##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number 000-33393
 Northwest Biotherapeutics, Inc.
 (Exact Name of Registrant as Specified in its Charter)
 Delaware
    
    I.R.S. Employer Identification No. 94-3306718(State or other Jurisdiction of Incorporation or Organization)
 7600 Wisconsin Avenue, Suite 750
Bethesda, Maryland 20814
 (240) 497-9024
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(do not check if a smaller reporting company)
 Yes o No þ




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##### 



TABLE OF CONTENTS
 NORTHWEST BIOTHERAPEUTICS, INC.
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATION

    
    3Item 1. Financial StatementsCondensed Consolidated Balance Sheets as of December 31, 2007 and September 30, 2008 (unaudited)

    
    3Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended
September 30, 2007 and 2008 and the period from March 18, 1996 (inception) to September 30,
2008

    
   4Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September
30, 2007 and 2008 and the period from March 18, 1996 (inception) to September 30, 2008

    
   5Notes to Condensed Consolidated Financial Statements

    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk

    
    32Item 4. Controls and Procedures

    
    32PART II  OTHER INFORMATION

    
    35Item 1. Legal Proceedings

    
    35Item 1A. Risk Factors

    
   37Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

    
   47Item 3. Defaults Upon Senior Securities

    
    47Item 4. Submission of Matters to a Vote of Security Holders

    
   47Item 5. Other Information

    
    47Item 6. Exhibits

    
    48SIGNATURES

    
    49INDEX TO EXHIBITS

    
    50Exhibit 10.1Exhibit 10.2Exhibit 10.3Exhibit 10.4Exhibit 10.5Exhibit 10.6Exhibit 31.1Exhibit 32.1
   2




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##### Table of Contents



Part I  Financial Information
 NORTHWEST BIOTHERAPEUTICS, INC.
 
 Condensed Consolidated Balance Sheets
 December 31,
    
    
    September 30,2007
    
    
    2008(Unaudited)AssetsCurrent assets:Cash
    
    $
    7,861
    
    
    $
    23Prepaid expenses and other current assets
    
    
    823
    
    
    
    1,662Total current assets
    
    
    8,684
    
    
    
    1,685Property and equipment:Laboratory equipment
    
    
    29
    
    
    
    29Office furniture and other equipment
    
    
    94
    
    
    
    82Construction in progress
    
    
    
    
    
    
    241123
    
    
    
    352Less accumulated depreciation and amortization
    
    
    (104
    )
    
    
    (104
    )Property and equipment, net
    
    
    19
    
    
    
    248Deposit and other non-current assets
    
    
    3
    
    
    
    6Total assets
    
    $
    8,706
    
    
    $
    1,939Liabilities And Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    846
    
    
    $
    2,782Accounts payable, related party
    
    
    161
    
    
    
    1,220Accrued expenses
    
    
    1,006
    
    
    
    1,043Accrued expense, related party
    
    
    886
    
    
    
    297Notes payable to related parties, net of discount
    
    
    
    
    
    
    5,212Total liabilities
    
    
    2,899
    
    
    
    10,554Stockholders equity (deficit):Preferred stock, $0.001 par value; 20,000,000 shares
authorized at December 31, 2007 and September 30,
2008 and 0 shares issued and outstanding at December
31, 2007 and September 30, 2008Common stock, $0.001 par value; 100,000,000 shares
authorized at December 31, 2007 and September 30,
2008 and 42,346,085 and 42,492,853 shares issued and
outstanding at December 31, 2007 and September 30,
2008, respectively
    
    
    42
    
    
    
    42Additional paid-in capital
    
    
    148,064
    
    
    
    150,723Deficit accumulated during the development stage
    
    
    (142,295
    )
    
    
    (159,384
    )Cumulative translation adjustment
    
    
    (4
    )
    
    
    4Total stockholders equity (deficit)
    
    
    5,807
    
    
    
    (8,615
    )Total liabilities and stockholders equity
    
    $
    8,706
    
    
    $
    1,939
   3




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##### Table of Contents



NORTHWEST BIOTHERAPEUTICS, INC.
 
