atrs-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________________________

FORM 10-Q

(Mark One)


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

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number: 001-32302

ANTARES PHARMA, INC.

(Exact name of registrant as specified in its charter)


Delaware						41-1350192
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


100 Princeton South, Suite 300, Ewing, NJ						08628
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (609) 359-3020

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ATRS

NASDAQ

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non–accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 5, 2022, the registrant had 170,852,427 shares of common stock outstanding at $0.01 par value per share.

ANTARES PHARMA, INC.

Quarterly Report on Form 10-Q

For the Three Months Ended March 31, 2022

TABLE OF CONTENTS



PART I – FINANCIAL INFORMATION
	Item 1.	Financial Statements	2
		Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (unaudited)	2
		Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (unaudited)	3
		Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021 (unaudited)	4
		Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2022 and 2021 (unaudited)	5
		Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)	6
		Notes to Condensed Consolidated Financial Statements (unaudited)	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
	Item 4.	Controls and Procedures	30
PART II – OTHER INFORMATION
	Item 1.	Legal Proceedings	32
	Item 1A.	Risk Factors	32
	Item 6.	Exhibits	35
SIGNATURES			36

PART I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

ANTARES PHARMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(UNAUDITED)


	March 31, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	61,715	$	65,913
Short-term investments	498		1,245
Accounts receivable, net	58,131		56,697
Other receivables	26,006		26,311
Inventories, net	11,591		11,544
Contract assets	9,142		8,030
Prepaid expenses and other current assets	4,502		4,532
Total current assets	171,585		174,272
Deferred tax assets, net	33,860		33,043
Property and equipment, net	25,727		26,015
Operating lease right-of-use assets	4,499		3,774
Intangibles, net	17,690		17,879
Goodwill	1,095		1,095
Other long-term assets	1,202		1,427
Total assets	$	255,658	$	257,505

Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	19,878	$	17,056
Accrued expenses and other liabilities	30,216		35,043
Current maturities of long-term debt, net	1,500		1,500
Operating lease liabilities, current	1,035		904
Deferred revenue	3,100		4,427
Total current liabilities	55,729		58,930
Long-term debt, less current maturities	17,891		18,241
Operating lease liabilities, long-term	5,063		4,576
Deferred revenue, long-term	1,207		—
Total liabilities	79,890		81,747
Commitments and contingencies (Note 11)
Stockholders’ Equity
Preferred Stock: $0.01 par; 3,000 shares authorized, none outstanding	—		—
Common Stock: $0.01 par; 300,000 shares authorized; 170,580 and 170,042 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively	1,706		1,701
Additional paid-in capital	353,406		351,079
Accumulated deficit	(178,658)		(176,337)
Accumulated other comprehensive loss	(686)		(685)
Total stockholders' equity	175,768		175,758
Total liabilities and stockholders’ equity	$	255,658	$	257,505

The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these condensed consolidated financial statements.

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(UNAUDITED)


	Three Months Ended March 31,
	2022		2021
Revenue
Product sales, net	$	32,103	$	29,135
Licensing and development revenue	4,191		4,984
Royalties	5,263		7,964
Total revenue, net	41,557		42,083
Operating expenses
Cost of product sales	15,648		12,498
Cost of development revenue	3,119		3,947
Research and development	5,008		2,640
Selling, general and administrative	20,602		17,607
Total operating expenses	44,377		36,692
Operating income (loss)	(2,820)		5,391
Other income (expense)
Interest expense	(174)		(962)
Other income (expense), net	(144)		(46)
Total other expense, net	(318)		(1,008)
Income (loss) before income taxes	(3,138)		4,383
Income tax expense (benefit)	(817)		590
Net income (loss)	$	(2,321)	$	3,793

Earnings (loss) per common share
Basic	$	(0.01)	$	0.02
Diluted	$	(0.01)	$	0.02

Weighted average common shares outstanding
Basic	170,104		167,822
Diluted	170,104		174,908

The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these condensed consolidated financial statements.

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(UNAUDITED)


	Three Months Ended March 31,
	2022		2021
Net income (loss)	$	(2,321)	$	3,793
Foreign currency translation adjustment	(1)		(10)
Comprehensive income (loss)	$	(2,322)	$	3,783

The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these condensed consolidated financial statements.

