ONCOLYTICS BIOTECH INC (Form: 20-F, Received: 03/28/2017 06:03:26)

Clinical trial expenses

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F



o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For fiscal year ended
		December 31, 2016

OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
OR
o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report:

Commission file number: 000-31062

ONCOLYTICS BIOTECH INC.

(Exact name of Registrant as specified in its charter)

Province of Alberta, Canada

(Jurisdiction of incorporation or organization)

Suite 210, 1167 Kensington Crescent, N.W. Calgary, Alberta, T2N 1X7

(Address of principal executive offices)

Kirk Look

Suite 210, 1167 Kensington Crescent, N.W. Calgary, Alberta, T2N 1X7

Tel: (403) 670-7377

E-mail: info@oncolytics.ca

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Shares, no par value

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the Registrant’s classes of capital or common stock as of the close of the period covered by the annual report: 121,258,222 common shares as at December 31, 2016

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No ý

If this report is an annual or transition report, indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o No ý

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 ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o

No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one)



Large accelerated filer o	Accelerated filer o	Non-accelerated filer x

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:



US GAAP	International Financial Reporting Standards as issued by the International Accounting Standards Board	Other
o	x	o

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 o Item 18 o

If this is an annual report, indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

ONCOLYTICS BIOTECH INC.

FORM 20-F

TABLE OF CONTENTS



Item 1. Identity of Directors, Senior Management and Advisers	5
Item 2. Offer Statistics and Expected Timetable	5
Item 3. Key Information	5
Item 4. Information on the Company	16
Item 4A. Unresolved Staff Comments	24
Item 5. Operating and Financial Review and Prospects	24
Item 6. Directors, Senior Management and Employees	25
Item 7. Major Shareholders and Related Party Transactions	44
Item 8. Financial Information	45
Item 9. The Offer and Listing	45
Item 10. Additional Information	47
Item 11. Quantitative and Qualitative Disclosures About Market Risk	57
Item 12. Description of Securities Other Than Equity Securities	57
Item 13. Defaults, Dividend Arrearages and Delinquencies	58
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds	58
Item 15. Controls and Procedures	58
Item 16. [Reserved]	59
Item 16A. Audit Committee Financial Expert	59
Item 16B. Code of Ethics	59
Item 16C. Principal Accountant Fees and Services	59
Item 16D. Exemptions from the Listing Standards for Audit Committees	60
Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchases	60
Item 16F. Change in Registrant's Certifying Accountants	60
Item 16G. Corporate Governance	60
Item 16H. Mine Safety Disclosure	61
Item 17. Financial Statements	61
Item 18 Financial Statements	61
Item 19. Exhibits	62
Signatures	63
Financial Statements	F1 - F24

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

All references in this annual report on Form 20-F to the terms “we”, “our”, “us”, “the Company” and “Oncolytics” refer to Oncolytics Biotech Inc.

Certain statements in this annual report on Form 20-F and the documents attached as exhibits to this annual report, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Oncolytics Biotech Inc., or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements are statements that are not historical facts, and include, but are not limited to, estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to the efficacy of our technologies; the timing and results of clinical studies related to our technologies; future operations, products and services; the impact of regulatory initiatives on our operations; the size of and opportunities related to the markets for our technologies; general industry and macroeconomic growth rates; expectations related to possible joint and/or strategic ventures and statements regarding future performance. Forward-looking statements generally, but not always, are identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates,” “projects”, “potential”, “possible” and similar expressions, or that events or conditions “will,” “may,” “could” or “should” occur.

