##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549



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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, 2002

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 [   ]

As of April 30, 2002, the registrant had outstanding 16,986,814 shares of
common stock, $0.001 par value.





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TABLE OF CONTENTS



|                              |                                                                                                |                                                      |  |  |  |  |  | 
|----------------------------- | ---------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I FINANCIAL INFORMATION
|                              | Item 1. Financial Statements                                                                  
|                              |                                                                                                | Condensed Consolidated Balance Sheets               
|                              |                                                                                                | Condensed Consolidated Statements Of Operations     
|                              |                                                                                                | Condensed Consolidated Statements Of Cash Flows     
|                              |                                                                                                | Notes To Condensed Consolidated 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                            
|PART II OTHER INFORMATION   
|                              | Item 2(D). Changes In Securities And Use Of Proceeds                                          
|                              | Item 6. Exhibits And Reports On Form 8-K                                                      
|SIGNATURES                   
|INDEX TO EXHIBITS            



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##### Table of Contents



NORTHWEST BIOTHERAPEUTICS, INC.

TABLE OF CONTENTS

|                               |  |         |  |                                                                                                                                                                                        |  |     
|------------------------------ |  | ------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                               |  |         |  |                                                                                                                                                                                        |  | Page
|                               |  |         |  |                                                                                                                                                                                        |  |     
|PART I  FINANCIAL INFORMATION |  |        
|                              
|                               |  | Item 1. |  | Financial Statements (unaudited)                                                                                                                                                       |  |     
|                              
|                               |  |         |  | Condensed Consolidated Balance Sheets (unaudited) as of March 31, 2002 and
December 31, 2001                                                                                           |  |     
|                              
|                               |  |         |  | Condensed Consolidated Statements Of Operations (unaudited) for the three-month
periods ended March 31, 2002 and 2001 and the period from March 18, 1996
(inception) to March 31, 2002 |  |     
|                              
|                               |  |         |  | Condensed Consolidated Statements Of Cash Flows (unaudited) for the three-month
periods ended March 31, 2002 and 2001 and the period from March 18, 1996
(inception) to March 31, 2002 |  |     
|                              
|                               |  |         |  | Notes To Condensed Consolidated 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                                                                                                                             |  |     
|                              
|PART II  OTHER INFORMATION    |  |        
|                              
|                               |  | Item 2. |  | Changes In Securities And Use Of Proceeds                                                                                                                                              |  |     
|                              
|                               |  | Item 6. |  | Exhibits And Reports On Form 8-K                                                                                                                                                       |  |     
|                              
|SIGNATURES                     |  |        
|                              
|INDEX TO EXHIBITS              |  |        

2



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##### Table of Contents






PART I FINANCIAL INFORMATION




Item 1. Financial Statements

NORTHWEST BIOTHERAPEUTICS, INC.
(A Development Stage Company)
AND SUBSIDIARY




Condensed Consolidated Balance Sheets

(unaudited)

|                                     |                                                                                                                                                                                |                            |           |                                            |            |           |            |              |            |   |            | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | --------- | ------------------------------------------ | ---------- | --------- | ---------- | ------------ | ---------- | - | ---------- | 
|                                     |                                                                                                                                                                                |                            |           |                                            |            | MARCH 31, |            | DECEMBER 31,
|                                     |                                                                                                                                                                                |                            |           |                                            |            | 2002      |            | 2001        
|                                     |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|Assets                               |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                    
|Current assets:                      |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                     | Cash and cash equivalents                                                                                                                                                      |                            | $         | 11,250,054                                 |            |           | $          | 14,966,126   |           
|                                     | Accounts receivable                                                                                                                                                            |                            |           | 11,080                                     |            |           |            | 50,125       |           
|                                     | Accounts receivable from affiliates                                                                                                                                            |                            |           | 4,669                                      |            |           |            | 42,183       |           
|                                     | Stock subscription receivable                                                                                                                                                  |                            |           |                                           |            |           |            | 207,440      |           
|                                     | Prepaid expenses and other current assets                                                                                                                                      |                            |           | 447,858                                    |            |           |            | 421,400      |           
|                                     |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                     |                                                                                                                                                                                | Total current assets       |           |                                            | 11,713,661 |           |            |              | 15,687,274 |  
|                                     |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|Property and equipment:              |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                     | Leasehold improvements                                                                                                                                                         |                            |           | 1,820,403                                  |            |           |            | 1,742,453    |           
|                                     | Laboratory equipment                                                                                                                                                           |                            |           | 1,497,759                                  |            |           |            | 1,480,575    |           
|                                     | Office furniture and other equipment                                                                                                                                           |                            |           | 479,355                                    |            |           |            | 433,554      |           
|                                     |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                     |                                                                                                                                                                                |                            | 3,797,517 |                                            |            |           | 3,656,582  |             
|                                     | Less accumulated depreciation and amortization                                                                                                                                 |                            |           | 1,014,147                                  |            |           |            | 871,561      |           
|                                     |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                     | Property and equipment, net                                                                                                                                                    |                            |           | 2,783,370                                  |            |           |            | 2,785,021    |           
|Restricted cash                      |                                                                                                                                                                                |                            | 1,107,624 |                                            |            |           | 1,003,968  |             
|                                     |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                     |                                                                                                                                                                                |                            |           | Total assets                               |            | $         | 15,604,655 |              |            | $ | 19,476,263 | 
|                                     |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                    
|Liabilities And Stockholders Equity |                                                                                                                                                                                |                            |           |                                            |            |          
|                                    
|Current liabilities:                 |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                     | Current portion of capital lease obligations                                                                                                                                   |                            | $         | 65,562                                     |            |           | $          | 65,464       |           
|                                     | Accounts payable                                                                                                                                                               |                            |           | 502,376                                    |            |           |            | 1,341,484    |           
|                                     | Accrued expenses                                                                                                                                                               |                            |           | 665,193                                    |            |           |            | 778,612      |           
|                                     |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                     |                                                                                                                                                                                | Total current liabilities  |           |                                            | 1,233,131  |           |            |              | 2,185,560  |  
|Long-term liabilities:               |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                     | Capital lease obligations, net of current portion                                                                                                                              |                            |           | 107,294                                    |            |           |            | 123,212      |           
|                                     | Deferred rent                                                                                                                                                                  |                            |           | 269,470                                    |            |           |            | 232,791      |           
|                                     |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                     |                                                                                                                                                                                | Total liabilities          |           |                                            | 1,609,895  |           |            |              | 2,541,563  |  
|                                     |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|Stockholders equity:                |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                     | Common stock, $0.001 par value; 30,000,000 shares
authorized and 16,986,814 and 16,868,754 shares
issued and outstanding at March 31, 2002 and
December 31, 2001, respectively |                            |           | 16,880                                     |            |           |            | 16,869       |           
|                                     | Additional paid-in capital                                                                                                                                                     |                            |           | 64,146,881                                 |            |           |            | 63,622,215   |           
|                                     | Deferred compensation                                                                                                                                                          |                            |           | (1,353,470                                 | )          |           |            | (1,016,380   | )         
|                                     | Deficit accumulated during the development stage                                                                                                                               |                            |           | (48,815,531                                | )          |           |            | (45,688,004  | )         
|                                     |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                     |                                                                                                                                                                                | Total stockholders equity |           |                                            | 13,994,760 |           |            |              | 16,934,700 |  
|                                     |                                                                                                                                                                                |                            |           |                                            |            |           |            |             
|                                     |                                                                                                                                                                                |                            |           | Total liabilities and stockholders equity |            | $         | 15,604,655 |              |            | $ | 19,476,263 | 
|                                     |                                                                                                                                                                                |                            |           |                                            |            |           |            |             

