##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549




---

FORM 10-Q

|(Mark One) |  |                                                                                        
|---------- |  | ---------------------------------------------------------------------------------------
|           |  |                                                                                        
|[X]        |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For The Quarterly Period Ended March 31, 2003

OR

|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-26825



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NORTHWEST BIOTHERAPEUTICS, INC.

(Exact Name Of Registrant As Specified In Its Charter)

|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|DELAWARE
(State or Other Jurisdiction of
Incorporation or Organization) |  | 94-3306718
(I.R.S. Employer Identification No.)

21720  23rd DRIVE SE, SUITE 100, BOTHELL, WA 98021
(Address Of Principal Executive Offices, Including Zip Code)

(425) 608-3000
(Registrants Telephone Number, Including Area Code)



---

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]

As of
May 5, 2003, the registrant had outstanding 18,940,776 shares of
common stock, $0.001 par value.

1



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TABLE OF CONTENTS



|                               |                                                                                                |                                         |  |  |  |  |  | 
|------------------------------ | ---------------------------------------------------------------------------------------------- | --------------------------------------- |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1. Financial Statements                                                                  
|                               |                                                                                                | Condensed Balance Sheets               
|                               |                                                                                                | Condensed Statements of Operations     
|                               |                                                                                                | Condensed Statements of Cash Flows     
|                               |                                                                                                | Notes to Condensed Financial Statements
|                               | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                               | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            
|                               | Item 4. Controls and Procedures                                                               
|PART II  OTHER INFORMATION   
|                               | Item 1. Legal Proceedings                                                                     
|                               | Item 2. Changes in Securities and Use of Proceeds                                             
|                               | Item 3. Defaults upon Senior Securities                                                       
|                               | Item 4. Submission of Matters to a Vote of Security Holders                                   
|                               | Item 5. Other Information                                                                     
|                               | Item 6. Exhibits and Reports on Form 8-K                                                      
|SIGNATURES                    
|CERTIFICATIONS                
|INDEX TO EXHIBITS             
|EXHIBIT 10.1                  
|EXHIBIT 99.1                  
|EXHIBIT 99.2                  



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##### Table of Contents



NORTHWEST BIOTHERAPEUTICS, INC.

TABLE OF CONTENTS

|                               |                                                                                               |                                                                                                                                                                           |    |      |   | 
|------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -- | ---- | - | 
|                               |                                                                                               |                                                                                                                                                                           |    | Page
|                               |                                                                                               |                                                                                                                                                                           |    |     
|PART I  FINANCIAL INFORMATION |                                                                                               |                                                                                                                                                                           |    |     
|                               | Item 1. Financial Statements (unaudited)                                                      |                                                                                                                                                                           |    |      |  
|                               |                                                                                               | Condensed Balance Sheets (unaudited)
as of March 31, 2003, and December 31, 2002                                                                                          |    |      | 3 | 
|                               |                                                                                               | Condensed Statements of Operations
(unaudited) for the three-month periods ended March
31, 2003 and 2002 and the period from March 18,
1996 (inception) to March 31, 2003 |    |      | 5 | 
|                               |                                                                                               | Condensed Statements of Cash Flows
(unaudited) for the three-month periods ended March
31, 2003 and 2002 and the period from March 18,
1996 (inception) to March 31, 2003 |    |      | 7 | 
|                               |                                                                                               | Notes to Condensed Financial Statements                                                                                                                                   |    |      | 9 | 
|                               | Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations |                                                                                                                                                                           |    | 11   |  
|                               | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                                                                                           |    | 23   |  
|                               | Item 4. Controls and Procedures                                                               |                                                                                                                                                                           |    | 23   |  
|PART II  OTHER INFORMATION    |                                                                                               |                                                                                                                                                                           | 23 |     
|                               | Item 1. Legal Proceedings                                                                     |                                                                                                                                                                           |    | 23   |  
|                               | Item 2. Changes in Securities and Use of Proceeds                                             |                                                                                                                                                                           |    | 24   |  
|                               | Item 3. Defaults Upon Senior Securities                                                       |                                                                                                                                                                           |    | 24   |  
|                               | Item 4. Submission of Matters to a Vote of Security Holders                                   |                                                                                                                                                                           |    | 24   |  
|                               | Item 5. Other Information                                                                     |                                                                                                                                                                           |    | 24   |  
|                               | Item 6. Exhibits                                                                              |                                                                                                                                                                           |    | 24   |  
|SIGNATURES                     |                                                                                               |                                                                                                                                                                           | 25 |     
|CERTIFICATIONS                 |                                                                                               |                                                                                                                                                                           | 26 |     
|INDEX TO EXHIBITS              |                                                                                               |                                                                                                                                                                           | 28 |     

2



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##### Table of Contents






PART I  FINANCIAL INFORMATION




Item 1. Financial Statements

NORTHWEST BIOTHERAPEUTICS, INC.




(A Development Stage Company)Condensed Balance Sheets
(unaudited)

(in thousands)

|                        |                                                |                                      |                      |        |   |           |       |              |   |       |  | 
|----------------------- | ---------------------------------------------- | ------------------------------------ | -------------------- | ------ | - | --------- | ----- | ------------ | - | ----- |  | 
|                        |                                                |                                      |                      |        |   | March 31, |       | December 31,
|                        |                                                |                                      |                      |        |   | 2003      |       | 2002        
|                        |                                                |                                      |                      |        |   |           |       |             
|                        |                                                |                                      |                      | Assets |   |           |       |              |   |       |  | 
|Current assets:         |                                                |                                      |                      |        |   |           |       |             
|                        | Cash and cash equivalents                      |                                      | $                    | 2,543  |   |           | $     | 2,539        |  
|                        | Marketable securities                          |                                      |                      |       |   |           |       | 704          |  
|                        | Accounts receivable                            |                                      |                      | 61     |   |           |       |             |  
|                        | Accounts
receivable from affiliates            |                                      |                      |       |   |           |       | 3            |  
|                        | Accounts receivable from Medarex               |                                      |                      |       |   |           |       | 1,124        |  
|                        | Prepaid expenses and other current assets      |                                      |                      | 464    |   |           |       | 745          |  
|                        |                                                |                                      |                      |        |   |           |       |              |  
|                        |                                                |                                      | Total current assets |        |   | 3,068     |       |              |   | 5,115 | 
|                        |                                                |                                      |                      |        |   |           |       |              |  
|Property and equipment: |                                                |                                      |                      |        |   |           |       |             
|                        | Leasehold improvements                         |                                      |                      | 755    |   |           |       | 739          |  
|                        | Laboratory equipment                           |                                      |                      | 936    |   |           |       | 952          |  
|                        | Office furniture and other equipment           |                                      |                      | 272    |   |           |       | 272          |  
|                        |                                                |                                      |                      |        |   |           |       |              |  
|                        |                                                |                                      | 1,963                |        |   |           | 1,963 |             
|                        | Less accumulated depreciation and amortization |                                      |                      | 677    |   |           |       | 615          |  
|                        |                                                |                                      |                      |        |   |           |       |              |  
|                        | Property and equipment, net                    |                                      |                      | 1,286  |   |           |       | 1,348        |  
|Restricted cash         |                                                |                                      | 1,109                |        |   |           | 1,109 |             
|                        |                                                |                                      |                      |        |   |           |       |              |  
|                        |                                                |                                      | Total assets         |        | $ | 5,463     |       |              | $ | 7,572 | 
|                        |                                                |                                      |                      |        |   |           |       |              |  
|                        |                                                | Liabilities And Stockholders Equity |                      |        |   |           |       |              |   |      
|Current liabilities:    |                                                |                                      |                      |        |   |           |       |             
|                        | Current portion of note payable                |                                      | $                    | 263    |   |           | $     | 420          |  
|                        | Current portion of capital lease obligations   |                                      |                      | 67     |   |           |       | 73           |  
|                        | Accounts payable                               |                                      |                      | 208    |   |           |       | 497          |  
|                        | Accrued expenses                               |                                      |                      | 235    |   |           |       | 241          |  

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|                       |                                                                                                                                                                                 |  |                                            |         |   |           |  |              |   |       |  | 
|---------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------ | ------- | - | --------- |  | ------------ | - | ----- |  | 
|                       |                                                                                                                                                                                 |  |                                            |         |   | March 31, |  | December 31,
|                       |                                                                                                                                                                                 |  |                                            |         |   | 2003      |  | 2002        
|                       |                                                                                                                                                                                 |  |                                            |         |   |           |  |             
|                       | Accrued loss on facility sublease, current portion                                                                                                                              |  |                                            | 275     |   |           |  | 418          |  
|                       |                                                                                                                                                                                 |  |                                            |         |   |           |  |              |  
|                       |                                                                                                                                                                                 |  | Total current liabilities                  |         |   | 1,048     |  |              |   | 1,649 | 
|Long-term liabilities: |                                                                                                                                                                                 |  |                                            |         |   |           |  |             
|                       | Capital lease obligations, net of current portion                                                                                                                               |  |                                            | 84      |   |           |  | 98           |  
|                       | Deferred rent                                                                                                                                                                   |  |                                            | 188     |   |           |  | 158          |  
|                       | Due to Medarex                                                                                                                                                                  |  |                                            |        |   |           |  | 280          |  
|                       | Accrued loss on facility sublease, less current portion                                                                                                                         |  |                                            | 493     |   |           |  | 511          |  
|                       |                                                                                                                                                                                 |  |                                            |         |   |           |  |              |  
|                       |                                                                                                                                                                                 |  | Total liabilities                          |         |   | 1,813     |  |              |   | 2,696 | 
|                       |                                                                                                                                                                                 |  |                                            |         |   |           |  |              |  
|Stockholders equity:  |                                                                                                                                                                                 |  |                                            |         |   |           |  |             
|                       | Common stock, $0.001 par value; 125,000,000 shares authorized and 18,940,776 and 17,930,276
shares issued and outstanding at March 31, 2003 and December 31, 2002, respectively |  |                                            | 19      |   |           |  | 18           |  
|                       | Additional paid-in capital                                                                                                                                                      |  |                                            | 64,073  |   |           |  | 63,794       |  
|                       | Deferred compensation                                                                                                                                                           |  |                                            | (359    | ) |           |  | (444         | )
|                       | Deficit accumulated during the development stage                                                                                                                                |  |                                            | (60,083 | ) |           |  | (58,492      | )
|                       |                                                                                                                                                                                 |  |                                            |         |   |           |  |              |  
|                       |                                                                                                                                                                                 |  | Total stockholders equity                 |         |   | 3,650     |  |              |   | 4,876 | 
|                       |                                                                                                                                                                                 |  |                                            |         |   |           |  |              |  
|                       |                                                                                                                                                                                 |  | Total liabilities and stockholders equity |         | $ | 5,463     |  |              | $ | 7,572 | 
|                       |                                                                                                                                                                                 |  |                                            |         |   |           |  |              |  

See accompanying notes to condensed financial statements.