The forward-looking statements in this annual report are subject to various risks and uncertainties, most of which are difficult to predict and generally beyond our control, including without limitation:


•	risks related to all of our products, including REOLYSIN ^® , being in the research and development stage and requiring further development and testing before they can be marketed commercially;


•	risks inherent in pharmaceutical research and development;


•	risks related to timing and possible delays in our clinical trials;


•	risks related to some of our clinical trials being conducted in, and subject to the laws of foreign countries;


•	risks related to our pharmaceutical products being subject to intense regulatory approval processes in the United States and other foreign jurisdictions;


•	risks related to being subject to government manufacturing and testing regulations;


•	risks related to the extremely competitive biotechnology industry and our competition with larger companies with greater resources;


•	risks related to our reliance on patents and proprietary rights to protect our technology;


•	risks related to potential products liability claims;


•	risks related to our limited manufacturing experience and reliance on third parties to commercially manufacture our products, if and when developed;


•	risks related to our new products not being accepted by the medical community or consumers;


•	risks related to our technologies becoming obsolete;


•	risks related to our dependence on third party relationships for research and clinical trials;


•	risks related to our lack of operating revenues and history of losses;


•	uncertainty regarding our ability to obtain third-party reimbursement for the costs of our product;


•	risks related to other third-party arrangements;


•	risks related to our ability to obtain additional financing to fund future research and development of our products and to meet ongoing capital requirements;


•	risks related to potential increases in the cost of director and officer liability insurance;


•	risks related to our dependence on key employees and collaborators;


•	risks related to Barbados law;


•	risks related to the effect of changes in the law on our corporate structure;


•	risks related to expenses in foreign currencies and our exposure to foreign currency exchange rate fluctuations;


•	risks related to our compliance with the Sarbanes-Oxley Act of 2002, as amended;


•	risks related to our status as a foreign private issuer;


•	risk related to possible “passive foreign investment company” status;


•	risks related to fluctuations in interest rates;


•	risks related to information technology systems; and


•	risks related to our common shares.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Some of the important risks and uncertainties that could affect forward-looking statements are described further under the section heading “Item 3. Key Information – D. Risk Factors” below. If one or more of these risks or uncertainties materializes, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected. Forward-looking statements in this document are not a prediction of future events or circumstances, and those future events or circumstances may not occur. Given these uncertainties, users of the information included herein, including investors and prospective investors are cautioned not to place undue reliance on such forward-looking statements. Investors should consult our quarterly and annual filings with the Canadian and US securities commissions for additional information on risks and uncertainties relating to forward-looking statements. We do not assume responsibility for the accuracy and completeness of these statements.

Forward-looking statements are based on our beliefs, opinions and expectations at the time they are made, and we do not assume any obligation to update our forward-looking statements if those beliefs, opinions, or expectations, or other circumstances, should change, except as required by applicable law.

CURRENCY AND EXCHANGE RATES

Canadian Dollars Per US Dollar

The following table sets out the exchange rates for United States dollars (“US$”) expressed in terms of Canadian dollars (“Cdn$”) including the average exchange rates (based on the average of the exchange rates on the last day of each month in such periods) and the range of high and low exchange rates for such periods.



	Canadian Dollars Per One US Dollar
	2016	2015	2014	2013	2012
Average for the period	1.3248	1.2787	1.1045	1.0299	0.9996



For the Month of
	February 2017	January 2017	December 2016	November 2016	October 2016	September 2016
High for the period	1.3248	1.3438	1.3556	1.3582	1.3403	1.3248
Low for the period	1.3004	1.3030	1.3120	1.3337	1.3104	1.2843

Exchange rates are based on the Bank of Canada nominal noon exchange rates. The nominal noon exchange rate on March 24, 2017 as reported by the Bank of Canada for the conversion of United States dollars into Canadian dollars was US$1.00 = Cdn $1.3373 . Unless otherwise indicated, in this annual report on Form 20-F, all references herein are to Canadian Dollars.

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable

ITEM 3. KEY INFORMATION


A.	Selected Financial Data

The selected financial data presented below for the five years ended December 31, 2016 is presented in Canadian dollars and is derived from our consolidated financial statements in Canadian dollars and in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The information set forth below should be read in conjunction with our consolidated financial statements (including notes thereto) included under Item 18 and "Operating and Financial Review and Prospects" included under Item 5. For exchange rate data please see the section heading “Currency and Exchange Rates” above.



