UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2004
Commission File Number 0-20945
ANTARES PHARMA, INC.
| A Minnesota Corporation | IRS Employer ID No. 41-1350192 |
707 Eagleview Boulevard, Suite 414
Exton, Pennsylvania
19341
(610) 458-6200
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of shares outstanding of the Registrant’s Common Stock, $.01 par value, as of August 10, 2004, was 38,081,796.
INDEX
| PAGE | ||||
| PART I. |
FINANCIAL INFORMATION | |||
| ITEM 1. |
Financial Statements (Unaudited) | |||
| Consolidated Balance Sheets, as of December 31, 2003 and June 30, 2004 | 3 | |||
| Consolidated Statements of Operations for the three months and six months ended June 30, 2003 and 2004 | 4 | |||
| Consolidated Statements of Cash Flows for the six months ended June 30, 2003 and 2004 | 5 | |||
| Notes to Consolidated Financial Statements | 6 | |||
| ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 | ||
| ITEM 3. |
Quantitative and Qualitative Disclosures About Market Risk | 19 | ||
| ITEM 4. |
Controls and Procedures | 19 | ||
| PART II. |
OTHER INFORMATION | 21 | ||
| SIGNATURES | 23 | |||
2
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| December 31, 2003 |
June 30, 2004 |
|||||||
| Assets | ||||||||
| Current Assets: |
||||||||
| Cash |
$ | 1,928,815 | $ | 3,170,301 | ||||
| Short-term investments |
— | 9,977,010 | ||||||
| Accounts receivable, net of allowances of $21,500 and $21,400, respectively |
481,886 | 221,454 | ||||||
| Other receivables |
7,947 | 96,366 | ||||||
| Inventories |
225,408 | 100,222 | ||||||
| Prepaid expenses and other assets |
61,239 | 250,986 | ||||||
| Total current assets |
2,705,295 | 13,816,339 | ||||||
| Equipment, furniture and fixtures, net |
801,369 | 648,523 | ||||||
| Patent rights, net |
1,214,356 | 1,249,399 | ||||||
| Goodwill |
1,095,355 | 1,095,355 | ||||||
| Other assets |
138,478 | 182,878 | ||||||
| Total Assets |
$ | 5,954,853 | $ | 16,992,494 | ||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities: |
||||||||
| Accounts payable |
$ | 253,336 | $ | 315,201 | ||||
| Accrued expenses and other liabilities |
827,676 | 754,903 | ||||||
| Due to related parties |
162,964 | 19,303 | ||||||
| Capital lease obligations - current maturities |
36,003 | 9,811 | ||||||
| Deferred revenue - current |
809,945 | 825,071 | ||||||
| Total current liabilities |
2,089,924 | 1,924,289 | ||||||
| Deferred revenue - long term |
3,557,835 | 3,178,504 | ||||||
| Total liabilities |
5,647,759 | 5,102,793 | ||||||
| Shareholders’ Equity: |
||||||||
| Series A Convertible Preferred Stock: $0.01 par; authorized 10,000 shares; 1,450 and 1,500 issued and outstanding at December 31, 2003 and June 30, 2004, respectively |
15 | 15 | ||||||
| Series D Convertible Preferred Stock: $0.01 par; authorized 245,000 shares; 243,749 issued and outstanding at December 31, 2003 and June 30, 2004 |
2,437 | 2,437 | ||||||
| Common Stock: $0.01 par; authorized 100,000,000 shares; 19,831,296 and 37,976,796 issued and outstanding at December 31, 2003 and June 30, 2004, respectively |
198,313 | 379,768 | ||||||
| Additional paid-in capital |
77,771,149 | 92,703,087 | ||||||
| Accumulated deficit |
(74,126,619 | ) | (77,783,061 | ) | ||||
| Prepaid license discount |
(2,894,677 | ) | (2,796,552 | ) | ||||
| Deferred compensation |
(23,688 | ) | — | |||||
| Accumulated other comprehensive loss |
(619,836 | ) | (615,993 | ) | ||||
| Total Shareholders’ Equity |
307,094 | 11,889,701 | ||||||
| Total Liabilities and Shareholders’ Equity |
$ | 5,954,853 | $ | 16,992,494 | ||||
See accompanying notes to consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| For the Three Months Ended June 30, |
For the Six Months Ended June 30, |