See accompanying notes to condensed consolidated financial statements.

3



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##### Table of Contents



NORTHWEST BIOTHERAPEUTICS, INC.
(A Development Stage Company)
AND SUBSIDIARY




Condensed Consolidated Statements Of Operations

(unaudited)

|                                                                           |                                                        |                          |            |                    |            |                   |            |                |            |   |             |            |             |  
|-------------------------------------------------------------------------- | ------------------------------------------------------ | ------------------------ | ---------- | ------------------ | ---------- | ----------------- | ---------- | -------------- | ---------- | - | ----------- | ---------- | ----------- | -
|                                                                           |                                                        |                          |            | Three Months Ended |            | Period from March
|                                                                           |                                                        |                          |            | March 31,          |            | 18, 1996         
|                                                                           |                                                        |                          |            |                    |            | (inception) to   
|                                                                           |                                                        |                          |            | 2002               |            | 2001              |            | March 31, 2002
|                                                                           |                                                        |                          |            |                    |            |                   |            |               
|Revenues:                                                                  |                                                        |                          |            |                    |            |                   |            |                |            |   |             |           
|                                                                           | Research material sales                                |                          | $          | 3,089              |            |                   | $          | 44,061         |            |   | $           | 330,059    |            
|                                                                           | Contract research and development from
related parties |                          |            |                   |            |                   |            |               |            |   |             | 1,127,638  |            
|                                                                           | Research grants and other                              |                          |            |                   |            |                   |            |               |            |   |             | 132,090    |            
|                                                                           |                                                        |                          |            |                    |            |                   |            |                |            |   |             |           
|                                                                           |                                                        | Total revenues           |            |                    | 3,089      |                   |            |                | 44,061     |   |             |            | 1,589,787   |  
|                                                                           |                                                        |                          |            |                    |            |                   |            |                |            |   |             |           
|Operating expenses:                                                        |                                                        |                          |            |                    |            |                   |            |                |            |   |             |           
|                                                                           | Cost of research material sales                        |                          |            | 2,700              |            |                   |            | 26,875         |            |   |             | 247,100    |            
|                                                                           | Research and development                               |                          |            | 1,352,481          |            |                   |            | 984,987        |            |   |             | 17,746,581 |            
|                                                                           | General and administrative                             |                          |            | 1,687,340          |            |                   |            | 961,788        |            |   |             | 16,009,051 |            
|                                                                           | Depreciation and amortization                          |                          |            | 142,586            |            |                   |            | 112,779        |            |   |             | 1,413,054  |            
|                                                                           |                                                        |                          |            |                    |            |                   |            |                |            |   |             |           
|                                                                           |                                                        | Total operating expenses |            |                    | 3,185,107  |                   |            |                | 2,086,429  |   |             |            | 35,415,786  |  
|                                                                           |                                                        |                          |            |                    |            |                   |            |                |            |   |             |           
|                                                                           |                                                        | Loss from operations     |            |                    | (3,182,018 | )                 |            |                | (2,042,368 | ) |             |            | (33,825,999 | )
|                                                                           |                                                        |                          |            |                    |            |                   |            |                |            |   |             |           
|Other income (expense):                                                    |                                                        |                          |            |                    |            |                   |            |                |            |   |             |           
|                                                                           | Interest expense                                       |                          |            | (11,905            | )          |                   |            | (136,268       | )          |   |             | (7,756,449 | )          
|                                                                           | Interest income                                        |                          |            | 66,396             |            |                   |            | 16,770         |            |   |             | 614,780    |            
|                                                                           |                                                        |                          |            |                    |            |                   |            |                |            |   |             |           
|Net loss                                                                   |                                                        |                          | (3,127,527 | )                  |            |                   | (2,161,866 | )              |            |   | (40,967,668 | )         
|Accretion of Series A preferred stock
mandatory redemption obligation      |                                                        |                          |           |                    |            |                   | (109,519   | )              |            |   | (1,872,094  | )         
|Series A preferred stock redemption fee                                    |                                                        |                          |           |                    |            |                   |           |                |            |   | (1,700,000  | )         
|Beneficial conversion feature of Series D
preferred stock                  |                                                        |                          |           |                    |            |                   |           |                |            |   | (4,273,566  | )         
|                                                                           |                                                        |                          |            |                    |            |                   |            |                |            |   |             |           
|Net loss applicable to common stockholders                                 |                                                        | $                        | (3,127,527 | )                  |            | $                 | (2,271,385 | )              |            | $ | (48,813,328 | )         
|                                                                           |                                                        |                          |            |                    |            |                   |            |                |            |   |             |           
|Net loss per share applicable to common
stockholders  basic and diluted   |                                                        | $                        | (0.19      | )                  |            | $                 | (1.17      | )              |            |   |             |           
|                                                                           |                                                        |                          |            |                    |            |                   |            |                |            |   |             |           
|Weighted average shares used in computing
basic and diluted loss per share |                                                        |                          | 16,879,349 |                    |            |                   | 1,934,450  |                |            |   |             |           
|                                                                           |                                                        |                          |            |                    |            |                   |            |                |            |   |             |           

See accompanying notes to condensed consolidated financial statements.