ANTARES PHARMA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

(UNAUDITED)












	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
Balance, December 31, 2021	170,072	$	1,701	$	351,079	$	(176,337)	$	(685)	$	175,758
Common stock issued under equity compensation plan, net of shares withheld for taxes	165	2		(523)		—		—		(521)
Exercise of options	343	3		910		—		—		913
Stock-based compensation	—	—		1,940		—		—		1,940
Net income (loss)	—	—		—		(2,321)		—		(2,321)
Other comprehensive income (loss)	—	—		—		—		(1)		(1)
Balance, March 31, 2022	170,580	$	1,706	$	353,406	$	(178,658)	$	(686)	$	175,768












	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
Balance, December 31, 2020	166,836	$	1,668	$	340,756	$	(222,626)	$	(683)	$	119,115
Common stock issued under equity compensation plan, net of shares withheld for taxes	417	4		(1,623)		—		—		(1,619)
Exercise of options	1,545	16		3,325		—		—		3,341
Stock-based compensation	—	—		1,605		—		—		1,605
Net income (loss)	—	—		—		3,793		—		3,793
Other comprehensive income (loss)	—	—		—		—		(10)		(10)
Balance, March 31, 2021	168,798	$	1,688	$	344,063	$	(218,833)	$	(693)	$	126,225

The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these condensed consolidated financial statements.

ANTARES PHARMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(UNAUDITED)


	Three Months Ended March 31,
	2022		2021
Cash Flows from Operating Activities
Net income (loss)	$	(2,321)	$	3,793
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Deferred taxes	(817)		590
Stock-based compensation	1,940		1,605
Depreciation and amortization	931		894
Changes in inventory reserve	549		40
Other	276		126
Changes in operating assets and liabilities:
Accounts receivable	(1,434)		(731)
Inventories, net	(596)		(1,438)
Contract assets	(1,112)		(2,820)
Prepaid expenses and other assets	30		650
Accounts payable	2,655		502
Accrued expenses and other liabilities	(4,862)		1,136
Deferred revenue	(120)		(2,369)
Net cash provided by (used in) operating activities	(4,881)		1,978
Cash Flows from Investing Activities
Purchases of property and equipment	(81)		(1,184)
Proceeds from maturities of investment securities	996		—
Purchases of investment securities	(249)		—
Net cash provided by (used in) investing activities	666		(1,184)
Cash Flows from Financing Activities
Principal payments on long-term debt	(375)		—
Proceeds from exercise of stock options	913		3,341
Taxes paid related to net share settlement of equity awards	(521)		(1,619)
Net cash provided by (used in) financing activities	17		1,722
Effect of exchange rate changes on cash and cash equivalents	—		(1)
Increase (decrease) in cash and cash equivalents	(4,198)		2,515
Cash and cash equivalents
Beginning of period	65,913		53,137
End of period	$	61,715	$	55,652
Supplemental disclosure of cash flow information
Cash paid for interest	$	148	$	850
Cash paid for income taxes	$	—	$	98
Supplemental disclosure of non-cash investing activities
Purchases of property and equipment recorded in accounts payable and accrued expenses	$	632	$	1,779

The accompanying Notes to Condensed Consolidated Financial Statements (Unaudited) are an integral part of these condensed consolidated financial statements.

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ANTARES PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

Note 1. Description of Business

Antares Pharma, Inc. (“Antares,” “we,” “our,” “us” or the “Company”) is a specialty pharmaceutical company focused primarily on the development and commercialization of pharmaceutical products and technologies in targeted therapeutic areas. We develop, manufacture and commercialize, for ourselves or with partners, novel therapeutic products using our advanced drug delivery systems that are designed to provide commercial or functional advantages, such as improved safety and efficacy, convenience, improved tolerability, and enhanced patient comfort and adherence. We also seek product opportunities that complement and leverage our commercial platform. We have a portfolio of proprietary and partnered commercial products and ongoing product development programs in various stages of development. We have formed partnership arrangements with several different industry leading pharmaceutical companies.