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NORTHWEST BIOTHERAPEUTICS, INC.
(A Development Stage Company)

Condensed Statements of Operations
(unaudited)




(in thousands, except per share data)

|                                                                      |                                                        |                          |        |                    |        |                            |        |                |        |   |         |        |         |  
|--------------------------------------------------------------------- | ------------------------------------------------------ | ------------------------ | ------ | ------------------ | ------ | -------------------------- | ------ | -------------- | ------ | - | ------- | ------ | ------- | -
|                                                                      |                                                        |                          |        | Three Months Ended |        |                           
|                                                                      |                                                        |                          |        | March 31,          |        | Period from March 18, 1996
|                                                                      |                                                        |                          |        |                    |        | (inception) to            
|                                                                      |                                                        |                          |        | 2003               |        | 2002                       |        | March 31, 2003
|                                                                      |                                                        |                          |        |                    |        |                            |        |               
|Revenues:                                                             |                                                        |                          |        |                    |        |                            |        |                |        |   |         |       
|                                                                      | Research material sales                                |                          | $      |                   |        |                            | $      | 3              |        |   | $       | 336    |        
|                                                                      | Contract research and development from related
parties |                          |        |                   |        |                            |        |               |        |   |         | 1,128  |        
|                                                                      | Research grants                                        |                          |        | 69                 |        |                            |        |                |        |   |         | 168    |        
|                                                                      | Other                                                  |                          |        |                   |        |                            |        |               |        |   |         | 33     |        
|                                                                      |                                                        |                          |        |                    |        |                            |        |                |        |   |         |        |        
|                                                                      |                                                        | Total revenues           |        |                    | 69     |                            |        |                | 3      |   |         |        | 1,665   |  
|                                                                      |                                                        |                          |        |                    |        |                            |        |                |        |   |         |        |        
|Operating expenses:                                                   |                                                        |                          |        |                    |        |                            |        |                |        |   |         |       
|                                                                      | Cost of research material sales                        |                          |        |                   |        |                            |        | 3              |        |   |         | 251    |        
|                                                                      | Research and development                               |                          |        | 508                |        |                            |        | 1,352          |        |   |         | 22,858 |        
|                                                                      | General and administrative                             |                          |        | 1,066              |        |                            |        | 1,687          |        |   |         | 22,851 |        
|                                                                      | Depreciation and amortization                          |                          |        | 87                 |        |                            |        | 143            |        |   |         | 1,951  |        
|                                                                      | Accrued loss on facility sublease                      |                          |        |                   |        |                            |        |               |        |   |         | 721    |        
|                                                                      | Asset impairment loss                                  |                          |        |                   |        |                            |        |               |        |   |         | 1,032  |        
|                                                                      |                                                        |                          |        |                    |        |                            |        |                |        |   |         |        |        
|                                                                      |                                                        | Total operating expenses |        |                    | 1,661  |                            |        |                | 3,185  |   |         |        | 49,664  |  
|                                                                      |                                                        |                          |        |                    |        |                            |        |                |        |   |         |        |        
|                                                                      |                                                        | Loss from operations     |        |                    | (1,592 | )                          |        |                | (3,182 | ) |         |        | (47,999 | )
|                                                                      |                                                        |                          |        |                    |        |                            |        |                |        |   |         |        |        
|Other income (expense):                                               |                                                        |                          |        |                    |        |                            |        |                |        |   |         |       
|                                                                      | Gain on sale of intellectual property                  |                          |        |                   |        |                            |        |               |        |   |         | 2,840  |        
|                                                                      | Interest expense                                       |                          |        | (11                | )      |                            |        | (12            | )      |   |         | (7,793 | )      
|                                                                      | Interest income                                        |                          |        | 12                 |        |                            |        | 66             |        |   |         | 717    |        
|                                                                      |                                                        |                          |        |                    |        |                            |        |                |        |   |         |        |        
|Net loss                                                              |                                                        |                          | (1,591 | )                  |        |                            | (3,128 | )              |        |   | (52,235 | )     
|Accretion of Series A preferred stock mandatory redemption
obligation |                                                        |                          |       |                    |        |                            |       |                |        |   | (1,872  | )     
|Series A preferred stock redemption fee                               |                                                        |                          |       |                    |        |                            |       |                |        |   | (1,700  | )     
|Beneficial conversion feature of                                      |                                                        |                          |        |                    |        |                            |        |                |        |   |         |       

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|                                                                           |  |   |        |                    |  |                            |        |                |  |   |         |   |  | 
|-------------------------------------------------------------------------- |  | - | ------ | ------------------ |  | -------------------------- | ------ | -------------- |  | - | ------- | - |  | 
|                                                                           |  |   |        | Three Months Ended |  | Period from March 18, 1996
|                                                                           |  |   |        | March 31,          |  | (inception) to            
|                                                                           |  |   |        | 2003               |  | 2002                       |        | March 31, 2003
|                                                                           |  |   |        |                    |  |                            |        |               
|Series D preferred stock                                                   |  |   |       |                    |  |                            |       |                |  |   | (4,274  | )
|                                                                           |  |   |        |                    |  |                            |        |                |  |   |         |   | 
|Net loss applicable to common stockholders                                 |  | $ | (1,591 | )                  |  | $                          | (3,128 | )              |  | $ | (60,081 | )
|                                                                           |  |   |        |                    |  |                            |        |                |  |   |         |   | 
|Net loss per share applicable to common stockholders  basic
and diluted   |  | $ | (0.09  | )                  |  | $                          | (0.19  | )              |  |   |         |  
|                                                                           |  |   |        |                    |  |                            |        |                |  |   |         |  
|Weighted average shares used in computing basic and diluted
loss per share |  |   | 18,657 |                    |  |                            | 16,879 |                |  |   |         |  
|                                                                           |  |   |        |                    |  |                            |        |                |  |   |         |  

See accompanying notes to condensed financial statements.

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NORTHWEST BIOTHERAPEUTICS, INC.

(A Development Stage Company)




Condensed Statements of Cash Flows
(unaudited)

(in thousands)

|                                                                            |                                                                                            |   |                    |       |                |   |                |      |   |   |             |        |  
|--------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | - | ------------------ | ----- | -------------- | - | -------------- | ---- | - | - | ----------- | ------ | -
|                                                                            |                                                                                            |   |                    |       |                |   |                |      |   |   | Period from
|                                                                            |                                                                                            |   | Three Months Ended |       | March 18, 1996
|                                                                            |                                                                                            |   | March 31,          |       | (inception) to
|                                                                            |                                                                                            |   | 2003               |       | 2002           |   | March 31, 2003
|                                                                            |                                                                                            |   |                    |       |                |   |               
|Cash flows from operating activities:                                       |                                                                                            |   |                    |       |                |   |                |      |   |   |             |       
|Net loss                                                                    |                                                                                            | $ | (1,591             | )     |                | $ | (3,128         | )    |   | $ | (52,235     | )     
|Adjustments to reconcile net loss to net cash used in operating activities: |                                                                                            |   |                    |       |                |   |                |      |   |   |             |       
|                                                                            | Depreciation and amortization                                                              |   |                    | 87    |                |   |                | 142  |   |   |             | 1,950  |  
|                                                                            | Amortization of deferred financing costs                                                   |   |                    |      |                |   |                |     |   |   |             | 320    |  
|                                                                            | Amortization of debt discount                                                              |   |                    |      |                |   |                |     |   |   |             | 5,749  |  
|                                                                            | Accrued interest converted to preferred stock                                              |   |                    |      |                |   |                |     |   |   |             | 260    |  
|                                                                            | Stock-based compensation costs                                                             |   |                    | 85    |                |   |                | 179  |   |   |             | 885    |  
|                                                                            | (Gain)
loss on sale and disposal of equipment                                              |   |                    | (40   | )              |   |                |     |   |   |             | 442    |  
|                                                                            | Gain on sale of intellectual property to Medarex                                           |   |                    |      |                |   |                |     |   |   |             | (2,840 | )
|                                                                            | Asset impairment loss                                                                      |   |                    |      |                |   |                |     |   |   |             | 1,032  |  
|                                                                            | Accrued loss on facility sublease                                                          |   |                    |      |                |   |                |     |   |   |             | 721    |  
|Changes in operating assets and liabilities:                                |                                                                                            |   |                    |       |                |   |                |      |   |   |             |       
|                                                                            | Accounts receivable                                                                        |   |                    | (58   | )              |   |                | 77   |   |   |             | (61    | )
|                                                                            | Prepaid expenses and other current assets                                                  |   |                    | 281   |                |   |                | (26  | ) |   |             | 2      |  
|                                                                            | Accounts payable and accrued expenses                                                      |   |                    | (295  | )              |   |                | (953 | ) |   |             | 842    |  
|                                                                            | Accrued
loss on facility sublease                                                          |   |                    | (161  | )              |   |                |     |   |   |             | (161   | )
|                                                                            | Deferred rent                                                                              |   |                    | 30    |                |   |                | 37   |   |   |             | 396    |  
|                                                                            |                                                                                            |   |                    |       |                |   |                |      |   |   |             |       
|Net cash used in operating activities                                       |                                                                                            |   | (1,662             | )     |                |   | (3,672         | )    |   |   | (42,698     | )     
|                                                                            |                                                                                            |   |                    |       |                |   |                |      |   |   |             |       
|Cash flows from investing activities:                                       |                                                                                            |   |                    |       |                |   |                |      |   |   |             |       
|                                                                            | Purchases of property and equipment, net                                                   |   |                    | (29   | )              |   |                | (141 | ) |   |             | (4,417 | )
|                                                                            | Proceeds
from sale of PP&E                                                                 |   |                    | 44    |                |   |                |     |   |   |             | 44     |  
|                                                                            | Proceeds from sale of intellectual property                                                |   |                    |      |                |   |                |     |   |   |             | 1,000  |  
|                                                                            | Proceeds
from sale of marketable securities                                                |   |                    | 1,828 |                |   |                |     |   |   |             | 2,000  |  
|                                                                            | Transfer of restricted cash                                                                |   |                    |      |                |   |                | (103 | ) |   |             | (1,109 | )
|                                                                            |                                                                                            |   |                    |       |                |   |                |      |   |   |             |       
|Net
cash provided by (used in) investing activities                         |                                                                                            |   | 1,843              |       |                |   | (244           | )    |   |   | (2,482      | )     
|                                                                            |                                                                                            |   |                    |       |                |   |                |      |   |   |             |       
|Cash flows from financing activities:                                       |                                                                                            |   |                    |       |                |   |                |      |   |   |             |       
|                                                                            | Proceeds from issuance of note payable to
stockholder                                      |   |                    |      |                |   |                |     |   |   |             | 1,650  |  
|                                                                            | Repayment of note payable to stockholder                                                   |   |                    |      |                |   |                |     |   |   |             | (1,650 | )
|                                                                            | Proceeds from issuance of convertible promissory
notes and warrants, net of issuance costs |   |                    |      |                |   |                |     |   |   |             | 5,064  |  