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##### Table of Contents



NORTHWEST BIOTHERAPEUTICS, INC.
(A Development Stage Company)
AND SUBSIDIARY




Condensed Consolidated Statements Of Cash Flows

(unaudited)

|                                                                                            |                                                                                             |   |                    |          |                |   |                |           |   |   |             |            |  
|------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------- | - | ------------------ | -------- | -------------- | - | -------------- | --------- | - | - | ----------- | ---------- | -
|                                                                                            |                                                                                             |   | Three Months Ended |          | Period from   
|                                                                                            |                                                                                             |   | March 31,          |          | March 18, 1996
|                                                                                            |                                                                                             |   |                    |          | (inception) to
|                                                                                            |                                                                                             |   | 2002               |          | 2001           |   | March 31, 2002
|                                                                                            |                                                                                             |   |                    |          |                |   |               
|Cash flows from operating activities:                                                       |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|Net loss                                                                                    |                                                                                             | $ | (3,127,527         | )        |                | $ | (2,161,866     | )         |   | $ | (40,967,668 | )         
|Adjustments to reconcile net loss to net cash used by operating
activities:                 |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|                                                                                            | Depreciation and amortization                                                               |   |                    | 142,586  |                |   |                | 112,779   |   |   |             | 1,413,054  |  
|                                                                                            | Amortization of deferred financing costs                                                    |   |                    |         |                |   |                |          |   |   |             | 319,799    |  
|                                                                                            | Amortization of debt discount                                                               |   |                    |         |                |   |                |          |   |   |             | 5,748,823  |  
|                                                                                            | Accrued interest converted to preferred stock                                               |   |                    |         |                |   |                |          |   |   |             | 260,378    |  
|                                                                                            | Stock-based compensation costs                                                              |   |                    | 179,316  |                |   |                | 34,349    |   |   |             | 537,982    |  
|                                                                                            | Loss on retirement of equipment                                                             |   |                    |         |                |   |                |          |   |   |             | 86,325     |  
|Changes in operating assets and liabilities:                                                |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|                                                                                            | Accounts receivable                                                                         |   |                    | 76,559   |                |   |                | 21,626    |   |   |             | (15,749    | )
|                                                                                            | Prepaid expenses and other current assets                                                   |   |                    | (26,458  | )              |   |                | (61,083   | ) |   |             | (401,093   | )
|                                                                                            | Accounts payable and accrued expenses                                                       |   |                    | (952,527 | )              |   |                | 162,671   |   |   |             | 1,167,569  |  
|                                                                                            | Accounts payable to Northwest Hospital                                                      |   |                    |         |                |   |                | (281,661  | ) |   |             |           |  
|                                                                                            | Deferred rent                                                                               |   |                    | 36,679   |                |   |                | 45,971    |   |   |             | 269,470    |  
|                                                                                            |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|Net cash used by operating activities                                                       |                                                                                             |   | (3,671,872         | )        |                |   | (2,127,214     | )         |   |   | (31,581,110 | )         
|                                                                                            |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|Cash flows from investing activities:                                                       |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|                                                                                            | Purchases of property and equipment, net                                                    |   |                    | (140,935 | )              |   |                | (64,845   | ) |   |             | (3,997,410 | )
|                                                                                            | Transfer of restricted cash                                                                 |   |                    | (103,656 | )              |   |                |          |   |   |             | (1,107,624 | )
|                                                                                            |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|Net cash used in investing activities                                                       |                                                                                             |   | (244,591           | )        |                |   | (64,845        | )         |   |   | (5,105,034  | )         
|                                                                                            |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|Cash flows from financing activities:                                                       |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|                                                                                            | Proceeds from issuance of note payable to stockholder                                       |   |                    |         |                |   |                |          |   |   |             | 1,650,000  |  
|                                                                                            | Repayment of note payable to stockholder                                                    |   |                    |         |                |   |                |          |   |   |             | (1,650,000 | )
|                                                                                            | Proceeds from issuance of convertible promissory notes and
warrants, net of issuance costs  |   |                    |         |                |   |                |          |   |   |             | 5,064,100  |  
|                                                                                            | Borrowings under line of credit with Northwest Hospital                                     |   |                    |         |                |   |                |          |   |   |             | 2,834,262  |  
|                                                                                            | Repayment of line of credit with Northwest Hospital                                         |   |                    |         |                |   |                |          |   |   |             | (2,834,262 | )
|                                                                                            | Payments on capital lease obligations                                                       |   |                    | (15,820  | )              |   |                | (11,950   | ) |   |             | (112,483   | )
|                                                                                            | Proceeds from issuance of preferred stock, net                                              |   |                    |         |                |   |                | 2,219,629 |   |   |             | 27,431,603 |  
|                                                                                            | Proceeds from exercise of stock options and warrants                                        |   |                    | 215,711  |                |   |                |          |   |   |             | 417,345    |  
|                                                                                            | Proceeds from issuances of common stock, net                                                |   |                    |         |                |   |                |          |   |   |             | 17,155,432 |  
|                                                                                            | Series A preferred stock redemption fee                                                     |   |                    |         |                |   |                |          |   |   |             | (1,700,000 | )
|                                                                                            | Deferred financing costs                                                                    |   |                    |         |                |   |                |          |   |   |             | 319,799    |  
|                                                                                            |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|Net cash provided by financing activities                                                   |                                                                                             |   | 194,891            |          |                |   | 2,207,679      |           |   |   | 47,936,198  |           
|                                                                                            |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|Net increase (decrease) in cash and cash equivalents                                        |                                                                                             |   | (3,716,072         | )        |                |   | 15,620         |           |   |   | 11,250,054  |           
|Cash and cash equivalents at beginning of period                                            |                                                                                             |   | 14,966,126         |          |                |   | 410,756        |           |   |   |            |           
|                                                                                            |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|Cash and cash equivalents at end of period                                                  |                                                                                             | $ | 11,250,054         |          |                | $ | 426,376        |           |   | $ | 11,250,054  |           
|                                                                                            |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|Supplemental disclosure of cash flow information  cash paid during
the period for interest |                                                                                             | $ | 11,905             |          |                | $ | 136,215        |           |   | $ | 1,321,819   |           
|                                                                                            |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|Supplemental schedule of noncash financing and investing activities:                        |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           
|                                                                                            | Equipment acquired through capital leases                                                   |   | $                  |         |                |   | $              | 40,000    |   |   | $           | 285,339    |  
|                                                                                            | Accretion of Series A preferred stock mandatory redemption
obligation                       |   |                    |         |                |   |                | 119,116   |   |   |             | 1,872,094  |  
|                                                                                            | Beneficial conversion feature of convertible promissory notes                               |   |                    |         |                |   |                |          |   |   |             | 1,025,575  |  
|                                                                                            | Conversion of convertible promissory notes and accrued interest
to Series D preferred stock |   |                    |         |                |   |                |          |   |   |             | 5,324,478  |  
|                                                                                            | Issuance of Series C preferred stock warrants in connection with
lease agreement            |   |                    |         |                |   |                |          |   |   |             | 41,130     |  
|                                                                                            | Issuance of common stock for license rights                                                 |   | $                  |         |                |   | $              |          |   |   | $           | 4,250      |  
|                                                                                            |                                                                                             |   |                    |          |                |   |                |           |   |   |             |           

