stock-based compensation expense of
$370,410.

     In 2000, the change in operating assets and liabilities caused an increase
in cash of $1,449,389, primarily due to the increase in deferred revenue of
$1,659,612 resulting from the adoption of the cumulative deferral method of
accounting. The change in operating assets and liabilities in 2001 utilized cash
of $1,354,569. This resulted primarily from the increase in Antares/Minnesota
inventory of $243,510 since January 31, 2001, and from the reduction in current
liabilities of $1,194,029 after receiving the proceeds from the private
placement of common stock in February and March of 2001. Cash increased by
$1,176,397 as a result of the change in operating assets and liabilities in
2002. This increase was primarily due to reductions in receivables of $654,266,
increases in accrued expenses and deferred revenue of $510,992 and $348,090,
respectively, offset by increased prepaid expenses and other assets of $365,065.

Investing Activities

     Net cash used in investing activities totaled $1,218,333, $940,929 and
$435,796 for the years ended December 31, 2000, 2001 and 2002, respectively.
Purchases of equipment, furniture and fixtures utilized cash of $133,641,
$424,691 and $155,145 in 2000, 2001 and 2002, respectively. Spending for patent
development and acquisitions in 2000, 2001 and 2002 were $51,396, $360,759 and
$280,651, respectively. Amounts incurred on behalf of or advanced to Medi-Ject
totaled $1,033,296 in 2000, and $602,756 in January 2001 prior to closing of the
Share Transaction. Cash used in investing activities was net of proceeds from
equipment and furniture sales of $91,699 in 2001 and cash of $355,578 in 2001
acquired in the Share Transaction.

Financing Activities

     Net cash provided by financing activities totaled $4,120,159 for the year
ended December 31, 2000, compared to $11,056,887 in 2001 and $4,571,212 in 2002.
The 2000 net cash provided by financing activities was due to proceeds from
subordinated loans from shareholders of $4,235,765, offset by principal payments
on capital lease obligations of $115,606. In 2001, net cash provided by
financing activities resulted primarily from net proceeds of $9,991,391 from the
private placement of common stock. Also in 2001, proceeds from stock option
exercises totaled $56,861 and proceeds from subordinated loans from shareholders
received prior to January 31, 2001 totaled $1,188,199, which were partially
offset by principal payments on capital lease obligations of $179,564. In 2002
net cash provided by financing activities was due to proceeds from subordinated
loans from shareholders of $2,700,000 and proceeds from issuance of convertible
debentures of $2,000,000, offset by principal payments on capital lease
obligations of $128,788.


                                       35



     The Company's contractual cash obligations at December 31, 2002, as
adjusted for the restructuring of the convertible debentures on February 7,
2003, noted below, are summarized in the following table:



                                                           Payment Due by Period
                                     ---------------------------------------------------------------
                                                     Less than         1-3         4-5       After 5
                                        Total          1 year         years       years       years
                                     -----------    -----------    ----------    --------    -------
                                                                              
    Capital leases ................  $  137,472     $  106,493     $   30,979    $     --    $   --
    Operating leases ..............   1,610,392        483,158        757,148     370,086        --
    Convertible debentures ........   1,613,255             --      1,613,255          --        --
    Jacques Gonella loans .........     700,000        700,000             --          --        --
                                     ----------     ----------     ----------    --------    ------
    Total contractual cash
      obligations .................  $4,061,119     $1,289,651     $2,401,382    $370,086    $   --
                                     ==========     ==========     ==========    ========    ======


     In July 2002, the Company sold $2,000,000 aggregrate principal amount of
its 10% debentures, with $700,000 maturing on July 12, 2003, $700,000 maturing
on July 26, 2003 and $600,000 maturing on October 15, 2003. The debentures were
convertible into shares of the Company's common stock at a conversion price
which was the lower of $2.50 or 75% of the average of the three lowest intraday
prices of the Company's common stock, as reported on the Nasdaq SmallCap Market,
during the 20 trading days preceding the conversion date. From October 10, 2002
to January 17, 2003, three of the original four holders of the 10% debentures
converted $581,000 of principal into 1,777,992 shares of common stock at an
average conversion price of approximately $0.327 per share. Two of the original
four holders accounted for the conversion of $536,000 of principal into
1,660,863 shares of common stock. As a result of the Company's low common stock
price, the 10% debentures became highly dilutive to the Company's current common
shareholders.

     To reduce the risk of future dilution to common shareholders in the
near-term, on February 7, 2003, the Company completed a restructuring of its 10%
debentures previously sold to four primary investors. Specifically, as part of
this restructuring, on January 24, 2003 and January 31, 2003, the Company
borrowed an aggregate of $621,025 from Xmark Funds. The Company used the
proceeds of these borrowings to repurchase $476,825 principal amount of the 10%
debentures previously sold to the two original 10% debenture holders who had
converted $536,000 of principal into common stock. This purchase price included
accrued interest of $12,825 and a repurchase premium of $144,200. As additional
repurchase compensation, the Company issued warrants to one of the two original
10% debenture holders and paid $5,000, in lieu of warrants, to the other.
Thereafter, in exchange for the surrender and cancellation of the promissory
notes, the Company issued to the Xmark Funds 8% Senior Secured Convertible
Debentures in the same principal amount of the promissory notes. The Company
intends to pay cash for interest in the amount of $679 that accrued on the
promissory notes. The Company also exchanged Amended and Restated 8% Senior
Secured Convertible Debentures for the remaining outstanding principal and
accrued interest of $955,000 and $37,230, respectively, of the original 10%
debentures. The aggregate principal amount of the 8% debentures is $1,613,255.
The 8% debentures contain substantially the same terms as the 10% debentures,
except that the 8% debentures include a fixed conversion price of $.50 per share
and an interest rate of 8% per annum. The 8% debentures are due March 31, 2004.
The Company granted a senior security interest in substantially all of its
assets to the holders of the 8% debentures. In connection with this
restructuring, the Company also issued to the holders of the 8% debentures
five-year warrants to purchase an aggregate of 2,932,500 shares of the Company's
common stock at an exercise price of $0.55 per share. The warrants are
redeemable at the option of the Company upon the achievement of certain
milestones set forth in the warrants.

     In connection with the restructuring of the 10% debentures, the Company
will recognize the difference between the fair value of the 10% debentures plus
the 8% bridge notes and the fair value of the 8% debentures and related warrants
in the Company's quarter ending March 31, 2003 consolidated financial
statements. The Company has not yet determined this amount, however, it may
represent a material charge to the Company's results of operations.

     As a result of the debenture restructuring, approximately $300,000 will be
recognized as interest expense in the first quarter of 2003, which represents
the portion of the deferred financing costs of $454,910 at December 31, 2002
that had not been amortized to interest expense or recorded to
additional-paid-in-capital as an offset against net proceeds upon conversion of
the debentures to common stock. Additionally, as a result of the debenture
restructuring, approximately $700,000 will be recognized as expense in the first
quarter of 2003, which represents the unamortized debt issuance discount related
to the intrinsic value of the beneficial in-the-money conversion feature of the
10% debentures.


                                       36



     The report of the Company's independent auditors contains an explanatory
paragraph expressing substantial doubt about the Company's ability to continue
as a going concern as a result of recurring losses and negative cash flows from
operations. The Company had negative working capital of ($11,712) and
($4,188,234) at December 31, 2001 and 2002, respectively, and has incurred net
losses of ($5,260,387), ($9,499,101) and ($11,608,765) in 2000, 2001 and 2002,
respectively. In addition, the Company has had net losses and has had negative
cash flows from operating activities since inception. The Company expects to
report a net loss for the year ending December 31, 2003, 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 and the receipt of revenues from sales of products.

     The Company has sufficient cash through March 2003 and will be required to
raise additional working capital to continue to exist. Management intends to
raise this additional capital through alliances with strategic corporate
partners, equity offerings, and/or debt financing. There can be no assurance
that the Company will ever become profitable or that adequate funds will be
available when needed or on acceptable terms.

     If for any reason the Company is unable to obtain additional financing it
may not be able to continue as a going concern, which may result in material
asset impairments, other material adverse changes in the business, results of
operations or financial condition, or the loss by shareholders of all or a part
of their investment in the Company.

     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.

     On November 29, 2002, Nasdaq notified the Company that its stock had closed
below the minimum $1.00 per share requirement for continued listing on the
SmallCap Market. As of November 28, 2002, the Company's stock had traded at a
price below $1.00 per share for 30 consecutive days. Accordingly, the Company
has been provided 180 calendar days or until May 28, 2003 to regain compliance.
In order to achieve compliance, the bid price of the Company's common stock must
close at $1.00 per share or more for a minimum of ten consecutive trading days.
The Company has the ability under its Articles of Incorporation and Minnesota
law, without shareholder approval, to affect a reverse stock split thereby
reducing the number of shares outstanding and, in essence, increasing the price
of the common stock. Even if the Company were able to improve its stock price to
regain compliance, the Nasdaq rules also state that for continued inclusion on
the listing, the Company must meet one of three financial tests, which are
having stockholders' equity of $2,500,000, market value of listed securities of
$35,000,000, or net income from operations of $500,000. As of December 31, 2002,
the Company does not meet any of the financial requirements for continued
listing on the Nasdaq SmallCap Market. In the event the Company is unable to
improve its stock price to regain compliance, Nasdaq will determine whether the
Company meets the initial listing criteria for the SmallCap Market, which is
having stockholders' equity of $5,000,000, market value of listed securities of
$50,000,000, or net income from continuing operations of $750,000. If the
Company meets the initial listing criteria, Nasdaq will grant the Company an
additional 180 days to demonstrate compliance. As of December 31, 2002, the
Company does not meet any of the financial requirements for initial listing on
the Nasdaq SmallCap Market. If the Company's stock were to be delisted, it would
constitute an event of default under the newly restructured 8% debentures, and
they would become due and payable at 130% of the outstanding principal and
accrued interest.

New Accounting Pronouncements

     In July 2001, the Financial Accounting Standards Board issued SFAS 141,
"Business Combinations," and SFAS 142, "Goodwill and Other Intangible Assets."
SFAS 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. SFAS 142 changes the
accounting for goodwill from an amortization method to an impairment-only
approach. Thus, amortization of goodwill, including goodwill recorded in past
business combinations, ceased upon adoption of that Statement. The Company
adopted SFAS 142 in the first quarter of fiscal 2002 and, accordingly, evaluated
its existing intangible assets and goodwill that were acquired in the Share
Transaction. The Company concluded that $1,935,588 representing the unamortized
portion of the amount allocated to other intangible assets on the date of
adoption should be classified as goodwill as these intangible assets did not
meet the definition for separate accounting under SFAS 142. These amounts were
previously classified as workforce, ISO certification and clinical studies with
unamortized balances of $510,413, $271,588 and $1,153,587, respectively, at
December 31, 2001. Upon adoption of SFAS 142, the Company reassessed the useful
lives and residual


                                       37



values of all intangible assets acquired in purchase business combinations, and
determined that there were no amortization period adjustments necessary.

     The Company adopted SFAS 141 during 2001 and adopted SFAS 142 effective
January 1, 2002. As of the date of adoption of SFAS 142, after reclassification
of other intangible assets as goodwill, the Company had approximately $3,095,355
of unamortized goodwill subject to the transition provisions of SFAS 141 and
142, all related to the Minnesota operations.

     In connection with the transitional goodwill impairment evaluation, SFAS
142 required the Company to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. To accomplish
this, the Company determined the fair value of the Minnesota operations and
compared it to the carrying amount. As of January 1, 2002, the fair value of the
Minnesota operations exceeded its carrying amount, and therefore there was no
indication that the goodwill was impaired. Accordingly, the Company was not
required to perform the second step of the transitional impairment test. Due to
a significant decline in the Company's stock price in the fourth quarter of 2002
and concerns about the continued existence of the Company due to continued net
losses and negative cash flows from operations, another review was completed as
of December 31, 2002. After the first step of the impairment test was performed,
there was an indication that the carrying amount of the Minnesota operations
exceeded its fair value, which required that the second step be performed. Fair
value was determined using the expected present value of future cash flows. In
the second step, the Company was required to compare the implied fair value of
the goodwill, determined by allocating the fair value of the Minnesota
operations to all of its assets (recognized and unrecognized) and liabilities
(in a manner similar to a purchase price allocation), to its carrying amount,
both of which were measured as of December 31, 2002. After completion of the
second step, the Company recorded a goodwill impairment charge of $2,000,000 in
the fourth quarter of 2002.

     For the three years ended December 31, 2000, 2001 and 2002, the goodwill
amortization, adjusted net loss and basic and diluted loss per share are as
follows:



                                                             December 31,
                                              -------------------------------------------
                                                  2000           2001            2002
                                              ------------  --------------  -------------
                                                                   
     Net loss applicable to common shares
      as reported ..........................  $(5,260,387)  $(14,913,226)   $(11,708,765)
     Addback goodwill amortization .........      177,963        464,434              --
                                              ------------  --------------  -------------
     Adjusted net loss .....................  $(5,082,424)  $(14,448,792)   $(11,708,765)
                                              ============  ==============  =============
     Basic and diluted loss per share:
         Net loss as reported ..............  $    (1.22)   $     (1.76)    $     (1.22)
         Goodwill amortization .............        0.04           0.06               --
                                              ------------  --------------  -------------
     Adjusted net loss per share ...........  $    (1.18)   $     (1.70)    $     (1.22)
                                              ============  ==============  =============


     The Company's goodwill impairment analysis as of December 31, 2002
indicated that the Company's goodwill might be impaired which required the
Company to assess the recoverability of its capitalized patent portfolio costs
as of December 31, 2002. As a result of this analysis, the Company recognized an
impairment charge of $435,035 in research and development expenses for the year
ended December 31, 2002. The analysis of patent costs was performed by
management based on values provided through third-party corporate development
activities. After the impairment charge, the gross carrying amount and
accumulated amortization of patents, which are the only intangible assets of the
Company subject to amortization, was $2,603,262 and $446,088, respectively, at
December 31, 2002. The Company's estimated aggregate amortization expense for
the next five years is $174,000 in 2003 through 2006, and $140,000 in 2007.

     In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS 146 addresses the financial accounting
and reporting for costs associated with exit and disposal activities and
nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring). The provisions
of SFAS 146 are effective for exit or disposal activities that are initiated
after December 31, 2002, with early application encouraged. The Company will
adopt the provisions of SFAS 146 on January 1, 2003 and it may impact the timing
of loss recognition for any restructuring activities initiated subsequent to
adoption.

     In December 2002, the FASB issued SFAS 148, Stock Compensation. SFAS 148
provides alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The Company does not plan to change its method
of accounting for stock-based


                                       38



employee compensation. The Company will make the required interim disclosures
effective with the quarter ending March 31, 2003.

     In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," which addresses certain disclosure
requirements to be made by a guarantor about its obligations under guarantees.
See Product Warranty in Note 1 in the Notes to Consolidated Financial Statements
for the required disclosures.

     In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities," which addresses accounting for special-purpose
and variable interest entities. The Company is required to adopt this guidance
for financial statements issued after December 31, 2002, and is currently
analyzing the impact of its adoption on the Company's financial statements.

     In December 2002, the EITF issued EITF 00-21, Revenue Arrangements with
Multiple Deliverables. This Issue addresses certain aspects of the accounting by
a vendor for arrangements under which it will perform multiple
revenue-generating activities. In some arrangements, the different
revenue-generating activities (deliverables) are sufficiently separable, and
there exists sufficient evidence of their fair values to separately account for
some or all of the deliverables (that is, there are separate units of
accounting). In other arrangements, some or all of the deliverables are not
independently functional, or there is not sufficient evidence of their fair
values to account for them separately. This Issue addresses when and, if so, how
an arrangement involving multiple deliverables should be divided into separate
units of accounting. This Issue does not change otherwise applicable revenue
recognition criteria. This Issue is applicable for the Company effective July 1,
2003, and could have an impact on revenue recognition of future licensing
transactions.

Item 7(A).  MARKET RISK ASSESSMENT

     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. Most of the Company's sales and licensing fees are denominated
in U.S. dollars, thereby significantly mitigating the risk of exchange rate
fluctuations on trade receivables. The effect of foreign exchange rate
fluctuations on the Company's financial results for the years ended December 31,
2000, 2001 and 2002 was not material. Beginning in 2003 the Company will also
have exposure to exchange rate fluctuations between the Euro and the U.S.
dollar. The licensing agreement entered into in January 2003 with Ferring,
discussed in Note 16 to the Consolidated Financial Statements, establishes
pricing in Euros for products sold under the existing supply agreement and for
all royalties. The Company does not currently use derivative financial
instruments to hedge against exchange rate risk. Because exposure increases as
intercompany balances grow, the Company will continue to evaluate the need to
initiate hedging programs to mitigate the impact of foreign exchange rate
fluctuations on intercompany balances. The Company's exposure to interest rate
risk is limited to $700,000 borrowed in 2002 under three Term Note agreements
with its majority shareholder. The notes bear interest at the three month
Euribor Rate as of the date of each advance, plus 5%. Due to the short-term
nature of the notes, the Company's exposure to interest rate risk is not
believed to be material. The Company does not use derivative financial
instruments to manage interest rate risk. All other existing debt agreements of
the Company bear interest at fixed rates, and are therefore not subject to
exposure from fluctuating interest rates.


                                       39



Item 8.  FINANCIAL STATEMENTS.

                              ANTARES PHARMA, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors' Report ..............................................  41

Consolidated Balance Sheets as of December 31, 2001 and 2002 ..............  42

Consolidated Statements of Operations for the Years Ended
  December 31, 2000, 2001 and 2002 ........................................  43

Consolidated Statements of Shareholders' Equity (Deficit) and
  Comprehensive Loss for the Years Ended
  December 31, 2000, 2001 and 2002 ........................................  44

Consolidated Statements of Cash Flows for the Years Ended
  December 31, 2000, 2001 and 2002 ........................................  46

Notes to Consolidated Financial Statements ................................  47


                                       40



                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Antares Pharma, Inc.:

     We have audited the accompanying consolidated balance sheets of Antares
Pharma, Inc. and subsidiaries (the Company) as of December 31, 2001 and 2002,
and the related consolidated statements of operations, shareholders' equity
(deficit) and comprehensive loss, and cash flows for each of the years in the
three-year period ended December 31, 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Antares
Pharma, Inc. and subsidiaries as of December 31, 2001 and 2002, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States of America.

     The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the financial statements, the Company has negative working capital and has
suffered recurring losses and negative cash flows from operations that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

     As discussed in Note 1 to the consolidated financial statements, the
Company adopted the cumulative deferral method of revenue recognition for
licensing arrangements effective January 1, 2000 and the provisions of Statement
of Financial Accounting Standards No. 142, "Goodwill and Other Intangible
Assets," on January 1, 2002.

                                       /s/ KPMG LLP



Minneapolis, Minnesota
March 21, 2003


                                       41



                              ANTARES PHARMA, INC.
                           CONSOLIDATED BALANCE SHEETS



                                                                                           December 31,
                                                                                  ----------------------------
                                                                                      2001             2002
                                                                                  ------------    ------------
                                                                                            
                                     Assets
Current Assets:
       Cash ...................................................................   $  1,965,089    $    267,945
       Accounts receivable, less allowance for doubtful accounts of $18,000 and
          $12,000, respectively ...............................................        535,461         174,566
       VAT, capital taxes and other receivables ...............................        331,660          38,289
       Inventories ............................................................        655,691         558,911
       Deferred financing costs ...............................................           --           454,910
       Prepaid expenses and other assets ......................................         55,041          39,849
                                                                                  ------------    ------------
              Total current assets ............................................      3,542,942       1,534,470

Equipment, furniture and fixtures, net ........................................      1,924,675       1,531,063
Patent rights, net ............................................................      2,464,336       2,157,174
Goodwill, net .................................................................      3,095,355       1,095,355
Other assets ..................................................................        101,142          90,909
                                                                                  ------------    ------------

              Total Assets ....................................................   $ 11,128,450    $  6,408,971
                                                                                  ============    ============

                      Liabilities and Shareholders' Equity

Current Liabilities:
       Accounts payable .......................................................   $    637,794    $    608,695
       Accrued expenses and other liabilities .................................      1,070,916       1,521,177
       Due to related parties .................................................        243,692         893,892
       Convertible debentures, net of issuance discount of $891,187 in 2002 ...           --           733,159
       Capital lease obligations - current maturities .........................         91,054         106,493
       Deferred revenue .......................................................      1,511,198       1,859,288
                                                                                  ------------    ------------
              Total current liabilities .......................................      3,554,654       5,722,704

Capital lease obligations, less current maturities ............................        105,629          30,979
                                                                                  ------------    ------------
Total liabilities .............................................................      3,660,283       5,753,683
                                                                                  ------------    ------------

Shareholders' Equity:

       Series A Convertible Preferred Stock:  $0.01 par; authorized 10,000
          shares; 1,250 and 1,350 issued and outstanding at
          December 31, 2001 and 2002, respectively ............................             13              14
       Common Stock:  $0.01 par; authorized 30,000,000 shares;
          9,161,188 and 10,776,885 issued and outstanding at
          December 31, 2001 and 2002, respectively ............................         91,612         107,769
       Additional paid-in capital .............................................     37,464,531      42,353,492
       Accumulated deficit ....................................................    (29,457,033)    (41,165,798)
       Deferred compensation ..................................................       (251,016)       (137,352)
       Accumulated other comprehensive loss ...................................       (379,940)       (502,837)
                                                                                  ------------    ------------
                                                                                     7,468,167         655,288
                                                                                  ------------    ------------
              Total Liabilities and Shareholders' Equity ......................   $ 11,128,450    $  6,408,971
                                                                                  ============    ============


          See accompanying notes to consolidated financial statements.