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|                                                                                            |                                                                                             |   |                    |      |                |   |                |     |   |   |             |        |  
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | - | ------------------ | ---- | -------------- | - | -------------- | --- | - | - | ----------- | ------ | -
|                                                                                            |                                                                                             |   |                    |      |                |   |                |     |   |   | Period from
|                                                                                            |                                                                                             |   | Three Months Ended |      | March 18, 1996
|                                                                                            |                                                                                             |   | March 31,          |      | (inception) to
|                                                                                            |                                                                                             |   | 2003               |      | 2002           |   | March 31, 2003
|                                                                                            |                                                                                             |   |                    |      |                |   |               
|                                                                                            | Borrowings under line of credit with Northwest
Hospital                                     |   |                    |     |                |   |                |    |   |   |             | 2,834  |  
|                                                                                            | Repayment of line of credit with Northwest Hospital                                         |   |                    |     |                |   |                |    |   |   |             | (2,834 | )
|                                                                                            | Payments on capital lease obligations                                                       |   |                    | (20  | )              |   |                | (16 | ) |   |             | (185   | )
|                                                                                            | Proceeds from issuance of preferred stock, net                                              |   |                    |     |                |   |                |    |   |   |             | 27,432 |  
|                                                                                            | Proceeds from exercise of stock options and warrants                                        |   |                    |     |                |   |                | 216 |   |   |             | 220    |  
|                                                                                            | Proceeds from issuances of common stock, net                                                |   |                    |     |                |   |                |    |   |   |             | 17,369 |  
|                                                                                            | Series A preferred stock redemption fee                                                     |   |                    |     |                |   |                |    |   |   |             | (1,700 | )
|                                                                                            | Deferred financing costs                                                                    |   |                    |     |                |   |                |    |   |   |             | (320   | )
|                                                                                            | Payments
on note payable                                                                    |   |                    | (157 | )              |   |                |    |   |   |             | (157   | )
|                                                                                            |                                                                                             |   |                    |      |                |   |                |     |   |   |             |       
|Net
cash provided by (used in) financing activities                                         |                                                                                             |   | (177               | )    |                |   | 200            |     |   |   | 47,723      |       
|                                                                                            |                                                                                             |   |                    |      |                |   |                |     |   |   |             |       
|Net increase (decrease) in cash and cash equivalents                                        |                                                                                             |   | 4                  |      |                |   | (3,716         | )   |   |   | 2,543       |       
|Cash and cash equivalents at beginning of period                                            |                                                                                             |   | 2,539              |      |                |   | 14,966         |     |   |   |            |       
|                                                                                            |                                                                                             |   |                    |      |                |   |                |     |   |   |             |       
|Cash and cash equivalents at end of period                                                  |                                                                                             | $ | 2,543              |      |                | $ | 11,250         |     |   | $ | 2,543       |       
|                                                                                            |                                                                                             |   |                    |      |                |   |                |     |   |   |             |       
|Supplemental disclosure of cash flow information  cash paid during the period for
interest |                                                                                             | $ | 11                 |      |                | $ | 12             |     |   | $ | 1,359       |       
|                                                                                            |                                                                                             |   |                    |      |                |   |                |     |   |   |             |       
|Supplemental schedule of noncash financing and investing activities:                        |                                                                                             |   |                    |      |                |   |                |     |   |   |             |       
|                                                                                            | Equipment acquired through capital leases                                                   |   | $                  |     |                |   | $              |    |   |   | $           | 285    |  
|                                                                                            | Accretion of Series A preferred stock mandatory
redemption obligation                       |   |                    |     |                |   |                |    |   |   |             | 1,872  |  
|                                                                                            | Beneficial conversion feature of convertible
promissory notes                               |   |                    |     |                |   |                |    |   |   |             | 1,026  |  
|                                                                                            | Conversion of convertible promissory notes and
accrued interest to Series D preferred stock |   |                    |     |                |   |                |    |   |   |             | 5,324  |  
|                                                                                            | Issuance of Series C preferred stock warrants in
connection with lease agreement            |   |                    |     |                |   |                |    |   |   |             | 43     |  
|                                                                                            | Issuance of common stock for license rights                                                 |   |                    |     |                |   |                |    |   |   |             | 4      |  
|                                                                                            | Liability for and issuance of common stock and
warrants to Medarex                          |   |                    |     |                |   |                |    |   |   |             | 560    |  
|                                                                                            | Deferred compensation on issuance of stock options
and restricted stock grants              |   |                    |     |                |   |                |    |   |   |             | 471    |  
|                                                                                            | Cancellation of options and restricted stock                                                |   |                    |     |                |   |                |    |   |   |             | 693    |  
|                                                                                            | Financing of prepaid insurance through note payable                                         |   |                    |     |                |   |                |    |   |   |             | 420    |  
|                                                                                            | Stock subscription receivable                                                               |   | $                  |     |                |   | $              |    |   |   | $           | 480    |  
|                                                                                            |                                                                                             |   |                    |      |                |   |                |     |   |   |             |       

See accompanying notes to condensed financial statements.

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Northwest Biotherapeutics, Inc.
(A Development Stage Company)




Notes to Condensed Financial Statements
(unaudited)

1. Basis of Presentation

The accompanying unaudited financial statements for Northwest
Biotherapeutics, Inc. (the Company) have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month period
ended March 31, 2003 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2003.

For further information, refer to the financial statements and footnotes
thereto included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2002, as filed with the Securities and Exchange Commission.

The auditors report on the foregoing financial statements of
the Company for the fiscal year ended December 31, 2002 states that because of
operating losses and an accumulated deficit, there is substantial doubt about
our ability to continue as a going concern. A going concern opinion
indicates that the financial statements have been prepared assuming we will
continue as a going concern and do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classification of liabilities that may result from the outcome
of this uncertainty.

Stock-Based Compensation

The Company accounts for its stock option plans for employees in
accordance with the provisions of Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. As such, compensation
expense related to employee stock options is recorded if, on the
date of grant, the fair value of the underlying stock exceeds
the exercise price. The Company applies the disclosure-only
requirements of SFAS No. 123, Accounting for Stock-Based
Compensation, which allows entities to continue to apply the
provisions of APB Opinion No. 25 for transactions with
employees, and to provide pro forma results of operations
disclosures for employee stock option grants as if the
fair-value-based method of accounting in SFAS No. 123 had
been applied to those transactions.

Stock compensation costs related to fixed employee awards with
pro rata vesting are recognized on a straight-line basis over
the period of benefit, generally the vesting period of the
options. For options and warrants issued to non-employees, the
Company recognizes stock compensation costs utilizing the fair
value methodology prescribed in SFAS No. 123 over the
related period of benefit.