See accompanying notes to condensed consolidated financial statements.

5



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##### Table of Contents



Northwest Biotherapeutics, Inc.
(A Development Stage Company)
And Subsidiary




Notes To Condensed Consolidated Financial Statements

(unaudited)


1. Basis Of Presentation

The accompanying unaudited condensed consolidated financial statements of
Northwest Biotherapeutics, Inc. and subsidiary (the Company) have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions for Form 10-Q and Article 10 of Regulation S-X and reflect all
adjustments consisting of normal recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of the results for the
periods shown. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United States of America for complete
financial statements. The results of operations for such periods are not
necessarily indicative of the results expected for the full fiscal year of any
future period. These condensed consolidated financial statements should be read in conjunction with the
audited consolidated financial statements and related notes included in the
Companys 2001 Annual Report on Form 10-K as filed with the Securities and
Exchange Commission on April 1, 2002.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.

2. 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, 2002, 107,000 issued and outstanding restricted shares of common stock
that are subject to repurchase. Options to purchase 1,513,306 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.
Options to purchase 961,049 shares of common stock and warrants to purchase
2,531,649 shares of common and preferred stock were excluded from the
calculation of diluted net loss per share for the three months ended March 31,
2001 as such securities were antidilutive.

3. Stockholder Rights Agreement

On March 6, 2002, the Company adopted a Stockholder Rights Agreement,
under which each common stockholder of record at the close of business on March
4, 2002 will receive a dividend of one right per share of common
stock held. Each right entitles the holder to purchase one share of common stock from the
Company at a price equal to $19.25 per share, subject to certain antidilution
provisions. The rights become exercisable only in the event that a third party acquires beneficial ownership of, or announces a
tender or exchange offer for, at least 15% of the then outstanding shares of the Companys common stock and such acquisition or offer is determined by the Board of Directors to not be in the best interests of the stockholders.
If the acquisition or offer were determined by the Board of Directors to be in the best interests of
the stockholders, the rights may be redeemed by the Company for $0.0001 per right. The rights will expire on February 25, 2012,
unless earlier redeemed, exchanged or terminated in accordance with the rights agreement.

4. Operations and Financing

The Company believes that its current cash balances will be sufficient to
meet its operating cash requirements and to fund budgeted capital expenditures
through the first quarter of 2003. The Companys actual cash needs will
depend on many unpredictable factors, including the timeframe for the successful
development of an effective product, if ever, and the commercialization of such
product, both of which include the regulatory approval process. The regulatory
approval process is uncertain, includes extensive preclinical testing and
clinical trials of each product in order to establish its safety and
effectiveness, can take many years and requires the expenditure of substantial
resources. As a result of these factors, the Company cannot accurately predict
the amount or timing of future cash needs.

6



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The Company will need to raise substantial additional funds to conduct the research
and development activities, preclinical studies and clinical trials necessary
to bring its product candidates to market. The Company intends to seek
additional funding through public or private equity financings, strategic
alliances with corporate collaborators or other sources. However, there is no
assurance that such efforts will be successful and that adequate funds will be
available to the Company. If unsuccessful, the Company has the ability to
scale down its operations and expenditures and delay development efforts
related to its core product candidates which may prolong the Companys existence.

7



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Item 2. Managements Discussion And Analysis Of Financial Condition And Results
Of Operations.

FORWARD LOOKING INFORMATION

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 within the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, and 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 their
absence does not mean that such statement is not forward-looking. Many factors
could affect our actual results, including those factors described under
Factors That May Affect Results of Operations and Financial Condition at the
end of this Item 2. These factors, among others, could cause results to differ
materially from those presently anticipated by us. Readers are cautioned not
to place undue reliance on these forward-looking statements.

Overview

We are a biotechnology company focused on discovering, developing and
commercializing innovative immunotherapy products that safely generate and
enhance effective immune responses to treat cancer. Since formation in 1996,
our activities have primarily been devoted to 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, 2002, had a deficit
accumulated during the development stage of approximately $48.8 million. We
anticipate incurring additional losses, which will increase in the foreseeable
future, as we progress through current and anticipated clinical trials and
expand research and development activities.

None of our primary product candidates have received regulatory approval
for commercial sale and no such approval may be received unless we successfully
complete clinical trials that demonstrate to the satisfaction of the U.S. Food
and Drug Administration that our candidates are safe and effective for the uses
we propose. 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. Ultimately, we
believe our revenue will consist mainly of pharmaceutical product sales, and
licensing and royalties from marketing and distribution partnerships and
technology transfers.