                                       42



                              ANTARES PHARMA, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                                              Years Ended December 31,
                                                                    --------------------------------------------
                                                                        2000            2001           2002
                                                                    ------------    ------------    ------------
                                                                                           
Revenues:
     Product sales ..............................................   $       --      $  2,769,591    $  3,357,128
     Licensing and product development ..........................        560,043         728,933         638,633
                                                                    ------------    ------------    ------------
                                                                         560,043       3,498,524       3,995,761

Cost of product sales ...........................................           --         1,862,955       2,573,280
                                                                    ------------    ------------    ------------
Gross margin ....................................................        560,043       1,635,569       1,422,481
                                                                    ------------    ------------    ------------

Operating Expenses:
     Research and development ...................................        938,562       3,555,874       3,654,333
     In-process research and development (Note 3) ...............           --           948,000            --
     Sales and marketing ........................................      1,157,066       1,343,628         797,655
     General and administrative .................................      2,101,749       5,358,606       5,232,389
     Goodwill impairment loss ...................................           --              --         2,000,000
                                                                    ------------    ------------    ------------
                                                                       4,197,377      11,206,108      11,684,377
                                                                    ------------    ------------    ------------

Net operating loss ..............................................     (3,637,334)     (9,570,539)    (10,261,896)
                                                                    ------------    ------------    ------------

Other income (expense):

     Interest income ............................................          7,290         228,814          19,748
     Interest expense ...........................................       (402,217)       (100,837)     (1,297,440)
     Foreign exchange gains (losses) ............................       (167,273)        (30,693)        (68,395)
     Other, net .................................................           --           (23,820)            322
                                                                    ------------    ------------    ------------
                                                                        (562,200)         73,464      (1,345,765)
                                                                    ------------    ------------    ------------

Loss before income taxes and cumulative effect of change in
     accounting principle .......................................     (4,199,534)     (9,497,075)    (11,607,661)

Income taxes ....................................................         (1,231)         (2,026)         (1,104)
                                                                    ------------    ------------    ------------

Loss before cumulative effect of change in accounting principle .     (4,200,765)     (9,499,101)    (11,608,765)

Cumulative effect of change in accounting principle .............     (1,059,622)           --              --
                                                                    ------------    ------------    ------------

Net loss ........................................................     (5,260,387)     (9,499,101)    (11,608,765)

In-the-money conversion feature-preferred stock dividend (Note 9)           --        (5,314,125)           --
Preferred stock dividends .......................................           --          (100,000)       (100,000)
                                                                    ------------    ------------    ------------

Net loss applicable to common shares ............................   $ (5,260,387)   $(14,913,226)   $(11,708,765)
                                                                    ============    ============    ============

Basic and diluted net loss per common share before
     cumulative effect of change in accounting principle ........   $       (.97)   $      (1.76)   $      (1.22)

Cumulative effect of change in accounting principle .............           (.25)           --              --
                                                                    ------------    ------------    ------------

Basic and diluted net loss per common share .....................   $      (1.22)   $      (1.76)   $      (1.22)
                                                                    ============    ============    ============

Basic and diluted weighted average common shares outstanding ....      4,326,308       8,494,795       9,617,749
                                                                    ============    ============    ============


          See accompanying notes to consolidated financial statements.


                                       43



                              ANTARES PHARMA, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE LOSS
                  Years Ended December 31, 2000, 2001 and 2002



                         Convertible Preferred Stock              Common Stock
                        -----------------------------  -----------------------------------
                          Series A        Series C        Permatec          Medi-Ject
                        -------------   -------------  --------------- -------------------
                        Number          Number         Number            Number            Additional
                          of              of             of                of                Paid-In    Accumulated   Deferred
                        Shares Amount   Shares Amount  Shares  Amount    Shares    Amount    Capital      Deficit   Compensation
                        ------ ------  ------- ------  ------ -------- ---------- -------- ----------- ------------ ------------
                                                                                    
December 31, 1999 .....    --   $ --        --  $  --  10,000 $689,655         -- $     -- $ 1,110,097 $(12,004,076) $      --
Share issuance to
 employees ............    --     --        --     --      --       --         --       --      64,583           --         --
Net loss ..............    --     --        --     --      --       --         --       --          --   (5,260,387)        --
Translation adjustments    --     --        --     --      --       --         --       --          --           --         --

Comprehensive loss ....    --     --        --     --      --       --         --       --          --           --         --
                        -----   ----   -------  -----  ------ -------- ---------- -------- ----------- ------------  ---------
December 31, 2000 .....    --     --        --     --  10,000  689,655         --       --   1,174,680  (17,264,463)        --
Net liabilities of
 subsidiaries assumed
 by shareholders ......    --     --        --     --      --       --         --       --    (644,725)   2,720,931         --
Medi-Ject stock
 outstanding at date
 of share transaction . 1,150     12        --     --      --       --  1,430,336   14,303   6,625,659           --         --
Exchange of Permatec
 shares for Medi-Ject
 stock ................    --     --        --     -- (10,000)(689,655) 2,900,000   29,000     660,655           --         --
Conversion of
 shareholder loans
 to equity ............    --     --        --     --      --       --         --       --  13,069,870           --         --
Conversion of notes to
 preferred Series C ...    --     --    27,500    275      --       --         --       --          --         (275)        --
Conversion of preferred
 Series C to common
 stock ................    --     --   (27,500)  (275)     --       --  2,750,000   27,500   5,286,900   (5,314,125)        --
Exercise of stock
 options ..............    --     --        --     --      --       --     38,307      383      56,478           --         --
Stock issued in lieu of
 dividends ............   100      1        --     --      --       --         --       --      99,999     (100,000)        --
Stock-based
 compensation .........    --     --        --     --      --       --     48,000      480     396,397           --   (251,016)
Issuance of common
 stock in private
 placement ............    --     --        --     --      --       --  1,706,482   17,065   9,974,326           --         --
Conversion of preferred
 Series B to common
 stock ................    --     --        --     --      --       --    100,000    1,000     249,000           --         --
Stock issued in
 technology acquisition
 agreement ............    --     --        --     --      --       --    188,063    1,881     515,292           --         --
Net loss ..............    --     --        --     --      --       --         --       --          --   (9,499,101)        --
Translation adjustments    --     --        --     --      --       --         --       --          --           --         --

Comprehensive loss ....    --     --        --     --      --       --         --       --          --           --         --
                        -----   ----   -------  ----- ------- -------- ---------- -------- ----------- ------------  ---------
December 31, 2001 ..... 1,250     13        --     --      --       --  9,161,188   91,612  37,464,531  (29,457,033)  (251,016)


[split table]






                         Accumulated
                            Other            Total
                         Comprehensive   Shareholders'
                         Income (Loss)  Equity (Deficit)
                         -------------  ----------------
                                    
December 31, 1999 .....  $   857,000      $ (9,347,324)
Share issuance to
 employees ............           --            64,583
Net loss ..............           --        (5,260,387)
Translation adjustments      681,523           681,523
                                          ------------
Comprehensive loss ....           --        (4,578,864)
                         -----------      ------------
December 31, 2000 .....    1,538,523       (13,861,605)
Net liabilities of
 subsidiaries assumed
 by shareholders ......   (1,538,523)          537,683
Medi-Ject stock
 outstanding at date
 of share transaction .           --         6,639,974
Exchange of Permatec
 shares for Medi-Ject
 stock ................           --                --
Conversion of
 shareholder loans
 to equity ............           --        13,069,870
Conversion of notes to
 preferred Series C ...           --                --
Conversion of preferred
 Series C to common
 stock ................           --                --
Exercise of stock
 options ..............           --            56,861
Stock issued in lieu of
 dividends ............           --                --
Stock-based
 compensation .........           --           145,861
Issuance of common
 stock in private
 placement ............           --         9,991,391
Conversion of preferred
 Series B to common
 stock ................           --           250,000
Stock issued in
 technology acquisition
 agreement ............           --           517,173
Net loss ..............           --        (9,499,101)
Translation adjustments     (379,940)         (379,940)
                                          ------------
Comprehensive loss ....           --        (9,879,041)
                         -----------      ------------
December 31, 2001 .....     (379,940)        7,468,167




                                       44



                              ANTARES PHARMA, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE LOSS
                                   (CONTINUED)
                  Years Ended December 31, 2000, 2001 and 2002




                         Convertible Preferred Stock              Common Stock
                        -----------------------------  -----------------------------------
                          Series A        Series C        Permatec          Medi-Ject
                        -------------   -------------  --------------- -------------------
                        Number          Number         Number            Number            Additional
                          of              of             of                of                Paid-In    Accumulated   Deferred
                        Shares Amount   Shares Amount  Shares  Amount    Shares    Amount    Capital      Deficit   Compensation
                        ------ ------  ------- ------  ------ -------- ---------- -------- ----------- ------------ ------------
                                                                                    
December 31, 2001 ..... 1,250   $ 13        --     --      --       --  9,161,188 $ 91,612 $37,464,531 $(29,457,033) $(251,016)
Conversion of
 shareholder loans to
 equity ...............    --     --        --     --      --       --    509,137    5,091   2,031,459           --         --
Stock issued in lieu of
 dividends ............   100      1        --     --      --       --         --       --      99,999     (100,000)        --
Stock-based compensation   --     --        --     --      --       --    158,810    1,588     321,158           --    113,664
Intrinsic value of
 beneficial conversion
 feature of convertible
 debentures ...........    --     --        --     --      --       --         --       --   1,720,000           --         --
Issuance of warrants in
 connection with
 convertible debentures    --     --        --     --      --       --         --       --     467,016           --         --
Convertible debentures
 concerted into common
 stock ................    --     --        --     --      --       --    947,750    9,478     249,329           --         --
Net loss                   --     --        --     --      --       --         --       --          --  (11,608,765)        --
Translation adjustments    --     --        --     --      --       --         --       --          --           --         --

Comprehensive loss ....    --     --        --     --      --       --         --       --          --           --         --
                        -----   ----   -------  ----- ------- -------- ---------- -------- ----------- ------------  ---------
December 31, 2002 ..... 1,350   $ 14        --  $  --      -- $     -- 10,776,885 $107,769 $42,353,492 $(41,165,798) $(137,352)
                        =====   ====   =======  ===== ======= ======== ========== ======== =========== ============  =========


[split table]






                         Accumulated
                            Other            Total
                         Comprehensive   Shareholders'
                         Income (Loss)  Equity (Deficit)
                         -------------  ----------------
                                    
December 31, 2001 .....  $  (379,940)     $  7,468,167
Conversion of
 shareholder loans to
 equity ...............           --         2,036,550
Stock issued in lieu of
 dividends ............           --                --
Stock-based compensation          --           436,410
Intrinsic value of
 beneficial conversion
 feature of convertible
 debentures ...........           --         1,720,000
Issuance of warrants in
 connection with
 convertible debentures           --           467,016
Convertible debentures
 concerted into common
 stock ................           --           258,807
Net loss                          --       (11,608,765)
Translation adjustments     (122,897)         (122,897)
                                          ------------
Comprehensive loss ....           --       (11,731,662)
                         -----------      ------------
December 31, 2002 .....  $  (502,837)     $    655,288
                         ===========      ============


          See accompanying notes to consolidated financial statements.


                                       45



                              ANTARES PHARMA, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                                   Years Ended December 31,
                                                                         --------------------------------------------
                                                                              2000           2001             2002
                                                                         ------------    ------------    ------------
                                                                                                
Cash flows from operating activities:
         Net loss ....................................................   $ (5,260,387)   $ (9,499,101)   $(11,608,765)
         Adjustments to reconcile net loss to net
            cash used in operating activities:
         Goodwill impairment loss ....................................           --              --         2,000,000
         Patent rights impairment loss................................           --              --           435,035
         Depreciation and amortization ...............................        392,847       1,324,539         907,131
         (Gain) loss on disposal and abandonment of assets ...........         (9,000)         31,417          19,878
         Write-off of tooling in process .............................           --           404,811            --
         In-process research and development .........................           --           948,000            --
         Amortization of deferred financing costs ....................           --              --         1,146,148
         Stock-based compensation expense ............................         64,583         145,861         370,410
         Changes in operating assets and liabilities, net of effect of
            business acquisition:
            Accounts receivable ......................................           --           (89,589)        360,895
            VAT, capital taxes and other receivables .................       (134,888)         72,945         293,371
            Inventories ..............................................           --          (243,510)         96,780
            Prepaid expenses and other assets ........................         (9,116)         90,027        (365,065)
            Accounts payable .........................................        (96,303)       (741,007)        (29,099)
            Accrued expenses and other ...............................        296,656        (453,022)        510,992
            Due to related parties ...................................           --           252,994         (49,800)
            Restructuring provisions .................................       (272,307)           --              --
            Deferred revenue .........................................      1,659,612        (148,414)        348,090
            Other ....................................................          5,735         (94,993)         10,233
                                                                         ------------    ------------    ------------
Net cash used in operating activities ................................     (3,362,568)     (7,999,042)     (5,553,766)
                                                                         ------------    ------------    ------------

Cash flows from investing activities:
         Purchases of equipment, furniture and fixtures ..............       (133,641)       (424,691)       (155,145)
         Proceeds from sale of equipment, furniture and fixtures .....           --            91,699            --
         Additions to patent rights ..................................        (51,396)       (360,759)       (280,651)
         Acquisition costs invoiced to Medi-Ject Corporation .........     (1,033,296)           --              --
         Increase in notes receivable and due from Medi-Ject .........           --          (602,756)           --
         Acquisition of Medi-Ject, including cash acquired ...........           --           355,578            --
                                                                         ------------    ------------    ------------
Net cash used in investing activities ................................     (1,218,333)       (940,929)       (435,796)
                                                                         ------------    ------------    ------------

Cash flows from financing activities:
         Proceeds from subordinated loans from shareholders ..........      4,235,765       1,188,199       2,700,000
         Proceeds from issuance of convertible debentures ............           --              --         2,000,000
         Principal payments on capital lease obligations .............       (115,606)       (179,564)       (128,788)
         Proceeds from issuance of common stock, net .................           --        10,048,252            --
                                                                         ------------    ------------    ------------
Net cash provided by financing activities ............................      4,120,159      11,056,887       4,571,212
                                                                         ------------    ------------    ------------

Effect of exchange rate changes on cash and cash equivalents .........         29,395        (395,049)       (278,794)
                                                                         ------------    ------------    ------------

Net increase (decrease) in cash and cash equivalents .................       (431,347)      1,721,867      (1,697,144)
Cash and cash equivalents:
         Beginning of year ...........................................        674,569         243,222       1,965,089
                                                                         ------------    ------------    ------------
         End of year .................................................   $    243,222    $  1,965,089    $    267,945
                                                                         ============    ============    ============

- ----------
Schedule of non-cash investing and financing activities: See information
regarding non-cash investing and financing activities related to the Share
Transaction in Notes 3 and 11.

          See accompanying notes to consolidated financial statements.


                                       46


                              ANTARES PHARMA, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        December 31, 2000, 2001 and 2002

1.  Description of Business and Summary of Significant Accounting Policies

Business

     The Company develops, produces and markets pharmaceutical delivery
solutions, including needle-free and mini-needle injector systems, gel
technologies and transdermal products. The Company currently distributes its
needle-free injector systems for the delivery of insulin and growth hormone in
more than 20 countries. In addition, the Company has several products and
compound formulations under development and is conducting ongoing research to
create new products and formulations that combine various elements of the
Company's technology portfolio. The corporate headquarters are located in Exton,
Pennsylvania, with research and production facilities in Minneapolis, Minnesota,
and research facilities in Basel, Switzerland. As discussed in Note 16, the
Company has initiated a plan to outsource its manufacturing operations at its
production facility in Minneapolis. The transition of the manufacturing
operations is expected to be complete by May of 2003.

Basis of Presentation

     In July 2000, Medi-Ject Corporation, now known as Antares Pharma, Inc.
("Antares" or "the Company"), entered into a Purchase Agreement with Permatec
Holding AG ("Permatec"), Permatec Pharma AG, Permatec Technology AG, and
Permatec NV. Pursuant to the Purchase Agreement, on January 31, 2001, Antares
purchased all of the outstanding shares of the three Permatec Subsidiaries (the
"Share Transaction"). In exchange, Antares issued 2,900,000 shares of Antares
common stock to Permatec. Upon the issuance, Permatec owned approximately 67% of
the outstanding shares of Antares common stock. For accounting purposes,
Permatec is deemed to have acquired Antares. The acquisition has been accounted
for by the purchase method of accounting. The financial statements and related
disclosures that were previously reported for Medi-Ject have been replaced with
the Permatec financial statements and disclosures. The operating financial
history of Antares has become that of Permatec.

     Prior to the business combination, Permatec consisted of six entities: a
holding company with no activity and five integrated operating subsidiaries. Two
of the subsidiaries were not sold pursuant to the Purchase Agreement. The
activities of these two subsidiaries were primarily research and development
activities for other Permatec entities and to a lesser extent for third parties.
The substantive operations of these two entities were moved into the remaining
three subsidiaries as a result of restructuring activities undertaken by
Permatec prior to the business combination. As these activities were integral to
the historical financial statements of Permatec, they were included in the
historical financial statements of Permatec until the date of the business
combination at which time their net liabilities of $537,683 were reflected as a
deemed contribution of capital. Because the substance of the transaction was the
contribution on additional equity by the majority shareholder to the post-merger
entity, this transaction was recognized by the Company as an equity transaction
similar to the sale of stock by a subsidiary without recognition of a gain, as
prescribed by Staff Accounting Bulletin 84. These two entities have been fully
liquidated and were legally dissolved. The consolidation of the operations of
the five entities into three entities was for purposes of gaining efficiencies
in Permatec's operations and did not substantively change the consolidated
group's operations.

Principles of Consolidation

     As discussed in Note 3, on January 31, 2001 the Company completed a
business combination to acquire the three operating subsidiaries of Permatec,
headquartered in Basel, Switzerland. The accompanying consolidated financial
statements include the accounts of Antares Pharma, Inc. and its three
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.

Foreign Currency Translation

     Revenues of the subsidiaries are denominated in U.S. dollars, and any
required funding of the subsidiaries is provided by the U.S. parent. However,
nearly all operating expenses, including labor, materials, leasing arrangements
and other operating costs, are denominated in Swiss Francs. Additionally, bank
accounts are denominated in Swiss Francs, there is a low volume of intercompany
transactions and there is not an extensive


                                       47



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

1.  Description of Business and Summary of Significant Accounting Policies
    (Continued)

interrelationship between the operations of the subsidiaries and the parent
company. As such, under Financial Accounting Standards Board Statement No. 52,
"Foreign Currency Translation," the Company has determined that the Swiss Franc
is the functional currency for its three subsidiaries. The reporting currency
for the Company is the United States Dollar ("USD"). The financial statements of
the Company's three subsidiaries are translated into USD for consolidation
purposes. All assets and liabilities are translated using period-end exchange
rates and statements of operations items are translated using average exchange
rates for the period. The resulting translation adjustments are recorded as a
separate component of shareholders' equity. Foreign currency transaction gains
and losses are included in the statements of operations.