 Condensed Consolidated Statements of Operations
 Period fromMarch 18, 1996Three Months Ended
    
    
    Nine Months Ended
    
    
    (Inception) toSeptember 30,
    
    
    September 30,
    
    
    September 30,2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2008Revenues:Research material sales
    
    $
    10
    
    
    $
    10
    
    
    $
    10
    
    
    $
    10
    
    
    $
    550Contract research and development from
related parties
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,128Research grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,061Total revenues
    
    
    10
    
    
    
    10
    
    
    
    10
    
    
    
    10
    
    
    
    2,739Operating expenses:Cost of research material sales
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    382Research and development
    
    
    1,873
    
    
    
    3,129
    
    
    
    5,342
    
    
    
    9,334
    
    
    
    53,956General and administrative
    
    
    1,697
    
    
    
    2,171
    
    
    
    3,643
    
    
    
    7,629
    
    
    
    47,767Depreciation and amortization
    
    
    2
    
    
    
    
    
    
    
    18
    
    
    
    22
    
    
    
    2,344Loss on facility sublease
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    895Asset impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,056Total operating costs and expenses
    
    
    3,572
    
    
    
    5,300
    
    
    
    9,003
    
    
    
    16,985
    
    
    
    107,400Loss from operations
    
    
    (3,562
    )
    
    
    (5,290
    )
    
    
    (8,993
    )
    
    
    (16,975
    )
    
    
    (104,661
    )Other income (expense):Warrant valuation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,759Gain on sale of intellectual property
and property and equipment
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8
    
    
    
    3,664Interest expense
    
    
    (697
    )
    
    
    (143
    )
    
    
    (5,561
    )
    
    
    (224
    )
    
    
    (21,554
    )Interest income and other
    
    
    350
    
    
    
    11
    
    
    
    738
    
    
    
    102
    
    
    
    1,217Net loss
    
    
    (3,909
    )
    
    
    (5,414
    )
    
    
    (13,816
    )
    
    
    (17,089
    )
    
    
    (114,575
    )Issuance of common stock in connection
with elimination of Series A and Series
A-1 preferred stock preferences
    
    
    
    
    
    
    
    
    
    
    (12,349
    )
    
    
    
    
    
    
    (12,349
    )Modification of Series A preferred stock
warrants
    
    
    
    
    
    
    
    
    
    
    (2,306
    )
    
    
    
    
    
    
    (2,306
    )Modification of Series A-1 preferred
stock warrants
    
    
    
    
    
    
    
    
    
    
    (16,393
    )
    
    
    
    
    
    
    (16,393
    )Series A preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    (334
    )
    
    
    
    
    
    
    (334
    )Series A-1 preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    (917
    )
    
    
    
    
    
    
    (917
    )Warrants issued on Series A and Series
A-1 preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    (4,664
    )
    
    
    
    
    
    
    (4,664
    )Accretion of Series A preferred stock
mandatory redemption obligation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,872
    )Series A preferred stock redemption fee
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,700
    )Beneficial conversion feature of Series D
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,274
    )Net loss applicable to common stockholders
    
    $
    (3,909
    )
    
    $
    (5,414
    )
    
    $
    (50,779
    )
    
    $
    (17,089
    )
    
    $
    (159,384
    )Net loss per share applicable to common
stockholders  basic and diluted
    
    $
    (0.09
    )
    
    $
    (0.13
    )
    
    $
    (2.76
    )
    
    $
    (0.40
    )Weighted average shares used in computing
basic and diluted net loss per share
    
    
    42,298
    
    
    
    42,493
    
    
    
    18,379
    
    
    
    42,405
   4




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##### Table of Contents



NORTHWEST BIOTHERAPEUTICS, INC.
 
 Condensed Consolidated Statements of Cash Flows
 Period fromMarch 18, 1996Nine Months Ended
    
    
    (Inception) toSeptember 30,
    
    
    September 30,2007
    
    
    2008
    
    
    2008Cash Flows from Operating Activities:Net Loss
    
    $
    (13,816
    )
    
    $
    (17,089
    )
    
    $
    (114,575
    )Reconciliation of net loss to net cash used in operating activities:Depreciation and amortization
    
    
    18
    
    
    
    22
    
    
    
    2,344Amortization of deferred financing costs
    
    
    
    
    
    
    
    
    
    
    320Amortization of debt discount
    
    
    5,750
    
    
    
    
    
    
    
    17,996Accrued interest converted to preferred stock
    
    
    