Results Of Operations

Three Months Ended March 31, 2002 and 2001

Total Revenues.Revenues decreased 93% from $44,061 for the three months
ended March 31, 2001 to $3,089 for the three months ended March 31, 2002. Our
revenues from research material sales will fluctuate depending upon the timing
of purchases by BioWhittaker, Inc., our sole customer.

Cost of Research Material Sales.Cost of research material sales
decreased 90% from $26,875 for the three months ended March 31, 2001 to $2,700
for the three months ended March 31, 2002. This decrease was due to the
reduced sales activity.

Research and Development Expense.Research and development expense
increased 37% from $984,987 for the three months ended March 31, 2001 to
$1,352,481 for the three months ended March 31, 2002. This increase was
primarily due to increased costs associated with site initiation expenditures
related to our Phase III clinical trials, and research and development
expenditures relating to HuRx-Prostate. Additionally, we expanded our
scientific and manufacturing team to 45 individuals as of March 31, 2002 from
33 as of March 31, 2001.

General and Administrative Expense.General and administrative expense
increased 75% from $961,788 for the three months ended March 31, 2001 to
$1,687,067 for the year ended March 31, 2002. The increase in costs was
primarily due to an increase in the number of employees, increased costs
associated with our directors and officers liability insurance and other costs
attributable to our becoming a public company, which occurred in December 2001.

Depreciation and Amortization.Depreciation and amortization increased
27% from $112,779 for the three months ended March 31, 2001 to $142,856 for the
three months ended March 31, 2002. This increase was primarily due to the our
purchase of laboratory equipment during 2001 to support our expanding clinical
activities.

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Total Other Income (Expense), Net.Other income (expense), net, consists
primarily of interest expense and interest income. Interest expense decreased
91% from $136,268 for the three months ended March 31, 2001 to $11,905 for the
three months ended March 31, 2002. This decrease was primarily due to the
repayment and termination of our line of credit from Northwest Hospital which
occurred in December 2001. Interest income increased from $16,770 for the
three months ended March 31, 2001 compared to $66,396 for the three months
ended March 31, 2002. This increase was due to the investment of the net
proceeds from our initial public offering in December 2001.

Liquidity and Capital Resources

From inception through March 31, 2002, we have financed our operations
primarily through the public and private sale of securities, cash generated
from the sale of biomedical research products, equipment leases and borrowings
from stockholders. At March 31, 2002, we had cash and cash equivalents of
$11.3 million compared to $15.0 million at December 31, 2001.

We used $3.7 million in cash for operating activities during the three
months ended March 31, 2002, compared to $2.1 million during the three months
ended March 31, 2001. The change in cash used in operating activities from
2001 to 2002 was primarily due to an increased net loss resulting from expanded
operations and the reduction of accounts payable. We used $244,861 in cash for
investing activities during the three months ended March 31, 2002 compared to
$64,845 during the three months ended March 31, 2001. The change in cash used
in investing activities from 2001 to 2002 was primarily due to the
reclassification of $103,655 of cash to restricted cash related to a required
deposit on a corporate credit card and $141,205 in purchases of property and
equipment. For the three months ended March 31, 2002, we obtained $194,891 in
cash from financing activities compared to $2.2 million for the three months
ended March 31, 2001. The primary reason for this difference was the $2.2
million of proceeds from the issuance of preferred stock during the first
quarter of 2001.

We expect to incur substantial costs as we continue to expand our clinical
trials, research and pre-clinical development initiatives. We expect that our
existing cash and cash equivalents will be sufficient to fund operations through the first quarter of 2003. However, if our capital
resources are insufficient to meet our capital requirements and expenses, we
would need to issue additional equity or debt securities or obtain credit
arrangements. Additional financing may not be available on terms acceptable to
us or at all. The issuance of additional equity or convertible debt securities
could result in additional dilution to our stockholders. Our future capital
needs will depend on many unpredictable factors including the size, duration
and number of clinical trials, the progress associated with pre-clinical
trials, the time frame for successful development of an effective product, if
ever, and the commercialization of such product all of which includes the
regulatory approval process. The regulatory process is uncertain, includes
extensive pre-clinical testing and clinical trials of each product candidate in
order to establish its safety and effectiveness, can take many years and
requires the expenditure of substantial resources. 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. As a result of these factors, we cannot
predict accurately the amount or timing of future cash needs.

We do not have committed external sources of funding and we may be unable
to obtain additional funds on acceptable terms, if at all. If adequate funds
are not available, we may be required to, among other things:



| |  | delay, reduce the scope of or eliminate one or more of our programs;                                                                                                                                 
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | obtain funds through arrangements with strategic partners or others that may require us to relinquish rights to technologies or
product candidates that we would otherwise seek to develop ourselves;
| 
| |  | license rights to technologies or product candidates on terms that are less favorable to us than might otherwise be available; or                                                                    
| 
| |  | dispose of assets and no assurance can be given as to what value will be realized upon their liquidation.                                                                                            

FACTORS THAT MAY AFFECT RESULTS OF OPERATIONS AND FINANCIAL CONDITION

This section briefly discusses certain risks that should be considered by
stockholders and prospective investors in Northwest Biotherapeutics. 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, the trading price of our common stock could decline.

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We will need to raise additional capital that may not be available, which could
adversely affect our operations.

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. Additional 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 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. Moreover, our cash used in operations has exceeded
cash generated from operations in each period since our inception. We expect
net cash used in operations to increase in the near future as we make
significant investments in clinical trials and research and development.

We are in the early stage of development and have a history of net losses.

We are a development stage company and have a limited operating history
upon which an investor may evaluate our operations and future prospects. We
have incurred net losses since inception, including net losses applicable to
common stockholders of approximately $17.3 million for the year ended December
31, 2001 and approximately $3.1 million for the three months ended March 31,
2002. As of March 31, 2002, we had a deficit accumulated during the
development stage of approximately $48.8 million. We expect to make
substantial expenditures to further develop and commercialize our product
candidates and expect that our rate of spending will accelerate as the result
of the increased costs and expenses associated with clinical trials, regulatory
approvals and commercialization of our product candidates.