Our marketed proprietary products include:

•XYOSTED® (testosterone enanthate) injection, indicated for testosterone replacement therapy in adult males for conditions associated with a deficiency or absence of endogenous testosterone, and the first and only subcutaneous testosterone enanthate product for once-weekly, at-home self-administration to be approved by the U.S. Food and Drug Administration (“FDA”);

•NOCDURNA® (desmopressin acetate), marketed in the United States (“U.S.”). for the treatment of nocturia due to nocturnal polyuria (“NP”) in adults who awaken at least two times per night to urinate; and

•TLANDO® (testosterone undecanoate), an oral treatment for testosterone replacement therapy (“TRT”) indicated for conditions associated with a deficiency or absence of endogenous testosterone, or hypogonadism in adult males, approved by the FDA on March 28, 2022 with commercial launch expected in the second quarter of 2022.

We are also party to various partnered product development and supply arrangements:

•We developed and are the exclusive supplier of devices for Teva Pharmaceutical Industries, Ltd’s (“Teva”) Epinephrine Injection USP products, the generic equivalent of EpiPen® and EpiPen® Jr., indicated for emergency treatment of severe allergic reactions including those that are life threatening (anaphylaxis) in adults and certain pediatric patients;

•Through our commercialization partner Teva, we sell Sumatriptan Injection USP, a generic equivalent to the Imitrex® STATdose Pen®, in the U.S. indicated for the acute treatment of migraine headaches and cluster headaches in adults;

•In collaboration with AMAG Pharmaceuticals, Inc. (“AMAG”), acquired by Covis Group S.a.r.l. (“CG”) (collectively CG and AMAG are herein after referred to as “Covis”) in November 2020, we developed a subcutaneous auto injector and are the exclusive supplier of devices and the final assembled and packaged commercial product of Makena® (hydroxyprogesterone caproate injection) subcutaneous auto injector, which is a ready-to-administer treatment indicated to reduce the risk of preterm birth in women pregnant with one baby and who spontaneously delivered at least one preterm baby in the past;

•We are the exclusive supplier of devices and the final assembled and packaged commercial product of OTREXUP® (methotrexate) injection, indicated for adults with severe active rheumatoid arthritis, children with active polyarticular juvenile idiopathic arthritis and adults with severe recalcitrant psoriasis, which we developed and sold to Otter Pharmaceuticals, LLC (a subsidiary of Assertio Holdings, Inc., together with Assertio Holdings, Inc., as guarantor, individually and collectively referred to as “Otter”) in December 2021 as discussed in Note 7; and

•We developed and are the exclusive supplier of devices for Teva’s generic equivalent of Forsteo® (Teriparatide Injection) which is approved and currently sold by Teva in various countries outside the U.S.

Additionally, we are developing other devices in collaboration with various pharmaceutical partners and advancing other internal research and development programs.

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ANTARES PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements, which include the accounts of Antares Pharma, Inc. and its two wholly-owned foreign subsidiaries, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of the Securities and Exchange Commission's Regulation S-X. Accordingly, all of the information and footnotes required by GAAP for complete financial statements is not included. All intercompany accounts and transactions have been eliminated in consolidation. We believe all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The accompanying unaudited condensed consolidated financial statements and unaudited condensed footnote disclosures thereto should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Cash and Cash Equivalents

Cash and cash equivalents represent demand deposits at commercial banks and highly liquid investments with an original maturity of three months or less. Cash equivalents, consisting of investments in money market funds and bank certificate of deposits, are remeasured and reported at fair value each reporting period based on quoted market prices, which is a Level 1 input within the three-level valuation hierarchy for disclosure of fair value measurements, and totaled $26,631 and $26,889 as of March 31, 2022 and December 31, 2021, respectively.

Investments

From time to time, we also invest in bank certificates of deposit that are classified as held-to-maturity because of our intent and ability to hold securities to maturity. Investments with original maturities greater than three months but less than one year are classified as short-term investments on the Condensed Consolidated Balance Sheets. The investment securities are carried at their amortized cost and fair value is determined by quoted market prices for identical or similar securities. The carrying value of our short-term investments as of March 31, 2022 and December 31, 2021 approximate fair value.