	2016		2015		2014		2013		2012
	$		$		$		$		$
Revenues	—		—		—		—		—
Net loss ⁽¹⁾	(15,139,979	)	(13,722,995	)	(18,619,335	)	(23,532,647	)	(36,373,521	)
Net comprehensive loss	(15,346,897	)	(13,242,060	)	(18,418,990	)	(23,395,834	)	(36,313,135	)
Basic and diluted loss per share ⁽²⁾	(0.13	)	(0.12	)	(0.21	)	(0.28	)	(0.48	)
Total assets ⁽²⁾	14,758,284		27,383,798		17,193,190		28,222,027		22,078,090
Shareholders’ equity ⁽²⁾	10,689,620		24,674,306		13,819,193		22,213,366		14,786,780
Cash dividends declared per share ⁽³⁾	Nil		Nil		Nil		Nil		Nil
Weighted average number of common shares outstanding	119,880,200		112,613,845		87,869,149		83,530,981		76,102,062

Notes:


1)	Included in net loss and net loss per share for the year ended December 31, 2016 are share based payment expenses of $406,078 ( 2015 - $429,537 ; 2014 - $980,325 ; 2013 - $424,384 ; 2012 - $730,751 ).


2)	We issued 3,106,600 common shares for net cash proceeds of $956,133 in 2016 ( 2015 - 24,639,128 common shares for net cash proceeds of $23,667,654 ; 2014 - 8,708,676 common shares for net cash proceeds of $9,044,492 ; 2013 - 8,093,533 common shares for net cash proceeds of $30,398,036 ; 2012 - 5,458,950 common shares for net cash proceeds of 20,848,785 ).


3)	We have not declared or paid any dividends since incorporation.


B.	Capitalization and Indebtedness

Not Applicable


C.	Reasons for the Offer and Use of Proceeds

Not Applicable


D.	Risk Factors

Investment in our common shares ("Common Shares") involves a high degree of risk. You should carefully consider, among other matters, the following risk factors in addition to the other information in this Annual Report on Form 20-F when evaluating our business because these risk factors may have a significant impact on our business, financial condition, operating results or cash flow. If any of the material risks described below or in subsequent reports we file with the SEC actually occur, they may materially harm our business, financial condition, operating results or cash flow. Additional risks and uncertainties that we have not yet identified or that we presently consider to be immaterial may also materially harm our business, financial condition, operating results or cash flow.

Research and Development Risks

All of our potential products, including REOLYSIN, are in the research and development stage and will require further development and testing before they can be marketed commercially.

Prospects for companies in the biotechnology industry generally may be regarded as uncertain given the nature of the industry and, accordingly, investments in biotechnology companies should be regarded as speculative. We are currently in the research and development stage on one product, REOLYSIN, for human application, the riskiest stage for a company in the biotechnology industry. It is not possible to predict, based upon studies in animals and early stage human clinical trials, whether REOLYSIN will prove to be safe and effective in humans. REOLYSIN will require additional research and development, including extensive additional clinical testing, before we will be able to obtain the approvals of the relevant regulatory authorities in applicable countries to market REOLYSIN commercially. There can be no assurance that the research and development programs we conduct will result in REOLYSIN or any other products becoming commercially viable products, and in the event that any product or products result from the research and development program, it is unlikely they will be commercially available for a number of years.

To achieve profitable operations we, alone or with others, must successfully develop, introduce and market our products. To obtain regulatory approvals for products being developed for human use, and to achieve commercial success, human clinical trials must demonstrate that the product is safe for human use and that the product shows efficacy. Unsatisfactory results obtained from a

particular study relating to a program may cause us to abandon our commitment to that program or the product being tested. No assurances can be provided that any current or future animal or human test, if undertaken, will yield favourable results. If we are unable to establish that REOLYSIN is a safe, effective treatment for cancer, we may be required to abandon further development of the product and develop a new business strategy.