In the future, we anticipate that our revenues will be derived primarily
through the commercialization of our product candidates, none of which are
currently approved for commercial sale. As a result of these factors, it is
difficult to evaluate our prospects, and our future success is more uncertain
than if we had a longer or more proven history of operations.

Failure to obtain regulatory approval for one or more of our product candidates
could significantly harm our business.

All of our product candidates are in early stages of development. None of
our product candidates will be commercially available prior to FDA approval.
Significant further research and development, financial resources and personnel
will be required to develop commercially viable products and obtain regulatory
approvals. Much of our efforts and expenditures over the next few years will
be devoted to our lead product candidates, DCVax-Prostate, DCVax-Brain,
DCVax-Lung and HuRx-Prostate. Success in pre-clinical and early clinical
trials does not ensure that subsequent large-scale trials will be successful
nor is it a basis for predicting final results. A number of companies in the
biotechnology industry have suffered significant setbacks in advanced clinical
trials, even after promising results have been achieved in earlier trials.
Failure to obtain FDA approval for one or more of our product candidates could
significantly harm our business.

Clinical trials for our product candidates are expensive and time consuming,
their outcome is uncertain and we have limited experience in managing them.

The process of obtaining and maintaining regulatory approvals for new
therapeutic products is expensive, lengthy and uncertain. It can vary
substantially, based upon the type, complexity and novelty of the product
involved. Accordingly, any of our current or future product candidates could
take a significantly longer time to gain regulatory approval than we expect or
may never gain approval, either of which could reduce our anticipated revenues
and delay or terminate the potential commercialization of our product
candidates.

We have limited experience in conducting and managing clinical trials. We
rely on third parties, including our strategic partners, to assist us in
managing and monitoring all of our clinical trials. Our reliance on these
third parties may result in delays in completing, or failure to complete, these
trials if the third parties fail to perform under the terms of our agreements
with them. For example, we rely solely on Quintiles Laboratories Limited to
provide us with analytical and data management services in connection with our
Phase III clinical trial for DCVax-Prostate. We may not be able to find a
sufficient alternative supplier of these services in a reasonable time period,
or on commercially reasonable terms, if at all. If we were unable to obtain an
alternative supplier of these services, we might be forced to curtail our Phase
III clinical trial for DCVax-Prostate.

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We may choose to, or may be required to, suspend, repeat or terminate our
clinical trials if they are not conducted in accordance with regulatory
requirements, the results are negative or inconclusive, or the trials are not
well designed.

Clinical trials must be conducted in accordance with the FDAs regulations
and guidelines and are subject to oversight by the FDA and the clinical sites
where the clinical trials are conducted. In addition, clinical trials must be
conducted with product candidates produced under the FDAs manufacturing
guidelines, and may require large numbers of test patients.

Clinical trials may be suspended by the FDA or a clinical site at any time
if the trials are not being conducted in accordance with FDA or clinical site
requirements, or if the trials expose patients to unacceptable health risks.

In addition, we, the clinical site, or the FDA might delay or halt our
clinical trials of a product candidate for various reasons, including but not
limited to the following:



| |  | the product candidate may have significant adverse side effects;                                                                                         
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | the time required to determine whether the product candidate is effective may be longer than expected;                                                   
| 
| |  | fatalities or other adverse events may arise during a clinical trial due to medical problems that may
or may not be related to clinical trial treatments;
| 
| |  | the product candidate may not achieve the level of efficacy required by the FDA;                                                                         
| 
| |  | there may be insufficient patient enrollment in the clinical trials; or                                                                                  
| 
| |  | we may be unable to produce sufficient quantities of the product candidate to complete the trials.                                                       

We believe we are currently in compliance with all applicable regulations
relating to our product candidates, all of which are subject to governmental
regulation.

Because we are not certain that we will obtain necessary regulatory approvals
to market our products in the United States and foreign jurisdictions, we do
not know if we will be permitted to commercialize our products.

The biotechnology and biopharmaceutical industries are subject to
stringent regulation by a wide range of authorities. We may fail to obtain
regulatory approval for any product candidate we develop. We cannot market any
of our products in the United States until they have completed rigorous
pre-clinical testing and clinical trials and the FDAs extensive regulatory
approval process. Satisfaction of regulatory requirements typically takes many
years, is dependent upon the type, complexity, and novelty of the product and
requires the expenditure of substantial resources for research and development,
testing, manufacturing, quality control, labeling and promotion of drugs.
Neither the FDA nor international regulatory authorities have approved
cancer-therapy products based on our area of scientific focus for
commercialization, and we do not know whether our research and clinical
approaches to developing new cancer therapies will lead to products that the
FDA will consider safe and effective for indicated uses. We must receive FDA
approval of preliminary investigational applications before commencing clinical
trials in humans. Clinical trials are subject to oversight by clinical sites
and the FDA and:



| |  | must conform with the FDAs good laboratory practice regulations;
|- |  | -----------------------------------------------------------------
| 
| |  | must meet requirements for informed consent;                     
| 
| |  | must meet requirements for good clinical practices;              
| 
| |  | are subject to continuing FDA oversight; and                     
| 
| |  | may require large numbers of test subjects.                      

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Before receiving FDA approval to market a product, we must demonstrate
that the product is safe and effective for the patient population that will be
treated. If we fail to comply with applicable FDA or other regulatory
requirements, we could be subject to criminal prosecution, civil penalties,
recall or seizure of products, total or partial suspension of production or
injunction, as well as other regulatory actions against our product candidates
or us. If we are unable to obtain approval for any of our product candidates,
we will not be permitted to bring these product candidates to market.

Outside the United States, our ability to market a product will depend
upon receiving marketing approvals from the appropriate regulatory authorities.
This foreign regulatory approval process includes all of the risks associated
with FDA approval described above.

We lack sales and marketing experience and, as a result, we may experience
significant difficulties commercializing our products.