Had the Company recognized the compensation cost of employee
stock options based on the fair value of the options on the date
of grant as prescribed by SFAS No. 123, the pro forma net
loss applicable to common stockholders and related loss per
share would have been adjusted to the pro forma amounts
indicated below:

|                                           |                                                                                                       |                             |   |        |   |  |   |        |  
|------------------------------------------ | ----------------------------------------------------------------------------------------------------- | --------------------------- | - | ------ | - |  | - | ------ | -
|                                           |                                                                                                       | Three
months ended March 31
|                                           |                                                                                                       |                            
|                                           |                                                                                                       | 2003                        |   | 2002  
|                                           |                                                                                                       |                             |   |       
|Net loss applicable to common stockholders |                                                                                                       |                             |   |        |   |  |   |       
|                                          
|                                          
|                                          
|                                          
|                                           | As reported                                                                                           |                             | $ | (1,591 | ) |  | $ | (3,128 | )
|                                          
|                                          
|                                          
|                                          
|                                           | Add: Stock-based employee compensation expense
    included in reported net loss, net                 |                             |   | 85     |   |  |   | 179    |  
|                                          
|                                          
|                                          
|                                          
|                                           | Deduct: Stock-based employee compensation
    determined under fair value based method for all awards |                             |   | 580    |   |  |   | 1,218  |  
|                                           |                                                                                                       |                             |   |        |   |  |   |       
|                                           | Pro forma                                                                                             |                             | $ | (2,086 | ) |  | $ | (4,167 | )
|                                           |                                                                                                       |                             |   |        |   |  |   |       
|Net loss per share  basic and diluted:    |                                                                                                       |                             |   |        |   |  |   |       
|                                          
|                                          
|                                          
|                                          
|                                           | As reported                                                                                           |                             | $ | (0.09  | ) |  | $ | (0.19  | )
|                                           |                                                                                                       |                             |   |        |   |  |   |       
|                                           | Pro forma                                                                                             |                             | $ | (0.11  | ) |  | $ | (0.25  | )
|                                           |                                                                                                       |                             |   |        |   |  |   |       

The per share weighted average fair value of stock options
granted during the three months ended March 31, 2003 and
2002 was $0.09 and $4.19, respectively, on the date of grant with the
following assumptions:

|                        |  |      |         |      |  |  |            |  
|----------------------- |  | ---- | ------- | ---- |  |  | ---------- | -
|                        |  | 2003 |         | 2002
|                        |  |      |         |     
|Risk-free interest rate |  |      | 3.438   | %    |  |  | 4.488      | %
|                       
|                       
|                       
|                       
|Expected life           |  |      | 5 years |      |  |  | 5 years    |  
|                       
|                       
|                       
|                       
|Expected volatility     |  |      | 187     | %    |  |  | 92% to
100 | %
|                       
|                       
|                       
|                       
|Dividend yield          |  |      | 0       | %    |  |  | 0          | %

2. Sale of Unregistered Securities

On
December 9, 2002, we entered into an Assignment and License
Agreement wherein we sold certain intellectual property to Medarex,
acquired certain intellectual property from Medarex and acquired
the rights to certain additional intellectual property from Medarex. Pursuant
to this agreement, we issued to Medarex 2.0 million unregistered
shares of common stock and warrants to purchase 800,000 shares of our
unregistered common stock, at an average price of $0.165, all of which had been
issued at March 31, 2003.

Also
pursuant to this agreement, we received $3.0 million consisting of $1.0 million in
cash and two payments of $1.0 million each payable in Medarex
(MEDX) common stock. Medarex guaranteed the value of each payment of common stock
at $1.0 million if sold within 30 days of issuance.
Remaining Medarex common stock that had not been sold at
December 31, 2002 was recorded as marketable securities and the
$1.0 million issued in January 2003 was included as a
receivable from Medarex at December 31, 2002. The Company has
realized a total of $3.0 million in cash as all such securities were
sold by February 10, 2003.

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3. Net Loss Per Share Applicable to Common Stockholders

Basic and diluted net loss per share applicable to common stockholders has
been computed using the weighted-average number of shares of common stock
outstanding during the period, less, for the three months ended March 31, 2003,
8,004 issued and outstanding restricted shares of common stock that are subject
to repurchase. Options to purchase 1,736,574 shares of common stock and
warrants to purchase 1,368,525 shares of common and preferred stock were
excluded from the calculation of diluted net loss per share for the three
months ended March 31, 2003 as such securities were antidilutive. Options to
purchase 1,513,706 shares of common stock and warrants to purchase 568,525
shares of common and preferred stock were excluded from the calculation of
diluted net loss per share for the three months ended March 31, 2002 as such
securities were antidilutive.

4. New Accounting Pronouncements

In July 2002, the FASB issued Statement No. 146, Accounting for Costs
Associated with Exit or Disposal Activities,which addresses financial
accounting and reporting for costs associated with exit or disposal activities.
Statement No. 146 nullifies 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 principal
difference between Statement No. 146 and Issue No. 94-3 relates to the
recognition of a liability for a cost associated with an exit or disposal
activity. Statement No. 146 requires that a liability be recognized for those
costs only when the liability is incurred, that is, when it meets the
definition of a liability in the FASBs conceptual framework. In contrast,
under Issue No. 94-3, a company recognized a liability for an exit cost when it
committed to an exit plan. Statement No. 146 also establishes fair value as the
objective for initial measurement of liabilities related to exit or disposal
activities. The Statement is effective for exit or disposal activities that are
initiated after December 31, 2002 although earlier application is encouraged.
The Company adopted SFAS 146 on January 1, 2003. The adoption of
SFAS 146 did not have any effect on the Companys financials.

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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with our financial
statements and the notes to those statements included with this report. In
addition to historical information, this report contains forward-looking
statements that are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected. The words
believe,
expect, intend, anticipate, and similar expressions are used to identify
forward-looking statements, but some forward-looking statements are
expressed differently. Many factors could affect our actual results, including
those factors described under Factors That May Affect Results of Operations
and Financial Condition. These factors, among others, could
cause results to differ materially from those presently anticipated by us.
You should not place undue reliance on these forward-looking
statements.

Overview

Northwest Biotherapeutics, a development-stage biotechnology company,
restructured its operations in the fourth quarter of the fiscal year ended
December 31, 2002 to focus on discovering and developing potential cancer
immunotherapy products and commercializing products for scientific research. As part of
its strategy, the Company is further developing diagnostic and therapeutic
antibodies against its proprietary cancer targets and it is continuing
refinement of its next generation system for cost effectively producing high
purity dendritic cells and dendritic cell precursors for potential cancer
products.

From our
formation in 1996 to our restructuring in 2002, our activities were
primarily limited to
the research and development of our dendritic cell-based immunotherapy platform and
our monoclonal antibody-based cancer therapies.

We have a limited history of operations. Since inception, we have incurred
significant losses and, as of March 31, 2003, we had a deficit accumulated during
the development stage of approximately $60.1 million. In late 2002, we
initiated actions to conserve cash including reducing and eliminating certain
future commitments, the sale of certain fixed assets, and restructuring as a
pre-clinical antibody and dendritic cell development company. Without
additional funding, we believe we will only have sufficient
funds to operate through the quarter ending September 30, 2003, which raises
substantial doubt about our ability to continue as a going concern. In
addition, if we are unable to obtain additional capital, we may choose to cease
operations prior to that date in an effort to maximize the value, if any, to be
paid to our stockholders following a potential liquidation.

Operating costs and expenses consist primarily of research and development
expenses, including clinical trial expenses, and general and administrative
expenses.

Research and development expenses include salary expenses and costs of
supplies used in our internal research and development projects. As a result of
our recent restructuring, we expect to expend approximately $1.0 million on research and development during 2003.

From our inception in March 1996 through March 31, 2003, we incurred costs
of approximately $22.8 million associated with the research into and
development of our product candidates. At this time, because our technologies are unproven, we are unable to estimate with any certainty the
costs we will incur in the continued development of our product candidates for
commercialization.

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General and administrative expenses include compensation expenses related
to executive, information technology, finance and administrative personnel, the
cost of facilities, insurance and legal support, as well as amortization costs
of stock options and warrants granted to consultants and for entering into
commercial
arrangements. As a result of our restructuring, we expect general and
administrative expenses to be approximately $3.5 million in 2003.

To date, our revenues have primarily been derived from the manufacture and
sale of research materials, contract research and development services and
research grants from the federal government. For the fiscal year
ended December 31, 2002, we earned approximately
$9,000 in revenues from the manufacture and sale of research materials. To date, we have never generated annual revenues in excess of
$129,000 from such sales and have never sold our research products to more than
one customer in any given year. If we are to rely exclusively on revenues from
the sale of our research products to fund our operations, we will need to
significantly increase both the number and the size of
such sales. We lack high volume manufacturing, sales and marketing experience
and, as a result, we may experience significant difficulties in funding our
operations through the manufactured sale of research products.

Critical Accounting Policies and Estimates

Accounting principles generally accepted in the
United States require our management to make estimates and assumptions that
affect the amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of our financial statements, as well as the
amounts of revenues and expenses during periods covered by our financial
statements. The actual amounts of these items could differ materially from
those estimates.

For example, under EITF 94-3, Accounting for Costs Associated with Exit or
Disposal Activities, if an entity remains responsible, without realizing
ongoing economic benefit, for continued rental payments for premises being
vacated, an estimate of the loss over the remaining life of the primary lease
must be made. Sublease rental income is an allowable off set against the total
accrued cost of the rental payments that the entity continues to be liable for
related to the vacated space.

Consequently,
we recognized a liability of approximately $929,000
and a loss on facility sublease of $721,000, net of deferred rent write off,
for the year ended December 31, 2002 in estimating the loss of economic benefit
from vacating approximately 22,000 square feet of laboratory and administrative
space at our Bothell, Washington, facility. Our payments over the remaining lease
term total $9.1 million.

As of
April 15, 2003, consistent with our original expectations, the First Amendment to the Lease for the Bothell,
Washington facility was finalized, reducing the Basic Annual Rent from
$1,137,720 to $1,081,656 for the balance of the 2003 lease contractual year.
This reduction in contractual rent will, however, continue to increase at 3.5%
on each succeeding September anniversary of the lease agreement as stipulated
in the original lease agreement. As of May 12, 2003, we had not subleased any
of the remaining vacated first floor space.
We have made our estimate of expected receipts under sublease payments based on
expected fair market value rents. To the extent that the parameters on which
the estimate of sublease payments to be received change in the
future, the liability recognized will be adjusted.

Also, we made certain estimates in allocating the cost of tenant
improvements to the remaining square feet of impaired
space, at our Bothell Washington facility, and made certain cost estimates
related to the impairment of certain equipment. As a result of this analysis,
we recognized an asset impairment loss of approximately $1.0 million
in December 2002.

We also
determine our employee stock option compensation costs
as the difference between the estimated fair value of our common stock and the
exercise price of options on their date of grant. Prior to our initial public
offering, our common stock was not actively traded. The fair value of our common
stock for purposes of determining compensation expense for this period was
determined based on our review of the primary business factors underlying the
value of our common stock on the date such option grants were made, viewed in
light of the expected initial public offering price per share prior to the
initial public offering of our common stock. The actual initial public offering
price was significantly lower than the expected price used in determining
compensation expense.