There are inherent risks in pharmaceutical research and development.

Pharmaceutical research and development is highly speculative and involves a high and significant degree of risk. The marketability of any product we develop will be affected by numerous factors beyond our control, including but not limited to:


•	the discovery of unexpected toxicities or lack of sufficient efficacy of products which make them unattractive or unsuitable for human use;


•	preliminary results as seen in animal and/or limited human testing may not be substantiated in larger, controlled clinical trials;


•	manufacturing costs or other production factors may make manufacturing of products ineffective, impractical and non-competitive;


•	proprietary rights of third parties or competing products or technologies may preclude commercialization;


•	requisite regulatory approvals for the commercial distribution of products may not be obtained; and


•	other factors may become apparent during the course of research, up-scaling or manufacturing which may result in the discontinuation of research and other critical projects.

Our products under development have never been manufactured on a commercial scale, and there can be no assurance that such products can be manufactured at a cost or in a quantity to render such products commercially viable. Production and utilization of our products may require the development of new manufacturing technologies and expertise. The impact on our business in the event that new manufacturing technologies and expertise are required to be developed is uncertain. There can be no assurance that we will successfully meet any of these technological challenges or others that may arise in the course of development.

Any failure or delay in clinical trials for our products, including REOLYSIN, may cause us to incur additional costs or delay or prevent the commercialization of our products and could severely harm our business.

We must conduct extensive clinical trials to demonstrate the safety and efficacy of our products in humans. Clinical testing, in particular, is expensive, difficult to design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more of our clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, the clinical trial process, which could delay or prevent us from receiving marketing approval or commercializing our product candidates, including the following:


•	Our clinical trials may produce negative or inconclusive results, and we may decide, or regulatory authorities may require us, to conduct additional clinical trials or we may abandon projects that we expect to be promising;


•	The number of subjects required for our clinical trials may be larger than we anticipate, enrollment in our clinical trials may be slower than we anticipate, or participants may drop out of our clinical trials at a higher rate than we anticipate;


•	We might have to suspend or terminate our clinical trials if the participants are being exposed to unacceptable health risks;


•	Regulators or institutional review boards may require that we hold, suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or our clinical protocols;


•	Regulators may refuse to accept or consider data from clinical trials for various reasons, including noncompliance with regulatory requirements or our clinical protocols;


•	The cost of our clinical trials may be greater than we anticipate; and


•	The supply or quality of our products or other materials necessary to conduct our clinical trials may be insufficient or inadequate.

Additionally, subject enrollment, which is a significant factor in the timing of clinical trials, is affected by a variety of factors, including the following:


•	The size and nature of the subject population;


•	The proximity of subjects to clinical sites;


•	The eligibility criteria for the trial;


•	The design of the clinical trial;


•	Competing clinical trials; and


•	Clinicians’ and subjects’ perceptions as to the potential advantages of the medication being studied in relation to other available therapies, including any new medications that may be approved for the indications we are investigating.

Furthermore, we plan to rely on clinical trial sites to ensure the proper and timely conduct of our clinical trials, and while we have agreements governing their committed activities, we have limited influence over their actual performance. Any delays or unanticipated problems during clinical testing, such as enrollment in our clinical trials being slower than we anticipate or participants dropping out of our clinical trials at a higher rate than we anticipate, could increase our costs, slow down our product development and approval process and jeopardize our ability to commence product sales and generate revenues.

Financial Condition Risks

We have no operating revenues and a history of losses.

To date, we have not generated sufficient revenues to offset our research and development costs and accordingly have not generated positive cash flow or made an operating profit. As of December 31, 2016 , we had an accumulated deficit of $278.8 million and we incurred net losses of $15.1 million , $13.7 million and $18.6 million for the years ended December 31, 2016 , 2015 , and 2014 , respectively. We anticipate that we will continue to incur significant losses during 2017 and in the foreseeable future. We do not expect to reach profitability at least until after successful and profitable commercialization of one or more of our products. Even if one or more of our products are profitably commercialized, the initial losses incurred by us may never be recovered.