    
    
    
    
    
    
    
    260Accreted interest on convertible promissory note
    
    
    307
    
    
    
    
    
    
    
    1,484Stock-based compensation costs
    
    
    4
    
    
    
    2,434
    
    
    
    6,225Gain on sale of intellectual property, property and equipment and royalty
rights
    
    
    
    
    
    
    (8
    )
    
    
    (3,664
    )Loss on sale of property and equipment
    
    
    
    
    
    
    
    
    
    
    273Warrant valuation
    
    
    
    
    
    
    
    
    
    
    (6,759
    )Asset impairment loss
    
    
    
    
    
    
    
    
    
    
    2,066Loss on facility sublease
    
    
    
    
    
    
    
    
    
    
    895Increase (decrease) in cash resulting from changes in assets and liabilities:Accounts receivable
    
    
    3
    
    
    
    
    
    
    
    Prepaid expenses and other current assets
    
    
    (261
    )
    
    
    (617
    )
    
    
    (942
    )Accounts payable and accrued expenses
    
    
    (2,429
    )
    
    
    1,973
    
    
    
    3,563Related party accounts payable and accrued expenses
    
    
    
    
    
    
    682
    
    
    
    1,914Accrued loss on sublease
    
    
    
    
    
    
    
    
    
    
    (265
    )Deferred rent
    
    
    
    
    
    
    
    
    
    
    410Net Cash used in Operating Activities
    
    
    (10,424
    )
    
    
    (12,603
    )
    
    
    (88,455
    )Cash Flows from Investing Activities:Purchase of property and equipment, net
    
    
    (15
    )
    
    
    (251
    )
    
    
    (4,856
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    8
    
    
    
    258Proceeds from sale of intellectual property
    
    
    
    
    
    
    
    
    
    
    1,816Proceeds from sale of marketable securities
    
    
    
    
    
    
    
    
    
    
    2,000Refund of security deposit
    
    
    
    
    
    
    
    
    
    
    (3
    )Transfer of restricted cash
    
    
    
    
    
    
    
    
    
    
    (1,035
    )Net Cash used in Investing Activities
    
    
    (15
    )
    
    
    (243
    )
    
    
    (1,820
    )Cash Flows from Financing Activities:Proceeds from issuance of notes payable to related parties
    
    
    2,600
    
    
    
    5,000
    
    
    
    10,750Repayment of note payable to stockholder
    
    
    (225
    )
    
    
    
    
    
    
    (6,700
    )Proceeds from issuance of convertible promissory note and warrants, net of
issuance costs
    
    
    
    
    
    
    
    
    
    
    13,099Borrowing under line of credit, Northwest Hospital
    
    
    
    
    
    
    
    
    
    
    2,834Repayment of line of credit, Northwest Hospital
    
    
    
    
    
    
    
    
    
    
    (2,834
    )Repayment of convertible promissory note
    
    
    
    
    
    
    
    
    
    
    (119
    )Payment on capital lease obligations
    
    
    (2
    )
    
    
    
    
    
    
    (323
    )Payments on note payable
    
    
    
    
    
    
    
    
    
    
    (420
    )Payment of preferred stock dividends
    
    
    (1,252
    )
    
    
    
    
    
    
    (1,252
    )Proceeds from issuance of Series A cumulative preferred stock, net
    
    
    
    
    
    
    
    
    
    
    28,708Proceeds from exercise of stock options and warrants
    
    
    
    
    
    
    
    
    
    
    227Proceeds from issuance of common stock, net
    
    
    25,886
    
    
    
    
    
    
    
    48,343Mandatorily redeemable Series A preferred stock redemption fee
    
    
    
    
    
    
    
    
    
    
    (1,700
    )Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    (319
    )Net Cash provided by Financing Activities
    
    
    27,007
    
    
    
    5,000
    
    
    
    90,294
  5




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##### Table of Contents



Period fromMarch 18, 1996Nine Months Ended
    
    
    (Inception) toSeptember 30,
    
    
    September 30,2007
    
    
    2008
    
    
    2008Effect of exchange rates on cash
    
    
    
    
    
    
    8
    
    
    
    4Net increase (decrease) in cash
    
    
    16,568
    
    
    
    (7,846
    )
    
    
    23Cash at beginning of period
    
    
    307
    
    
    