Cash Equivalents

     The Company considers highly liquid debt instruments with original
maturities of 90 days or less to be cash equivalents.

Inventories

     Inventories are stated at the lower of cost or market. Cost is determined
on a first-in, first-out basis. Certain components of the Company's products are
provided by a limited number of vendors. Disruption of supply from key vendors
may have a material adverse impact on the Company's operations.

Inventory Reserves

     The Company records reserves for inventory shrinkage and for potentially
excess, obsolete and slow moving inventory. The amounts of these reserves are
based upon inventory levels, expected product lives and forecasted sales demand.
Although management believes the likelihood to be relatively low, results could
be materially different if demand for the Company's products decreased because
of economic or competitive conditions, or if products became obsolete because of
technical advancements in the industry or by the Company. The Company recorded
inventory reserves of $105,000 and $50,000 at December 31, 2001 and 2002.

Deferred Financing Costs

     The Company capitalized costs associated with the issuance of its 10%
debentures. These costs were being amortized to interest expense over the
twelve-month period of the debentures, or recorded to additional-paid-in-capital
as an offset against net proceeds upon conversion of the debentures to common
stock. As further described in Note 5, the 10% debentures were restructured and
exchanged in January 2003 for 8% debentures. As a result of the debenture
restructuring, approximately $300,000 will be recognized as interest expense in
the first quarter of 2003, which represents the portion of the deferred
financing costs of $454,910 at December 31, 2002 that had not been amortized to
interest expense or recorded to additional-paid-in-capital as an offset against
net proceeds upon conversion of the debentures to common stock.

Equipment, Furniture, and Fixtures

     Equipment, furniture, and fixtures are stated at cost and are depreciated
using the straight-line method over their estimated useful lives ranging from
three to ten years. Certain equipment and furniture held under capital leases is
classified in equipment, furniture and fixtures and is amortized using the
straight-line method over the lesser of the lease term or estimated useful life,
and the related obligations are recorded as liabilities. Lease amortization is
included in depreciation expense.


                                       48



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

1.  Description of Business and Summary of Significant Accounting Policies
    (Continued)

Goodwill

     In July 2001, the Financial Accounting Standards Board issued SFAS 141,
"Business Combinations," and SFAS 142, "Goodwill and Other Intangible Assets."
SFAS 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. SFAS 142 changes the
accounting for goodwill from an amortization method to an impairment-only
approach. Thus, amortization of goodwill, including goodwill recorded in past
business combinations, ceased upon adoption of that Statement. The Company
adopted SFAS 142 in the first quarter of fiscal 2002 and, accordingly, evaluated
its existing intangible assets and goodwill that were acquired in the Share
Transaction. The Company concluded that $1,935,588 representing the unamortized
portion of the amount allocated to other intangible assets on the date of
adoption should be classified as goodwill as these intangible assets did not
meet the definition for separate accounting under SFAS 142. These amounts were
previously classified as workforce, ISO certification and clinical studies with
unamortized balances of $510,413, $271,588 and $1,153,587, respectively, at
December 31, 2001. Upon adoption of SFAS 142, the Company reassessed the useful
lives and residual values of all intangible assets acquired in purchase business
combinations, and determined that there were no amortization period adjustments
necessary.

     The Company adopted SFAS 141 during 2001 and adopted SFAS 142 effective
January 1, 2002. As of the date of adoption of SFAS 142, after reclassification
of other intangible assets as goodwill, the Company had approximately $3,095,355
of unamortized goodwill subject to the transition provisions of SFAS 141 and
142, all related to the Minnesota operations.

     In connection with the transitional goodwill impairment evaluation, SFAS
142 required the Company to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. To accomplish
this, the Company determined the fair value of the Minnesota operations and
compared it to the carrying amount. As of January 1, 2002, the fair value of the
Minnesota operations exceeded its carrying amount, and therefore there was no
indication that the goodwill was impaired. Accordingly, the Company was not
required to perform the second step of the transitional impairment test. Due to
a significant decline in the Company's stock price in the fourth quarter of 2002
and concerns about the continued existence of the Company due to continued net
losses and negative cash flows from operations, another review was completed as
of December 31, 2002. After the first step of the impairment test was performed,
there was an indication that the carrying amount of the Minnesota operations
exceeded its fair value, which required that the second step be performed. Fair
value was determined using the expected present value of future cash flows. In
the second step, the Company was required to compare the implied fair value of
the goodwill, determined by allocating the fair value of the Minnesota
operations to all of its assets (recognized and unrecognized) and liabilities
(in a manner similar to a purchase price allocation), to its carrying amount,
both of which were measured as of December 31, 2002. After completion of the
second step, the Company recorded a goodwill impairment charge of $2,000,000 in
the fourth quarter of 2002.

     For the three years ended December 31, 2000, 2001 and 2002, the goodwill
amortization, adjusted net loss and basic and diluted loss per share are as
follows:



                                                                   December 31,
                                                  --------------------------------------------
                                                       2000           2001            2002
                                                  -------------  -------------   -------------
                                                                        
         Net loss applicable to common shares
           as reported .......................... $ (5,260,387)  $(14,913,226)   $(11,708,765)
         Addback goodwill amortization ..........      177,963        464,434              --
                                                  ------------   ------------    ------------
         Adjusted net loss ...................... $ (5,082,424)  $(14,448,792)   $(11,708,765)
                                                  ============   ============    ============

         Basic and diluted loss per share:
             Net loss as reported ............... $      (1.22)   $     (1.76)    $     (1.22)
             Goodwill amortization ..............         0.04           0.06              --
                                                  ------------   ------------    ------------
          Adjusted net loss per share ........... $      (1.18)   $     (1.70)    $     (1.22)
                                                  ============   ============    ============



                                       49




                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

1.  Description of Business and Summary of Significant Accounting Policies
   (Continued)

     The Company's goodwill impairment analysis as of December 31, 2002
indicated that the Company's goodwill might be impaired which required the
Company to assess the recoverability of its capitalized patent portfolio costs
as of December 31, 2002. As a result of this analysis, the Company recognized an
impairment charge of $435,035 in research and development expenses for the year
ended December 31, 2002. The analysis of patent costs was performed by
management based on values provided through third-party corporate development
activities. After the impairment charge, the gross carrying amount and
accumulated amortization of patents, which are the only intangible assets of the
Company subject to amortization, was $2,603,262 and $446,088, respectively, at
December 31, 2002. The Company's estimated aggregate amortization expense for
the next five years is $174,000 in 2003 through 2006, and $140,000 in 2007.

     Goodwill arising from the purchase of minority ownership interests in 1996
was amortized on a straight-line basis over a period of five years. Prior to the
adoption of SFAS 142, goodwill arising from the Share Transaction described in
Note 3 was being amortized on a straight-line basis over a period of ten years
and the Company periodically estimated the future undiscounted cash flows to
which goodwill relates to ensure that the carrying value of goodwill had not
been impaired. To the extent the Company's undiscounted cash flows were less
than the carrying amount of goodwill, the Company would have recognized an
impairment charge.

Patent Rights

     The Company capitalizes the cost of obtaining patent rights. These
capitalized costs are being amortized on a straight-line basis over periods
ranging from six to ten years beginning on the earlier of the date the patent is
issued or the first commercial sale of product utilizing such patent rights.
Recoverability of such patent assets is evaluated when certain events or changes
in circumstances indicate that the carrying amount of patents may not be
recoverable.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

     Long-lived assets, including patent rights, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.

Fair Value of Financial Instruments

     All financial instruments are carried at amounts that approximate estimated
fair value.

Revenue Recognition of Product Sales

     The Company sells its proprietary needle-free injectors and related
disposable products through pharmaceutical and medical product distributors. The
Company's injectors and disposable products are not interchangeable with any
competitive products and must be used together. The Company recognizes revenue
upon shipment. The Company offers no price protection or return rights other
than for customary warranty claims. Sales terms and pricing are governed by
sales and distribution agreements.

Licensing and Product Development Revenue Recognition

     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin ("SAB") No. 101 which provides the Staff's views in applying
generally accepted accounting principles to selected revenue recognition issues.
The SAB provides additional guidance on when revenue is realized, earned and
properly recognized. The Company elected to adopt the cumulative deferral method
for recognizing milestone revenues beginning with the fourth quarter of fiscal
2000, effective January 1, 2000. This method defers milestone payments with
amortization to income over the contract term using the percentage of completion
or straight-line basis commencing with the achievement of a contractual
milestone. If the Company is required to refund any portion of a milestone
payment, the milestone will not be amortized into revenue until the repayment
obligation no longer exists.


                                       50




                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

1.  Description of Business and Summary of Significant Accounting Policies
    (Continued)

     Upon adoption of the cumulative deferral method, the Company recognized a
cumulative effect adjustment that increased its losses by $1,059,622 or $0.25
per share as of January 1, 2000. For the years ended December 31, 2000, 2001 and
2002, the Company recognized $277,200, $267,180 and $139,311, respectively, of
license revenues that were deferred at January 1, 2000 as the result of the
adoption of the cumulative deferral method.

     Prior to the adoption of the cumulative deferral method, licensing and
product development revenue was recognized when underlying performance criteria
for payment had been met and the Company had an unconditional right to such
payment. Depending on a license or product development agreement's terms,
recognition criteria were satisfied upon achievement of milestones or passage of
time. Milestone payments were typically triggered by the successful achievement
of important events such as the completion of clinical studies, filings with the
FDA, bioequivalence to other drugs, and approval by the FDA as defined by the
underlying licensing and product development agreement. The Company classified
amounts received related to the performance of a series of tasks, (e.g. testing
the transdermal penetration of a drug, manufacture of a clinical batch, etc.) as
product development revenues.

     The Company recognizes royalty revenues upon the sale of licensed products
by the licensee, and recognizes such revenue as license revenue. The Company
occasionally receives payment of up-front royalty advances from licensees. Upon
adoption of the cumulative deferral method, if specific objective evidence of
fair value exists, revenues from up-front royalty payments are deferred until
earned through the sale of licensed revenue from the licensee or the termination
of the agreement based on the terms of the license. If specific objective
evidence of fair value does not exist, revenues from up-front royalty payments
are recognized using the cumulative deferral method. The Company classifies
amounts received related to royalties from sales of products licensed by the
Company, which the Company developed or partially developed, as license revenues
in accordance with the terms of the underlying agreement.

     In certain cases the Company receives up-front payments upon signing
licensing and development agreements. Prior to the adoption of the cumulative
deferral method, if the up-front payment related to services already performed,
and there was no additional performance obligation under the agreement, the
amount was recognized as revenue in the period the payment was received. If the
Company had subsequent obligations under the agreement, or the payment did not
relate to services already provided, the amount was deferred in relation to the
performance requirements under the related licensing and development agreement.
Upon adoption of the cumulative deferral method, up-front license payments are
deferred and amortized into revenues on a straight-line basis.

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, no compensation expense has been recognized for stock-based
compensation plans. 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 and loss per share would
have increased to the pro-forma amounts shown below:



                                                               2000              2001             2002
                                                          --------------   ---------------   ---------------
                                                                                    
Net loss applicable to common shareholders:
     As reported ........................................ $  (5,260,387)   $  (14,913,226)   $  (11,708,765)
     Compensation expense ............................... $    (373,103)   $     (550,698)   $     (389,722)
                                                          -------------    --------------    --------------
     Pro forma .......................................... $  (5,633,490)   $  (15,463,924)   $  (12,098,487)
Basic and diluted net loss per common share:
     As reported ........................................ $       (1.22)   $        (1.76)   $        (1.22)
     Compensation expense ............................... $       (0.08)   $        (0.06)   $        (0.04)
                                                          -------------    --------------    --------------
     Pro forma .......................................... $       (1.30)   $        (1.82)   $        (1.26)



                                       51



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

1.  Description of Business and Summary of Significant Accounting Policies
    (Continued)

     The per share weighted-average fair value of stock based awards granted
during 2000, 2001 and 2002 is estimated as $1.20, $2.68 and $3.66 respectively,
on the date of grant using the Black-Scholes option pricing model with the
following assumptions:

                                              2000         2001          2002
                                              ----         ----          ----
Risk-free interest rate ..................... 5.5%         4.5%          4.5%
Annualized volatility ....................... 100%         130%          134%
Weighted average expected life, in years .... 5.0          5.0           5.0
Expected dividend yield ..................... 0.0%         0.0%          0.0%

     The Company accounts for stock-based instruments granted to nonemployees
under the fair value method of SFAS 123 and Emerging Issues Task Force (EITF)
96-18, "Accounting for Equity Instruments That Are issued to Other Than
Employees for Acquiring, or in Conjunction with Selling Goods or Services."
Under SFAS 123, options granted to nonemployees are recorded at their fair value
on the measurement date, which is typically the vesting date.

Product Warranty

     The Company provides a warranty on its needle-free injector devices.
Warranty terms for devices sold to end-users by dealers and distributors are
included in the device instruction manual included with each device sold.
Warranty terms for devices sold to corporate customers who provide their own
warranty terms to end-users are included in the contracts with the corporate
customers. The Company is obligated to repair or replace, at the Company's
option, a device found to be defective due to use of defective materials or
faulty workmanship. The warranty does not apply to any product that has been
used in violation of instructions as to the use of the product or to any product
that has been neglected, altered, abused or used for a purpose other than the
one for which it was manufactured. The warranty also does not apply to any
damage or defect caused by unauthorized repair or the use of unauthorized parts.
Warranty periods on devices range from 12 to 30 months from either the date of
retail sale of the device by a dealer or distributor or the date of shipment to
a customer if specified by contract. 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     Warranty      Warranty       Balance at
                        Year        Provisions      Claims       End of Year
                    ------------    -----------    --------      -----------
2002 ..............    $87,000       $238,555      $146,555         $179,000

Research and Development

     Research and development costs are expensed as incurred.

Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Company's significant accounting estimates relate to the
revenue recognition periods for license revenues, product warranty accruals,
obsolete inventory accruals, and determination of the fair value and
recoverability of goodwill and patent rights. Actual results could differ from
these estimates.


                                       52



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

1.  Description of Business and Summary of Significant Accounting Policies
    (Continued)

Advertising Expense

     Advertising costs (including production and communication costs) for 2000
and 2002 were insignificant, and for 2001 were approximately $45,000. Production
costs related to advertising are expensed as incurred.

Income Taxes

     Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Due to historical net losses of the
Company, a valuation allowance is established to offset the deferred tax asset.

Net Loss Per Share

     Basic EPS is computed by dividing net income or loss available to common
shareholders by the weighted-average number of common shares outstanding for the
period. Diluted EPS is computed similar to basic earnings per share except that
the weighted average shares outstanding are increased to include additional
shares from the assumed exercise of stock options, warrants or convertible debt,
if dilutive. The number of additional shares is calculated by assuming that
outstanding stock options or warrants were exercised and that the proceeds from
such exercise were used to acquire shares of common stock at the average market
price during the reporting period. If the convertible debentures were dilutive,
the associated interest expense and amortization of deferred financing costs,
net of taxes, would be removed from operations and the shares issued would be
assumed to be outstanding for the dilutive period. All potentially dilutive
common shares were excluded from the calculation because they were anti-dilutive
for all periods presented. At December 31, 2000, 2001 and 2002 the Company had
antidilutive stock options and warrants totaling 912,880, 1,612,360 and
1,878,288, respectively. At December 31, 2002 the principal balance of
anti-dilutive convertible debentures was $1,624,346.

Reclassifications

     Certain prior year amounts have been reclassified to conform to the current
year presentation. These reclassifications did not impact previously reported
net loss or net loss per share.

New Accounting Pronouncements

     In June 2002, the FASB issued SFAS 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS 146 addresses the financial accounting
and reporting for costs associated with exit and disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring). The provisions
of SFAS 146 are effective for exit or disposal activities that are initiated
after December 31, 2002, with early application encouraged. The Company will
adopt the provisions of SFAS 146 on January 1, 2003 and it may impact the timing
of loss recognition for any restructuring activities initiated subsequent to
adoption.

     In December 2002, the FASB issued SFAS 148, Stock Compensation. SFAS 148
provides alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, SFAS 148 amends the disclosure requirements of SFAS 123 to require
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The Company does not plan to change its method
of accounting for stock-based employee compensation. The Company will make the
required interim disclosures effective with the quarter ending March 31, 2003.


                                       53



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

1.  Description of Business and Summary of Significant Accounting Policies
   (Continued)

     In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities", which addresses accounting for special-purpose
and variable interest entities. The Company is required to adopt this guidance
for financial statements issued after December 31, 2002, and is currently
analyzing the impact of its adoption on the Company's financial statements.

     In December 2002, the EITF issued EITF 00-21, Revenue Arrangements with
Multiple Deliverables. This Issue addresses certain aspects of the accounting by
a vendor for arrangements under which it will perform multiple
revenue-generating activities. In some arrangements, the different
revenue-generating activities (deliverables) are sufficiently separable, and
there exists sufficient evidence of their fair values to separately account for
some or all of the deliverables (that is, there are separate units of
accounting). In other arrangements, some or all of the deliverables are not
independently functional, or there is not sufficient evidence of their fair
values to account for them separately. This Issue addresses when and, if so, how
an arrangement involving multiple deliverables should be divided into separate
units of accounting. This Issue does not change otherwise applicable revenue
recognition criteria. This Issue is applicable for the Company effective July 1,
2003 and could have an impact on revenue recognition of future licensing
transactions.

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 negative working capital of $11,712 and $4,188,234 at December 31, 2001 and
2002, respectively, and had incurred net losses and negative cash flows from
operating activities since inception, and incurred net losses of $5,260,387,
$9,499,101 and $11,608,765 in 2000, 2001 and 2002, respectively.

     The Company expects to report a net loss for the year ending December 31,
2003, 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 and the receipt of revenues from
sales of products.

     The Company's cash position is currently only sufficient to fund working
capital requirements through March 2003. Moreover, the Company has no immediate
access to additional capital. While the Company received a total of
EURO1,500,000 (approximately $1,600,000) from Ferring BV in connection with a
license agreement described in Note 16, those funds will not last beyond March
2003. Management's intentions are to attempt to raise additional capital through
alliances with strategic corporate partners, equity offerings, and/or debt
financing. However, there can be no assurance that the Company will ever become
profitable or that additional adequate funds will be available when needed or on
acceptable terms.

     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.

     On November 29, 2002, Nasdaq notified the Company that its stock had closed
below the minimum $1.00 per share requirement for continued listing on the
SmallCap Market. As of November 28, 2002, the Company's stock had traded at a
price below $1.00 per share for 30 consecutive days. Accordingly, the Company
has been provided 180 calendar days or until May 28, 2003 to regain compliance.
In order to achieve compliance, the bid price of the Company's common stock must
close at $1.00 per share or more for a minimum of ten consecutive trading days.
The Company has the ability under its Articles of Incorporation and Minnesota
law, without shareholder approval, to affect a reverse stock split thereby
reducing the number of shares outstanding and, in essence, increasing the price
of the common stock. Even if the Company were able to improve its stock price to
regain compliance, the Nasdaq rules also state that for continued inclusion on
the listing, the Company must meet one of three financial tests, which are


                                       54



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

2.   Going Concern (Continued)

having stockholders' equity of $2,500,000, market value of listed securities of
$35,000,000, or net income from operations of $500,000. As of December 31, 2002,
the Company does not meet any of the financial requirements for continued
listing on the Nasdaq SmallCap Market. In the event the Company is unable to
improve its stock price to regain compliance, Nasdaq will determine whether the
Company meets the initial listing criteria for the SmallCap Market, which is
having stockholders' equity of $5,000,000, market value of listed securities of
$50,000,000, or net income from continuing operations of $750,000. If the
Company meets the initial listing criteria, Nasdaq will grant the Company an
additional 180 days to demonstrate compliance. As of December 31, 2002, the
Company does not meet any of the financial requirements for initial listing on
the Nasdaq SmallCap Market. If the Company's stock were to be delisted, it would
constitute an event of default under the newly restructured 8% debentures, and
they would become due and payable at 130% of the outstanding principal and
accrued interest.