We may not be able to obtain third-party reimbursement for the cost of our product.

Government authorities and third party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels. A primary trend in the US healthcare industry and elsewhere is cost containment. Government authorities and these third party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Uncertainty exists regarding the reimbursement status of newly-approved pharmaceutical products and reimbursement may not be available for REOLYSIN. Any reimbursements granted may not be maintained or limits on reimbursements available from third-party payors may reduce the demand for, or negatively affect the price of, these products. If REOLYSIN does not qualify for reimbursement, if reimbursement levels diminish, or if reimbursement is denied, our sales and profitability would be adversely affected.

Third-Party Risk

In the normal course of our business, we have entered into contractual arrangements with third parties which subject us to the risk that such parties may default on their obligations. Oncolytics may be exposed to third party credit risk through our contractual arrangements with our current contract manufacturer, the institutions which operate our clinical trials, or our contract research organizations and other parties. In the event such entities fail to meet their contractual obligations to Oncolytics, such failures could have a material adverse effect on Oncolytics and our operations.

We may need additional financing in the future to fund the research and development of our products and to meet our ongoing capital requirements.

As of December 31, 2016 , we had cash and cash equivalents (including short-term investments) of $14.1 million . Working capital was approximately $10.4 million . We anticipate that we will need additional financing in the future to fund research and development and to meet our ongoing capital requirements. The amount of future capital requirements will depend on many factors, including continued scientific progress in our drug discovery and development programs, progress in our pre-clinical and clinical evaluation of drug candidates, time and expense associated with filing, prosecuting and enforcing our patent claims and costs associated with obtaining regulatory approvals. In order to meet such capital requirements, we will consider contract fees, collaborative research and development arrangements, and additional public or private financings (including the incurrence of debt and the issuance of additional equity securities) to fund all or a part of particular programs as well as potential partnering or licensing opportunities.

Oncolytics, from time to time, along with all other pharmaceutical research and development entities, may have restricted access to capital, bank debt and equity, and, from time to time, may face increased borrowing costs. Although our business and asset base have not changed, the lending capacity of all financial institutions fluctuates causing a corresponding change in risk premiums. As future operations will be financed out of funds generated from financing activities, our ability to do so is dependent on, among other factors, the overall state of capital markets and investor appetite for investments in the pharmaceutical industry and our securities in particular.

Should we elect to satisfy our cash commitments through the issuance of securities, by way of either private placement or public offering or otherwise, there can be no assurance that our efforts to raise such funding will be successful, or achieved on terms favourable to us or our existing shareholders. If adequate funds are not available on terms favorable to us, we may have to reduce substantially or eliminate expenditures for research and development, testing, production and marketing of our proposed product, or obtain funds through arrangements with corporate partners that require us to relinquish rights to certain of our technologies or product. There can be no assurance that we will be able to raise additional capital if our current capital resources are exhausted.

Regulatory Risks

Pharmaceutical products are subject to intense regulatory approval processes.

The regulatory process for pharmaceuticals, which includes preclinical studies and clinical trials of each compound to establish its safety and efficacy, takes many years and requires the expenditure of substantial resources. Moreover, if regulatory approval of a drug is granted, such approval may entail limitations on the indicated uses for which it may be marketed. Failure to comply with applicable regulatory requirements can, among other things, result in suspension of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution. Further, government policy may change, and additional government regulations may be established that could prevent or delay regulatory approvals for our products. In addition, a marketed drug and its manufacturer are subject to continual review. Later discovery of previously unknown problems with the product or manufacturer may result in restrictions on such product or manufacturer, including withdrawal of the product from the market.