    7,861
    
    
    
    Cash at end of period
    
    $
    16,875
    
    
    $
    23
    
    
    $
    23Supplemental disclosure of cash flow information  Cash paid during the period
for interest
    
    $
    8
    
    
    $
    8
    
    
    $
    1,879Supplemental schedule of non-cash financing activities:Issuance of common stock in connection with elimination of Series A and Series
A-1 preferred stock preferences
    
    $
    12,349
    
    
    $
    
    
    
    $
    12,349Modification of Series A preferred stock warrants
    
    
    2,306
    
    
    
    
    
    
    
    2,306Modification of Series A-1 preferred stock warrants
    
    
    16,393
    
    
    
    
    
    
    
    16,393Warrants issued on Series A and Series A-1 preferred stock dividends
    
    
    4,664
    
    
    
    
    
    
    
    4,664Issuance of common stock for right to acquire license (prepaid expense)
    
    
    
    
    
    
    
    
    
    
    225Equipment acquired through capital leases
    
    
    
    
    
    
    
    
    
    
    285Common stock warrant liability
    
    
    
    
    
    
    
    
    
    
    11,841Accretion of mandatorily redeemable Series A preferred stock redemption
obligation
    
    
    
    
    
    
    
    
    
    
    1,872Beneficial conversion feature of convertible promissory notes
    
    
    
    
    
    
    
    
    
    
    7,242Conversion of convertible promissory notes and accrued interest to Series D
preferred stock
    
    
    
    
    
    
    
    
    
    
    5,324Conversion of convertible promissory notes and accrued interest to Series A-1
preferred stock
    
    
    
    
    
    
    
    
    
    
    7,707Conversion of convertible promissory notes and accrued interest to common stock
    
    
    
    
    
    
    
    
    
    
    269Issuance of Series C preferred stock warrants in connection with lease agreement
    
    
    
    
    
    
    
    
    
    
    43Issuance of common stock for license rights
    
    
    
    
    
    
    
    
    
    
    4Issuance of common stock and warrants to Medarex
    
    
    
    
    
    
    
    
    
    
    840Issuance of common stock to landlord
    
    
    
    
    
    
    
    
    
    
    35Deferred compensation on issuance of stock options and restricted stock grants
    
    
    
    
    
    
    
    
    
    
    759Cancellation of options and restricted stock
    
    
    
    
    
    
    
    
    
    
    849Stock subscription receivable
    
    
    
    
    
    
    
    
    
    
    480Financing of prepaid insurance through note payable
    
    
    
    
    
    
    
    
    
    
    491
   6




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##### Table of Contents



Northwest Biotherapeutics, Inc.
(A Development Stage Company)
 
 Notes to Condensed Consolidated Financial Statements
(unaudited)
 1. Basis of Presentation
   2. Summary of Significant Accounting Policies
   Recent Accounting Pronouncements
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
  7




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Accounting for Collaborative Arrangements
 Fair Value Measurements Effective Date of FASB Statement No. 157 ,
 The Fair Value Option for Financial
Assets and Financial Liabilities, including an amendment of FASB Statement No. 115
 Accounting for Advance Payments
for Goods or Services Received for Use in Future Research and Development Activities
 Disclosures about Derivative Instruments and
Hedging Activities
 Accounting for Convertible Debt
Instruments that may be Settled in Cash upon Conversion (Including Partial Cash Settlement)
 The Hierarchy of Generally Accepted Accounting
Principles.
 Accounting for Financial Guarantee Insurance
Contracts, an interpretation of SFAS 60. Accounting for Derivative Instrument and Hedging Activities.
  8




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Determining Whether an Instrument (or an
Embedded Feature) is Indexed to an Entitys Own Stock
 Transition Guidance for Conforming Changes
to Issue No. 98-5 Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios that result from EITF
Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments, and SFAS Issue
No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities
and Equity.
 Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities .
 3. Fair Value Measurements
  Level 1
    
    Quoted market prices in active markets for identical assets or liabilities.Level 2
    
    Observable market based inputs or unobservable inputs that are corroborated by market data.Level 3
    
    Unobservable inputs that are not corroborated by market data.
   4. Stock-Based Compensation Plans
 Share Based Payment
   9