3.  Acquisition of Medi-Ject Corporation

     Upon closing of the Share Transaction on January 31, 2001, the full
principal amount of Permatec's shareholders' loans to the three Permatec
subsidiaries which were included in the Share Transaction, of $13,069,870, was
converted to equity. There were no shares issued pursuant to this conversion,
and the amounts were converted to additional paid-in capital using historical
values.

     Also on January 31, 2001, promissory notes issued by Medi-Ject to Permatec
between January 25, 2000 and January 15, 2001, in the aggregate principal amount
of $5,500,000, were converted into Series C Convertible Preferred Stock ("Series
C"). Permatec, the holder of the Series C stock, immediately exercised its right
to convert the Series C stock, and Antares issued 2,750,000 shares of common
stock to Permatec upon such conversion. Also on that date, the name of the
corporation was changed to Antares Pharma, Inc.

     The total consideration paid, or purchase price, for Medi-Ject was
approximately $6,889,974, which represents the fair market value of Medi-Ject
and related transaction costs of $480,095. For accounting purposes, the fair
value of Medi-Ject is based on the 1,424,729 shares of Medi-Ject common stock
outstanding on January 25, 2000, at an average closing price three days before
and after such date of $2.509 per share plus the estimated fair value of the
Series A convertible preferred stock and the Series B mandatorily redeemable
convertible preferred stock plus the fair value of outstanding stock options and
warrants representing shares of Medi-Ject common stock either vested on January
25, 2000, or that became vested at the close of the Share Transaction plus the
capitalized acquisition cost of Permatec.

     The purchase price allocation was as follows:

          Cash acquired ........................................ $   394,535
          Current assets .......................................     900,143
          Equipment, furniture and fixtures ....................   1,784,813
          Patents ..............................................   1,470,000
          Other intangible assets ..............................   2,194,000
          Goodwill .............................................   1,276,806
          Other assets .........................................       3,775
          Current liabilities ..................................  (2,026,723)
          Debt .................................................     (55,375)
          In-process research and development ..................     948,000
                                                                 -----------
          Purchase price ....................................... $ 6,889,974
                                                                 ===========

     In connection with the Share Transaction on January 31, 2001, the Company
acquired in-process research and development projects having an estimated fair
value of $948,000 that had not yet reached technological feasibility and had no
alternative future use. Accordingly, this amount was immediately expensed in the
Consolidated

                                       55



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

3.   Acquisition of Medi-Ject Corporation (Continued)

Statement of Operations. The fair value of in-process research and development
was determined by using discounted forecasted cash flows directly related to the
products expected to result from the research and development projects. The
discount rates used in the valuation take into account the stage of completion
and the risks surrounding the successful development and commercialization of
each of the purchased in-process technology projects that were valued. The
weighted-average discount rate used in calculating the present value of the
in-process technology was 65%. Projects included in the valuation were
approximately 10% to 40% complete and related to ongoing injection research,
mini-needle technology, pre-filled syringes and single-shot disposable injection
devices. The nature of the efforts to develop the acquired in-process research
and development into commercially viable products consists principally of
planning, designing and testing activities necessary to determine that the
products can meet market expectations, including functionality, technical and
performance requirements and specifications.

     Unaudited pro forma results of operations for the years ended December 31,
2000 and 2001, assuming Permatec's acquisition of Medi-Ject, the conversion of
the $5,000,000 in promissory notes, and the Company's implementation of SFAS
141, all collectively occurred on January 1, 2000 are as follows:



                                               Pro forma               Pro forma
                                               Year Ended              Year Ended
                                            -----------------       -----------------
                                            December 31, 2000       December 31, 2001
                                            -----------------       -----------------
                                                               
Net revenues .............................. $    2,553,284           $    3,811,362
Loss before cumulative effect of a
   change in accounting principle ......... $  (10,030,643)          $  (15,086,836)
Net loss .................................. $  (11,145,026)          $  (15,086,836)
Basic and diluted net loss per share ...... $        (1.63)          $       (1.78)


4.  Composition of Certain Financial Statement Captions

                                                        December 31,
                                                --------------------------
                                                    2001            2002
                                                -----------    -----------
Inventories:
     Raw material ...........................   $   254,890    $   238,177
     Work-in-process ........................        29,611         32,370
     Finished goods .........................       371,190        288,364
                                                -----------    -----------
                                                $   655,691    $   558,911
                                                ===========    ===========
Equipment, furniture and fixtures:
     Furniture, fixtures and office equipment   $ 1,254,568    $ 1,470,745
     Production equipment ...................     1,567,849      1,799,135
     Less accumulated depreciation ..........      (897,742)    (1,738,817)
                                                -----------    -----------
                                                $ 1,924,675    $ 1,531,063
                                                ===========    ===========
Patent rights:
     Patent rights ..........................   $ 2,697,975    $ 2,603,262
     Less accumulated amortization ..........      (233,639)      (446,088)
                                                -----------    -----------
                                                $ 2,464,336    $ 2,157,174
                                                ===========    ===========
Goodwill:
     Goodwill ...............................   $ 4,376,813    $ 2,557,909
     Less accumulated amortization ..........    (1,281,458)    (1,462,554)
                                                -----------    -----------
                                                $ 3,095,355    $ 1,095,355
                                                ===========    ===========


                                       56



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

4.  Composition of Certain Financial Statement Captions (Continued)



                                                                            December 31,
                                                                     ----------------------------
                                                                         2001            2002
                                                                     ------------    ------------
                                                                               
Accrued expenses and other liabilities:
     VAT (value added taxes) ....................................... $    291,678    $     27,295
     Customer deposits .............................................           --         499,337
     Other liabilities (each less than 5% of current liabilities) ..      779,238         994,545
                                                                     ------------    ------------
                                                                     $  1,070,916    $  1,521,177
                                                                     ============    ============


5.  Convertible Debentures

     In July 2002, the Company sold $2,000,000 aggregate principal amount of its
10% debentures, with $700,000 maturing on July 12, 2003, $700,000 maturing on
July 26, 2003 and $600,000 maturing on October 15, 2003. The debentures were
convertible into shares of the Company's common stock at a conversion price
which is the lower of $2.50 or 75% of the average of the three lowest intraday
prices of the Company's common stock, as reported on the Nasdaq SmallCap Market,
during the 20 trading days preceding the conversion date. From October 10, 2002
to January 17, 2003, three of the original four holders of the 10% debentures
converted $581,000 of principal into 1,777,992 shares of common stock at an
average conversion price of approximately $0.327 per share. Two of the original
four holders accounted for the conversion of $536,000 of principal into
1,660,863 shares of common stock. As a result of the Company's low common stock
price, the 10% debentures became highly dilutive to the Company's current common
shareholders.

     To reduce the risk of substantial dilution to common shareholders in the
near-term, on February 7, 2003, the Company completed a restructuring of its 10%
debentures previously sold to four primary investors. Specifically, as part of
this restructuring, on January 24, 2003 and January 31, 2003, the Company
borrowed an aggregate of $621,025 from Xmark Funds. The Company used the
proceeds of these borrowings to repurchase $476,825 principal amount of the 10%
debentures previously sold to the two original 10% debenture holders who had
converted $536,000 of principal into common stock. This purchase price included
accrued interest of $12,825 and a repurchase premium of $144,200. As additional
repurchase compensation, the Company issued warrants to one of the two original
10% debenture holders and paid $5,000, in lieu of warrants, to the other.
Thereafter, in exchange for the surrender and cancellation of the promissory
notes, the Company issued to Xmark Funds 8% Senior Secured Convertible
Debentures in the same principal amount of the promissory notes. The Company
intends to pay cash for interest in the amount of $679 that accrued on the
promissory notes. The Company also exchanged Amended and Restated 8% Senior
Secured Convertible Debentures for the remaining outstanding principal and
accrued interest of $955,000 and $37,230, respectively, of the original 10%
debentures. The aggregate principal amount of the 8% debentures is $1,613,255.
The 8% debentures contain substantially the same terms as the 10% debentures,
except that the 8% debentures include a fixed conversion price of $.50 per share
and an interest rate of 8% per annum. The 8% debentures are due March 31, 2004.
The Company granted a senior security interest in substantially all of its
assets to the holders of the 8% debentures. If all remaining debentures were
converted at the $0.50 conversion price, a total of 3,226,511 shares would be
issued, which would result in substantial dilution to current shareholders. In
connection with this restructuring, the Company also issued to the holders of
the 8% debentures five-year warrants to purchase an aggregate of 2,932,500
shares of the Company's common stock at an exercise price of $0.55 per share.
The warrants are redeemable at the option of the Company upon the achievement of
certain milestones set forth in the warrants.

     Although Company has completed the refinancing with the 8% debentures that
are due March 31, 2004, the 10% debentures outstanding as of December 31, 2002
have been classified as a current liability at December 31, 2002. One of the
events of default of the 8% debentures is if the Company's common stock is
delisted from the Nasdaq SmallCap Market. As discussed in Note 2, on November
29, 2002, Nasdaq notified the Company that its stock had closed below the
minimum $1.00 per share requirement for continued listing on the SmallCap Market
and,


                                       57



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

5.   Convertible Debentures (Continued)

accordingly, the Company has been provided 180 calendar days or until May 28,
2003 to regain compliance. Additionally, another of the financial requirements
for continued listing on the Nasdaq SmallCap Market is having stockholders'
equity of $2,500,000. At December 31, 2002, the Company's stockholders' equity
is $655,288. The Company does not currently have a mechanism in place to assure
compliance with either Nasdaq requirement. Therefore, it is possible the Company
will be delisted from the Nasdaq SmallCap Market, resulting in an event of
default of the 8% debentures, in which case the debentures become immediately
due and payable.

     The Company granted the holders of the 8% debentures customary demand and
piggyback registration rights with respect to the shares of its common stock
issuable upon conversion of the same or upon exercise of the warrants. These
registration rights are substantially similar to the registration rights granted
to the original holders of the 10% debentures.

     Upon conversion of the 8% debentures and exercise of the warrants, the
Company will be obligated to issue an aggregate of 6,159,011 shares of its
common stock, resulting in the holders of the 8% debentures and warrants owning
in excess of 34% of the Company's common stock. Pursuant to NASD Marketplace
Rules, the Company must obtain shareholder approval for the issuance of 20% or
more of its currently outstanding shares. Therefore, under the terms of the 8%
debentures and warrants, the holders thereof may not convert the 8% debentures
or exercise the warrants for more than 19.99% of the number of shares of the
Company's common stock outstanding on January 31, 2003, or 2,366,337 shares,
until the Company obtains shareholder approval for the transaction and related
stock issuances. The Company intends to seek such approval at a special
shareholders meeting. In connection with the restructuring transaction, the
Company's majority shareholder, Dr. Jacques Gonella, delivered a letter of
undertaking to the holders of the 8% debentures stating that he would vote in
favor of allowing the issuance of the Company's common stock upon conversion or
exercise of the 8% debentures or warrants.

     In connection with the restructuring of the 10% debentures, the Company
will recognize the difference between the fair value of the 10% debentures plus
the 8% bridge notes and the fair value of the 8% debentures and related warrants
in the Company's quarter ending March 31, 2003 consolidated financial
statements. The Company has not yet determined this amount, however, it may
represent a material charge to the Company's results of operations.

     As a result of the debenture restructuring, approximately $300,000 will be
recognized as interest expense in the first quarter of 2003, which represents
the portion of the deferred financing costs of $454,910 at December 31, 2002
that had not been amortized to interest expense or recorded to
additional-paid-in-capital as an offset against net proceeds upon conversion of
the debentures to common stock. Additionally, as a result of the debenture
restructuring, approximately $700,000 will be recognized as expense in the first
quarter of 2003, which represents the unamortized debt issuance discount related
to the intrinsic value of the beneficial in-the-money conversion feature of the
10% debentures.

6.  Restructuring Activities

     The Company recorded $266,790 of restructuring expenses during the year
ended December 31, 2000. Such expenses were in connection with the closure of
the Company's developmental facility in Argentina and termination of employees
associated with the Company's business development, patent administration,
project management and administrative functions in France. The Company recorded
all restructuring charges incurred during the year ended December 31, 2000, as
general and administrative expense.

     The restructuring charge is primarily comprised of involuntary severance
benefits and other incremental costs of exiting facilities, including lease
termination costs, and write-off of certain assets. In connection with the
closure of these facilities, the Company involuntarily terminated in 1999
approximately 25 employees, of which 13 were entitled to receive severance
benefits. The restructuring charges incurred during 2000 included involuntary
severance benefits of $178,257 for two employees of the Company's French
operations resulting from an out of court arbitration settlement finalized in
March 2000.


                                       58



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

6.   Restructuring Activities (Continued)

     The Company reported charges of approximately $17,000 related to the
write-off of assets which were disposed of in connection with the closure of the
France and Argentina facilities for the year ended December 31, 2000. The assets
disposed of consisted of certain laboratory equipment and office equipment that
the Company decided not to transfer to its central facilities in Basel,
Switzerland.

     The Company undertook these restructuring actions as part of its efforts to
reduce costs and to centralize its developmental and administrative functions in
Switzerland. These restructuring programs were completed during the year ended
December 31, 2000. The following table provides a summary of the Company's
restructuring provision activity:

                               Severance                 Facilities,
                                  and         Asset       Legal and
                                Benefits    Impairment      Other        Total
                               ---------    ----------   -----------  ---------
Balance December 31, 1999 .... $ 179,288    $    --      $ 101,528    $ 280,816
   2000 restructuring expenses   178,257       17,000       71,533      266,790
   Amount utilized in 2000 ...  (357,545)     (17,000)    (173,061)    (547,606)
                               ---------    ---------    ---------    ---------
Balance December 31, 2000 .... $    --      $    --      $    --      $    --
                               =========    =========    =========    =========

7.  Leases

     The Company has non-cancelable operating leases for its office, research
and manufacturing facility in Minneapolis, MN, for office space in Exton, PA,
and for its office and research facility in Basel, Switzerland. The leases
require payment of all executory costs such as maintenance and property taxes.
The Company also leases certain equipment and furniture under various operating
and capital leases. The cost of equipment and furniture under capital leases at
December 31, 2001 and 2002 was $245,905 and $340,963, respectively, and
accumulated amortization was $113,478 and $252,804, respectively.

     Rent expense incurred for the years ended December 31, 2000, 2001 and 2002
was $143,349, $421,942, and $559,512 respectively.

Future minimum lease payments are as follows as of December 31, 2002:



                                                               Capital          Operating
                                                               Leases            Leases
                                                             --------------    ------------
                                                                         
     2003 .................................................. $    110,446      $    473,781
     2004 ..................................................       37,001           350,767
     2005 ..................................................           --           204,515
     2006 ..................................................           --           201,865
     2007 ..................................................           --           201,865
     Thereafter ............................................           --           168,222
                                                             ------------      ------------
     Total future minimum lease payments ...................      147,447      $  1,601,015
                                                                               ============
     Amount representing interest at various rates
         up to 18.3% .......................................       (9,975)
                                                             ------------
     Obligations under capital leases ......................      137,472
     Obligations due within one year .......................     (106,493)
                                                             ------------
     Long-term obligations under capital leases ............ $     30,979
                                                             ============



                                       59



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

8.  Income Taxes

     The Company incurred losses for both book and tax purposes in each of the
years in the three-year period ended December 31, 2002, and, accordingly, only
insignificant amounts of income taxes were provided. In 2000 the Company was
subject to Swiss taxes and in 2001 and 2002 was subject to taxes in both the
U.S. and Switzerland. Effective tax rates differ from statutory income tax rates
in the years ended December 31, 2000, 2001 and 2002 as follows:

                                                     2000      2001       2002
                                                   --------   -------   -------
     Statutory income tax rate ...................  (20.0)%   (34.0)%   (34.0)%
     State income taxes, net of federal benefit ..     --      (0.0)     (0.0)
     Research and experimentation credit .........     --      (0.6)     (0.3)
     In-process research and development costs ...     --       3.4       --
     Intangibles impairment ......................     --        --       7.1
     Valuation allowance increase ................   17.0      30.7       7.5
     Expiration of net operating losses ..........     --        --       7.3
     Effect of foreign operations ................     --        --      12.3
     Other .......................................    3.0       0.5       0.1
                                                   --------   -------   -------
                                                      0.0%      0.0%      0.0%
                                                   ========   =======   =======

Deferred tax assets as of December 31, 2001 and 2002 consist of the following:

                                                         2001          2002
                                                     ------------  ------------
     Net operating loss carryforward - U.S. ......   $ 12,253,000  $ 13,480,000
     Net operating loss carryforward - Switzerland      1,156,000     1,946,000
     Research & development costs and credit
       carryforward ..............................      1,619,000       721,000
     Other .......................................        704,000       675,000
                                                     ------------  ------------
                                                       15,732,000    16,822,000
     Less valuation allowance ....................    (15,732,000)  (16,822,000)
                                                     ------------  ------------
                                                     $         --  $         --
                                                     ============  ============

     The valuation allowance for deferred tax assets as of December 31, 2001 and
2002 was $15,732,000 and $16,822,000, respectively. The net change in the total
valuation allowance for the years ended December 31, 2001 and 2002 was an
increase of $13,505,400 and $1,090,000, respectively. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income and tax planning
strategies in making this assessment. Due to the uncertainty of realizing the
deferred tax asset, management has placed a valuation allowance against the
entire deferred tax asset.

     The Company has a U.S. federal net operating loss carryforward at December
31, 2002, of approximately $35,000,000, which is available to reduce income
taxes payable in future years. If not used, this carryforward will expire in
years 2003 through 2023. Additionally, the Company has a research credit
carryforward of approximately $721,000. These credits expire in years 2009
through 2023.

         The Company also has a Swiss net operating loss carryforward at
December 31, 2002, of approximately $14,345,000, which is available to reduce
income taxes payable in future years. If not used, this carryforward will expire
in years 2004 through 2010.


                                       60



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

8.  Income Taxes (Continued)

     The U.S. net operating losses and tax credits of Antares Pharma, Inc. are
subject to annual limitations under Internal Revenue Code Sections 382 and 383,
respectively, as a result of significant changes in ownership, including the
business combination with Permatec and private placements. Subsequent
significant equity changes, which could occur through exercise of outstanding
warrants or conversion of the convertible debentures discussed in Note 5, could
further limit the utilization of the net operating losses and credits. The
annual limitations have not yet been determined; however, when the annual
limitations are determined, the gross deferred tax assets for the net operating
losses and tax credits will be reduced with a reduction in the valuation
allowance of a like amount.

9.  Shareholders' Equity

     As discussed in Note 3, on January 31, 2001 Medi-Ject Corporation purchased
Permatec Pharma AG, Permatec Technology AG, and Permatec NV from Permatec
Holding AG ("Permatec"). The acquisition was consummated under the purchase
method of accounting and Medi-Ject Corporation changed its name to Antares
Pharma, Inc. The transaction was accounted for as a reverse acquisition because
upon completion of the transaction the shareholders of Permatec held
approximately 67% of the outstanding common shares. Accordingly, Permatec is
deemed to have acquired Medi-Ject Corporation. As a result, the historical
financial statements are those of Permatec. However, the outstanding common
shares, preferred shares, stock warrants and employee, consultant and director
stock options of Antares Pharma, Inc. are those that existed under Medi-Ject
Corporation, adjusted for shares issued in the purchase transaction. The
employee, consultant and director stock options outstanding on January 31, 2001
became fully vested as a result of the purchase transaction.

     In February and March of 2001 the Company raised $9,991,391 of net proceeds
through an issuance of common stock Units to accredited investors in a private
placement transaction. Each Unit was sold for $23.44 and consisted of (i) four
shares of common stock, $0.01 par value, and (ii) a warrant to purchase one
share of common stock. These five-year warrants allow for the purchase of
426,620 shares of common stock, at an exercise price of $7.03 per share.

     In October 2001 the Company issued 188,063 shares of common stock valued at
$517,173 in connection with a technology acquisition agreement with Endoscoptic,
Inc. ("Endoscoptic"), a French Company, to purchase certain patents, patent
applications, trademarks, trade secrets, know-how and other related technology
incorporating or relating to the Hiprin single-use, needle-free, pre-filled,
disposable syringe.