The United States Food and Drug Administration (“FDA”) and similar regulatory authorities in other countries may deny approval of a new drug application if required regulatory criteria are not satisfied, or may require additional testing. Product approvals may be withdrawn if compliance with regulatory standards is not maintained or if problems occur after the product reaches the market. The FDA and similar regulatory authorities in other countries may require further testing and surveillance programs to monitor the pharmaceutical product that has been commercialized. Non-compliance with applicable requirements can result in fines and other judicially imposed sanctions, including product withdrawals, product seizures, injunction actions and criminal prosecutions.

In addition to our own pharmaceuticals, we may supply active pharmaceutical ingredients and advanced pharmaceutical intermediates for use in our customers’ drug products. The final drug products in which the pharmaceutical ingredients and advanced pharmaceutical intermediates are used, however, are subject to regulation for safety and efficacy by the FDA and possibly other regulatory authorities in other jurisdictions. Such products must be approved by such agencies before they can be commercially marketed. The process of obtaining regulatory clearance for marketing is uncertain, costly and time consuming. We cannot predict how long the necessary regulatory approvals will take or whether our customers will ever obtain such approval for their products. To the extent that our customers do not obtain the necessary regulatory approvals for marketing new products, our product sales could be adversely affected.

The FDA and other governmental regulators have increased requirements for drug purity and have increased environmental burdens upon the pharmaceutical industry. Because pharmaceutical drug manufacturing is a highly regulated industry, requiring significant documentation and validation of manufacturing processes and quality control assurance prior to approval of the facility to manufacture a specific drug, there can be considerable transition time between the initiation of a contract to manufacture a product and the actual initiation of manufacture of that product. Any lag time in the initiation of a contract to manufacture product and the actual initiation of manufacture could cause us to lose profits or incur liabilities.

The pharmaceutical regulatory regime in Europe and other countries is generally similar to that of the United States. We could face similar risks in these other jurisdictions as the risks described above.

Our operations and products may be subject to other government manufacturing and testing regulations.

Securing regulatory approval for the marketing of therapeutics by the FDA in the United States and similar regulatory agencies in other countries is a long and expensive process, which can delay or prevent product development and marketing. Approval to market products may be for limited applications or may not be received at all.

The products we anticipate manufacturing will have to comply with the FDA’s current Good Manufacturing Practices ( “ cGMP ” ) and other FDA and local government guidelines and regulations, including other international regulatory requirements and guidelines. Additionally, certain of our customers may require the manufacturing facilities contracted by us to adhere to additional manufacturing standards, even if not required by the FDA. Compliance with cGMP regulations requires manufacturers to expend time, money and effort in production and to maintain precise records and quality control to ensure that the product meets applicable specifications and other requirements. The FDA and other regulatory bodies periodically inspect drug-manufacturing facilities to ensure compliance with applicable cGMP requirements. If the manufacturing facilities contracted by us fail to comply with the

cGMP requirements, the facilities may become subject to possible FDA or other regulatory action and manufacturing at the facility could consequently be suspended. We may not be able to contract suitable alternative or back-up manufacturing facilities on terms acceptable to us or at all.

The FDA or other regulatory agencies may also require the submission of any lot of a particular product for inspection. If the lot product fails to meet the FDA requirements, then the FDA could take any of the following actions: (i) restrict the release of the product; (ii) suspend manufacturing of the specific lot of the product; (iii) order a recall of the lot of the product; or (iv) order a seizure of the lot of the product.

We are subject to regulation by governments in many jurisdictions. If we do not comply with healthcare, drug, manufacturing and environmental regulations, among others, in such jurisdiction, our existing and future operations may be curtailed, and we could be subject to liability.

In addition to the regulatory approval process, we may be subject to regulations under local, provincial, state, federal and foreign law, including, but not limited to, requirements regarding occupational health, safety, laboratory practices, environmental protection and hazardous substance control, and may be subject to other present and future local, provincial, state, federal and foreign regulations.