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Additionally, we estimate the fair value of stock options and warrants
issued to nonemployees using an option valuation method that considers market
indicators.

Related Party Transactions

On December 9, 2002, we entered into an agreement to sell certain rights,
title, and interest in certain antigen targets pertaining to our fully human
monoclonal antibodies to Medarex. Pursuant to this agreement, we received $3.0
million in working capital, forgiveness of $400,000 payable to Medarex, and we
will receive a royalty of 2% of net sales with respect to products deriving
from certain intellectual property. Under the terms of our agreement
with Medarex, we also acquired the rights to
certain other cancer targets in exchange for 2.0 million newly issued
unregistered shares of our common stock and warrants to purchase 800,000
shares of our common stock that are dilutive to our stockholders.

Results of Operations

Three Months Ended March 31, 2003 and 2002

Total
Revenues.Revenues increased from $3,000 for the three months
ended March 31, 2002 to $69,000 for the three months ended March 31, 2003. One
component of revenue consisted of research material sales which decreased
from $3,000 for the three months ended March 31, 2002 to $0 for the
three months ended March 31, 2003. The rest of our revenues for
the period consisted of research grant revenue, which increased from $0 for the
three months ended March 31, 2002 to $69,000 for the three months ended March
31, 2003. This increase in revenue was attributable to the receipt of
a research grant award in the first quarter 2003. While we continue
to seek funding through research grants, we do not anticipate
receiving grant revenue sufficient to fund our operations.

Cost of Research Material Sales.Cost of research material sales decreased
from $3,000 for the three months ended March 31, 2002 to $0 for the three
months ended March 31, 2003. This decrease was due to reduced sales
activity.

Research and Development Expense.Research and development expense
decreased 64% from $1.4 million for the three months ended March 31, 2001 to
$0.5 million for the three months ended March 31, 2003. This decrease was
primarily due to the November 2002 suspension of all clinical trial activity
for our DCVax product candidates and through withdrawing our Investigational
New Drug Application (IND) for DCVax-Prostate, a potential
treatment for prostate cancer, and
for DCVax-Lung, a potential treatment for non-small cell lung cancer.

General and Administrative Expense.General and administrative expense
decreased 37% from $1.7 million for the three months ended March 31, 2002 to
$1.0 million for the three months ended March 31, 2003. This decrease was
primarily due to the October 9, 2002 directive from our Board of Directors to
initiate immediate actions to conserve cash and resulting staff reductions.

Depreciation and Amortization.Depreciation and amortization decreased 39%
from $143,000 for the three months ended March 31, 2002 to $87,000 for the
three months ended March 31, 2003. This decrease was primarily due to the
disposal or impairment of $1.2 million of equipment and leasehold improvements in
2002.

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Total Other Income (Expense), Net.Other income (expense), net, consists
primarily of interest expense and interest income. Interest expense decreased
8% from $12,000 for the three months ended March 31, 2002 to $11,000 for the
three months ended March 31, 2003. This decrease was primarily due to several
capital leases reaching the end of their respective lease terms with the
elimination of the interest component of each lease payment. Interest income
decreased 82% from $66,000 for the three months ended March 31, 2002 compared
to $12,000 for the three months ended March 31, 2003. This decrease was
primarily due to the decline in market interest rates and having lower average
cash balances during the quarter.

Liquidity and Capital Resources

Our
independent auditors have indicated in their report on our 2002
financial statements, included in our
2002 Form 10-K, that there is substantial doubt about our
ability to continue as a going concern. From inception, we have financed our operations primarily through the
public and private sale of securities, cash generated from the sale of
scientific research products, equipment leases, sale of intellectual property
rights and borrowings from stockholders. We need to raise substantial additional funding to conduct research and
development activities, pre-clinical studies and clinical trials necessary to
bring our product candidates to market. We intend to seek additional financing
through public or private equity financings, strategic alliances with corporate
collaborators, additional government grants or other sources.

However, additional financing may not be available on terms acceptable to
us or at all. The alternative of issuing additional equity or convertible debt
securities also may not be available and, in any event, would result
in additional dilution to our stockholders. We expect to incur
substantial costs as we continue our research and pre-clinical
development initiatives. Additional costs will be incurred for preparing, filing,
maintaining and enforcing patent claims and other intellectual property rights,
modifications in existing or the establishment of new strategic partnerships
and licensing arrangements, and clinical trials manufacturing costs.

On October 9, 2002, our Board of Directors authorized management to
initiate immediate actions to conserve cash. For that purpose, we reduced and
eliminated certain future commitments, sold certain fixed assets and
restructured our operations to focus on discovering and developing potential
cancer immunotherapy products and commercializing research products.

In November 2002, we suspended all clinical trial activity for our DCVax
product candidates. We withdrew our Investigational New Drug Application (IND)
for DCVax-Prostate, a potential treatment for prostate cancer, and for
DCVax-Lung, a potential treatment for non-small cell lung cancer.

As a further result of our restructuring activities, forty-five (45)
members of our research and administrative staff were terminated, including our
Chief Financial Officer and our Chief Medical Officer. Severance and other
related costs of this downsizing totaled $596,000. All severance
costs pursuant to the 2002 downsizing have been paid. After these terminations, our remaining staff of
20 consisted of 9 employees in administration and 11 employees in research and
development.

On December 9, 2002, we entered into an agreement to sell certain rights,
title, and interest in certain antigen targets pertaining to our fully human
monoclonal antibodies to Medarex, Inc. Pursuant to this agreement, we received
$3.0 million in working capital and we will receive a royalty of 2% of net
sales with respect to any products derived from certain intellectual property.
Under the terms of our agreement with Medarex, we acquired the rights to
certain other cancer targets in exchange for 2.0 million newly issued
unregistered shares of our common stock and warrants to purchase 800,000
unregistered shares of our common stock, all of which, are dilutive to our
stockholders.

On December 23, 2002, our common stock was delisted from the NASDAQ National
Market for our failure to maintain minimum stockholders equity of at least $10
million. In addition, our shares did not meet the minimum bid price requirement
of one dollar per share and our public float was not in compliance with the
$5 million requirement contained in the NASDAQ Marketplace Rules. Our common
stock is currently trading on the Over The Counter Bulletin Board (OTCBB). We
do not expect to regain compliance with the NASDAQ common stock listing
requirements in the foreseeable future.

We used
$3.7 million in cash for operating activities during the three
months ended March 31, 2002, compared to $1.7 million during the three months
ended March 31, 2003. The change in cash used in operating activities from
2002 to 2003 was primarily a result of the November 2002 suspension of all
clinical trial activity.

We used
$244,000 in cash for investing activities during the three months
ended March 31, 2002 compared to $1.9 million provided by investing activities
during the three months ended March 31, 2003. The cash used
during the three
months ended March 31, 2003 consisted of $1.1 million received from Medarex and
the sale of Medarex (MEDX) common stock held as marketable securities on
December 31, 2002 arising from the December 9, 2002 Assignment and License
Agreement.

We were awarded a National Institutes of Health (NIH) cancer research grant,
on April 8, 2003, for research to be conducted from February 1,
2003 through January 31, 2004. The total award for fiscal 2003
is $318,137,
comprised of approximately $191,649 authorized for direct grant research expenditures and
approximately $126,488 authorized for use to cover our facilities and
administrative overhead costs. The total award for fiscal 2004 is
$327,681,
comprised of approximately $197,398 authorized for direct grant research expenditures and
approximately $130,283 authorized for use to cover our facilities and
administrative overhead costs. Only 10% of the fiscal 2003 portion of the salary and wage cost
expended on the grants authorized research may be released at
this time. The remaining portion of the fiscal 2003 award may be
released upon agreement on our facilities and administrative costs. As of March 31, 2003, $69,000 had been expended under the grant
which will be recognized in revenue in the second quarter of 2003.

We were also awarded, by the University of Washington, as a
subcontractor to the University of Washingtons award from NIH, a cancer
research subcontract on February 26, 2003. This subcontract is from January 1,
2003 through December 31, 2003. The total award for fiscal 2003 is $146,563
consisting of $104,688 authorized for direct grant research expenditures and
with approximately $41,875 authorized for use to cover our facilities and
administrative overhead costs.

Receipt of the potential facilities and administrative dollars from these
grants will provide nominal funds for the Companys working capital
needs.

On April 21, 2003, because we
have received frequent requests from researchers for access to our
cancer associated monoclonal antibodies, human dendritic cells, and
dendritic cell precursors (monocytes), we announced our entry into
the sale of Research Reagents. However, we have limited manufacturing
facilities and expertise to produce our research products and the
commercial success of any of our research products will depend upon
the strength of our sales and marketing efforts.

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Other
than grants described above, we do not have committed external sources of
funding as of May 12, 2003. We may be unable to obtain additional funds on
acceptable terms, if at all, and may need to undertake additional
restructuring in the second and third quarters
of 2003. Depending upon the impact of this further restructuring, and
depending upon whether adequate funds are available to us we may cease business operations. If we are unable to
obtain additional capital, we may choose to cease operations at any time in an
effort to maximize the value, if any, to be paid to our stockholders following
a potential liquidation.

FACTORS THAT MAY AFFECT RESULTS OF OPERATIONS AND FINANCIAL CONDITION

This section briefly discusses certain risks that should be considered by
our stockholders and prospective investors. You should carefully consider the
risks described below, together with all other information included in this
Quarterly Report on Form 10-Q and the information incorporated by reference. If
any of the following risks actually occur, our business, financial condition or
operating results could be harmed. In such case, you could lose all of your
investment.

Our auditors have issued a going concern audit opinion.