Inventories

Inventories are stated at the lower of cost or net realizable value with cost determined on a first-in, first-out basis. Certain components of our products are provided by a limited number of vendors, and our production, assembly, warehousing and distribution operations are outsourced to third-party suppliers where substantially all of our inventory is located. Disruption of supply from key vendors or third-party suppliers may have a material adverse impact on our operations and financial results.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over an asset’s estimated useful life as follows:


			Useful Life
Computer equipment and software			3-5 years
Furniture, fixtures and office equipment			5-7 years
Production molds, tooling and equipment			3-10 years
Leasehold improvements			Lesser of useful life or lease term

Expenditures, including interest costs, for assets under construction and internal use software that are not yet ready for their intended use are capitalized and will be depreciated based on the above guidelines when placed in service. Costs associated with repairs and maintenance are expenses as incurred.

Revenue Recognition

We generate revenue from proprietary and partnered product sales, license and development activities and royalty arrangements. Revenue is recognized when or as we transfer control of the promised goods or services to the customer at the transaction price, which is the amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services.

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ANTARES PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

At inception of each contract, we identify the goods and services that have been promised to the customer and each of those that represent a distinct performance obligation, determine the transaction price including any variable consideration, allocate the transaction price to the distinct performance obligations and determine whether control transfers to the customer at a point in time or over time. Variable consideration is included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. We reassess our reserves for variable consideration at each reporting date and make adjustments, if necessary, which may affect revenue and earnings in periods in which any such changes become known.

We have elected to recognize the cost for freight and shipping activities as a fulfillment cost. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of underlying goods are transferred to the customer. The related shipping and freight charges incurred are included in cost of product sales in the Consolidated Statements of Operations.

Proprietary Product Sales

We sell our proprietary commercial products primarily to wholesale and specialty distributors. Revenue is recognized when control has transferred to the customer, which is typically upon delivery, at the net selling price, which reflects the variable consideration for which reserves and sales allowances are established for estimated returns, wholesale distribution fees, prompt payment discounts, government rebates and chargebacks, plan rebate arrangements and patient discount and support programs.

The determination of certain reserves and sales allowances requires us to make a number of judgements and estimates to reflect our best estimate of the transaction price and the amount of consideration to which we believe we would be ultimately entitled to receive. The expected value is determined based on unit sales data, contractual terms with customers and third-party payers, historical and estimated future percentage of rebates incurred on sales, historical and future insurance plan billings, any new or anticipated changes in programs or regulations that would impact the amount of the actual rebates, customer purchasing patterns, product expiration dates and levels of inventory in the distribution channel. Reserves for prompt payment discounts are recorded as a reduction in accounts receivable in the Condensed Consolidated Balance Sheets. Reserves for returns, distributor fees, rebates and customer co-pay support programs are included within current liabilities in the Condensed Consolidated Balance Sheets.

Partnered Product Sales

We are party to several license, development, supply and distribution arrangements with pharmaceutical partners, under which we produce and are the exclusive supplier of certain products, devices and/or components. Revenue is recognized when or as control of the goods transfers to the customer as discussed below.

We are the exclusive supplier of the Makena® subcutaneous auto injector product to Covis and beginning in December 2021, the exclusive supplier of OTREXUP® to Otter. Because these products are custom manufactured for each customer with no alternative use and we have a contractual right to payment for performance completed to date, control is continuously transferred to the customer as the product is produced pursuant to firm purchase orders. Revenue is recognized over time using the output method based on the contractual selling price and number of units produced. The amount of revenue recognized in excess of the amount shipped/billed to the customer, if any, is recorded as contract assets in the Condensed Consolidated Balance Sheets due to the short-term nature in which the amount is ultimately expected to be billed and collected from the customer.

All other partnered product sales are recognized at the point in time in which control is transferred to the customer, which is typically upon shipment. Sales terms and pricing are governed by the respective supply and distribution agreements, and there is generally no right of return. Revenue is recognized at the transaction price, which includes the contractual per unit selling price and estimated variable consideration, such as volume-based pricing arrangements or profit sharing arrangements, if any. We recognize revenue, including the estimated variable consideration we expect to receive for contract margin on future commercial sales, upon shipment of the goods to our partner. The estimated variable consideration is recognized at an amount we believe is not subject to significant reversal based on historical experience and is adjusted at each reporting period if the most likely amount of expected consideration changes or becomes fixed.