Intellectual Property Risks

We rely on patents and proprietary rights to protect our technology.

Our success will depend, in part, on our ability to obtain patents, maintain trade secret protection and operate without infringing the rights of third parties. We have received Granted Patents in countries throughout the world, including the United States, Canada, Europe, and Japan. We file our Applications for Patent in the United States and under the PCT, allowing us to subsequently file in other jurisdictions. Our success will depend, in part, on our ability to obtain, enforce and maintain patent protection for our technology in Canada, the United States and other countries. We cannot be assured that patents will issue from any pending applications or that claims now or in the future, if any, allowed under issued patents will be sufficiently broad to protect our technology. In addition, no assurance can be given that any patents issued to, or licensed by us, will not be challenged, invalidated, infringed or circumvented, or that the rights granted thereunder will provide continuing competitive advantages to us.

The patent positions of pharmaceutical and biotechnology firms, including us, are generally uncertain and involve complex legal and factual questions. In addition, it is not known whether any of our current research endeavours will result in the issuance of patents in Canada, the United States, or elsewhere, or if any patents already issued will provide significant proprietary protection or will be circumvented or invalidated. Since patent applications in the United States and Canada may be maintained in secrecy until at least 18 months after filing of the original priority application, and since publication of discoveries in the scientific or patent literature tends to lag behind actual discoveries by several months, we cannot be certain that we or any licensor were the first to create inventions claimed by pending patent applications or that we or the licensor were the first to file patent applications for such inventions. Loss of patent protection could lead to generic competition for these products, and others in the future, which would materially and adversely affect our financial prospects for these products.

Similarly, since patent applications filed before November 29, 2000 in the United States may be maintained in secrecy until the patents issue or foreign counterparts, if any, publish, we cannot be certain that we or any licensor were the first creator of inventions covered by pending patent applications or that we or such licensor were the first to file patent applications for such inventions. There is no assurance that our patents, if issued, would be held valid or enforceable by a court or that a competitor’s technology or product would be found to infringe such patents.

Accordingly, we may not be able to obtain and enforce effective patents to protect our proprietary rights from use by competitors. If other such parties obtain patents for certain information relied on by us in conducting our business, then we may be required to stop using, or pay to use, certain intellectual property, and as such, our competitive position and profitability could suffer as a result.

Third parties may choose to file patent infringement claims against us; defending ourselves from such allegations would be costly, time-consuming, distracting to management and could materially affect our business.

Our development and commercialization activities, as well as any product candidates or products resulting from these activities, may infringe or be claimed to infringe patents and other intellectual property rights of third parties under which we do not hold sufficient licenses or other rights. Additionally, third parties may be successful in obtaining patent protection for technologies that cover development activities in which we are already engaged. Third parties may own or control these patents and intellectual

property rights in the United States and abroad. These third parties may have substantially greater financial resources than us and could bring claims against us that could cause us to incur substantial expenses to defend against these claims and, if successful against us, could cause us to pay substantial damages. Further, if a patent infringement or other similar suit were brought against us, we could be forced to stop or delay development, manufacturing or sales of the product or product candidate that is the subject of the suit. Intellectual property litigation in the biopharmaceutical industry is common, and we expect this trend to continue.

As a result of patent infringement or other similar claims, or to avoid potential claims, we may choose or be required to seek a license from the third party and be required to pay license fees or royalties or both. These licenses may not be available on acceptable terms, or at all. Even if we were able to obtain a license, the rights may be non-exclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms, if at all, or if an injunction is granted against us, which could harm our business significantly.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected.

In addition to patented technology, we rely upon unpatented proprietary technology, processes and know-how. However, these types of trade secrets can be difficult to protect. We seek to protect this confidential information, in part, through agreements with our employees, consultants and third parties as well as confidentiality policies and audits, although these may not be successful in protecting our trade secrets and confidential information.