     On June 10, 2002, the Company's majority shareholder, Dr. Jacques Gonella,
converted principal and interest of $2,036,550, loaned to the Company under a
Term Note agreement, into 509,137 shares of common stock at $4.00 per share, the
market price of the Company's stock on that date.

     During 2002 a total of 118,810 shares of common stock were issued to
non-employees as compensation for services rendered during 2002. The total value
of the shares issued was $304,300, based on the market price of the stock on the
dates the shares were issued.

Series A Convertible Preferred Stock

     On November 10, 1998, the Company sold 1,000 shares of Series A Convertible
Preferred Stock ("Series A") and warrants to purchase 56,000 shares of common
stock to Elan International Services, Ltd., for total consideration of
$1,000,000. The Series A carries a 10% dividend which is payable semi-annually.
The Series A is redeemable at the Company's option at any time and is
convertible into common stock for sixty days following the 10th anniversary of
the date of issuance at the lower of $7.50 per share or 95% of the market price
of the Common Stock. The warrants to purchase Common Stock may be exercised at
any time prior to November 10, 2005, at a price of $12.40 per share.


                                       61



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

9.  Shareholders' Equity (Continued)

Conversion of Series B Convertible Preferred Stock to Common Stock

     On December 22, 1999, the Company sold 250 shares of Series B Convertible
Preferred Stock ("Series B") to Bio-Technology General Corporation for total
consideration of $250,000. The Series B did not carry a dividend rate. Series B
was automatically converted on June 30, 2001, into 100,000 shares of common
stock pursuant to the terms of the Series B stock agreement.

In-The-Money Conversion Feature-Preferred Stock Dividend

     During 2000 and 2001, prior to the closing of the Share Transaction on
January 31, 2001, Medi-Ject borrowed a total of $5,500,000 in convertible
promissory notes from Permatec. At the closing of the Share Transaction, the
principal amount of convertible promissory notes converted to 27,500 shares of
Series C preferred stock. At the option of the holder, these shares were
immediately converted into 2,750,000 shares of Antares common stock. As the
conversion feature to common stock was contingent upon the closing of the Share
Transaction, the measurement of the stated conversion feature as compared to the
Company's common stock price of $4.56 at January 31, 2001, resulted in an
in-the-money conversion feature of $5,314,125, which is a deemed dividend to the
Series C preferred shareholder. This dividend increases the net loss applicable
to common shareholders in the Antares' net loss per share calculation.

Convertible Debentures Beneficial Conversion Feature and Conversion into Common
Stock

     As discussed in Note 5, on July 12, 2002 the Company entered into a
Securities Purchase Agreement for the sale and purchase of up to $2,000,000
aggregate principal amount of the Company's 10% Convertible Debentures. As the
per share conversion price of the debentures was substantially lower than the
market price of the common stock on the date the debentures were sold, the
Company recorded a debt issuance discount of $1,720,000 in 2002 for the
intrinsic value of the beneficial in-the-money conversion feature of the
debentures. Interest expense of $606,456 was recorded as accretion of the
$1,720,000 of debt issuance discount over the original one year redemption
period, and an additional $222,357 of the debt issuance discount was recorded as
interest expense due to conversions of the 10% debentures to common stock. As of
December 31, 2002, $382,750 of the debentures had been converted into 896,880
shares of common stock.

Restricted Stock

     Roger G. Harrison, Ph.D., was appointed Chief Executive Officer of Antares
Pharma, Inc., effective March 12, 2001. The terms of the employment agreement
with Dr. Harrison include up to 216,000 restricted shares of common stock that
will be granted after the achievement of certain time-based and
performance-based milestones. The Company anticipates the time-based milestones
will be achieved and has recorded deferred compensation expense related to
48,000 shares issued to Dr. Harrison in April 2001 and 40,000 shares issued in
March 2002. The shares vest over a three-year period and had an aggregate market
value of $341,000 at the measurement date. Compensation expense is being
recognized ratably over the three-year vesting period. During the years ended
December 31, 2001 and 2002, compensation expense of $89,984 and $113,664,
respectively, has been recognized in connection with these shares.

Stock Options and Warrants

     The Company's stock option plans allow for the grants of options to
officers, directors, consultants and employees to purchase shares of Common
Stock at exercise prices not less than 100% of fair market value on the dates of
grant. The term of the options is either ten or eleven years and they vest in
varying periods. As of December 31, 2002, these plans had 374,893 shares
available for grant.

                                       62



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

9.  Shareholders' Equity (Continued)

     Warrants were issued in connection with debt financing, financial
consulting and technology procurement during 1996 through 2002. The terms of the
warrants do not exceed ten years and vest in varying periods. During 2000, the
Company granted 26,500 warrants to non-employees for services rendered during
2000. In 2001 the Company completed a private placement of common stock in which
426,620 warrants were issued. Under the terms of an equity advisor agreement in
connection with the Company's 10% Convertible Debentures, the Company issued in
July and October 2002, warrants to purchase an aggregate of 112,000 and 48,000
shares, respectively, valued at $412,118 and $54,899, respectively, which were
recorded to deferred financing costs. During 2002 the deferred financing costs
were being amortized to interest expense over the one-year life of the
debentures. As debentures are converted to common stock, the unamortized portion
of the allocated deferred financing costs is recorded to additional paid in
capital. As discussed in Note 5, a restructuring of the Company's 10% debentures
was completed on February 7, 2003, and as a result the remaining unamortized
deferred financing costs will be recognized as interest expense in the first
quarter of 2003.

     Stock option and warrant activity is summarized as follows:

                                                                      Weighted
                                                     Number           average
                                                   of Shares           prices
                                                   ---------        -----------
Outstanding at December 31, 1999 ................    848,850              20.68
     Granted ....................................    360,217               1.79
     Exercised ..................................     (5,607)              1.56
     Canceled ...................................   (290,580)              7.41
                                                   ---------        -----------
Outstanding at December 31, 2000 ................    912,880              17.55
     Granted ....................................    822,620               5.84
     Exercised ..................................    (38,307)              1.56
     Canceled ...................................    (84,833)             19.11
                                                   ---------        -----------
Outstanding at December 31, 2001 ................  1,612,360              11.51
     Granted ....................................    303,622               3.48
     Exercised ..................................         --                 --
     Canceled ...................................    (37,694)              4.09
                                                   ---------        -----------
Outstanding at December 31, 2002 ................  1,878,288        $     10.59
                                                   =========        ===========

     The following table summarizes information concerning currently outstanding
and exercisable options and warrants by price range at December 31, 2002:



- --------------------- --------------------------------------------------------- --------------------------------------
                                            Outstanding                                      Exercisable
- --------------------- --------------------------------------------------------- --------------------------------------
                                          Weighted Average
                      Number of Shares     Remaining Life    Weighted Average      Number      Weighted Average
    Price Range          Outstanding          In Years        Exercise Price     Exercisable    Exercise Price
- --------------------- ------------------ ------------------- ------------------ ------------- ------------------
                                                                                    
Pursuant  to  Option
Plans:
$    1.56                    262,115              4.9             $  1.56           262,115        $  1.56
     4.56                    472,570              8.5                4.56           181,791           4.56
     9.05 to 16.40             7,514              4.9               11.76             6,714          12.04
     23.00                    76,162              3.1               23.00            76,162          23.00
                           ---------              ---             -------         ---------        -------
                             818,361              6.8             $  5.38           526,782        $  5.83
                           ---------              ---             -------         ---------        -------
Warrants:
$    2.40 to 4.66            196,500              8.3             $  2.79           196,500        $  2.79
     7.03                    426,620              3.1                7.03           426,620           7.03
     12.40                    56,000              2.9               12.40            56,000          12.40
     29.55                   380,807              3.1               29.55           380,807          29.55
                           ---------              ---             -------         ---------        -------
                           1,059,927              4.1               14.62         1,059,927          14.62
                           ---------              ---             -------         ---------        -------
Total Options &
Warrants                   1,878,288              5.3             $ 10.59         1,586,709        $ 11.70
                           =========              ===             =======         =========        =======
- --------------------- ------------------ ------------------- ------------------ ------------- ------------------



                                       63



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

10.  Employee Savings Plan

     The Company has an employee savings plan that covers all U.S. employees who
have met minimum age and service requirements. Under the plan, eligible
employees may contribute up to 50% of their compensation into the plan. At the
discretion of the Board of Directors, the Company may contribute elective
amounts to the plan, allocated in proportion to employee contributions to the
plan, employee's salary, or both. No elective contributions have been made for
the year ended December 31, 2002.

11.  Supplemental Disclosures of Cash Flow Information

     The Company did not make any cash payments for interest during the year
ended December 31, 2000. All interest expense incurred in that year related to
its subordinated loans from shareholders and has been included in the
outstanding loan balance at December 31, 2000. Cash paid for interest during the
years ended December 31, 2001 and 2002 was $100,837 and $21,451, respectively.

     Cash paid for taxes during the years ended December 31, 2000, 2001 and 2002
was $1,231, $2,026 and $1,104, respectively.

     The Company incurred capital lease obligations of $96,550, $142,729 and
$42,266 in the years ended December 31, 2000, 2001 and 2002, respectively.

     In connection with the purchase transaction discussed in Note 3, Permatec's
primary shareholder, Dr. J. Gonella, advanced operating funds directly to
Medi-Ject Corporation on behalf of Permatec. As a result of these transactions
Permatec had recorded $4,100,000 in notes receivable and a corresponding
increase in subordinated loans from shareholders. In addition, Permatec incurred
acquisition related costs of $1,033,296, which were billed to Medi-Ject pursuant
to the terms of the amended acquisition agreement. At December 31, 2000, an
aggregate of $900,000 of the acquisition cost obligation was converted to notes
receivable, bringing the total to $5,000,000 in notes receivable from Medi-Ject
Corporation, and $133,296 is reflected as due from Medi-Ject Corporation.

     As a result of the purchase transaction described in Note 3, the appraised
value of the assets and liabilities of Medi-Ject as of January 31, 2001 were
added to those of Permatec. In addition, subordinated loans from shareholders of
$13,069,870 were converted to equity.

     The Company recorded $341,000 of deferred compensation expense related to
48,000 shares of common stock issued in April 2001 to its Chief Executive
Officer and 40,000 shares issued in March 2002. Compensation expense of $89,984
and $113,664 was recognized in connection with these shares during the years
ended December 31, 2001 and 2002, respectively.

     During 2001 the Company extended the expiration date of certain directors'
stock options, resulting in recognition of compensation expense and an increase
to additional paid in capital of $45,284.

     In October 2001 the Company issued 188,063 shares of common stock in
connection with a technology acquisition agreement with Endoscoptic, Inc., a
French Company, to purchase certain patents, patent applications, trademarks,
trade secrets, know-how and other related technology incorporating or relating
to the Hiprin single-use, needle-free, pre-filled, disposable syringe. As a
result of the issuance of these shares, both patents and equity were increased
by $517,173.

     In each of the years 2001 and 2002, the Company paid $100,000 of dividends
payable to the Series A shareholder through the issuance of additional shares of
Series A preferred stock.

                                       64



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

11.  Supplemental Disclosures of Cash Flow Information (Continued)

     On June 10, 2002, the Company's majority shareholder, Dr. Jacques Gonella,
converted principal and interest of $2,036,550, loaned to the Company under a
Term Note agreement, into 509,137 shares of common stock at $4.00 per share, the
market price of the Company's stock on that date.

     During 2002, a total of 118,810 shares of common stock were issued to
non-employees as compensation for services rendered during 2002. The total value
of the shares issued was $304,300, based on the market price of the stock on the
dates the shares were issued.

     As discussed in Note 5, on July 12, 2002 the Company entered into a
Securities Purchase Agreement for the sale and purchase of up to $2,000,000
aggregate principal amount of the Company's 10% Convertible Debentures. As the
per share conversion price of the debentures was substantially lower than the
market price of the common stock on the date the debentures were sold, the
Company recorded a debt issuance discount of $1,720,000 in 2002 for the
intrinsic value of the beneficial in-the-money conversion feature of the
debentures. As of December 31, 2002, $382,750 of the debentures had been
converted into 896,880 shares of common stock.

     Under the terms of an equity advisor agreement in connection with the
Company's 10% Convertible Debentures, the Company issued in July and October
2002, 112,000 and 48,000 warrants, respectively, valued at $412,118 and $54,899,
respectively.

12.  License Agreements

Segix License Agreement

     In May 1999, the Company entered into an exclusive agreement to license one
application of its drug-delivery technology to Segix Italia S.p.a. ("Segix") in
Italy, the Vatican and San Marino (collectively, "the Segix Territories"). The
Company is required to transfer technology know-how, provide technical
assistance, and to reimburse an estimated $75,000 to Segix for one-half of the
cost of a bio-equivalency study, if that study is required by the Italian
regulatory authorities. Segix will use the licensed technology to seek marketing
approval of a hormone replacement therapy product. The license agreement
requires Segix to pay a $25,000 exclusivity fee, $125,000 upon signing of the
license, $100,000 upon the first submission by Segix to any one of the
regulatory authorities in the Segix Territories, $100,000 upon the first
completed registration with any of the regulatory officials in the Segix
Territories, and $150,000 upon the earlier of receipt of reimbursement
classification from regulatory authorities or the launch of product sales in the
Segix Territories.

     The Company must also provide Segix with licensed product under a supply
agreement that runs for two years from the date of first delivery of products
ordered by Segix, which is automatically renewable for additional one-year
periods unless terminated by either party. The supply agreement is a separately
priced, independent agreement that is not tied to the license agreement. The
Company will receive from Segix a 5% royalty from the sale of licensed products
in the Segix Territories.

     In 2000, the Company adopted the cumulative deferral method for recognizing
revenue, which results in the ratable revenue recognition of milestone payments
from the date of achievement of the milestone through the date that is the
earlier of receipt of reimbursement classification from regulatory authorities
or the launch of product sales in the Segix Territories. The Company had
expected the receipt of reimbursement classification from regulatory authorities
to occur first, and had estimated this date to be March 2003. Because of this,
the Company has recognized the first two milestone payments of $125,000 and
$100,000 over estimated 47 and 46-month periods, respectively, ending March
2003. The project has been temporarily stopped. The final two milestone payments
will be recognized ratably from the date the milestone payment is earned until
the date estimated to be the earlier of receipt of reimbursement classification
from regulatory authorities or the launch of product sales in the Segix
Territories.

                                       65



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

12.  License Agreements (Continued)

Solvay License Agreement

     In June 1999, the Company entered into an exclusive agreement to license
one application of its drug-delivery technology to Solvay Pharmaceuticals
("Solvay") in all countries except the United States, Canada, Japan and Korea
(collectively, "the Solvay Territories"). The Company is required to transfer
technology know-how and to provide developmental assistance to Solvay until each
country's applicable regulatory authorities approve the licensed product. Solvay
will reimburse the Company for all technical assistance provided during Solvay's
development. Solvay will use the licensed technology for the development of a
hormone replacement therapy gel. The license agreement requires Solvay to pay
the Company milestone payments of $1,000,000 upon signing of the license,
$1,000,000 upon the start of Phase IIb/III clinical trials, as defined in the
agreement, $1,000,000 upon the first submission by Solvay to regulatory
authorities in the Solvay Territories, and $2,000,000 upon the first completed
registration in either Germany, France or the United Kingdom. The Company will
receive from Solvay a 5% royalty from the sale of licensed products. In 2002 the
agreement was amended to change the terms associated with the second $1,000,000
milestone payment, resulting in a payment of $500,000 received in 2002, and two
$250,000 payments to be received upon satisfaction of certain conditions.

     In 2000, the Company adopted the cumulative deferral method for recognizing
revenue, which results in the ratable revenue recognition of milestone payments
from the date of achievement of the milestone through the estimated date of the
first completed registration in either Germany, France or the United Kingdom.
The Company expects the first completed registration to occur in April 2006. The
Company is recognizing the first $1,000,000 milestone payment over a period of
83 months, the $500,000 received in 2002 over 49 months, and will recognize the
two $250,000 payments and the third $1,000,000 payment from the date the
milestone is earned until the estimated date of the first completed
registration.

BioSante License Agreement

     In June 2000, the Company entered into an exclusive agreement to license
four applications of its drug-delivery technology to BioSante Pharmaceuticals,
Inc. ("BioSante") in the United States, Canada, China, Australia, New Zealand,
South Africa, Israel, Mexico, Malaysia and Indonesia (collectively, "the
BioSante Territories"). The Company is required to transfer technology know-how
and to provide significant development assistance to BioSante until each
country's regulatory authorities approve the licensed product. BioSante will use
the licensed technology for the development of hormone replacement therapy
products. At the signing of the contract, BioSante made an upfront payment to
the Company, a portion of which will offset future royalties from BioSante's
sale of licensed products and/or sublicense up front payments. This milestone
payment was for the delivery of intellectual property to BioSante. BioSante is
required to tender milestone payments upon commencement of manufacturing of each
of the first two licensed products. In the event that the Company fails to
produce or have produced the ordered clinical batches, then the Company is
required to repay 25% of these two milestone payments to BioSante.

     The Company will receive payments upon the achievement of certain
milestones and will receive from BioSante a royalty from the sale of licensed
products. The Company will also receive a portion of any sublicense fees
received by BioSante. The Company is obligated to incur the first $150,000 of
production costs for each of the four products, for an aggregate of $600,000.
The Company is further obligated to provide BioSante licensed products under a
twenty-year supply agreement. The supply agreement is a separately priced,
independent agreement that is not tied to the license agreement.

     In the agreement, the Company has granted BioSante the option for
additional licensed territories and the licensed products. The Company will
receive additional milestone payments if this option is exercised.

                                       66



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

12.  License Agreements (Continued)

     In 2000, the Company adopted the cumulative deferral method for recognizing
revenue, which results in the ratable revenue recognition of milestone payments
from the date of achievement of the milestone through the estimated date of
receipt of final regulatory approval in the BioSante Territory. The Company is
recognizing the initial milestone payment in revenue over a 74-month period. All
other milestone payments will be recognized ratably on a product-by-product
basis from the date the milestone payment is earned and all repayment
obligations have been satisfied until the receipt of final regulatory approval
in the BioSante Territory for each respective product. It is expected that these
milestones will be earned at various dates from January 2003 to July 2006 and
will be recognized as revenue over periods of up to 43 months. The Company
received a $200,000 milestone payment in January of 2003 and is recognizing
revenue over a period of 43 months.

     In August 2001, BioSante entered into an exclusive agreement with Solvay in
which Solvay has sublicensed from BioSante the U.S. and Canadian rights to an
estrogen/progestogen combination transdermal hormone replacement gel product,
one of the four drug-delivery products the Company has licensed to BioSante.
Under the terms of the license agreement between the Company and BioSante, the
Company received a portion of the up front payment made by Solvay to BioSante,
net of the portion of the initial up front payment the Company received from
BioSante intended to offset sublicense up front payments. The Company is also
entitled to a portion of any milestone payments or royalties BioSante receives
from Solvay under the sublicense agreement. The Company is recognizing the
payment received from BioSante in revenue over a 60-month period. All other
milestone payments will be recognized ratably from the date the milestone
payment is earned until the receipt of final regulatory approval in the U.S. and
Canada.

SciTech Medical Products License Agreement

     In April 2001, the Company entered into an exclusive agreement to license
certain drug-delivery technology to SciTech Medical Product Pte Ltd ("SciTech")
in various Asian countries ("the SciTech Territories") with options to other
countries if certain conditions are met. The Company is required to transfer
technology know-how necessary and/or useful to seek and apply for registration
of the products in the SciTech Territories. SciTech will purchase the product
needed for development purposes from the Company. The Company will formulate,
produce and supply products in sufficient quantities for all purposes of
development and registration as reasonably needed for SciTech to perform its
development obligations under this agreement. The Company will receive an
aggregate license fee of $600,000 in milestone payments upon the occurrence of
certain events. In addition to the license fees, the Company will receive a 5%
royalty from the sale of licensed products. The Company has recorded no deferred
license fee revenue at December 31, 2002 and has recognized no license fee
revenue in 2002 in connection with this agreement.

13.  Segment Information and Significant Customers

     Upon consummation of the Share Transaction, the Company has one operating
segment, drug delivery, which includes the development of drug delivery
transdermal and transmucosal pharmaceutical products and drug delivery injection
devices and supplies.