|||||||||||||||
| 2003 |
2004 |
2003 |
2004 |
|||||||||||||
| Revenue: |
||||||||||||||||
| Product sales |
$ | 696,522 | $ | 434,910 | $ | 1,375,558 | $ | 906,356 | ||||||||
| Development revenue |
25,639 | 69,654 | 50,299 | 144,962 | ||||||||||||
| Licensing fees |
168,388 | 168,803 | 329,836 | 329,165 | ||||||||||||
| Royalties |
17,753 | 18,013 | 62,735 | 36,718 | ||||||||||||
| Total revenue |
908,302 | 691,380 | 1,818,428 | 1,417,201 | ||||||||||||
| Cost of sales: |
||||||||||||||||
| Cost of product sales |
563,560 | 359,283 | 1,059,383 | 704,091 | ||||||||||||
| Cost of development revenue |
5,521 | 43,517 | 12,174 | 44,192 | ||||||||||||
| Total cost of sales |
569,081 | 402,800 | 1,071,557 | 748,283 | ||||||||||||
| Gross margin |
339,221 | 288,580 | 746,871 | 668,918 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
687,340 | 603,990 | 1,402,115 | 1,267,963 | ||||||||||||
| Sales and marketing |
92,044 | 124,281 | 202,909 | 234,333 | ||||||||||||
| General and administrative |
1,319,263 | 1,273,263 | 2,817,595 | 2,702,438 | ||||||||||||
| 2,098,647 | 2,001,534 | 4,422,619 | 4,204,734 | |||||||||||||
| Net operating loss |
(1,759,426 | ) | (1,712,954 | ) | (3,675,748 | ) | (3,535,816 | ) | ||||||||
| Other income (expense): |
||||||||||||||||
| Loss on debt extinguishments |
— | — | (885,770 | ) | — | |||||||||||
| Loss on common stock warrants |
(1,696,477 | ) | — | (1,580,766 | ) | — | ||||||||||
| Interest income |
5,785 | 32,943 | 9,667 | 45,612 | ||||||||||||
| Interest expense |
(226,823 | ) | (965 | ) | (537,303 | ) | (79,084 | ) | ||||||||
| Foreign exchange gains (losses) |
14,450 | (9,273 | ) | (14,109 | ) | (10,740 | ) | |||||||||
| Other, net |
(7,070 | ) | (337 | ) | (2,983 | ) | (4,985 | ) | ||||||||
| (1,910,135 | ) | 22,368 | (3,011,264 | ) | (49,197 | ) | ||||||||||
| Net loss |
(3,669,561 | ) | (1,690,586 | ) | (6,687,012 | ) | (3,585,013 | ) | ||||||||
| Preferred stock dividends |
(50,000 | ) | (71,429 | ) | (50,000 | ) | (71,429 | ) | ||||||||
| Net loss applicable to common shares |
$ | (3,719,561 | ) | $ | (1,762,015 | ) | $ | (6,737,012 | ) | $ | (3,656,442 | ) | ||||
| Basic and diluted net loss per common share |
$ | (0.31 | ) | $ | (0.05 | ) | $ | (0.57 | ) | $ | (0.11 | ) | ||||
| Basic and diluted weighted average common shares outstanding |
12,026,954 | 37,943,664 | 11,882,424 | 33,285,470 | ||||||||||||
See accompanying notes to consolidated financial statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| For the Six Months Ended June 30, |
||||||||
| 2003 |
2004 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (6,687,012 | ) | $ | (3,585,013 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
429,205 | 312,558 | ||||||
| Loss on disposal and abandonment of assets |
5,576 | 5,701 | ||||||
| Stock-based compensation expense |
579,682 | 410,494 | ||||||
| Noncash interest expense |
277,486 | 75,388 | ||||||
| Provision for doubtful accounts |
34,629 | — | ||||||
| Loss on debt extinguishments |
741,570 | — | ||||||
| Losses on common stock warrants |
1,580,766 | — | ||||||
| Amortization of prepaid license discount |
— | 98,125 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
(290,585 | ) | 260,432 | |||||
| Other receivables |
(76,456 | ) | (104,043 | ) | ||||
| Inventories |
259,632 | 125,186 | ||||||
| Prepaid expenses and other assets |
(91,922 | ) | (189,747 | ) | ||||
| Accounts payable |
238,719 | 61,865 | ||||||
| Accrued expenses and other |
315,663 | (72,773 | ) | |||||
| Deferred revenue |
1,087,172 | (364,205 | ) | |||||
| Due to related parties |
110,321 | (143,361 | ) | |||||
| Other |
(664 | ) | (44,400 | ) | ||||
| Net cash used in operating activities |
(1,486,218 | ) | (3,153,793 | ) | ||||