Even if we do obtain regulatory approval to market one of our product
candidates, the commercial success of any of our 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
pharmaceutical products. If we develop an approved product, we will need to
create a substantial marketing staff and sales force with technical expertise
and the ability to distribute our products. As an alternative, we could seek
assistance from a pharmaceutical or biotechnology company 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 products.

We have limited manufacturing facilities and expertise to produce our
product candidates. For the duration of our currently anticipated clinical
trials and pre-development efforts, third-party manufacturers, such as Medarex,
will produce some or all of the components of our product candidates. They
will also package, label and distribute some or all of those products.
Although we believe that such third parties have adequate resources to meet our
needs, we cannot directly control the amount or timing of resources they will
devote to our product candidates.

We have never manufactured, on a commercial scale, any of our product
candidates. We may be unable to manufacture these product candidates or any
other products that we or our strategic partners develop at a reasonable cost
or in sufficient quantities to be profitable. If we cannot manufacture or
contract with manufacturers to provide a sufficient supply of our product
candidates on acceptable terms, it will delay:



| |  | our pre-clinical and clinical testing schedule;        
|- |  | -------------------------------------------------------
| 
| |  | our submission of products for regulatory approval; and
| 
| |  | our new development programs.                          

These delays would seriously harm our business. Any other delays or
difficulties that we may have in manufacturing or contracting with
manufacturers to produce, package and distribute our products will also harm
our ability to market or sell our products.

Our product candidates may not gain market acceptance among physicians,
patients, health care payors and the medical community.

The degree of market acceptance of any approved product will depend on a
number of factors, including:



| |  | cost-effectiveness;                                 
|- |  | ----------------------------------------------------
| 
| |  | potential advantage over alternative treatments; and
| 
| |  | marketing and distribution support.                 

In addition, government health administrative authorities, private health
insurers and other organizations are increasingly challenging both the need for
and the price of new medical products and services. Consequently, uncertainty
exists as to the reimbursement status of newly approved therapeutics. For
these and other reasons, physicians, patients, third-party payors and the

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medical community may not accept and utilize any product candidates that we
develop and, even if they do, adequate levels of reimbursement may not be
available to enable us to realize an appropriate return on our investment in
research and product development.

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. Our primary current strategic partner is Medarex, Inc.
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.

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.

Even if we obtain regulatory approval of a product candidate, we will be
subject to extensive regulation, which can be costly and time consuming and may
subject us to unanticipated delays.

Even if we obtain regulatory approval of a product candidate, we will
continue to be subject to extensive governmental regulation which may be costly
and time consuming, and which may adversely impact our ability to commercialize
our product candidates. Currently, we are required to comply with FDA
manufacturing guidelines for compounds used in our product candidates in
clinical trials, and we believe that we and our third-party suppliers of our
compounds are in compliance with these guidelines. The principal regulating
authority in the United States is the FDA. Similar agencies in other countries
will regulate our products. These regulations affect product:



| |  | manufacturing;
|- |  | --------------
| 
| |  | labeling;     

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| |  | marketing;       
|- |  | -----------------
| 
| |  | sales;           
| 
| |  | distribution; and
| 
| |  | export or import.

Any approved product candidate will be subject to extensive governmental
regulation. For example, regulatory agencies could:



| |  | withdraw product approvals;                                                                                                
|- |  | ---------------------------------------------------------------------------------------------------------------------------
| 
| |  | limit the uses for which our product may be labeled, which would limit the uses for which our new products may be marketed;
| 
| |  | impose burdensome labeling requirements;                                                                                   
| 
| |  | require us to conduct additional clinical trials, thereby suspending our ability to sell any approved products; or         
| 
| |  | require us to prepare and submit additional marketing applications.                                                        

We may be subject to any of the following penalties or compliance actions
for violating government regulations:



| |  | warning letters;                                             
|- |  | -------------------------------------------------------------
| 
| |  | fines;                                                       
| 
| |  | injunctions;                                                 
| 
| |  | recall or seizure of our products;                           
| 
| |  | total or partial suspension of production;                   
| 
| |  | government refusal to approve our marketing applications; and
| 
| |  | criminal prosecution.                                        

We must also comply with numerous laws, regulations and recommendations
relating to:



| |  | safe working conditions;               
|- |  | ---------------------------------------
| 
| |  | laboratory and manufacturing practices;
| 
| |  | experimental use of animals;           
| 
| |  | protection of the environment; and     

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| |  | safe use and disposal of hazardous substances used in product discovery,
research, and development, including radioactive compounds and
infectious disease agents.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 DCVax and HuRx 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 many of our competitors have
substantially greater resources than we have.

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:



| |  | 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 products, which could enable third parties to use our
technology, or very similar technology, and could reduce our ability to compete
in the market.

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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 four issued patents (one in the United States and three in foreign
jurisdictions) and 33 patent applications pending (10 in the United States and
23 in foreign jurisdictions) which cover the use of dendritic cells in DCVax as
well as targets for either DCVax or HuRx-based therapies. The issued patents
expire at dates from 2015 to 2017. In addition, we have a world-wide exclusive
license from Cytogen to use PSMA for the development, manufacture and sale of
DCVax-Prostate. The license expires upon the expiration of the last to expire
of the underlying patents, but not prior to November 2012.

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.

Our success will depend to a substantial degree upon our ability to
develop, manufacture, market and sell our product candidates without infringing
the proprietary rights of third parties and without breaching any licenses we
have entered into regarding our product candidates. Numerous U.S. and foreign
issued patents and pending patent applications, which are owned by third
parties, exist in the general field of immunotherapy. In particular, we are
aware of other patents issued to third parties for monoclonal antibodies that
bind to prostate-specific membrane antigen, or PSMA, and patent applications of
others that may issue with similar claims. Our ability to market a product
based on the binding of antibodies to PSMA may depend on the actual invention
date of the subject matter of the issued patent, or the scope of claimed
coverage of the pending patent applications, both of which are unknown to us.

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

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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 products 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 license from Cytogen to use PSMA 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.