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ANTARES PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

Licensing and Development Revenue

We have entered into several license, development and supply arrangements with pharmaceutical partners under which we grant a license to our device technology and know-how and provide research and development services that often involve multiple performance obligations and highly customized deliverables. For such arrangements, we identify each of the promised goods and services within the contract and the distinct performance obligations at inception and allocate consideration to each performance obligation based on relative standalone selling price, which is generally determined based on the expected cost plus mark-up.

If the contract includes an enforceable right to payment for performance completed to date and performance obligations are satisfied over time, we recognize revenue over the development period using either the input or output method depending on which is most appropriate given the nature of the distinct deliverable. For other contracts that do not contain an enforceable right to payment for performance completed to date, revenue is recognized when control is transferred to the customer. Factors that may indicate that the transfer of control has occurred include the transfer of legal title, transfer of physical possession, the customer has obtained the significant risks and rewards of ownership of the assets and we have a present right to payment.

Our typical payment terms for development contracts may include an upfront payment equal to a percentage of the total contract value with the remaining portion to be billed upon completion and transfer of the individual deliverables or satisfaction of the individual performance obligations. We record a contract liability for cash received in advance of performance, which is presented within deferred revenue and deferred revenue, long-term in the Condensed Consolidated Balance Sheets and recognized as revenue in the Consolidated Statements of Operations when the associated performance obligations have been satisfied. We recognized $1,670 in licensing and development revenue in connection with contract liabilities that were outstanding as of December 31, 2021 and satisfied during the three months ended March 31, 2022.

License fees and milestones received in exchange for the grant of a license to our functional intellectual property such as patented technology and know-how in connection with a partnered development arrangement are generally recognized at inception of the arrangement, or over the development period depending on the facts and circumstances, as the license is generally not distinct from the non-licensed goods or services to be provided under the contract. Milestone payments that are contingent upon the occurrence of future events are evaluated and recorded at the most likely amount, and to the extent that it is probable that a significant reversal will not occur when the associated uncertainty is resolved.

Royalties

We earn royalties in connection with licenses granted under license and development arrangements with partners. Royalties are based upon a percentage of commercial sales of partnered products with rates ranging from mid-single digits to low double digits and are tiered based on levels of net sales. These sales-based royalties, for which the license was deemed the predominant element to which the royalties relate, are estimated and recognized in the period in which the partners’ commercial sales occur. The royalties are generally reported and payable to us within 45 to 60 days of the end of the period in which the commercial sales are made. We base our estimates of royalties earned on actual sales information from our partners when available or estimated prescription sales from external sources and estimated net selling price. If actual royalties received are different than amounts estimated, we would adjust the royalty revenue in the period in which the adjustment becomes known.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price of firm orders and development contract deliverables for which work has not been completed or orders fulfilled and excludes potential purchase orders under ordering-type supply contracts with indefinite delivery or quantity. As of March 31, 2022, the aggregate value of remaining performance obligations, excluding contracts with an original expected length of one year or less, was $13,989. We expect to recognize revenue on the remaining performance obligations over the next three years, with the majority being recognized in the next twelve months.

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ANTARES PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

Note 3. Inventories

Inventories consisted of the following:


	March 31, 2022		December 31, 2021
Raw material	$	325	$	325
Work in process	8,615		6,784
Finished goods	2,651		4,435
Total inventories, net	$	11,591	$	11,544

A reserve is recorded for potentially excess, dated or obsolete inventories based on an analysis of inventory on hand compared to forecasted future sales, which was $764 and $214 as of March 31, 2022 and December 31, 2021, respectively.

Note 4. Property and Equipment

Property and equipment, net consisted of the following:


	March 31, 2022		December 31, 2021
Production molds, tooling and equipment	$	22,113	$	22,069
Leasehold improvements	7,656		7,559
Furniture, fixtures and office equipment	912		907
Computer equipment and software	1,977		1,717
Construction and tooling in process	6,990		6,942
Total property and equipment	39,648		39,194
Less: Accumulated depreciation	(13,921)		(13,179)
Total property and equipment, net	$	25,727	$	26,015

Depreciation expense was $742 and $689 for the three months ended March 31, 2022 and 2021, respectively. We capitalized $0 and $17 interest costs associated with construction of property and equipment during the three months ended March 31, 2022 and 2021, respectively.