The auditors report on our consolidated financial statements for the
fiscal year ended December 31, 2002 states that because of operating losses and
an accumulated deficit, there is substantial doubt about our ability to
continue as a going concern. A going concern opinion indicates that the
financial statements have been prepared assuming we will continue as a going
concern and do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.

We will need to raise additional
capital which may not be available.

We will need to raise more money to continue our operations. We may seek
additional funds from public and private stock offerings, strategic
partnerships and licenses, borrowing under lease lines of credit or other
sources. These additional forms of capital may not be available on terms
acceptable to us, or at all. Any additional equity financing may be dilutive to
stockholders, and debt financing, if available, may include restrictive
covenants. If we cannot raise more money when needed, we may have to further
reduce our capital expenditures, scale back our development of new product
candidates, reduce our workforce or license to others product candidates that
we otherwise would seek to commercialize ourselves or, voluntarily liquidate
the assets of the company.

Moreover, our cash used in operations has exceeded cash generated from
operations in each period since our inception. For example, we used
approximately $6.4 million of net cash in operating activities in 2000,
approximately $8.9 million in 2001 and approximately $13.1 in 2002. Due to our
late 2002 restructuring, we expect net cash used in operations to decrease in
the near future, but our restructuring efforts may not result in the savings we
anticipate.

Other
than nominal research grant awards, we do not have committed external sources of
funding as of May 12, 2003 and we may be unable to obtain additional funds on
acceptable terms, if at all. Without committed external sources of funds, we
may undertake additional restructuring in the second and third quarters
of 2003. Depending upon the impact of this further

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restructuring, and depending upon
whether adequate funds are available to us, we may cease business operations.
If we are unable to obtain additional capital, we may choose to cease
operations at any time in an effort to maximize the value, if any, to be paid to our
stockholders following a potential liquidation.

As a result of questions concerning our status as a going concern, potential
customers and strategic partners may decide not to do business with us.

The success of our restructured operations will depend on our ability to
attract customers to our research products and our ability to attract strategic
partners to our research initiatives. Due to concerns regarding our ability to
continue operations, these third parties may decide not to conduct business
with us, or may conduct business with us on terms that are less favorable than
those customarily extended by them. If either of these events occur, our business will suffer
significantly.

We expect to continue to incur substantial losses, and we may never achieve
profitability.

We have incurred net losses every year since our inception in March 1996
and, as of March 31, 2003, we had a deficit accumulated during the development
stage of approximately $60.1 million. We have had net losses applicable to
common stockholders as follows:



| |  |  | $5.0 million in 1998;     
| | - |  | --------------------------
|
| |  |  | $6.0 million in 1999;     
|
| |  |  | $13.2 million in 2000;    
|
| |  |  | $17.3 million in 2001; and
|
| |  |  | $12.8 million in 2002     

We expect that these losses will continue and anticipate negative cash
flows from operations for the foreseeable future. Because of our current cash
position, we will need to secure additional funding to continue operations. In
addition, we will need to generate revenue sufficient to cover operating
expenses and research and development costs to achieve profitability. We may
never achieve or sustain profitability.

As a company in the early stage of development with an unproven business
strategy, our limited history of operations makes an evaluation of our business
and prospects difficult.

We have had a limited operating history and are at an early stage of
development. We may not be able to achieve revenue growth in the future. We
have generated the following limited revenues:



| |  |  | $385,000 in 1998;    
| | - |  | ---------------------
|
| |  |  | $211,000 in 1999;    
|
| |  |  | $156,000 in 2000;    
|
| |  |  | $129,000 in 2001; and
|
| |  |  | $9,000 in 2002       

We have derived most of these limited revenues from:



| |  |  | the sale of research products to a single customer;
| | - |  | ---------------------------------------------------

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| |  |  | contract research and development from related parties; and
| | - |  | -----------------------------------------------------------
|
| |  |  | research grants.                                           

In the future, we anticipate that our revenues will be derived primarily
through the sale of research products. Because this represents a shift in our
business focus, it is difficult to evaluate our prospects. Additionally, our
future success is more uncertain than if we had a longer or more proven history
of operations.

We may not be able to retain existing personnel.

During 2002, we significantly reduced the number of our employees as part
of an extensive cost containment initiative. Our workforce reductions, the
volatility in our stock price and our recent asset sales may create anxiety and
uncertainty, which may adversely affect employee morale and cause us to lose
employees whom we would prefer to retain. To the extent that we are unable to
retain our existing personnel, our business and financial results may suffer.

Because we lack sales and marketing experience, we may experience significant
difficulties commercializing our research products.

The commercial success of any of our research products will depend upon
the strength of our sales and marketing efforts. We do not have a sales force
and have no experience in the sales, marketing or distribution of our research
products. To fully commercialize our research products, we will need to create
a substantial marketing staff and sales force with technical expertise and the
ability to distribute these products. As an alternative, we could seek
assistance from a third party with a large distribution system and a large
direct sales force. We may be unable to put either of these plans in place. In
addition, if we arrange for others to market and sell our products, our
revenues will depend upon the efforts of those parties. Such arrangements may
not succeed. If we fail to establish adequate sales, marketing and distribution
capabilities, independently or with others, our business will be seriously
harmed.

We have limited manufacturing capabilities, which could adversely impact our
ability to commercialize our research products.

We have limited manufacturing facilities and expertise to produce our
research products. We have never manufactured, on a commercial scale, any of
our research products. We may be unable to manufacture these products at a
reasonable cost or in sufficient quantities to be profitable.

Our success partially depends on existing and future strategic partners.

The success of our business strategy partially depends upon our ability to
develop and maintain multiple strategic partnerships and to manage them
effectively. Therefore, our success depends partially upon the performance of
our strategic partners. Currently, our primary strategic partner is Medarex. We
cannot directly control the amount and timing of resources that our existing or
future strategic partners devote to the research, development or marketing of
our products. As a result, those strategic partners:



| |  |  | may not commit sufficient resources to our programs or products;                                                                                
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | may not conduct their agreed activities on time, or at all, resulting
in delay or termination of the development of our products and
technology;
|
| |  |  | may not perform their obligations as expected;                                                                                                  
|
| |  |  | may pursue product candidates or alternative technologies in preference to ours; or                                                             
|
| |  |  | may dispute the ownership of products or technology developed under our strategic partnerships.                                                 

We may have disputes with our strategic partners, which could be costly
and time consuming. Our failure to successfully defend our rights could
seriously harm our business, financial condition and operating results.

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We intend to continue to enter into strategic partnerships in the future.
However, we may be unable to successfully negotiate any additional strategic
partnerships and any of these relationships, if established, may not be
scientifically or commercially successful.

We also work with scientists and medical professionals at academic and
other institutions, including the University of California, Los Angeles, the
University of Iowa and Northwest Hospital, some of whom conduct research for us
or assist us in developing our research and development strategy. These
scientists and medical professionals are not our employees. They may have
commitments to, or contracts with, other businesses or institutions that limit
the amount of time they have available to work with us. We have little control
over these individuals. We can only expect them to devote to our projects the
amount of time required by our license, consulting and sponsored research
agreements. In addition, these individuals may have arrangements with other
companies to assist in developing technologies that may compete with ours. If
these individuals do not devote sufficient time and resources to our programs,
our business could be seriously harmed.

Our product development efforts are based on technologies that may not prove to
be viable.

We intend to devote significant resources to the research and development
of new products based upon our unproven technologies. We may not be
successful in developing products, and we may never realize any benefits from
such research and development activities. Our ability to achieve and sustain
profitability depends upon our ability to successfully develop new and
commercially viable products, which is particularly difficult for us as our
technologies and their commercial viability are unproven.

Competition in our industry is intense and most of our competitors have
substantially greater resources than we have.

The research products market recently entered by the Company is very
competitive with many well-established large and small distribution
companies, such as BioWhittaker, a Cambrex Company, Dako-Cytomation,
and Cellsignalling Technology.

Currently, our Company is marketing its research products through direct mail,
the internet, and select participation in trade shows frequented by researchers
who could be interested in our research products.
 We are also seeking distribution relationships with established and
well-positioned distribution companies. There can be no assurances that we
will be successful in establishing a market demand for our research products
nor that we will be successful in finding a suitable distributor interested in
selling our research products.

The biotechnology and biopharmaceutical industries are characterized by
rapidly advancing technologies, intense competition and a strong emphasis on
proprietary products. Several companies, such as Cell Genesys, Inc., Dendreon
Corporation and Genzyme Molecular Oncology, a division of Genzyme Corporation,
are actively involved in the research and development of cell-based cancer
therapeutics. Of these companies, we believe that only Dendreon is carrying-out
Phase III clinical trials with a cell-based therapy. No cell-based therapeutic
product is currently approved for commercial sale. Additionally, several
companies, such as Abgenix, Inc., Agensys, Inc., IDEC Pharmaceuticals
Corporation and Genentech, Inc., are actively involved in the research and
development of monoclonal antibody-based cancer therapies. Currently, at least
three antibody-based products are approved for commercial sale for cancer
therapy. Genentech is also engaged in several Phase III clinical trials for
additional antibody-based therapeutics for a variety of cancers, and several
other companies are in early stage clinical trials for such products. Many
other third parties compete with us in developing alternative therapies to
treat cancer, including:



| |  |  | biopharmaceutical companies; 
| | - |  | -----------------------------
|
| |  |  | biotechnology companies;     
|
| |  |  | pharmaceutical companies;    
|
| |  |  | academic institutions; and   
|
| |  |  | other research organizations.

Many of our competitors have significantly greater financial resources and
expertise in research and development, manufacturing, pre-clinical testing,
conducting clinical trials, obtaining regulatory approvals and marketing than
we do. In addition, many of these competitors have become active in seeking
patent protection and licensing arrangements in anticipation of collecting
royalties for use of technology they have developed. Smaller or early-stage
companies may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies. These third
parties compete with us in recruiting and retaining qualified scientific and
management personnel, as well as in acquiring technologies complementary to our
programs.