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Stock Option Plans
  5. Liquidity
    10




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Management Loans
    Toucan Capital and Toucan Partners
       11




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Conversion of Preferred Stock and Related Matters
          12




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##### Table of Contents




    
    an aggregate of 19,299,486 shares of Common Stock;
    
    warrants to purchase 14,150,732 shares of Common Stock at an exercise price of $0.60 per
share; and
    
    warrants to purchase 7,884,357 shares of Common Stock at an exercise price of $0.15 per
share
  
    
    an aggregate of 2,572,710 shares of Common Stock; and
    
    warrants to purchase 8,832,541 shares of Common Stock at an exercise price of $0.60 per
share
    Private Placement
    Placement of Common Stock with Foreign Institutional Investors
   13




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##### Table of Contents



Shareholder Loan
  Other Loans
   Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Companys Own Stock
   14




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Going Concern
 ® ® ®
  6. Net Income (Loss) Per Share Applicable to Common Stockholders
    15




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##### Table of Contents



7. Related Party Transactions
 Cognate Agreement
 ® ®
  Toucan Capital
   Toucan Partners
  Al Rajhi
   16




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##### Table of Contents



8. Contingencies
 Private Placement
    Legal Proceedings
 Soma Arbitration
       17




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##### Table of Contents



Lonza Patent Infringement Claim
 ® ® ®
  Stockholder Class Action Lawsuits
  SEC Inquiry
  Management Warrants
    9. Common Stock
    18




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10. Subsequent Events
         19




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
  ® ® ®
 ®
 ® ® ®
 ® ® ®
 ® ® ®
  20




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® ®
 ® ®
   21




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22




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23




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##### Table of Contents



Critical Accounting Policies and Estimates
  Recent Accounting Pronouncements
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
  24




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##### Table of Contents



Accounting for Collaborative Arrangements
 Fair Value Measurements Effective Date of FASB Statement No. 157 ,
 The Fair Value Option for Financial
Assets and Financial Liabilities, including an amendment of FASB Statement No. 115
 Accounting for Advance Payments
for Goods or Services Received for Use in Future Research and Development Activities
 Disclosures about Derivative Instruments and
Hedging Activities
 Accounting for Convertible Debt
Instruments that may be Settled in Cash upon Conversion (Including Partial Cash Settlement)
 The Hierarchy of Generally Accepted Accounting
Principles.
 Accounting for Financial Guarantee Insurance
Contracts, an interpretation of SFAS 60. Accounting for Derivative Instrument and Hedging Activities.
  25




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##### Table of Contents



Determining Whether an Instrument (or an
Embedded Feature) is Indexed to an Entitys Own Stock
 Transition Guidance for Conforming Changes
to Issue No. 98-5 Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios that result from EITF
Issue No. 00-27, Application of Issue No. 98-5 to Certain Convertible Instruments, and SFAS Issue
No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities
and Equity.
 Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities .
 Results of Operations
 Operating expenses:
  Research and development:
  ®
 General and administrative:
  Three Months Ended September 30, 2007 and 2008
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Research and Development Expense.
 
    
    increased monthly contract manufacturing costs for our DCVax® product due to the
increased number of participants in the DCVax®- Brain clinical trial;
    
    increased support costs related to the development of a clinical trial program and
potential compassionate use/named patient programs in certain countries outside the U.S.;
    
    increased clinical trials costs in the U.S. due to the initiation of additional clinical
sites and screening and enrollment of patients in our Phase II DCVax®-Brain clinical trial;
and
    
    increased personnel costs as we build our clinical organization.
 General and Administrative Expense.
 
    
    increased costs associated with our AIM listing in the United Kingdom;
    
    potentially non-recurring start-up costs (mainly consulting and travel costs) for
international programs, locations such as in Switzerland, Spain and Israel;
    
    higher staffing costs associated with expansion of our business activities in the U.S.
and internationally;
    
    legal costs associated with ongoing litigation; and
    
    SFAS 123(R) expense associated with stock option grants to executives.
 Depreciation and Amortization.
 Interest Income (Expense), Net.
 Nine Months Ended September 30, 2007 and 2008
  Research and Development Expense.
 
