SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

For The Quarterly Period Ended March 31, 2005

OR

Commission File Number 0-26825

NORTHWEST BIOTHERAPEUTICS, INC.

Canyon Park Building 8, 22322 20th Avenue S.E., Suite 150, 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 þ No £

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes £ No þ

     As of May 13, 2005, the registrant had outstanding 19,078,048 shares of common stock, $0.001 par value.

TABLE OF CONTENTS

NORTHWEST BIOTHERAPEUTICS, INC.

TABLE OF CONTENTS

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Part I — Financial Information

NORTHWEST BIOTHERAPEUTICS, INC .
(A Development Stage Company)

Balance Sheets
(in thousands)
(Unaudited)

See accompanying notes to condensed financial statements.

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NORTHWEST BIOTHERAPEUTICS, INC.
(A Development Stage Company)

Statements of Operations
(in thousands, except per share data)
(Unaudited)

See accompanying notes to condensed financial statements.

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NORTHWEST BIOTHERAPEUTICS, INC .
(A Development Stage Company)

Condensed Statement of Cash Flows
(in thousands)
(Unaudited)

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See accompanying notes to condensed financial statements.

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NORTHWEST BIOTHERAPEUTICS, INC .
(A Development Stage Company)

Notes to Condensed Financial Statements
(unaudited)

1. Basis of Presentation

     The accompanying unaudited financial statements for Northwest Biotherapeutics, Inc. have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the year ending December 31, 2005.

     For further information, refer to the financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the Securities and Exchange Commission.

     The auditor’s report on our financial statements for the fiscal year ended December 31, 2004 states that because of recurring operating losses, a working capital deficit, and a deficit accumulated during the development stage, there is substantial doubt about our ability to continue as a going concern. A “going concern” opinion indicates that the financial statements have been prepared assuming we will continue as a going concern and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Stock-Based Compensation

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

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

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

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     There were no stock options granted during the three months ended March 31, 2004. The per share weighted average fair value of stock options granted during the three months ended March 31, 2005 was $0.21. The weighted average fair values were determined on the date of grant using the following weighted average assumptions:

2. Liquidity

      From February 2, 2004 to March 31, 2005, we have undergone a significant recapitalization pursuant to which Toucan Capital Fund II, L.P., or Toucan Capital, has loaned us $4.35 million. On January 26, 2005, we entered into a securities purchase agreement with Toucan Capital pursuant to which they purchased 32.5 million shares of our newly designated series A preferred stock at a purchase price of 0.04 per share, for a net purchase price of $1.276 million, net of issue related costs of approximately $24,000.

     As of March 31, 2005, we had cash of approximately $82,000. We will have to seek additional funds from Toucan Capital, which Toucan Capital is not obligated to provide to us. Any additional financing with Toucan Capital or any other third party is likely to be dilutive to stockholders, and any debt financing, if available, may include additional restrictive covenants. If we are unable to obtain significant additional capital in the near-term, we may cease operations at anytime. We do not believe that our assets would be sufficient to satisfy the claims of all of our creditors in full. Therefore, if we were to pursue a liquidation it is highly unlikely that any proceeds would be received by our stockholders.

     Our independent auditors have indicated in their report on our financial statements, included in our December 31, 2004 annual report on Form 10-K, that there is substantial doubt about our ability to continue as a going concern. We need to raise significant additional funding to continue our operations, conduct research and development activities, pre-clinical studies and clinical trials necessary to bring our product candidates to market. However, additional funding may not be available on terms acceptable to us or at all. The alternative of issuing additional equity or convertible debt securities also may not be available and, in any event, would result in additional dilution to our stockholders.

3. Net Loss Per Share Applicable to Common Stockholders

     Basic and diluted net loss per share applicable to common stockholders has been computed using the weighted-average number of shares of common stock outstanding during the period, less, for the three months ended March 31, 2005, options to purchase 784,000 shares of common stock and warrants to purchase 117 million shares of common and preferred stock as such securities were antidilutive. Options to purchase 1.2 million shares of common stock and warrants to purchase 5 million shares of common and preferred stock were excluded from the calculation of diluted net loss per share for the three months ended March 31, 2004 as such securities were antidilutive.

4. Notes Payable to Related Parties

     Management Loans

     On November 13, 2003, we borrowed an aggregate of $335,000 from members of our management enabling us to continue operating into the first quarter of 2004. Net of repayments, the loan liability remaining at March 31, 2005 is $235,000, as more fully described in the following table:

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     The notes initially had a 12-month term, accrue interest at an annual rate equal to the prime rate plus 2% and were initially secured by substantially all of our assets not otherwise collateralized. The aggregate principal amount of the five notes was $335,000 of which $50,000, including interest of $1,674, was repaid on June 1, 2004 and $50,000, including interest of $4,479, was repaid on February 24, 2005. In connection with the April 26, 2004 recapitalization agreement with Toucan Capital, holders of notes representing 70% of the principal amount of the notes agreed to an amendment to their notes to set the conversion price of the amended notes at $0.10 per share and change the maturity date to November 12, 2004 in the event the Company raises at least $15 million in a financing prior to that time or May 12, 2005 if the Company has not completed a $15 million financing by May 12, 2005. The maturity date for these notes was subsequently changed to July 12, 2005.