     The geographic distributions of the Company's identifiable assets and
revenues are summarized in the following table:

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

                                                      December 31,
                                           ---------------------------------
                                                2001                2002
                                           -------------       -------------
    Switzerland .......................... $   2,388,337       $   1,447,468
    United States of America .............     8,740,113           4,961,503
                                           -------------       -------------
                                           $  11,128,450       $   6,408,971
                                           =============       =============

                                       67



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

13.  Segment Information and Significant Customers (Continued)

     Revenues by customer location are summarized as follows:

                                       For the Years Ended December 31,
                                ----------------------------------------------
                                    2000              2001             2002
                                -----------       -----------      -----------
    United States of America ...$   122,808       $ 1,335,939      $ 1,655,713
    Europe .....................    437,235         1,848,091        2,237,940
    Other ......................         --           314,494          102,108
                                -----------       -----------      -----------
                                $   560,043       $ 3,498,524      $ 3,995,761
                                ===========       ===========      ===========

     The following summarizes significant customers comprising 10% or more of
total revenue for the years ended December 31:

                                       2000             2001             2002
                                    ----------       ----------      ----------
    Ferring ....................... $       --       $1,318,982      $1,966,082
    BioSante ......................    122,808          983,566       1,183,445
    Solvay ........................    196,680          173,600         123,181
    Segix .........................     80,451           67,790          14,816

     There were no customer receivables at December 31, 2000. The following
summarizes significant customers comprising 10% or more of outstanding accounts
receivable as of December 31:

                                                 2001           2002
                                               --------       --------
    Solvay ................................... $     --       $ 48,278
    Ferring ..................................   82,654         46,040
    BioSante .................................  353,952         31,642

14.  Quarterly Financial Data (unaudited)



                                                    First            Second             Third           Fourth
                                                 -----------       -----------       -----------      -----------
                                                                                          
2001:
Total revenues ...............................   $   587,169       $ 1,106,153       $   596,757      $ 1,208,445
Net loss (2) .................................    (7,968,072)       (1,728,723)       (2,156,890)      (3,059,541)
Net loss applicable to common shares (2) .....         (1.14)             (.20)             (.24)            (.33)
Weighted average shares (1) ..................     7,012,134         8,840,448         8,955,347        9,142,791

2002:
Total revenues ...............................   $   668,971       $ 1,128,613       $ 1,232,861      $   965,316
Net loss (2) .................................    (2,146,640)       (1,966,884)       (2,373,153)      (5,222,088)
Net loss applicable to common shares (2) .....          (.23)             (.21)             (.24)            (.51)
Weighted average shares (1) ..................     9,170,077         9,286,359         9,790,411       10,210,816


(1)  Loss per Common Share is computed based upon the weighted average number of
     shares outstanding during each period. Basic and diluted loss per share
     amounts are identical as the effect of potential Common Shares is
     anti-dilutive.
(2)  The net loss and net loss applicable to common shares include preferred
     stock dividends of $5,314,125 in the first quarter of 2001, and $50,000 in
     the second and fourth quarters of 2001 and 2002. The fourth quarter of 2002
     includes a goodwill impairment loss of $2,000,000 and a patent rights
     impairment loss of $435,035.


                                       68



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

15.  Related Party Transactions

     At December 31, 2000 the Company had $321,640 payable to other companies
ultimately owned by the Company's shareholder, Dr. Gonella, related to
administrative and management services provided by related companies in the
period. This amount was non-interest bearing and was classified as a current
liability. As further discussed in Note 3 these related party loans were
converted to equity on January 31, 2001.

     At December 31, 2000 the Company had subordinated loans payable to its
majority shareholder, Dr. Jacques Gonella of $15,227,131 and to its minority
shareholder, VECAP, of $2,436,889. These parties have provided the loans, which
bear an annual interest rate of 3%, in several installments throughout the
Company's operating history. As further discussed in Note 3 the subordinated
loans were converted to equity on January 31, 2001.

     Effective February 1, 2001, the Company entered into a consulting agreement
with JG Consulting AG, a company owned by the Company's majority shareholder,
Dr. Jacques Gonella. In 2001 and 2002 the Company recognized expense of $245,532
and $186,000, respectively, in connection with this agreement, and had
liabilities to JG Consulting AG at December 31, 2001 and 2002 of $90,532 and
$46,500, respectively. In addition, in 2001 the Company sold equipment,
furniture and fixtures to JG Consulting AG for $91,699, which approximated the
book value of the assets sold.

     In October 2001, in connection with a technology acquisition agreement with
Endoscoptic, Inc. ("Endoscoptic"), a French Company, the Company issued 85,749
and 52,314 shares of common stock to Dr. Jacques Gonella and New Medical
Technologies ("NMT"), respectively. Jacques Rejeange, one of the Company's board
members, was Chairman of the Board of NMT at the time of the transaction. The
Company issued the shares to satisfy Endoscoptic debt assumed in the technology
acquisition agreement.

     During 2001 the Company recognized expense of $92,500 for feasibility study
and market research services performed by a company in which Dr. Gonella has an
ownership interest of approximately 25%. At December 31, 2001 and 2002 the
Company had a payable to this company of $92,500.

     During 2001 and 2002 the Company recognized expense of $49,845 and
$100,612, respectively, for consulting services provided by John Gogol, one of
the Company's board members. The Company had a payable to Mr. Gogol at December
31, 2001 and 2002 of $6,363 and $22,211, respectively.

     During 2001 and 2002 the Company recognized expense of $97,292 and $37,348,
respectively, for legal services provided by Rinderknecht Klein and Stadelhofer,
and had a payable to this firm of $54,297 and $32,681 at December 31, 2001 and
2002, respectively. Dr. Thomas Rinderknecht, one of the Company's board members
during 2001 and 2002 until his resignation on December 13, 2002, is a partner in
the firm of Rinderknecht Klein and Stadelhofer.

     The Company received $1,000,000 on March 12, 2002 and $1,000,000 on April
24, 2002 from the Company's majority shareholder, Dr. Jacques Gonella, under a
Term Note agreement dated February 20, 2002. The Term Note agreement allowed for
total advances to the Company of $2,000,000 and was interest bearing at the
three-month Euribor Rate as of the date of each advance, plus 5%. The principal
of $2,000,000 and accrued interest of $36,550 was converted into 509,137 shares
of common stock on June 10, 2002 at $4.00 per share. In addition, the Company
borrowed from its majority shareholder $300,000, $200,000 and $200,000 in June,
September and December of 2002, respectively, to be repaid in July, September
and December of 2003, respectively, with interest at the three-month Euribor
Rate as of the date of the advance, plus 5%. These amounts are included in due
to related parties on the consolidated balance sheet as of December 31, 2002.


                                       69



                              ANTARES PHARMA, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                        December 31, 2000, 2001 and 2002

16.  Subsequent Events

Ferring License Agreement

     The Company entered into a License Agreement, dated January 22, 2003, with
Ferring BV ("Ferring"), under which the Company licensed certain of its
intellectual property and extended the territories available to Ferring for use
of certain of the Company's needle-free injector devices. Specifically, the
Company granted to Ferring an exclusive, perpetual, irrevocable, royalty-bearing
license, within a prescribed manufacturing territory, to manufacture certain of
the Company's needle-free injector devices. The Company granted to Ferring
similar non-exclusive rights outside of the prescribed manufacturing territory.
In addition, the Company granted to Ferring a non-exclusive right to make and
have made the equipment required to manufacture the licensed products, and an
exclusive, perpetual, royalty-free license in a prescribed territory to use and
sell the licensed products.

     The Company also granted to Ferring a right of first offer to obtain an
exclusive worldwide license to manufacture and sell the Company's AJ-1 device
for the treatment of limited medical conditions.

     As consideration for the license grants, Ferring paid the Company
EUR500,000 upon execution of the License Agreement, and paid an additional
EUR1,000,000 on February 24, 2003. Ferring will also pay the Company royalties
for each device manufactured by or on behalf of Ferring, including devices
manufactured by the Company. Beginning on January 1, 2004, EUR500,000 of the
license fee received on February 24, 2003, will be credited against the
royalties owed by Ferring, until such amount is exhausted. These royalty
obligations expire, on a country-by-country basis, when the respective patents
for the products expire, despite the fact that the License Agreement does not
itself expire until the last of such patents expires.

     The Company also agreed that it would enter into a third party supply
agreement to supply sufficient licensed products to meet the Company's
obligations to Ferring under the License Agreement and under the parties'
existing supply agreement.

Third Party Supply Agreement

     On February 22, 2003 the Company entered into a manufacturing agreement
under which all manufacturing and assembly work currently performed by the
Company at its Minneapolis facility will be outsourced to a third party supplier
("Supplier"). Under the terms of the agreement, the Supplier will be responsible
for procurement of raw materials and components, inspection of procured
materials, production, assembly, testing, sterilization, labeling, packaging and
shipping to the Company's customers. The manufacturing operations are expected
to be transferred to the Supplier by May 2003. The Company will continue to have
ultimate responsibility for the quality of all products and for the release of
all products produced by the Supplier. The agreement has an initial term of two
years.


                                       70



Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS OF THE REGISTRANT

  Directors Whose Terms Continue Until the 2003 Annual Meeting of Shareholders

                            Age
                            ---
Dr. Roger Harrison           54         Dr. Harrison joined the Company as Chief
                                        Executive Officer and a member of the
                                        Board of Directors in March 2001. Since
                                        1984, Dr. Harrison held various
                                        positions at Eli Lilly and Company. His
                                        most recent role there was Director of
                                        Alliance Management from May 1999 until
                                        March 2001. Other positions at Eli Lilly
                                        and Company included Global Product Team
                                        Leader from March 1997 to May 1999 and
                                        Director, Development Projects
                                        Management and Technology Development
                                        and Planning from September 1993 to May
                                        1997. He is the author of twelve
                                        publications, has contributed to four
                                        books and holds nine patents. Dr.
                                        Harrison earned a Ph.D. in organic
                                        chemistry and a B.Sc. in chemistry from
                                        Leeds University in the United Kingdom
                                        and conducted postdoctoral research work
                                        at Zurich University in Switzerland.

  Directors Whose Terms Continue Until the 2004 Annual Meeting of Shareholders

Dr. Jacques Gonella          60         Dr. Gonella joined the Board of
                                        Directors in January 2001 as its
                                        Chairman and is a member of the
                                        Compensation Committee. He is the
                                        founder of Permatec and has served as
                                        the Chairman of the Board of Directors
                                        of Permatec since its founding in June
                                        1997. Prior to founding Permatec, Dr.
                                        Gonella founded JAGO Pharma AG in 1983
                                        and served as the President and Chief
                                        Executive Officer from its founding
                                        until its acquisition in May 1996 by
                                        SkyePharma, a United Kingdom company
                                        listed on the London Stock Exchange. Dr.
                                        Gonella is currently a non-executive
                                        member of the Board of Directors of
                                        SkyePharma. Prior to founding JAGO, Dr.
                                        Gonella occupied various positions with
                                        Roche and Pfizer between 1968 and 1979.
                                        Dr. Gonella currently also sits on the
                                        board of directors of several private
                                        pharmaceutical companies and
                                        pharmaceutical investment funds. He
                                        holds a doctorate in analytical
                                        chemistry from the Polytechnic Institute
                                        of Lausanne, Switzerland.

Jacques F. Rejeange          62         Mr. Rejeange joined the Board of
                                        Directors in August 2001 and serves on
                                        its Audit Committee. He is currently
                                        Chairman of the Board of NMT Management
                                        AG, a medical technology investment
                                        group located in Basel, Switzerland. He
                                        also works as an independent consultant
                                        to various pharmaceutical, healthcare
                                        and medical technology companies. Mr.
                                        Rejeange previously held various
                                        positions including CEO, President and
                                        COO at Sterling Winthrop, Inc., a
                                        pharmaceutical company located in New
                                        York. Prior to that, he had managed a



                                       71



                                        number of Sandoz pharmaceutical
                                        facilities, including the U.S., France,
                                        Belgium and United Kingdom operations.
                                        Mr. Rejeange serves on the Board of
                                        Directors for several healthcare
                                        companies in the United States and
                                        Europe. He also served on the Board of
                                        Directors of the Pharmaceutical
                                        Manufacturers Association in Washington,
                                        DC and as a member of the Board of
                                        Trustees of Drew University in New
                                        Jersey.

John S. Gogol                45         Mr. Gogol joined the Board of Directors
                                        in August 2001. An independent
                                        consultant since 1998, Mr. Gogol
                                        identifies business opportunities for
                                        investments, mergers and acquisitions
                                        and assists clients during the
                                        negotiation and decision-making
                                        processes. Previously, Mr. Gogol was
                                        with Stokors SA, an asset management
                                        firm in Geneva, Switzerland, where he
                                        was responsible for public relations,
                                        marketing and client acquisition. He
                                        also served as Area Manager for Business
                                        International (part of The Economist
                                        Group), where he was responsible for
                                        marketing and sales for Europe, Eastern
                                        Europe and Canada. Throughout his
                                        career, Mr. Gogol has created, sponsored
                                        and managed humanitarian aid and trading
                                        companies in Europe, the Middle East and
                                        Eastern Europe.

  Directors Whose Terms Continue Until the 2005 Annual Meeting of Shareholders

Franklin Pass, M.D.          65         Dr. Pass has been a member of the Board
                                        of Directors since January 1992 and
                                        currently serves as Vice Chairman of the
                                        Board. He joined the Company as a
                                        director and consultant in January 1992
                                        and served as President, Chief Executive
                                        Officer and chairman of the Board of
                                        Directors from February 1993 until March
                                        2001. From 1990 to 1992, Dr. Pass served
                                        as President of International
                                        Agricultural Investments, Ltd., an
                                        agricultural technology consulting and
                                        investment company. Dr. Pass, a
                                        physician and scientist, was Director of
                                        the Division of Dermatology at Albert
                                        Einstein College of Medicine from 1967
                                        to 1973, the Secretary and Treasurer of
                                        the American Academy of Dermatology from
                                        1978 to 1981 and the co-founder and
                                        Chief Executive Officer of Molecular
                                        Genetics, Inc., now named MGI Pharma,
                                        Inc., from 1979 to 1986. He is the
                                        author of more than 40 published medical
                                        and scientific articles

Dr. Philippe Dro             39         Dr. Dro joined the Board of Directors in
                                        January 2001 and is a member of the
                                        Audit Committee. He is currently the
                                        Chief Operating Officer for Axovan
                                        Limited, a Swiss drug discovery
                                        biotechnology company. Dr. Dro served as
                                        the President and Chief Operating
                                        Officer of Permatec from January 2000
                                        through October 2000. From June 1997 to
                                        January 2000, Dr. Dro was the Executive
                                        Director of Permatec. From March 1995 to
                                        June 1997, Dr. Dro served as Executive
                                        Director of JAGO Pharma. From 1992 to
                                        1995, Dr. Dro held various finance and
                                        controller positions at Sandoz
                                        Corporation in Basel, Switzerland. From
                                        1989 to 1992, Dr. Dro held various
                                        positions in the production and
                                        development area at Ethypharm
                                        Corporation in France and India. He
                                        received a doctorate in Pharmacy from
                                        the School of Pharmacy of the University
                                        of Grenoble, France and holds an MBA
                                        from the Cranfield School of Management
                                        in the United Kingdom.

James L. Clark               54         Mr. Clark joined the Board of Directors
                                        in March 2001 and is Chairman of the
                                        Compensation Committee. Mr. Clark is the
                                        principal officer of Pharma Delivery
                                        Systems, which he founded in 1991, a
                                        drug delivery consultancy group that
                                        identifies and develops drug delivery
                                        technologies for use by multinational
                                        pharmaceutical companies. Holding
                                        degrees in chemistry and marketing from
                                        St. Joseph's University in Philadelphia,
                                        Mr. Clark has held senior management
                                        positions in the areas of medical
                                        devices, wound care and drug delivery.



                                       72



     None of the above directors are related to one another or to any executive
officer of the Company. Kenneth Evanstad and Thomas Rinderknecht resigned from
the board of directors on August 30, 2002, and December 13, 2002, respectively.
Additionally, on February 19, 2003, Professor Ubaldo Conte resigned from the
board of directors.

     Pursuant to General Instruction G(3) to Form 10-K and Instruction 3 to Item
401(b) of Regulation S-K, information as to executive officers is set forth in
Part 1 of this Annual Report on Form 10-K under separate caption.

Information Concerning the Board of Directors

     The Board of Directors met four times during 2002 and acted by written
action six times during 2002. The Board of Directors has an Audit Committee, an
Options Committee and a Compensation Committee.

     The Audit Committee consisted of Mr. Evenstad, Dr. Dro and Mr. Rejeange
until Mr. Evenstad resigned in August 2002, at which time Mr. Clark became a
member. The Audit Committee met three times during 2002. The Audit Committee
reviews the results and scope of the audit and other services provided by the
Company's independent auditors, as well as the Company's accounting principles
and systems of internal controls, and reports the results of its review to or
holds concurrent meetings with the full Board of Directors.

     The Options Committee was formed March 14, 2002 consisting of Mr. Clark and
Mr. Evanstad. This Committee had no meetings during 2002.

     The Compensation Committee, consisting of Mr. Clark, Dr. Harrison and Dr.
Rinderknecht, met informally during 2002 with compensation actions being
considered by the full Board. The Compensation Committee makes recommendations
concerning executive salaries and incentive compensation for employees and
administers the 1993 Stock Option Plan (the "1993 Plan"). The Board of Directors
as a whole administers the 1996 Incentive and Stock Option Plan (the "1996
Plan"), the 2001 Incentive Stock Option Plan for Employees (the "2001 Plan"),
the 1998 Stock Option Plan for Non-Employee Directors (the "1998 Directors
Plan") and the 2001 Stock Option Plan for Non-Employee Directors and Consultants
(the "2001 Directors Plan").

     During 2002, each of the directors attended at least 50% of the aggregate
number of meetings of the Board of Directors and of the Committees on which he
serves with the exception of Kenneth Evenstad. Mr. Evenstad did not attend any
of the Board of Directors meetings held during the year due to his commitments
with other business interests until his resignation from the board in August of
2002.

Compensation Committee Interlocks and Insider Participation

     No member of the Compensation Committee was, during the 2002 fiscal year or
previously, an officer or employee of the Company, nor did any member have any
relationship or transaction with the Company which is required to be reported
under Item 402(k) of Regulation S-K under the Securities Exchange Act of 1934,
as amended, except for Dr. Rinderknecht. Dr. Rinderknecht served as a member of
both the Audit Committee and the Compensation Committee and his law firm,
Rinderknecht, Klein & Stadelhofer, of which he is a principle, also served as
legal advisor on various matters. The Company recognized expenses of $37,348 for
services provided by Rinderknecht, Klein & Stadelhofer in 2002.

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain officers and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership on Form 3 and changes in ownership on Forms 4 or 5 with the SEC. Such
officers, directors and ten percent shareholders are also required by the SEC's
rules to furnish the Company with copies of all Section 16(a) reports they file.


                                       73



     Specific due dates for such reports have been established by the SEC and
the Company is required to disclose any failure to file reports by such dates.
Based solely on a review of the copies of such reports received by the Company
or by written representations from certain reporting persons, the Company
believes that during the year ended December 31, 2002, all Section 16(a) filing
requirements applicable to officers, directors and ten percent shareholders were
met.

Item 11. EXECUTIVE COMPENSATION

Compensation of Directors

     The Company has not in the past paid directors' fees. All directors may be
reimbursed for expenses actually incurred in attending meetings of the Board of
Directors and its committees. In the past, the Board of Directors has made
annual discretionary grants of options to purchase shares of Common Stock under
the 1993 Plan, 1996 Plan and 2001 Plan to certain members of the Board of
Directors. The size of these grants has varied from year to year. In accordance
with the Directors' Plan, eligible non-employee directors will receive an
automatic grant of an option to purchase 5,000 shares of Common Stock as of the
first business day of each calendar year. The Directors' Plan also provides for
an initial option grant of 15,000 shares of Common Stock on the day each
director is first elected to the Board of Directors.