    
    increased monthly contract manufacturing costs for our DCVax® product; due to the
increased number of participants in our DCVax®-Brain clinical trial
    
    increased costs in Switzerland relating to the Authorization for Use, and the application
for Marketing Authorization, relating to DCVax®-Brain;
    
    increased support costs related to the development of a clinical trial program and
potential compassionate use/named patient programs in certain countries outside the U.S.;
    
    increased clinical trial costs due to the initiation of additional clinical sites and
screening and enrollment of patients in our Phase II DCVax®-Brain clinical trial; and
    
    increased personnel costs as we build our clinical organization.
  27




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General and Administrative Expense.
 
    
    costs associated with our AIM listing in the United Kingdom which were higher in 2008
than in 2007 when the initial listing occurred;
    
    potentially non-recurring start-up costs (mainly consulting and travel costs) for
international programs, locations such as in Switzerland, Spain and Israel;
    
    higher staffing costs associated with expansion of our business activities in the United
States and internationally;
    
    legal costs associated with ongoing litigation;
    
    additional rent expense related to our new headquarters located in Bethesda, Maryland;
and
    
    SFAS 123(R) expense associated with stock option grants to executives.
 Depreciation and Amortization.
 Interest Income (Expense), Net.
 Liquidity and Capital Resources
 Toucan Capital and Toucan Partners
      28




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Conversion of Preferred Stock and Related Matters
         29




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
    
    an aggregate of 19,299,486 shares of common stock;
    
    warrants to purchase 14,150,732 shares of common stock at an exercise price of $0.60 per
share; and
    
    warrants to purchase 7,884,357 shares of common stock at an exercise price of $0.15 per
share.
  
    
    an aggregate of 2,572,710 shares of common stock; and
    
    warrants to purchase 8,832,541 shares of common stock at an exercise price of $0.60 per
share.
     Other Financings
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® ® ®
  Sources of Cash
        31




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Uses of Cash
 ® ®
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Market Interest Rate Risk
  Foreign Currency Exchange Rate Risk
  
 Item 4. Controls and Procedures
 Controls and Procedures
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Evaluation of disclosure controls and procedures
  Material Weaknesses Identified
     33




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Plan for Remediation of Material Weaknesses
   
    
    We plan to recruit two or more additional independent board members to join our board of
directors in due course. Such recruitment will include at least one person who qualifies as
an audit committee financial expert to join as an independent board member and as an audit
committee member.
    
    We have hired additional qualified and experienced accounting personnel to perform the
month-end review and closing processes as well as provide additional oversight and
supervision within the accounting department. In February 2008, we hired a full-time
controller who has assisted us in documenting the majority of our processes. We are in the
process of establishing more rigorous review procedures. In addition, we have changed our
accounting system to make it simpler and more appropriate for a company our size.
    
    We are initiating a formal commitment review process to establish and document the
accounting events and methodology at the time the transactions are entered into, so that
there is a clear understanding of what events will trigger an accounting event and establish
the amounts to be recognized for each event.
    
    We are initiating a formal monthly reporting and approval process with our related
parties to ensure timely provision of information affecting our quarterly and annual
consolidated financial statements.
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Changes in Internal Control over Financial Reporting
   
 Part II  Other Information
 
 Item 1. Legal Proceedings
  SOMA Arbitration
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Lonza Patent Infringement Claim
 ® ® ®
  Stockholder Class Action Lawsuits
  SEC Inquiry
  Management Warrants
     36