We expect that our ability to compete effectively will be dependent upon
our ability to:

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| |  |  | successfully complete clinical trials and obtain all requisite regulatory approvals;
| | - |  | ------------------------------------------------------------------------------------
|
| |  |  | maintain a proprietary position in our technologies and products;                   
|
| |  |  | attract and retain key personnel; and                                               
|
| |  |  | maintain existing or enter into new strategic partnerships.                         

Our competitors may develop more effective or affordable products, or
achieve earlier patent protection or product marketing and sales than we may.
As a result, any products we develop may be rendered obsolete and
noncompetitive.

Our intellectual property rights may not provide meaningful commercial
protection for our research products or product candidates, which could enable
third parties to use our technology, or very similar technology, and could
reduce our ability to compete in the market.

We rely on patent, copyright, trade secret and trademark laws to limit the
ability of others to compete with us using the same or similar technology in
the United States and other countries. However, as described below, these laws
afford only limited protection and may not adequately protect our rights to the
extent necessary to sustain any competitive advantage we may have. The laws of
some foreign countries do not protect proprietary rights to the same extent as
the laws of the United States, and we may encounter significant problems in
protecting our proprietary rights in these countries.

We have seven issued patents (four in the United States and three in
foreign jurisdictions) and 68 patent applications pending (18 in the United
States and 50 in foreign jurisdictions) which cover the use of dendritic cells
in DCVax as well as targets for either our dendritic cell or fully
human monoclonal antibody therapy candidates. The
issued patents expire at dates from 2015 to 2017.

We will only be able to protect our technologies from unauthorized use by
third parties to the extent that they are covered by valid and enforceable
patents or are effectively maintained as trade secrets. The patent positions of
companies developing novel cancer treatments, including our patent position,
generally are uncertain and involve complex legal and factual questions,
particularly concerning the scope and enforceability of claims of such patents
against alleged infringement. Recent judicial decisions are prompting a
reinterpretation of the limited case law that exists in this area, and
historical legal standards surrounding questions of infringement and validity
may not apply in future cases. A reinterpretation of existing law in this area
may limit or potentially eliminate our patent position and, therefore, our
ability to prevent others from using our technologies. The biotechnology patent
situation outside the United States is even more uncertain. Changes in either
the patent laws or in interpretations of patent laws in the United States and
other countries may therefore diminish the value of our intellectual property.

We own, or have rights under licenses to a variety of issued patents and
pending patent applications. However, the patents on which we rely may be
challenged and invalidated, and our patent applications may not result in
issued patents. Moreover, our patents and patent applications may not be
sufficiently broad to prevent others from practicing our technologies or from
developing competing products. We also face the risk that others may
independently develop similar or alternative technologies or design around our
patented technologies.

We have taken security measures to protect our proprietary information,
especially proprietary information that is not covered by patents or patent
applications. These measures, however, may not provide adequate protection of
our trade secrets or other proprietary information. We seek to protect our
proprietary information by entering into confidentiality agreements with
employees, strategic partners and consultants. Nevertheless, employees,
strategic partners or consultants may still disclose our proprietary
information, and we may not be able to protect our trade secrets in a
meaningful way. If we lose any employees, we may not be able to prevent the
unauthorized disclosure or use of our technical knowledge or other trade
secrets by those former employees despite the existence of nondisclosure and
confidentiality agreements and other contractual restrictions to protect our
proprietary technology. In addition, others may independently develop
substantially equivalent proprietary information or techniques or otherwise
gain access to our trade secrets.

Our success will depend partly on our ability to operate without infringing or
misappropriating the proprietary rights of others.

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Our success will depend to a substantial degree upon our ability to
develop, manufacture, market and sell our research products and product
candidates without infringing the proprietary rights of third parties and
without breaching any licenses we have entered into regarding our product
candidates.

There is a substantial amount of litigation involving patent and other
intellectual property rights in the biotechnology and biopharmaceutical
industries generally. Infringement and other intellectual property claims, with
or without merit, can be expensive and time-consuming to litigate and can
divert managements attention from our core business. We may be exposed to
future litigation by third parties based on claims that our products infringe
their intellectual property rights. This risk is exacerbated by the fact that
there are numerous issued and pending patents in the biotechnology industry and
the fact that the validity and breadth of biotechnology patents involve complex
legal and factual questions for which important legal principles remain
unresolved. Our competitors may assert that our products and the methods we
employ are covered by U.S. or foreign patents held by them. In addition,
because patent applications can take many years to issue, there may be
currently pending applications, unknown to us, which may later result in issued
patents that our products may infringe. There could also be existing patents of
which we are not aware that one or more of our products may inadvertently
infringe.

If we lose a patent infringement lawsuit, we could be prevented from
selling our research products or product candidates unless we can obtain a license to use technology or ideas
covered by such patent or are able to redesign our products to avoid
infringement. A license may not be available at all or on terms acceptable to
us, or we may not be able to redesign our products to avoid any infringement.
If we are not successful in obtaining a license or redesigning our products, we
may be unable to sell our products and our business could suffer.

Our rights to the use of technologies licensed to us by third parties are not
within our control, and without these technologies, our products and programs
may not be successful and our business could be harmed.

We rely on our licenses from our agreement with Medarex and may rely on
other licenses in the future to use various technologies that may be material
to our business. We rely upon our licensors to prevent infringement of the
licensed patents. Our rights to use these technologies and employ the
inventions claimed in the licensed patents are or may be subject to our
licensors abiding by the terms of those licenses and not terminating them.

If we lose key management or scientific personnel or cannot recruit qualified
employees, our business could suffer.

We are highly dependent on the principal members of our management and
scientific staff, including Daniel O. Wilds, our Chairman, President and Chief
Executive Officer, and Alton L. Boynton, our Executive Vice President, Chief
Operating Officer, Chief Scientific Officer and Secretary, and other members of
senior management. Experienced biotechnology executives are few in number, and
we believe it would be very difficult and time-consuming to replace either Mr.
Wilds or Dr. Boynton. We are dependent upon Mr. Wilds and his position in the
biotechnology community to continue our efforts to pursue strategic
partnerships and commercialize our product candidates. Dr. Boynton is one of
our founders, has substantial experience in immunotherapy research and is a
recognized leader in that field of study.

With the exception of Mr. Wilds and Dr. Boynton, none of the principal
members of our management team or scientific staff have entered into employment
agreements with us, nor, with the exception of Mr. Wilds and Dr. Boynton, do we
have any key person life insurance on such individuals. Additionally, as a
practical matter, any employment agreement we enter into will not ensure the
retention of the employee who is a party to the agreement.

Our future success will also depend in part on the continued service of
our key scientific and management personnel and our ability to identify, hire
and retain additional personnel. We experience intense competition for
qualified personnel. We may be unable to attract and retain the personnel
necessary for the development of our

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business. Moreover, our work force is located in the Seattle, Washington
area, where demand for personnel with the scientific and technical skills we
seek is extremely high and is likely to remain high. Because of this
competition, our compensation costs may increase significantly.

We are exposed to potential product liability claims, and it is uncertain that
insurance against these claims will be available to us at a reasonable rate in
the future.

Testing product candidates and marketing and selling commercial
biotechnology and biopharmaceutical products, including our research
products, involves unavoidable risks. The
use of our product candidates or research products in clinical trials, could result in injury to patients, and may lead to claims or lawsuits against us by:



| |  |  | consumers;                                                          
| | - |  | --------------------------------------------------------------------
|
| |  |  | regulatory agencies;                                                
|
| |  |  | biotechnology and biopharmaceutical companies; or                   
|
| |  |  | others using or selling our
product candidates or research products.

We have purchased liability insurance coverage in the amount of $10.0
million for our past clinical trials and for the research products we may sell.
We intend to seek additional liability insurance coverage if and when we
restart our suspended clinical trials or develop products that are approved for
commercialization. We may be unable to obtain or maintain product liability
insurance in the future on acceptable terms. Even if we are able to purchase
the insurance, the policy limits may be insufficient to cover all potential
claims or liabilities. Insufficient insurance to cover any damages resulting
from a claim could seriously harm our business.

We use hazardous materials and must comply with environmental, health and
safety laws and regulations, which can be expensive and restrict how we do
business.

We store, handle, use and dispose of controlled hazardous, radioactive and
biological materials in our business. Our current use of these materials
generally is below thresholds giving rise to burdensome regulatory
requirements. Our development efforts, however, may result in our becoming
subject to additional requirements, and if we fail to comply with applicable
requirements we could be subject to substantial fines and other sanctions,
delays in research and production, and increased operating costs. In addition,
if regulated materials were improperly released at our current or former
facilities or at locations to which we send materials for disposal, we could be
strictly liable for substantial damages and costs, including cleanup costs and
personal injury or property damages, and incur delays in research and
production and increased operating costs.

Insurance covering certain types of claims of environmental damage or
injury resulting from the use of these materials is available but can be
expensive and is limited in its coverage. We have no insurance specifically
covering environmental risks or personal injury from the use of these materials
and if such use results in liability, our business may be seriously harmed.

The future sale of common stock could negatively affect our stock price.

As of
May 5, 2003, we had 18,940,776 shares of common stock
outstanding. The 4.0 million shares sold in our initial public offering are
freely tradable without restriction or further registration under the federal
securities laws unless purchased by our affiliates. Of our remaining
outstanding shares, approximately 12,940,776 may be sold in the public market,
subject in some cases to volume and other limitations.

If our stockholders sell substantial amounts of common stock in the public
market, or the market perceives that such sales may occur, the market price of
our common stock could fall. The holders of a substantial majority of our
outstanding shares of common stock will have rights, subject to some
conditions, to include their shares in registration statements that we may file
for ourselves or other stockholders. Furthermore, if we were to include in a
company-initiated registration statement shares held by those holders pursuant
to the exercise of their registration

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rights, those sales could impair our ability to raise needed capital by
depressing the price at which we could sell our common stock.