                                       74



Summary of Cash and Certain Other Compensation

     The following table provides certain summary information concerning
compensation paid or accrued by the Company (or Medi-Ject prior to January 31,
2001) to or on behalf of the Chief Executive Officer and the four other most
highly compensated executive officers (the "Named Executive Officers") as of the
year ended December 31, 2002, for services in all capacities as well as
compensation earned by such person for the previous two fiscal years (if the
person was an executive officer during any part of such fiscal year):

                           SUMMARY COMPENSATION TABLE


                                                                                                Long-Term
                                                        Annual Compensation                  Compensation
                                             ----------------------------------------   -----------------------
          Name and                                                      Other Annual     Stock       Restricted
          Principal              Fiscal         Salary        Bonus    Compensation     Options        Stock
          Position                Year            ($)          ($)          ($)(1)        (#)            ($)
- ---------------------------    ---------     -------------  ---------  ---------------  ---------   -----------
                                                                                  
Dr. Roger Harrison,                2002         275,000            --         18,000       5,625       155,000
   Chief Executive Officer         2001         221,939(2)         --         14,250          --       186,000
   and President

Franklin Pass, M.D.,               2002         228,000            --         23,336       7,500            --
   Former Chairman,                2001         228,000(3)     50,000         23,336      30,000            --
   Chief Executive Officer         2000         228,300        12,000         39,798      10,000            --
   and President

Lawrence Christian,                2002         145,600            --             --       7,500            --
   Chief Financial Officer,        2001         140,655        17,000             --      20,000            --
   Secretary, and Vice             2000         114,833        12,000             --      10,000            --
   President, Finance

Dr. Dario Carrara, Managing        2002         160,500            --        100,100       7,500            --
Director-Formulations Group        2001(4)(6)   123,456         9,037         57,157      60,000            --

Dr. Peter Sadowski, Chief          2002         156,000            --          5,400       7,500            --
   Technology Officer and          2001         150,000        17,000          5,400      50,000            --
   Vice President, Devices Group   2000         135,820        12,000             --      30,000            --

Carlos Samayoa                     2001(5)(6)    60,374         9,037             --      30,000            --
    Assistant Secretary, Manager
    Finance and Administration -
    Formulations Group


(1)  Represents auto allowance payments and premiums paid for disability and
     life insurance policies with coverage limits in excess of those provided
     under the Company's standard employee insurance policies.
(2)  Represents salary paid from employment date of March 12, 2001.
(3)  Franklin Pass served as chief executive officer until January 31, 2001 and
     has remained an employee of the Company in a different capacity. The
     compensation shown is for the full year.
(4)  Represents compensation information from February 1, 2001, the date of the
     business combination.
(5)  Represents compensation information from February 1, 2001, the date of the
     business combination until Mr. Samayoa resigned on August 31, 2001.
(6)  Compensation for Dr. Carrara and Mr. Samayoa was in Swiss Francs converted
     to U.S. dollars at the Swiss Francs per U.S. dollar exchange rates of
     1.6598 and 1.3833 at December 31, 2001 and 2002, respectively.

     Dr. Jacques Gonella, the Chairman of the Board of Directors of the Company
and the Company's majority shareholder, receives 5,000 stock options annually,
as do each of the Company's directors. Effective February 1, 2001, the Company
entered into a consulting agreement with JG Consulting AG, a company solely
owned by Dr. Gonella. Under this agreement, the Company pays a monthly fee of
$15,500 to JG Consulting AG.


                                       75




Employment Agreements with Executive Officers

     The Company has written employment agreements with Dr. Roger Harrison,
Franklin Pass, M.D., Lawrence Christian, Dr. Dario Carrara and Dr. Peter
Sadowski.

     Employment Agreement with Dr. Harrison. Roger G. Harrison, Ph.D., was
appointed to the position of Chief Executive Officer of Antares Pharma, Inc.,
effective March 12, 2001. The terms of the employment agreement with Dr.
Harrison include an annual salary of $275,000 and up to 216,000 restricted
shares of common stock which will be granted after the achievement of certain
time-based and performance-based milestones.

     Employment Agreements with Lawrence Christian and Dr. Peter Sadowski. Mr.
Christian and Dr. Sadowski entered into employment agreements with the Company
as of December 22, 1999, with updated agreements as of May 1, 2000, (each, an
"Employment Agreement" and together, the "Employment Agreements"). The
Employment Agreements provided for 2000 base salaries of $102,000 for Mr.
Christian until May 1, 2000, and $124,000 thereafter and $135,820 for Dr.
Sadowski. Salaries have subsequently been adjusted to $145,600 for Mr. Christian
and $156,000 for Dr. Sadowski. Upon the closing of the Share Transaction, the
Company paid to each of Mr. Christian and Dr. Sadowski a bonus of $17,000. Upon
the closing of the Share Transaction, the Company granted options to purchase
20,000 shares of Antares common stock to Mr. Christian and 50,000 shares of
Antares common stock to Dr. Sadowski. The Employment Agreements also contain
provisions regarding participation in benefit plans, repayment of expenses,
participation as a director or consultant to other companies (which is permitted
provided that such participation does not materially detract from their
respective obligations to the Company or otherwise violate the terms of their
Employment Agreements), protection of confidential information and ownership of
intellectual property. In addition, the Employment Agreements contain covenants
not to compete and covenants with respect to nonsolicitation and noninterference
with customers, suppliers or employees. Mr. Christian's Employment Agreement is
for 365 days continuing each day on a rolling 365-day basis. Dr. Sadowski's
Employment Agreement had a term through December 31, 2002, and he is continuing
employment without a contract.

     Employment Agreement with Dr. Dario Carrara. Dr. Carrara entered into an
employment agreement with Permatec on May 31, 2000. The Company assumed all
employment obligations of Permatec upon consummation of the business combination
as of January 31, 2001. Dr. Carrara is a citizen of Argentina and, accordingly,
is considered a foreign service employee for Swiss employment purposes. The
Employment Agreement provides for a 2000 base salary of $102,415, bonuses at the
discretion of the board of directors, participation in stock option programs as
may be available, expense account allowance of $482 per month, two family trips
per year to his home country, private school cost for his children up to $15,062
per year, family housing cost in Switzerland up to $21,689 per year and family
local language lessons up to $6,025 during the first twelve months. Dr.
Carrara's salary has subsequently been adjusted to 222,000 Swiss Francs, or
approximately $160,000 using the exchange rate at December 31, 2002 of 1.3833.
The agreement is for an indeterminate period of time and either party may
terminate the agreement with a three month written notice.


                                       76



Original Option Grants During 2002

     The table below sets forth individual grants of stock options made to the
Named Executive Officers during the year ended December 31, 2002.



                                                                                        Potential Realizable
                                                                                          Value at Assumed
                                       Percent of                                           Annual Rates
                       Number of     Total Options     Exercise                            of Stock Price
                       Securities      Granted to      Price or                             Appreciation
                       Underlying      Employees         Base                           for Option Term (1)
                         Options        During         Price/sh.     Expiration       --------------------
      Name              Granted(#)     the Year(%)       ($)            Date           5%($)        10%($)
- ----------------------------------------------------------------------------------------------------------
                                                                                  
Dr. Roger Harrison(2)       5,625         5.8          4.56          02/01/12         16,100        40,900

Franklin Pass, M.D.(2)      7,500         7.7          4.56          02/01/12         21,500        54,500

Lawrence Christian(2)       7,500         7.7          4.56          02/01/12         21,500        54,500

Dr. Dario Carrara(2)        7,500         7.7          4.56          02/01/12         21,500        54,500

Dr. Peter Sadowski(2)       7,500         7.7          4.56          02/01/12         21,500        54,500


(1)  The 5% and 10% assumed annual rates of compounded stock price appreciation
     are mandated by rules of the Securities and Exchange Commission and do not
     represent the Company's estimate or projection of the Company's future
     common stock prices.

(2)  Incentive stock option granted pursuant to the Company's 2001 Stock Option
     Plan on February 1, 2002. These options vest in three equal installments on
     February 1 of each of 2003, 2004 and 2005.

Aggregated Option Exercises in 2002 and Year End Option Values

     The following table provides information concerning stock option exercises
and the value of unexercised options at December 31, 2002 for the Named
Executive Officers:



                                                           Number of                          Value of
                      Shares                         Securities Underlying                   Unexercised
                     Acquired                             Unexercised                   In-The-Money Options
                        on           Value          Options at Year End(#)                 at Year End($)
                     Exercise      Realized         --------------------------        ----------------------------
Name                   (#)            ($)           Exercisable  Unexercisable        Exercisable    Unexercisable
- ------------------------------------------------------------------------------------------------------------------
                                                                                         
Dr. Roger Harrison       0             0                 --           5,625                 --              --

Franklin Pass, M.D.      0             0            141,417          27,600                 --              --

Lawrence Christian       0             0             37,600          20,900                 --              --

Dr. Dario Carrara        0             0             19,800          47,700                 --              --

Dr. Peter Sadowski       0             0             64,907          41,000                 --              --




                                       77



         REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

Overview

     The Compensation Committee is responsible for establishing compensation
policies for all executive officers of the Company, including the four most
highly compensated executive officers named in the accompanying tables (the
"Named Executives Officers"). The members of the Compensation Committee are
James Clark, Dr. Jacques Gonella and Dr. Thomas Rinderknecht (until his
resignation on December 13, 2002). The Compensation Committee establishes the
total compensation for the executive officers in light of these policies.

     The objectives of the Company's executive compensation program are:

     1.   to attract and retain superior talent and reward individual
          performance;

     2.   to support the achievement of the Company's financial and strategic
          goals; and

     3.   through stock based compensation, align the executive officers'
          interests with those of the shareholders of the Company.

     The following report addresses the Company's executive compensation
policies and discusses factors considered by the Compensation Committee in
determining the compensation of the Company's Chief Executive Officer and
President and other executive officers for the year ended December 31, 2002.

Compensation Policies for Executive Officers

     The Compensation Committee's executive compensation policies are designed
to provide competitive levels of compensation that integrate pay with the
Company's annual and long term performance goals, reward above average corporate
performance, recognize individual initiative and achievements, and assist the
Company in attracting and retaining qualified executives. To that end, the
Compensation Committee has established certain parameters of corporate
performance that must be met before the discretionary features of its executive
compensation plans apply. These discretionary features include stock option
grants and performance bonuses based upon an executive officer's base salary.
Absent the discretionary features, the Company's executive officers are paid
base salaries that are subject to annual cost-of-living increases, along with
periodic adjustments to make such salaries competitive with other similar sized
companies in the drug delivery industry. The Company's executive officers are
also given the opportunity to participate in certain other broad-based employee
benefit plans. As a result of the Company's emphasis on tying executive
compensation to corporate performance, in any particular year the Company's
executives may be paid more or less than the executives of other companies in
the drug delivery industry. The Company's use of stock option grants as a key
component of its executive compensation plans reflects the Compensation
Committee's position that stock ownership by management and stock based
compensation arrangements are beneficial in aligning management's and
shareholders' interests to enhance shareholder value.

Bonuses

     Cash bonuses are used to reward executive officers for achievement of
financial and technical milestones, as well as for individual performance.
Bonuses of $12,000 each were awarded to certain of the executive officers in
December 2000 and bonuses ranging from $9,037 to $50,000 were awarded to certain
executive officers in February 2001. No bonuses were awarded during 2002.

Stock Options

     Stock options awarded under the Company's 1993, 1996 and 2001 Plans are
intended as incentive compensation and have historically been granted annually
to officers, other key employees and consultants based on the Company's
financial performance and achievement of technical and regulatory milestones.
During 1999, stock options to purchase a total of 24,115 shares held by the five
outside directors were canceled and reissued at an exercise price of $3.50 per
share. Also, on January 3, 2000, options to purchase a total of 31,829 shares
held by the five outside


                                       78



directors, options to purchase a total of 160,924 shares held by three executive
officers and options to purchase a total of 86,200 shares held by 37 employees
were canceled and reissued at an exercise price of $1.5625 per share (see report
on repricing of options below). The 1999 annual stock option grant totaling
50,000 and 26,200 shares, with a grant date of January 3, 2000, were granted to
three executive officers and 37 employees, respectively. The 2000 annual stock
option grant totaling 160,000 and 90,000 shares with a grant date of March 22,
2001, were granted to 5 executive officers and 40 employees, respectively and
the 2001 annual stock option grant totaling 35,625 and 52,052 shares with a
grant date of February 1, 2002, were granted to 4 executive officers and 52
employees, respectively. All grants are made to provide ongoing incentives to
the Company's consultants, outside directors and employees.

Chief Executive Officer's Compensation

     Compensation for Dr. Roger Harrison during 2002, as reflected in the
Summary Compensation Table in "Item 11. Executive Compensation" herein,
consisted of base compensation and certain employee benefits. Dr. Harrison's
base compensation for 2002 was $275,000.

     At this time the Committee has no formal long-range written plan for CEO
compensation separate and apart from the employment agreement (see above).

SUBMITTED BY THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS:

               James Clark               Dr. Roger Harrison


                                       79



Performance Graph

     The graph below provides an indication of cumulative total shareholder
returns ("Total Return") for the Company as compared with the Nasdaq Composite
Index and the Nasdaq Biotechnology Stocks weighted by market value at each
measurement point.

     This graph covers the period beginning December 31, 1997, through December
31, 2002. The graph assumes $100 was invested in each of the Company's Common
Stock, the Nasdaq Composite Index and the Nasdaq Biotechnology Stock Index on
December 31, 1997 (based upon the closing price of each). Total Return assumes
reinvestment of dividends.

                             [GRAPHIC APPEARS HERE]



                 December 31,   December 31,      December 31,     December 31       December 31      December 31,
                     1997            1998             1999              2000            2001              2002
                     ----            ----             ----              ----            ----              ----
                                                                                   
Antares Pharma     $  100.00       $  19.00       $     75.00      $    217.00    $    185.00        $    21.00

Nasdaq Composite
   Index              100.00         139.63            259.13           157.32         124.20             85.05

Biotechnology
 Stocks               100.00         144.28            290.92           357.81         299.83            163.92



                                       80



Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
         RELATED STOCKHOLDER MATTERS

     The following table provides information as of December 31, 2002 with
respect to compensation plans under which equity securities of the Company are
authorized for issuance to employees or non-employees in exchange for
consideration in the form of goods or services.

                      Equity Compensation Plan Information



        Plan Category             Number of securities to          Weighted-average           Number of securities
                                  be issued upon exercise         exercise price of         remaining available for
                                  of outstanding options,        outstanding options,           future issuance
                                    warrants and rights          warrants and rights
                                            (a)                         (b)                           (c)
- ------------------------------   --------------------------    -------------------------    -------------------------
                                                                                            
Equity compensation
  plans approved by
  security holders                       1,878,288                      $10.59                       374,893
Equity compensation
  plans not approved by
  security holders                              --                         --                             --
                                 --------------------------    -------------------------    -------------------------
Total                                    1,878,288                      $10.59                       374,893
                                 ==========================    =========================    =========================


     In 2002 the Company entered into an agreement with a public relations
representative for a term of six months, ending April 15, 2003, under which the
Company must issue either 5,000 or 10,000 restricted shares per month, depending
upon the Company's share price.

     In 2002 the Company entered into two equity advisor agreements. Under the
first agreement, which was terminated in November 2002, the Company issued a
total of 50,000 shares of its common stock. Pursuant to the second agreement,
the Company must issue $10,000 worth of restricted shares of its common stock
per month based on the market price of the shares on the 17th of each month,
which was done for the first time in December 2002. The Company also issued
100,000 restricted shares of its common stock in January 2003 in connection with
execution of the agreement.

     In 2002 the Company entered into a consulting agreement for public and
investor relations services for a term of four months. Under this agreement the
Company issued 30,000 shares of its common stock.


                                       81



     The following table sets forth certain information concerning beneficial
ownership of the Company's Common Stock as of March 19, 2003, with respect to
(i) all persons known to be the beneficial owners of more than 5% of the
outstanding Common Stock, (ii) each of the directors, (iii) each Named Executive
Officer, and (iv) all directors and executive officers as a group.



                                                   Shares            Percentage       Outstanding
                                                Beneficially       of Outstanding       Options &
   Name of Beneficial Owner                       Owned(1)             Shares         Warrants (2)
                                                                                
Dr. Jacques Gonella (3) (4)                       3,364,886             28.3%             25,000
Permatec Holding AG (3) (5)                       2,900,000             24.4%                 --
Franklin Pass, M. D.  (4)                           174,217              1.4%            169,017
Dr. Roger Harrison (4)                              105,406              1.0%              5,625
James Clark (4)                                      22,000              *                25,000
Dr. Philippe Dro (4)                                 20,000              *                25,000
John Gogol  (4)                                      20,000              *                25,000
Jacques Rejeange (4)                                 20,000              *                25,000
Lawrence Christian (4)                               68,375              1.0%             58,500
Dr. Dario Carrara   (4)                              42,675              *                67,500
Dr. Peter Sadowski (4)                               84,382              1.0%            105,907
All directors and executive officers
  as a group (10 persons) (3)                     6,821,942             55.4%            531,550


*    Less than 1%.
(1)  Beneficial ownership is determined in accordance with rules of the
     Securities and Exchange Commission, and includes generally voting power
     and/or investment power with respect to securities. Shares of Common Stock
     subject to options or warrants currently exercisable or exercisable within
     60 days of March 19, 2003, are deemed outstanding for computing the
     percentage of the person holding such options but are not deemed
     outstanding for computing the percentage of any other person. Except as
     indicated by footnote, the Company believes that the persons named in this
     table, based on information provided by such persons, have sole voting and
     investment power with respect to the shares of Common Stock indicated.
(2)  Shares of Antares Common Stock issuable upon the exercise of outstanding
     options and warrants.
(3)  Dr. Jacques Gonella owns controlling interest in Permatec Holding AG and,
     therefore, exercises voting and investment control for the entity.
(4)  The director's or officer's address is 707 Eagleview Boulevard, Suite 414,
     Exton, PA 19341.
(5)  The address of Permatec Holding AG is Hauptstrasse 16, 4132 Muttenz,
     Switzerland.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Effective February 1, 2001, the Company entered into a consulting agreement
with JG Consulting AG, a company owned by the Company's majority shareholder,
Dr. Jacques Gonella. In 2001 and 2002 the Company recognized expense of $245,532
and $186,000, respectively, in connection with this agreement, and had
liabilities to JG Consulting AG at December 31, 2001 and 2002 of $90,532 and
$46,500, respectively. In addition, in 2001 the Company sold equipment,
furniture and fixtures to JG Consulting AG for $91,699, which approximated the
book value of the assets sold.

     In October 2001, in connection with a technology acquisition agreement with
Endoscoptic, Inc. , a French Company, the Company issued 85,749 and 52,314
shares of common stock to Dr. Jacques Gonella and New Medical Technologies
("NMT"), respectively. Jacques Rejeange, one of the Company's board members, was
Chairman of the Board of NMT at the time of the transaction. The Company issued
the shares to satisfy Endoscoptic debt assumed in the technology acquisition
agreement.

     During 2001 the Company recognized expense of $92,500 for feasibility study
and market research services performed by a company in which Dr. Gonella has an
ownership interest of approximately 25%. At December 31, 2001 and 2002 the
Company had a payable to this company of $92,500.


                                       82



     During 2001 and 2002 the Company recognized expense of $49,845 and
$100,612, respectively, for consulting services provided by John Gogol, one of
the Company's board members. The Company had a payable to Mr. Gogol at December
31, 2001 and 2002 of $6,363 and $22,211, respectively.

     During 2001 and 2002 the Company recognized expense of $97,292 and $37,348,
respectively, for legal services provided by Rinderknecht Klein and Stadelhofer,
and had a payable to this firm of $54,297 and $32,681 at December 31, 2001 and
2002, respectively. Dr. Thomas Rinderknecht, one of the Company's board members
during 2001 and 2002 until his resignation on December 13, 2002, is a partner in
the firm of Rinderknecht Klein and Stadelhofer.

     The Company received $1,000,000 on March 12, 2002 and $1,000,000 on April
24, 2002 from the Company's majority shareholder, Dr. Jacques Gonella, under a
Term Note agreement dated February 20, 2002. The Term Note agreement allowed for
total advances to the Company of $2,000,000 and was interest bearing at the
three-month Euribor Rate as of the date of each advance, plus 5%. The principal
of $2,000,000 and accrued interest of $36,550 was converted into 509,137 shares
of common stock on June 10, 2002 at $4.00 per share. In addition, the Company
borrowed from its majority shareholder $300,000, $200,000 and $200,000 in June,
September and December of 2002, respectively, to be repaid in July, September
and December of 2003, respectively, with interest at the three-month Euribor
Rate as of the date of the advance, plus 5%.