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Item 1A. Risk Factors
  We will need to raise additional capital, which may not be available.
 ®
 We are likely to continue to incur substantial losses, and may never achieve profitability.
  Our auditors have issued a going concern audit opinion.
  As a company in the early stage of development with an unproven business strategy, our limited
history of operations makes an evaluation of our business and prospects difficult.
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We may not be able to retain existing personnel.
  We may not be able to attract expert personnel.
  We rely on a single relationship with a third-party contract manufacturer, which will limit our
ability to control the availability of our product candidates in the near-term.
 ® ® ® ® ®
  Our success partly depends on existing and future collaborators.
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®
  We are involved in legal proceedings that could result in an adverse outcome, or that could
otherwise harm our business. In addition, future litigation could be costly to defend or pursue and
uncertain in its outcome.
 ®
  Clinical trials for our product candidates are expensive and time-consuming and their outcome is
uncertain.
  We have limited experience in conducting and managing clinical trials.
 ®
 Our product candidates will require a different distribution model than conventional therapeutic
products.
  We lack sales and marketing experience and as a result may experience significant difficulties
commercializing our research product candidates.
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Competition in the biotechnology and biopharmaceutical industry is intense and most of our
competitors have substantially greater resources than us.
     Our intellectual property rights may not provide meaningful commercial protection for our research
products or product candidates, which could enable third parties to use our technology, or very
similar technology, and could reduce our ability to compete in the market.
  ®
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Our success will depend substantially on our ability to operate without infringing or
misappropriating the proprietary rights of others.
     We may not receive regulatory approvals for our product candidates or there may be a delay in
obtaining such approvals.
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Further trials and other costly and time-consuming assessments of our product candidates may be
required to obtain or maintain regulatory approval.
  ®
 ® ® ® ®
 ® ®
  Regulatory approval may be withdrawn at any time.
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We may fail to comply with regulatory requirements.
  We may be subject to sanctions if we are determined to be promoting our investigational products
prior to regulatory approval or for unapproved uses.
  We may not obtain or maintain orphan drug status and the associated benefits, including marketing
exclusivity.
 ® ® ®
 New legislation may have an adverse effect on our business.
  The availability and amount of reimbursement for our product candidates and the manner in which
government and private payers may reimburse for our potential products is uncertain.
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DCVax® is our only technology in clinical development.
 ® ®
 We may be prevented from using the DCVax® name in Europe.
 ® ®
 Competing generic medicinal products may be approved.
  We may be exposed to potential product liability claims, and insurance against these claims may not
be available to us at a reasonable rate in the future, if at all.
  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.
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Toucan Capital and Toucan Partners beneficially own a majority of our shares of common stock and,
as a result, the trading price for our common stock may be depressed and these stockholders can
take actions that may be adverse to the interests of other investors.
  Our Certificate of Incorporation and Bylaws and stockholder rights plan may delay or prevent a
change in our management.
  
    
    authorize the issuance of preferred stock that can be created and issued by the Board
without prior stockholder approval, commonly referred to as blank check preferred stock,
with rights senior to those of the common stock;
    
    allow the Board to call special meetings of stockholders at any time but restrict the
stockholders from calling special meetings;
    
    authorize the Board to issue dilutive common stock upon certain events; and
    
    provide for a classified Board.
  There may not be an active, liquid trading market for our common stock.
  
    
    limited release of the market price of our securities;
    
    limited news coverage;
    
    limited interest by investors in our securities;
    
    volatility of our stock price due to low trading volume;
    
    increased difficulty in selling our securities in certain states due to blue sky
restrictions; and
    
    limited ability to issue additional securities or to secure additional financing.
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The resale, or the availability for resale, of the shares placed in the PIPE Financing could have a
material adverse impact on the market price of our common stock.
  Because our common stock is subject to penny stock rules, the market for the common stock may be
limited.
  
    
    make a special written suitability determination for the purchaser;
    
    receive the purchasers written agreement to a transaction prior to sale;
    
    provide the purchaser with risk disclosure documents which identify certain risks
associated with investing in penny stocks and which describe the market for these penny
stocks as well as a purchasers legal remedies; and
    
    obtain a signed and dated acknowledgment from the purchaser demonstrating that the
purchaser has actually received the required risk disclosure document before a transaction
in a penny stock can be completed.
  The price of our common stock may be highly volatile.
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The requirements of the Sarbanes-Oxley Act of 2002 and other U.S. securities laws reporting
requirements impose cost and operating challenges on us.
  Our management has identified significant internal control deficiencies, which management and our
independent auditor believe constitute material weaknesses.
  
    
    lack of a sufficient number of independent directors on our audit committee;
    
    insufficient segregation of duties in our finance and accounting function due to limited
personnel;
    
    insufficient corporate governance policies; and
    
    inadequate approval and control over transactions and commitments made on our behalf by
related parties.
  Our business could be adversely affected by animal rights activists.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  
 Item 4.
Submission of Matters to a Vote of Shareholders
  
 Item 5. Other Information
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Item 6. Exhibits
 3.1
    
    
    Seventh Amended and Restated Certificate of Incorporation (3.1)(1)3.2
    
    
    Third Amended and Restated Bylaws (3.1)(2)3.3
    
    
    Amendment to the Seventh Amended and Restated Certificate of Incorporation (3.2)(2)3.4
    