Pursuant to our December 2002 agreement with Medarex, we issued 2.0
million shares of our unregistered common stock and warrants to purchase
800,000 shares of our unregistered common stock at an average exercise price
of $0.165 per share. Pursuant to the agreement, Medarex has certain rights to
include its shares in registration statements that we may file for ourselves or
other stockholders. Furthermore, if we were to include in a company-initiated
registration statement shares held by Medarex pursuant to the exercise of their
registration rights, those sales could impair our ability to raise needed
capital by depressing the price at which we could sell our common stock.

Our principal stockholders, executive officers and directors own a significant
percentage of our stock and, as a result, the trading price for our shares may
be depressed and these stockholders can take actions that may be adverse to
your interests.

Our principal stockholders, executive officers, and directors and entities
affiliated with them, in the aggregate, beneficially own approximately 42.0% of
our common stock as of December 31, 2002. This significant concentration of
share ownership may adversely affect the trading price for our common stock
because investors often perceive disadvantages in owning stock in companies
with controlling stockholders. These stockholders, acting together, will have
the ability to exert substantial influence over all matters requiring approval
by our stockholders, including the election and removal of directors and any
proposed merger, consolidation or sale of all or substantially all of our
assets. In addition, they could dictate the management of our business and
affairs. This concentration of ownership could have the effect of delaying,
deferring or preventing a change in control, or impeding a merger or
consolidation, takeover or other business combination that could be favorable
to you.

There may not be an active, liquid trading market for our common stock.

Prior to
December 14, 2001, there was no public market for our common
stock. On December 23, 2002, we were delisted from the NASDAQ National Market
and subsequently listed on the Over The Counter Bulletin Board (OTCBB). You may
not be able to sell your shares quickly or at the market price if trading in
our stock is not active.

Our common stock may experience extreme price and volume fluctuations, which
could lead to costly litigation for us and make an investment in us less
appealing.

The market price of our common stock may fluctuate substantially due to a
variety of factors, including:



| |  |  | announcements of technological innovations or new products by us or our competitors;
| | - |  | ------------------------------------------------------------------------------------
|
| |  |  | development and introduction of new cancer therapies;                               
|
| |  |  | media reports and publications about cancer therapies;                              
|
| |  |  | announcements concerning our competitors or the biotechnology industry in general;  
|
| |  |  | new regulatory pronouncements and changes in regulatory guidelines;                 
|
| |  |  | general and industry-specific economic conditions;                                  
|
| |  |  | changes in financial estimates or recommendations by securities analysts; and       
|
| |  |  | changes in accounting principles.                                                   

The market prices of the securities of biotechnology companies,
particularly companies like ours without earnings and consistent product
revenues, have been highly volatile and are likely to remain highly volatile in
the future. This volatility has often been unrelated to the operating
performance of particular companies. In the past, securities class action
litigation has often been brought against companies that experience volatility
in the market price of their securities. Moreover, market prices for stocks of
biotechnology-related and technology companies can occasionally reach levels
that bear no relationship to the operating performance of such companies. These
market prices generally are not sustainable and are subject to wide variations.
Whether or not meritorious, litigation brought

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against us could result in substantial costs, divert managements
attention and resources and harm our financial condition and results of
operations.

Our incorporation documents, bylaws and stockholder rights plan may delay or
prevent a change in our management.

Our amended and restated certificate of incorporation, bylaws and
stockholder rights plan contain provisions that could delay or prevent a change
in our management team. Some of these provisions:



| |  |  | authorize the issuance of preferred stock that can be created and
issued by the board of directors without prior stockholder approval,
commonly referred to as blank check preferred stock, with rights
senior to those of common stock;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | authorize our board of directors to issue dilutive shares of common stock upon certain events; and                                                                                                                                        
|
| |  |  | provide for a classified board of directors.                                                                                                                                                                                              

These provisions could allow our board of directors to affect your rights as a
stockholder since our board of directors can make it more difficult for common
stockholders to replace members of the board. Because our board of directors is
responsible for appointing the members of our management team, these provisions
could in turn affect any attempt to replace our current management team.




Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk is presently limited to the interest rate
sensitivity of our cash and cash equivalents which is affected by changes in
the general level of U.S. interest rates. We are exposed to interest rate
changes primarily as a result of our investment activities. The primary
objective of our investment activities is to preserve principal while at the
same time maximizing the income we receive without significantly increasing
risk. To minimize risk, we maintain our cash and cash equivalents in
interest-bearing instruments, primarily money market funds. Our interest rate
risk management objective with respect to our borrowings is to limit the impact
of interest rate changes on earnings and cash flows. Due to the nature of our
cash and cash equivalents, we believe that we are not subject to any material
market risk exposure. We do not have any foreign currency or other derivative
financial instruments.




Item 4. Controls and Procedures

(a)  Evaluation of disclosure controls and procedures.

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Our Chief Executive Officer and our Controller (Principal Financial and
Accounting Officer), after evaluating the effectiveness of the Companys
disclosure controls and procedures (as defined in Exchange Act Rules
13a-14(c) and 15d-14(c)) as of a date (the Evaluation Date) within 90 days
prior to the filing date of this quarterly report, have concluded that, as of
the Evaluation Date, our disclosure controls and procedures were adequate to
ensure that material information relating to the registrant and its
consolidated subsidiaries would be made known to them by others within those
entities.

(b)  Changes in internal controls.

|                                                                                                                                                                                               
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|To our knowledge, there were no significant changes in the Companys internal
controls or in other factors that could significantly affect internal controls
subsequent to the Evaluation Date.




PART II  OTHER INFORMATION




Item 1. Legal Proceedings

None.

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Item 2. Changes in Securities and Use of Proceeds

The Registration Statement (SEC File No. 333-67350) for our initial public
offering, or IPO, was declared effective by the Securities and Exchange
Commission on December 14, 2001, covering an aggregate of 4,000,000 shares of
our common stock, and on December 19, 2001, we issued 4,000,000 shares of our
common stock at an initial public offering price of $5.00 per share.
Approximately $2.8 million of the aggregate $20,000,000 IPO proceeds was used
to pay underwriting discounts and commissions and offering expenses resulting
in net IPO proceeds of approximately $17.2 million. C.E. Unterberg, Towbin was
the managing underwriter of our IPO, and Fahnestock & Co., Inc. and Roth
Capital Partners, LLC were the co-managers, all such proceeds have
been expended as of March 31, 2003.




Item 3. Defaults upon Senior Securities

None.




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

None.




Item 5. Other Information

None.




Item 6. Exhibits and Reports on Form 8-K

a) Exhibits:

10.1
First Amendment to Lease between Canyon Nexus, Inc. and the Company,
effective April 15, 2003.

99.1 Certificate of Chief Executive Officer

99.2 Certificate of Controller (Principal Financial and Accounting Officer)

24



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##### Table of Contents






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.

|                    |  |                                |  |                                             
|------------------- |  | ------------------------------ |  | --------------------------------------------
|                    |  | NORTHWEST BIOTHERAPEUTICS, INC
|                    |  |                                |  |                                             
|Dated: May 13, 2003 |  | By:                            |  | /s/ Daniel O. Wilds                         
|                    |  |                                |  |                                             
|                    |  |                                |  | Daniel O. Wilds                             
|                    |  |                                |  | President and Chief Executive Officer       
|                    |  |                                |  | (Principal Executive Officer)               
|                    |  |                                |  |                                             
|Dated: May 13, 2003 |  | By:                            |  | /s/ Larry L. Richards                       
|                    |  |                                |  |                                             
|                    |  |                                |  | Larry L. Richards                           
|                    |  |                                |  | Controller                                  
|                    |  |                                |  | (Principal Financial and Accounting Officer)

25



---



##### Table of Contents






CERTIFICATIONS

I, Daniel O. Wilds, Chief Executive Officer of the Company, certify that:



|(1) |  | I have reviewed this quarterly report on Form 10-Q of Northwest
Biotherapeutics;                                                                                                                                                                                                                                            
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of 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 quarterly report;
|   
|(3) |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;                 
|   
|(4) |  | The registrants other certifying officer 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 we
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 quarterly 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 quarterly report (the Evaluation Date) and;                                                                                                  
|
| | (c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|(5) |  | The registrants other certifying officer 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 officer and I have indicated in this
quarterly report whether or not 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: May 13, 2003 |  | By: |  | /s/ Daniel O. Wilds                    
|                   |  |     |  |                                        
|                   |  |     |  | Daniel O. Wilds
Chief Executive Officer

26



---



##### Table of Contents



CERTIFICATIONS

I, Larry L. Richards, Controller (Principal Financial and Accounting Officer)
of the Company, certify that:



|(1) |  | I have reviewed this quarterly report on Form 10-Q of Northwest
Biotherapeutics;                                                                                                                                                                                                                                            
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of 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 quarterly report;
|   
|(3) |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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
quarterly report;                 
|   
|(4) |  | The registrants other certifying officer 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 we
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 quarterly 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 quarterly report (the Evaluation Date) and;                                                                                                  
|
| | (c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|(5) |  | The registrants other certifying officer 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 officer and I have indicated in this
quarterly report whether or not 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: May 13, 2003 |  |     |  |                                             
|                   |  | By: |  | /s/ Larry L. Richards                       
|                   |  |     |  |                                             
|                   |  |     |  | Larry L. Richards                           
|                   |  |     |  | Controller                                  
|                   |  |     |  | (Principal Financial and Accounting Officer)

27



---



##### Table of Contents






INDEX TO EXHIBITS

|        |  |                                                                                              
|------- |  | ---------------------------------------------------------------------------------------------
|Exhibit
|Number  |  | Description                                                                                  
|        |  |                                                                                              
|10.1    |  | First Amendment to Lease
between Canyon Nexus, Inc. and the Company, effective April 15,
2003
|99.1    |  | Certificate of Chief Executive Officer                                                       
|        |  |                                                                                              
|99.2    |  | Certificate of Controller (Principal Financial and Accounting Officer)                       

28