Item 14.  CONTROLS AND PROCEDURES

     Based on an evaluation of the disclosure controls and procedures conducted
within 90 days prior to the filing date of this Annual Report on Form 10-K, the
Company's Chief Executive Officer and Chief Financial Officer have concluded
that the disclosure controls and procedures (as defined in Rules 13a-14(c) and
15d-14(c)) are effective. There were no significant changes in the internal
controls or in other factors that could significantly affect those controls
subsequent to the date of the evaluation thereof.

     The Company's management, including the CEO and CFO, does not expect that
disclosure controls and procedures will prevent all error and all fraud. 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.


                                       83



                                     PART IV

Item 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  The following documents are filed as part of this report:

     (1)  Financial Statements - see Part II

     (2)  Financial Statement Schedules

               Independent Auditors' Report on Financial Statement Schedule -
                  see page 92
               Schedule II - Valuation and Qualifying Accounts - see page 93

          All other schedules have been omitted because they are not applicable,
          are immaterial or are not required because the information is included
          in the financial statements or the notes thereto.

     (3)  Item 601 Exhibits - see list of Exhibits below

(b)  Reports on Form 8-K

     On December 3, 2002 the Company filed a Form 8-K reporting under Item 5,
     Other Events, that it received notification by letter dated November 29,
     2002, from the Listing Qualifications arm of The Nasdaq Stock Market, Inc.,
     that the Company is at risk of having its common stock delisted from the
     Nasdaq SmallCap Stock Market.

(c)  Exhibits

     The following is filed as an exhibit to Part I of this Form 10-K:

             Exhibits                        Description
             -------------------------------------------------------------------

               3.1  Second Amended and Restated Articles of Incorporation as
                    amended to date (a)

               3.2  Articles of Amendment Restating Articles of Incorporation
                    (g)

               3.3  Second Amended and Restated Bylaws (a)

               3.4  Third Amended and Restated Articles of Incorporation (m)

               3.5  Certificate of Designations for Series A Convertible
                    Preferred Stock (d)

               3.6  Certificate of Designations for Series B Convertible
                    Preferred Stock (i)

               3.7  Certificate of Designations for Series C Convertible
                    Preferred Stock (g)

               4.1  Form of Certificate for Common Stock (a)

               4.2  Stock Warrant, dated January 25, 1996, issued to Becton
                    Dickinson and Company (a)

               4.3  Stock Option, dated January 25, 1996, issued to Becton
                    Dickinson and Company (a)

               4.6  Preferred Stock, Option and Warrant Purchase Agreement,
                    dated January 25, 1996, with Becton Dickinson and Company
                    (a)


                                       84



               4.7  Warrant issued to Elan International Services, Ltd. on
                    November 10, 1998 (d)

               4.8  Warrant issued to Grayson & Associates, Inc. on September
                    23, 1999 (e)

               4.9  Warrant issued to Plexus Ventures, Ltd. on September 12,
                    2000 (g)

               4.10 Form of warrant issued to:
                       Aventic Partners AG on February 5, 2001 for 85,324 shares
                       Basellandschaftliche Kantonalbank on February 5, 2001 for
                         85,324 shares
                       HCI Healthcare Investments Limited on February 5, 2001
                         for 127,986 shares
                       Lombard Odier & Cie on March 5, 2001 for 127,986
                         shares (g)

               10.0 Stock Purchase Agreement with Permatec Holding AG, Permatec
                    Pharma AG, Permatec Technologie AG and Permatec NV with
                    First and Second Amendments dated July 14, 2000 (f)

               10.1 Third Amendment to Stock Purchase Agreement, dated January
                    31, 2001 (g)

               10.2 Registration Rights Agreement with Permatec Holding AG dated
                    January 31, 2001 (g)

               10.3 Registration Rights Agreement with Aventic Partners AG,
                    Basellandschaftliche Kantonalbank and HCI Healthcare
                    Investments Limited dated February 5, 2001, and Lombard
                    Odier & Cie dated March 5, 2001 (g)

               10.4 Office/Warehouse/Showroom Lease, dated January 2, 1995,
                    including amendments thereto (a)

               10.5 Exclusive License & Supply Agreement with Bio-Technology
                    General Corporation, dated December 22, 1999 (e)

               10.6 Preferred Stock Purchase Agreement with Bio-Technology
                    General Corporation, dated December 22, 1999 (e)

               10.7 Preferred Stock, Option and Warrant Purchase Agreement,
                    dated January 25, 1996, with Becton Dickinson and Company
                    (a)

              10.8* Employment Agreement, dated January 31, 2001, with Franklin
                    Pass, M.D. (g)

              10.9* Employment Agreement, dated March 12, 2001, with Roger
                    Harrison, Ph.D. (g)

             10.10* Employment Agreement and Term and Compensation Addendum
                    for 2000, dated May 1, 2000, with Lawrence Christian (g)

             10.11* Employment Agreement and Term and Compensation Addendum
                    for 2000, dated May 1, 2000, with Peter Sadowski (g)

             10.12* Employment Agreement, dated May 31, 2000 with Dr. Dario
                    Carrara (i)

             10.13* 1993 Stock Option Plan (a)

             10.14* Form of incentive stock option agreement for use with 1993
                    Stock Option Plan (a)

             10.15* Form of non-qualified stock option agreement for use with
                    1993 Stock Option Plan (a)

             10.16* 1996 Stock Option Plan, with form of stock option
                    agreement (a)


                                       85



             10.17+ Development and License Agreement with Becton Dickinson
                    and Company, effective January 1, 1996 (terminated January
                    1, 1999). See Exhibit 10.21 (a)

              10.18 Office - Warehouse lease with Carlson Real Estate Company,
                    dated February 11, 1997 (b)

             10.19* 1998 Stock Option Plan for Non-Employee Directors (c)

             10.20* Letter consulting agreement dated February 20, 1998 with
                    Geoffrey W. Guy (c)

             10.21# Agreement with Becton Dickinson dated January 1, 1999 (d)

              10.22 Securities Purchase Agreement with Elan International
                    Services, Ltd. dated November 10, 1998 (d)

             10.23# License & Development Agreement with Elan Corporation,
                    plc, dated November 10, 1998 (d)

              10.24 2001 Stock Option Plan for Non-Employee Directors and
                    Consultants (h)

              10.25 2001 Incentive Stock Option Plan for Employees (h)

             10.26* Consulting Agreement with JG Consulting AG dated February
                    1, 2001 (i)

              10.27 Office lease agreement with 707 Eagleview Boulevard
                    Associates, a Pennsylvania Partnership, dated June 18, 2001
                    (i)

              10.28 $2,000,000 Term Note with Dr. Jacques Gonella dated
                    February 20, 2002 (j)

              10.29 Securities Purchase Agreement, dated July 12, 2002, between
                    Antares Pharma, Inc. and AJW Partners, LLC; AJW/New
                    Millennium Offshore, Ltd.; Pegasus Capital Partners, LLC;
                    XMark Fund, L.P.; XMark Fund, Ltd.; SDS Merchant Fund, LP;
                    and OTATO Limited Partnership.(k)

              10.30 Registration Rights Agreement, dated July 12, 2002, between
                    Antares Pharma, Inc. and AJW Partners, LLC; AJW/New
                    Millennium Offshore, Ltd.; Pegasus Capital Partners, LLC;
                    XMark Fund, L.P.; XMark Fund, Ltd.; SDS Merchant Fund, LP;
                    and OTATO Limited Partnership.(k)

              10.31 Security Agreement, dated July 12, 2002, between Antares
                    Pharma, Inc. and AJW Partners, LLC; AJW/New Millennium
                    Offshore, Ltd.; Pegasus Capital Partners, LLC; XMark Fund,
                    L.P.; XMark Fund, Ltd.; SDS Merchant Fund, LP; and OTATO
                    Limited Partnership.(k)

              10.32 Form of Secured Convertible Debenture, dated July 12,
                    2002.(k)

            10.33** License Agreement with Solvay Pharmaceuticals BV, Dated
                    June 9, 1999.(l)

            10.34** License Agreement with BioSante Pharmaceuticals, Inc.,
                    dated June 13, 2000.(l)

            10.35** Amendment No. 1 to License Agreement with BioSante
                    Pharmaceuticals, Inc., dated May 20, 2001.(l)

            10.36** Amendment No. 2 to License Agreement with BioSante
                    Pharmaceuticals, Inc., dated July 5, 2001.(l)


                                       86



            10.37** Amendment No. 3 to License Agreement with BioSante
                    Pharmaceuticals, Inc., dated August 28, 2001.(l)

            10.38** Amendment No. 4 to License Agreement with BioSante
                    Pharmaceuticals, Inc., dated August 8, 2002. (l)

              10.39 Debenture and Warrant Purchase Agreement, dated January 31,
                    2003, by and among Antares Pharma, Inc., XMark Fund, L.P.,
                    XMark Fund, Ltd. and SDS Merchant Fund, LP (n)

              10.40 Debenture and Warrant Purchase Agreement, dated January 31,
                    2003, by and among Antares Pharma, Inc., XMark Fund, L.P.
                    and XMark Fund, Ltd. (n)

              10.41 Registration Rights Agreement, dated January 31, 2003, by
                    and among Antares Pharma, Inc., XMark Fund, L.P., XMark
                    Fund, Ltd. and SDS Merchant Fund, LP (n)

              10.42 Amended and Restated Security Agreement, dated January 31,
                    2003, by and among Antares Pharma, Inc., XMark Fund, L.P.,
                    XMark Fund, Ltd. and SDS Merchant Fund, LP (n)

              10.43 Form of Warrant, dated January 31, 2003 (n)

              10.44 Form of 8% Senior Secured Convertible Debenture, dated
                    January 31, 2003 (n)

              10.45 Form of Amended and Restated 8% Senior Secured Convertible
                    Debenture, dated January 31, 2003 (n)

              10.46 Form of Promissory Note (n)

            10.47** License Agreement between Antares Pharma, Inc. and
                    Ferring BV, dated January 21, 2003 (o)

               21.1 Subsidiaries of the Registrant

               23.1 Consent of KPMG LLP

               99.1 Section 906 CEO and CFO Certification

     *    Indicates management contract or compensatory plan or arrangement.
     **   Confidential portions of this document have been redacted and have
          been separately filed with the Securities and Exchange Commission.
     +    Pursuant to Rule 406 of the Securities Act of 1933, as amended,
          confidential portions of Exhibit 10.17 were deleted and filed
          separately with the Securities and Exchange Commission pursuant to a
          request for confidential treatment, which was subsequently granted by
          the Securities and Exchange Commission.
     #    Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as
          amended, confidential portions of Exhibits 10.21 and 10.23 were
          deleted and filed separately with the Securities and Exchange
          Commission pursuant to a request for confidential treatment.
     (a)  Incorporated by reference to the Registration Statement on Form S-1
          (File No. 333-6661), filed with the Securities and Exchange Commission
          on October 1, 1996.
     (b)  Incorporated by reference to Form 10-K for the year ended December 31,
          1996.
     (c)  Incorporated by reference to Form 10-K for the year ended December 31,
          1997.

                                       87



     (d)  Incorporated by reference to Form 10-K for the year ended December 31,
          1998.
     (e)  Incorporated by reference to Form 10-K for the year ended December 31,
          1999.
     (f)  Incorporated by reference to the Proxy Statement filed December 28,
          2000.
     (g)  Incorporated by reference to Form 10-K for the year ended December 31,
          2000.
     (h)  Incorporated by reference to the Registration Statement on Form S-8
          (File No. 333-64480), filed with the Securities and Exchange
          Commission on July 3, 2001.
     (i)  Incorporated by reference to Form 10-K for the year ended December 31,
          2001.
     (j)  Incorporated by reference to Form 10-Q for the quarter ended March 31,
          2002.
     (k)  Incorporated by reference to Form 8-K filed with the SEC on July 17,
          2002.
     (l)  Incorporated by reference to Form 10-K/A for the year ended December
          31, 2001, filed on September 19,2002.
     (m)  Incorporated by reference to Form 10-Q for the quarter ended September
          30, 2002.
     (n)  Incorporated by reference to Form 8-K filed with the SEC on February
          12, 2003.
     (o)  Incorporated by reference to Form 8-K filed with the SEC on February
          20, 2003.


                                       88



                                   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, in the City of Minneapolis, State of
Minnesota, on March 21, 2003.

                                       ANTARES PHARMA, INC.

                                       /s/ Roger G. Harrison, Ph.D.
                                       -----------------------------------------
                                       Roger G. Harrison, Ph.D.
                                       Chief Executive Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this Report has been signed by the following persons on behalf of
the registrant in the capacities indicated on March 21, 2003.

         Signature                                         Title
         ---------                                         -----

/s/ Roger G. Harrison, Ph.D.               Chief Executive Officer and Director
- -----------------------------              (principal executive officer)
Roger G. Harrison, Ph.D.


/s/ Lawrence M. Christian                  Vice President of Finance,
- -----------------------------              Chief Financial Officer and Secretary
Lawrence M. Christian                      (principal financial and accounting
                                           officer)


/s/ Dr. Jacques Gonella                    Director, Chairman of the Board
- -----------------------------
Dr. Jacques Gonella


/s/ Franklin Pass, M.D.                    Director, Vice Chairman of the Board
- -----------------------------
Franklin Pass, M.D.


/s/ Jim Clark                              Director
- -----------------------------
Jim Clark


/s/ Dr. Philippe Dro                       Director
- -----------------------------
Dr. Philippe Dro


/s/ John S. Gogol                          Director
- -----------------------------
John S. Gogol


/s/ Jacques F. Rejeange                    Director
- -----------------------------
Jacques F. Rejeange


                                       89




                                 Certifications

I, Roger G. Harrison, Ph.D., certify that:


1.   I have reviewed this annual report on Form 10-K of Antares Pharma, Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report; and

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report.

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14), for the registrant and have:

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Effective Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent functions):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether there were significant changes in internal controls
     or in other factors that could significantly affect internal controls
     subsequent to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:    March 21, 2003

/s/ Roger G. Harrison, Ph.D.
- ------------------------------
Roger G. Harrison, Ph. D.
Chief Executive Officer and President


                                       90



I, Lawrence M. Christian, certify that:

1.   I have reviewed this annual report on Form 10-K of Antares Pharma, Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report; and

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report.

4.   The registrant's other certifying officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14), for the registrant and have:

     a)   designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, including its
          consolidated subsidiaries, is made known to us by others within those
          entities, particularly during the period in which this annual report
          is being prepared;

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Effective Date;

5.   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent functions):

     a)   all significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b)   any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether there were significant changes in internal controls
     or in other factors that could significantly affect internal controls
     subsequent to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:    March 21, 2003

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


                                       91



                          Independent Auditors' Report

The Board of Directors and Shareholders
Antares Pharma, Inc.:

     Under the date of March 21, 2003, we reported on the consolidated balance
sheets of Antares Pharma, Inc. and subsidiaries (the Company) as of December 31,
2001 and 2002, and the related consolidated statements of operations,
shareholders' equity (deficit) and comprehensive loss and cash flows for each of
the years in the three-year period ended December 31, 2002, as included in
Antares Pharma, Inc.'s Annual Report on Form 10-K for the fiscal year ended
December 31, 2002. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedule as listed in the accompanying index. This financial
statement schedule is the responsibility of Antares Pharma, Inc.'s management.
Our responsibility is to express an opinion on this financial statement schedule
based on our audits.

     In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

     The audit report on the consolidated financial statements of Antares
Pharma, Inc. and subsidiaries referred to above contains an explanatory
paragraph that states that the Company's negative working capital, recurring
losses and negative cash flows from operations raise substantial doubt about the
entity's ability to continue as a going concern. The financial statement
schedule included in the annual report on Form 10-K does not include any
adjustments that might result from the outcome of this uncertainty.


                                       /s/ KPMG LLP

Minneapolis, Minnesota
March 21, 2003

                                       92



                              Antares Pharma, Inc.

                                   Schedule II

                        Valuation and Qualifying Accounts
              For the Years Ended December 31, 2000, 2001 and 2002



                                          Balance at      Charged to     Charged to                      Balance at
                                         Beginning of      Costs and        Other                          End of
             Description                     Year          Expenses       Accounts       Deductions         Year
- --------------------------------------   --------------   ------------   ------------   --------------   -----------
                                                                                          
Year Ended December 31, 2000
  Restructuring reserve                  $    280,816     $   266,790    $        --    $   547,606      $       --

Year Ended December 31, 2001
  Allowance for doubtful accounts
  (Deducted from accounts receivable)    $        --      $    18,913 (1)$        --    $       913      $   18,000
  Inventory reserves
  (Deducted from inventory)              $        --      $   151,259 (1)$        --    $    46,259      $  105,000

Year Ended December 31, 2002
  Allowance for doubtful accounts
  (Deducted from accounts receivable)    $    18,000      $    34,829    $        --    $    40,829      $   12,000
  Inventory reserves
  (Deducted from inventory)              $   105,000      $    59,870    $        --    $   114,870      $   50,000

- ----------
(1)  Includes reserves acquired from Medi-Ject Corporation at the time of
     acquisition.


                                       93

EX-21.1

                                                                    Exhibit 21.1


                              Antares Pharma, Inc.
                         Subsidiaries of the Registrant



                                                 State or Other Jurisdiction
Name                                                   of Formation
- ----                                             ---------------------------

Antares Pharma AG                                       Switzerland
Antares Pharma IPL AG                                   Switzerland
Antares Pharma NV                                  Netherlands, Antilles

EX-23.1

                                                                    Exhibit 23.1


                          Independent Auditors' Consent
                          -----------------------------

The Board of Directors and Shareholders
Antares Pharma, Inc.:

We consent to the incorporation by reference in the registration statement (Nos.
333-20389, 333-40483, 333-64480) on Form S-8 and registration statements (Nos.
333-61950, 333-96739) on Form S-3 of Antares Pharma, Inc. (formerly known as
Medi-Ject Corporation) of our report dated March 14, 2003, with respect to the
consolidated balance sheets of Antares Pharma, Inc. and subsidiaries as of
December 31, 2001 and 2002, and the related consolidated statements of
operations, shareholders' equity (deficit) and comprehensive loss, and cash
flows for each of the years in the three-year period ended December 31, 2002,
and the related financial statement schedule, which reports appear in the
December 31, 2002, annual report on Form 10-K of Antares Pharma, Inc.

The audit report on the consolidated financial statements of Antares Pharma,
Inc. and subsidiaries referred to above contains an explanatory paragraph that
states that the Company's negative working capital, recurring losses, and
negative cash flows from operations raise substantial doubt about the entity's
ability to continue as a going concern. The consolidated financial statements
and financial statement schedule included in the registration statement does not
include any adjustments that might result from the outcome of this uncertainty.

Our report on the 2002 consolidated financial statements refers to the Company's
adoption of the cumulative deferral method of revenue recognition for licensing
arrangements effective January 1, 2000 and the provisions of Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets,"
on January 1, 2002.


                                       /s/ KPMG LLP

Minneapolis, Minnesota
March 21, 2003

EX-99.1

                                                                    Exhibit 99.1


                              ANTARES PHARMA, INC.

          CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL
                              OFFICER PURSUANT TO
         SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)

     Each of the undersigned, Roger G. Harrison and Lawrence M. Christian, the
Chief Executive Officer and the Chief Financial Officer, respectively, of
Antares Pharma, Inc. (the "Company"), individually and not jointly has executed
this Certification in connection with the filing with the Securities and
Exchange Commission of the Company's Annual Report on Form 10-K for the year
ended December 31, 2002 (the "Report").

     Each of the undersigned hereby certifies that:

     1.   The Report fully complies with the requirements of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     2.   The information contained in the Report fairly presents, in all
          material respects, the financial condition and results of operations
          of the Company.

     IN WITNESS WHEREOF, each of the undersigned has executed this Certification
as of the 21st day of March 2003.


                                       /s/ Roger G. Harrison
                                       -----------------------------------------
                                       Roger G. Harrison
                                       Chief Executive Officer

                                       /s/ Lawrence M. Christian
                                       -----------------------------------------
                                       Lawrence M. Christian
                                       Chief Financial Officer