Note 5. Long-term Debt

Term Loan

On June 6, 2017, we entered into a loan and security agreement (the “Loan Agreement”) with Hercules Capital, Inc., for a term loan of up to $35,000 (the “Term Loan”), under which we initially borrowed $25,000 (“Tranche I”). the proceeds of which were used for working capital and general corporate purposes. The Term Loan was secured by substantially all of our assets, excluding intellectual property, and accrued interest at a calculated prime-based variable rate with a maximum of 9.50%. The interest rate in effect as of March 31, 2021 was 8.50%. Payments under the loan were interest-only until the first principal payment was due.

On June 26, 2019, we entered into a First Amendment (the “Amendment”) to the Loan Agreement, which increased the aggregate principal amount available under the Term Loan from $35,000 to $50,000 and extended the interest-only payment period of the Term Loan to August 1, 2021. Under the Amendment, the interest-only period could be further extended to August 1, 2022 if we achieved a certain loan extension milestone, requested such extension by July 31, 2021, and paid an extension fee equal to one half of one percent of the principal amount outstanding. Upon signing of the Amendment, an additional $15,000 (“Tranche II”) was funded to us. The Term Loan maturity date remained July 1, 2022; however, the Term Loan could be extended to July 1, 2024 contingent upon satisfaction of a certain loan extension milestone. We were eligible, but not obligated, to request one or more additional advances of at least $5,000, not to exceed $10,000 in the aggregate (“Tranche III”). Our option to request additional advances expired on October 31, 2020.

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ANTARES PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

We were required to pay an end of term fee (“End of Term Charge”) equal to 4.25% of Tranche I and 3.95% of the borrowings under Tranche II, payable upon the earlier of July 1, 2022 or repayment of the Term Loan. The Loan Agreement also imposed a prepayment fee of 1.0% to 3.0% if any or all of the balance was prepaid prior to the maturity date.

In July 2021, having previously met the loan extension milestone, we requested that the interest-only period be extended to August 1, 2022 and the maturity date be extended to July 1, 2024 in accordance with the terms of the Amendment. Hercules Capital, Inc. granted the extension of the interest-only period and maturity date and waived the extension fee. In June and September 2021, we made principal prepayments of $15,000 and $5,000, respectively, and paid a 1.0% prepayment fee.

On November 1, 2021, we extinguished the Loan Agreement with Hercules Capital, Inc. and repaid the outstanding $20,000 principal on the Term Loan, along with the 1.0% prepayment fee of $200 and the End of Term Charge of $1,655. All remaining unamortized debt issuance costs associated with the Term Loan were immediately amortized to interest expense.

Credit Facilities

On November 1, 2021, we entered into a Credit Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent for the lenders, (“Administrative Agent”) for credit facilities in an aggregate principal amount of up to $40,000 with a maturity date of November 1, 2024. The Credit Agreement provides for a $20,000 term loan facility (the “Term Loan Facility”) and a $20,000 revolving credit facility, $5,000 of which is available for the issuance of letters of credit and $1,000 of which is available for Swingline loans (the “Revolving Credit Facility”), (collectively the “Credit Facilities”), which are secured by substantially all of our assets. The Term Loan Facility was funded upon execution of the Credit Agreement with the proceeds used to repay our $20,000 Term Loan with Hercules Capital, Inc. and to pay fees and expenses incurred in connection with the early repayment. The Revolving Credit Facility remains available for future use and can be drawn upon for ongoing working capital requirements and other general corporate purposes as needed.

As of March 31, 2022 and December 31, 2021, we had $19,625 and $20,000 outstanding under our Term Loan Facility, respectively, with a carrying value of $19,391 and $19,741, respectively, which consisted of the principal balance outstanding, less unamortized debt issuance costs that are being amortized/accrued to interest expense over the term of the Term Loan Facility using the effective interest rate method. The fair value of our debt is estimated to approximate the carrying value based on our understanding of current market conditions and rates we could obtain for similar loans.

As of March 31, 2022 and December 31, 2021, there were no outstanding borrowings under the Revolving Credit Facility, including no outstanding letters of credit drawn from the Revolving Credit Facility or Swingline loans. Commitment fees are payable on the unused portion of the Revolving Credit Facility at rates between 0.30% and 0.45% based on our Consolidated Total Leverage Ratio, as defined in the Credit Agreement and below, remeasured quarterly. For the three months ended March 31, 2022, commitment fees incurred totaled $18.