    
    Amendment to Seventh Amended and Restated Certificate of Incorporation (3.4)(3)*10.1
    
    
    Loan Agreement and Promissory Note, dated August 19, 2008, between the Company and Toucan Partners, LLC.*10.2
    
    
    Loan Agreement and Promissory Note, dated October 1, 2008, between the Company and SDS Capital Group
SPC, Ltd.*10.3
    
    
    Warrant, dated October 1, 2008, between the Company and SDS Capital Group SPC, Ltd.*10.4
    
    

Loan
Agreement and Promissory Note, dated October 21, 2008, between the Company and SDS Capital Group
SPC, Ltd.*10.5
    
    
    Form of Loan Agreement and Promissory Note, dated November 6, 2008, between the Company and a Group of
Private Investors.*10.6
    
    
    Form of Warrant, dated November 6, 2008, between the Company and SDS Capital Group SPC, Ltd. and a
Group of Private Investors.*31.1
    
    
    Certification of President and Chief Executive Officer (Principal executive officer and principal
financial and accounting officer) Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*32.1
    
    
    Certification of President and Chief Executive Officer (Principal executive officer and principal
financial and accounting officer) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Incorporated by reference to the exhibit shown in the preceding parentheses filed with the
Registrants registration statement Form S-1 (File No. 333-67350) on July 17, 2006.(2)
    
    Incorporated by reference to the exhibit shown in the preceding parentheses filed with the
Registrants Current Report on Form 8-K on June 22, 2007.(3)
    
    Incorporated by reference to the exhibit shown in the preceding parentheses filed with the
Post-Effective Amendment No. 2 to the Registrants Registration Statement on Form S-1 on
January 28, 2008.*
    
    Filed herewith.  48




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SIGNATURES
  NORTHWEST BIOTHERAPEUTICS, INCDated: November 19, 2008
    By:
    /s/ Alton L. BoyntonAlton L. BoyntonPresident and Chief Executive Officer
(Principal Executive, Financial and Accounting Officer)  49




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NORTHWEST BIOTHERAPEUTICS, INC.
(A Development Stage Company)
 
 EXHIBIT INDEX
 3.1
    
    
    Seventh Amended and Restated Certificate of Incorporation (3.1)(1)3.2
    
    
    Third Amended and Restated Bylaws (3.1)(2)3.3
    
    
    Amendment to the Seventh Amended and Restated Certificate of Incorporation (3.2)(2)3.4
    
    
    Amendment to Seventh Amended and Restated Certificate of Incorporation (3.4)(3)*10.1
    
    
    Loan Agreement and Promissory Note, dated August 19, 2008, between the Company and Toucan Partners, LLC.*10.2
    
    
    Loan Agreement and Promissory Note, dated October 1, 2008, between the Company and SDS Capital Group
SPC, Ltd.*10.3
    
    
    Warrant, dated October 1, 2008, between the Company and SDS Capital Group SPC, Ltd.*10.4
    
    

Loan
Agreement and Promissory Note, dated October 21, 2008, between the Company and SDS Capital Group
SPC, Ltd.*10.5
    
    
    Form of Loan Agreement and Promissory Note, dated November 6, 2008, between the Company and a Group of
Private Investors.*10.6
    
    
    Form of Warrant, dated November 6, 2008, between the Company and SDS Capital Group SPC, Ltd. and a
Group of Private Investors.*31.1
    
    
    Certification of President and Chief Executive Officer (Principal executive officer and principal
financial and accounting officer) Pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*32.1
    
    
    Certification of President and Chief Executive Officer (Principal executive officer and principal
financial and accounting officer) Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Incorporated by reference to the exhibit shown in the preceding parentheses filed with the
Registrants registration statement Form S-1 (File No. 333-67350) on July 17, 2006.(2)
    
    Incorporated by reference to the exhibit shown in the preceding parentheses filed with the
Registrants Current Report on Form 8-K on June 22, 2007.(3)
    
    Incorporated by reference to the exhibit shown in the preceding parentheses filed with the
Post-Effective Amendment No. 2 to the Registrants Registration Statement on Form S-1 on
January 28, 2008.*
    
    Filed herewith.  50