     As part of the November 13, 2003 loan, the investors received warrants initially exercisable to acquire an aggregate of 3.7 million shares of the Company’s common stock, expiring November 2008 subject to certain antidilution adjustments, at an exercise price to be determined as follows: (i) in the event that the Company completes an offering of its common stock generating gross proceeds of at least $1 million, then the price per share paid by investors in that offering; or (ii) if the Company does not complete such an offering, then $0.18, which was the closing price of its common stock on the date of the financing. In connection with the April 26, 2004 recapitalization agreement, certain members of management who hold warrants agreed to an amendment to their warrants. The amendment applies to all warrants issued in the November 13, 2003 financing. The purpose of the amendment was to remove the anti-dilution provisions and set the warrant exercise price at the lesser of (i) $0.10 per share or (ii) a 35% discount to the average closing price during the twenty trading days prior to the first closing of the sale by the Company of convertible preferred stock as contemplated by the recapitalization agreement but not less than $0.04 per share.

     Proceeds from the offering were allocated between the Notes and Warrants on a relative fair value basis. The value allocated to the warrants on the date of the grant was approximately $221,000. The fair value of the warrants was determined using the Black-Scholes option pricing model with the following assumptions: expected dividend yield of 0%, risk-free interest rate of 3.36%, volatility of 194%, and a contractual life of 5-years. The value of the warrants was recorded as a deferred debt discount against the $335,000 proceeds of the Note. In addition, a beneficial conversion feature related to the Notes was determined to be approximately $221,000 but is capped at the remaining value originally allocated to the Notes of approximately $114,000. As a result, the total discount on the Notes equalled the face value of $335,000 which was fully amortized by December 31, 2004.

     Toucan Capital Loans

     On April 26, 2004 we entered into a recapitalization agreement with Toucan Capital which contemplates the possible recapitalization of our company. At Toucan Capital’s option, and if successfully implemented, the recapitalization could provide us with up to $40 million through the issuance of new securities to Toucan Capital and a syndicate of other investors. Following the recapitalization, Toucan Capital and the investor syndicate would potentially own, on a combined basis, over 90% of our outstanding capital stock. As part of our recapitalization plan we borrowed $4.35 million from Toucan Capital, from February 2, 2004 through March 31, 2005, comprised of the following transactions:

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(1)	As of March 31, 2005. Interest accrues at 10% per annum based on a 365-day basis compounded annually from their respective original issuance dates.
(2)	The warrant shares are exercisable for shares of convertible preferred stock if the convertible preferred stock is approved and authorized and other investors have purchased in cash a minimum of $15 million of such convertible preferred stock, on the terms and conditions set forth in the recapitalization agreement. However, if, for any reason, such convertible preferred stock is not approved or authorized and/or if other investors have not purchased in cash a minimum of $15 million of such convertible preferred stock, on the terms and conditions set forth in the recapitalization agreement, these warrants shall be exercisable for any equity security and/or debt security and/or any combination thereof.
(3)	Exercise period is 7-years from the issuance date of the convertible note except for the February 2 and March 1, 2004 warrants which have an April 26 exercise date.
(4)	Per share exercise price is $0.01
(5)	Per share exercise price is $0.04
(6)	The notes issued February 2, March 1, and April 26, 2004 to Toucan Capital were each amended subsequently to change their respective maturity dates to June 26, 2005.

     The notes are secured by a first priority senior security interest in all of our assets.

5. Unregistered Sales of Equity Securities

Toucan Capital Series A Cumulative Convertible Preferred Stock

          On January 26, 2005, we entered into a securities purchase agreement with Toucan Capital pursuant to which they purchased 32.5 million shares of our newly designated series A preferred stock at a purchase price of $0.04 per share, for a net purchase price of $1.276 million, net of issue related costs of approximately $24,000. The series A preferred stock:

	(i)	is entitled to cumulative dividends at the rate of 10% per year;
	(ii)	is entitled to a liquidation preference in the amount of its initial purchase price plus all accrued and unpaid dividends (to the extent of legally available funds);
	(iii)	has a preference over the common stock with respect to dividends and distributions;
	(iv)	is entitled to participate on an as-converted basis with the common stock on any distributions after the payment of any preferential amounts to the series A stock;

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	(v)	votes on an as converted basis with the common stock on matters submitted to the common stockholders for approval and as a separate class on certain other material matters; and
	(vi)	is convertible into common stock on a one-for-one basis (subject to adjustment in the event of stock dividends, stock splits, reverse stock splits, recapitalizations, etc.).

     The number of shares of common stock issuable upon conversion of each share of series A stock is also subject to increase in the event of certain dilutive issuances in which we sell or are deemed to have sold shares below the then applicable conversion price (currently $0.04 per share). The consent of the holders of a majority of the series A preferred stock is required in the event that we elect to undertake certain significant business actions.

Toucan Capital Series A Warrant

     On January 26, 2005, we issued Toucan Capital a warrant, with a contractual life of 7-years, to purchase 13.0 million shares of series A preferred stock, with an exercise price of $0.04 per share, in connection with Toucan Capital’s purchase of series A preferred stock on January 26, 2005. The number of shares issuable pursuant to the exercise of the warrant and the exercise price thereof is subject to adjustment in the event of stock splits, reverse stock splits, stock dividends, dilutive events and the like.

6. Subsequent Events

     On April 12, 2005, we borrowed an additional $450,000 from Toucan Capital and issued warrants to purchase up to 4.5 million additional shares of our capital stock. The warrant, with a contractual life of 7-years, has an exercise price of $0.04 per share. The number of share