As defined in the Credit Agreement governing the Term Loan Facility, principal payments of the outstanding term loans are due in consecutive quarterly installments on the last business day of each of March, June, September and December, commencing on March 31, 2022. A principal payment of $375 was made on March 31, 2022. The Credit Agreement also requires prepayment of the outstanding loans under the Term Loan Facility, subject to certain exceptions, with (a) 100% of the net cash proceeds of (i) any incurrence or issuance of certain debt, other than debt permitted under the Credit Agreement; (ii) issuance of equity other than that associated with employee compensation; and (iii) certain asset sales and casualty and condemnation events, subject to reinvestment rights and certain other exceptions. We may voluntarily prepay outstanding loans under the Term Facility at any time without premium or penalty. All obligations under the Term Facility are secured, subject to certain exceptions, by substantially all of our assets and the assets of our subsidiaries.

Borrowings made under the Credit Agreement bear interest at a rate per annum equal to either the Base Rate or LIBOR plus the Applicable Margin, as defined in the Credit Agreement. Swingline loans bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin. The Applicable Margin is based on the Consolidated Total Leverage Ratio, as defined in the Credit Agreement and below, remeasured quarterly. Base Rate is defined as the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) LIBOR for an interest period of one month plus 1.0%. In the event of default, we no longer have the option to request LIBOR rate loans, Swingline Loans or Letters of Credit and all outstanding financial instruments will bear interest at a rate per annum of 2.0% in excess of the calculated interest rate.

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ANTARES PHARMA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(in thousands, except per share amounts)

We have the option to select either the Base Rate or LIBOR as the rate of interest for the Term Loan and Revolving Credit Facilities, along with an interest period of either 1-month, 3-months or 6-months. Upon cessation of LIBOR on June 30, 2023, an appropriate benchmark replacement will be determined pursuant to the terms of the Credit Agreement. We have not yet evaluated the impact the cessation of LIBOR will have on our financial condition and results of operations. As of March 31, 2022, the Applicable Margin was 1.50% for Base Rate loans and 2.50% for LIBOR loans with a 1-month LIBOR selected as the rate of interest for the Term Loan Facility. The weighted average interest rate on the Term Loan Facility outstanding balance during the three months ended March 31, 2022 was approximately 2.65%.

Under the Credit Agreement, we are subject to customary affirmative and negative covenants, including, among others, restrictions on our ability to incur debt; create liens; make investments; merge, consolidate or dispose of assets or subsidiaries; enter into transactions with affiliates; modify accounting practices, our year end and organizational documents; pledge assets; revise nature of business; perform sale leasebacks; and enter into any restrictive agreements and customary events of default (including payment defaults, covenant defaults, change of control defaults and bankruptcy defaults). The Credit Agreement also contains financial covenants, including the ratio of consolidated total indebtedness to consolidated earnings before income, taxes, depreciation and amortization (“Consolidated EBITDA”) (“Consolidated Total Leverage Ratio”), as defined in the Credit Agreement” and the ratio of consolidated senior secured indebtedness to Consolidated EBITDA (“Consolidated Senior Secured Leverage Ratio”), as well as the ratio of Adjusted EBITDA to consolidated fixed charges (“Consolidated Fixed Charge Coverage Ratio”), as defined in the Credit Agreement. These covenants restrict our ability to purchase outstanding shares of our common stock. As of March 31, 2022 and December 31, 2021, we were in compliance with all affirmative, negative and financial covenants.

Future principal payments under the Term Loan Facility are as follows:


	Future Principal Payments
Remainder of 2022	$	1,125
2023	1,500
2024	17,000
Total future principal payments	$	19,625

Note 6. Share-based Compensation

We have an Equity Compensation Plan (the “Plan”), which allows for grants in the form of incentive stock options, non-qualified stock options, stock units, stock awards, stock appreciation rights, and other stock-based awards. The Plan was amended and restated in June 2021 to increase the total number of shares available for grant under the Plan by

SEC Form 10-Q filed by Antares Pharma Inc.