Our license from Cytogen provides us with worldwide exclusive rights to
use PSMA for the development, manufacture and sale of DCVax-Prostate in
exchange for payments upon the achievement of certain milestones. Cytogen may
terminate our license to use PSMA if we fail to use reasonable efforts to
achieve certain milestones in the development of commercial products or
otherwise breach the agreement. We believe we are currently in compliance with
the terms of this agreement. Nevertheless, the scope of our rights under this
or other licenses may be subject to dispute of our licensors or third parties.

If we fail to properly manage our growth, our business could be adversely
affected.

We have experienced significant growth in the number of our employees and
the scope of our operations. As of March 31, 2002, we had 60 employees, and as
of March 31, 2001, we had 45 employees. We expect our number of employees to
continue to increase for the foreseeable future. In addition, we have
substantially increased the scale of our operations in the last year and expect
to continue doing so for the foreseeable future. Our overall growth and need
to develop many different areas of our business have placed, and may continue
to place, a strain on our management and operations. If we obtain regulatory
approval to market DCVax-Prostate, we may be required to establish processing
facilities in diverse geographic regions to keep pace with the introduction of
the product. This growth would place additional stress on our resources. If
we are unable to manage our growth effectively, our business will be harmed.
The management of our growth will depend, among other things, upon our ability
to improve our operational, financial and management controls, reporting
systems and procedures. In addition, upon the approval of any of our other
DCVax product candidates for commercial sale, we will need to invest
significant resources in additional processing facilities to produce sufficient
quantities of these products. This will result in additional burdens on our
existing systems and resources.

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 CEO candidates are few in number,
and we believe it would be very difficult and time-consuming to replace Mr.
Wilds. 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. Because of Dr. Boyntons history with us, we believe that
it would be very difficult, expensive and time-consuming to replace him.

With the exception of Mr. Wilds and Dr. Boynton we do not have any key
person life insurance on individuals. 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 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.

Health care reform and other changes in the health care industry, including
changes in reimbursement policies, could adversely affect our potential
profitability.

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Recent proposals to change the health care system in the United States
have included measures that would limit or eliminate payments for medical
procedures and treatments or subject the pricing of medical treatment products
to government control. In addition, as a result of the trend towards managed
health care in the United States, as well as legislative proposals to reduce
government insurance programs, third-party payors are increasingly attempting
to contain health care costs by limiting both coverage and the level of
reimbursement for new medical treatment products. Even if we are successful in
obtaining regulatory approval for any of our product candidates, our
commercialization efforts and any potential profits may be adversely affected
by these developments in the U.S. health care system.

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 involves unavoidable risks. The
use of our product candidates in clinical trials, and the sale of products we
may develop, could result in injury to patients receiving our product
candidates or products, 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 products.

We have purchased liability insurance coverage in the amount of $15
million for our current clinical trials and for the research products we may
sell. We intend to seek additional liability insurance coverage if and when we
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 plans for growth, 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 April 30, 2002, we have 16,986,814 shares of common stock
outstanding. The 4,000,000 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. The remaining 12,986,814
shares of our outstanding common stock will be available for sale in the public
market on June 17, 2002, subject in some cases to volume and other limitations.
The previous sentence assumes the effectiveness of the lockup agreements with
the underwriters under which holders of substantially all of our common stock
have agreed not to sell or otherwise dispose of their shares of common stock.
We have been advised by C.E. Unterberg, Towbin that it has no current intention
of releasing any shares subject to a lock-up agreement. Any request for the
release of any lock-up would be considered on a case-by-case basis, taking into
account, among other factors, the particular circumstances surrounding the
request, including but not limited to the number of shares to be released, the
circumstances of the proposed sale and prevailing market conditions.

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 approximately 11.5 million 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

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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 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 executive officers and directors and entities affiliated with them, in
the aggregate, beneficially own approximately 21% of our common stock as of
March 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 had been no public market for our common
stock. An active trading market for our common stock may not develop. 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, particularly following an
initial public offering, can reach levels that bear no relationship to the
operating performance of such companies. These market prices generally are not
sustainable and are subject to

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wide variations. Whether or not meritorious, litigation brought 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.

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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.




PART II OTHER INFORMATION




Item 2(D). 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. As of March 31, 2002, we had
approximately $11.2 million of these proceeds remaining which are invested in
money market accounts.




Item 6. Exhibits And Reports On Form 8-K

|   |  |                                                                                                                                |  |                                                                                   
|-- |  | ------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------
|a) |  | Exhibits:                                                                                                                     
|  
|   |  | 3.1
3.2
4.1                                                                                                                    |  | Amended and Restated Certificate of Incorporation
Bylaws
Form of Stock Certificate
|  
|b) |  | Reports on Form 8-K.                                                                                                          
|  
|   |  | On March 6, 2002 we filed a report on Form 8-K to report that our
Board of Directors adopted a Stockholders Rights Agreement.

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SIGNATURES

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

|                    |                                                                                   |                    
|------------------- | --------------------------------------------------------------------------------- | -------------------
|                    | NORTHWEST BIOTHERAPEUTICS, INC.                                                  
|                   
|Dated: May 14, 2002 | By:                                                                               | -s- Daniel O. Wilds
|                    |                                                                                  
|                    | Daniel O. WildsPresident and Chief Executive Officer(principal executive officer)

|                    |                                                                                                                                      |                    
|------------------- | ------------------------------------------------------------------------------------------------------------------------------------ | -------------------
|                    |                                                                                                                                     
|Dated: May 14, 2002 | By:                                                                                                                                  | -s- Jim D. Johnston
|                    |                                                                                                                                     
|                    | Jim D. JohnstonExecutive Vice President, Chief Financial Officer,and Assistant Secretary(principal financial and accounting officer)

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INDEX TO EXHIBITS

|              |  |                                                                 
|------------- |  | ----------------------------------------------------------------
|ExhibitNumber |  | Description                                                     
|              |  |                                                                 
|             
|3.1           |  | Fifth Amended and Restated Certificate of Incorporation (3.1)(1)
|             
|3.2           |  | Bylaws of the Registrant (3.2)(1)                               
|             
|4.1           |  | Specimen of Common Stock Certificate (4.1)(1)                   



---

|(1) |  | Incorporated by reference to the exhibit shown in the preceding parentheses
filed with the Registrants Registration Statement on Form S-1 (File No.
333-67350).
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

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