These agreements may be breached, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known, including through a potential cyber security breach, or may be independently developed by competitors. If we are unable to protect the confidentiality of our proprietary information and know-how, competitors may be able to use this information to develop products that compete with our products, which could adversely impact our business.

Other Business Risks

The biotechnology industry is extremely competitive and we must successfully compete with larger companies with substantially greater resources.

Technological competition in the pharmaceutical industry is intense and we expect competition to increase. Other companies are conducting research on therapeutics involving innate and adaptive immune responses as well as other novel treatments or therapeutics for the treatment of cancer which may compete with our product. Many of these competitors are more established, benefit from greater name recognition and have substantially greater financial, technical and marketing resources than us. In addition, many of these competitors have significantly greater experience in undertaking research, preclinical studies and human clinical trials of new pharmaceutical products, obtaining regulatory approvals and manufacturing and marketing such products. In addition, there are several other companies and products with which we may compete from time to time, and which may have significantly better and larger resources than we do. Accordingly, our competitors may succeed in manufacturing and/or commercializing products more rapidly or effectively, which could have a material adverse effect on our business, financial condition or results of operations.

We anticipate that we will face increased competition in the future as new products enter the market and advanced technologies become available. There can be no assurance that existing products or new products developed by our competitors will not be more effective, or be more effectively manufactured, marketed and sold, than any that may be developed or sold by us. Competitive products may render our products obsolete and uncompetitive prior to recovering research, development or commercialization expenses incurred with respect to any such products.

Our products may fail or cause harm, subjecting us to product liability claims.

Use of our product during current clinical trials may entail risk of product liability. We maintain clinical trial liability insurance; however, it is possible this coverage may not provide full protection against all risks. Given the scope and complexity of the clinical development process, the uncertainty of product liability litigation, and the shrinking capacity of insurance underwriters, it is not possible at this time to assess the adequacy of current clinical trial coverage, nor the ability to secure continuing coverage at the same level and at reasonable cost in the foreseeable future. While we carry, and intend to continue carrying amounts believed to be appropriate under the circumstances, it is not possible at this time to determine the adequacy of such coverage.

In addition, the sale and commercial use of our product entails risk of product liability. We currently do not carry any product liability insurance for this purpose. There can be no assurance that we will be able to obtain appropriate levels of product liability insurance prior to any sale of our pharmaceutical products. An inability to obtain insurance on economically feasible terms or to otherwise protect against potential product liability claims could inhibit or prevent the commercialization of products developed by us. The obligation to pay any product liability claim or a recall of a product could have a material adverse effect on our business, financial condition and future prospects.

Future legal proceedings and the impact of any finding of liability or damages could adversely impact the company and its financial condition and results of operations.

From time to time, we may be named as a defendant in various legal actions or other proceedings, inlcuding class action lawsuits. Certain of these actions include and future actual or threatened legal actions may include, claims for substantial and indeterminate amounts of damages, or may result in other results adverse to us. Management does not currently know of any pending, material legal proceedings against the Company, but such legal action could be brought in the future.

The results of possible future legal proceedings cannot be predicted with certainty. Accordingly, we cannot determine whether our insurance coverage would be sufficient to cover the costs or potential losses, if any. Regardless of merit, litigation may be both time-consuming and disruptive to our operations and cause significant expense and diversion of management attention. If we do not prevail in future legal proceedings, we may be faced with significant monetary damages or injunctive relief against us that may adversely affect our business, financial condition and results of operations, possibly materially.

We have limited manufacturing experience and intend to rely on third parties to commercially manufacture our products, if and when developed.

To date, we have relied upon a contract manufacturer to manufacture small quantities of REOLYSIN. The manufacturer may encounter difficulties in scaling up production, including production yields, quality control and quality assurance. Only a limited number of manufacturers can supply therapeutic viruses and failure by the manufacturer to deliver the required quantities of REOLYSIN on a timely basis at a commercially reasonable price may have a material adverse effect on us. We have completed a program for the development of a commercial process for manufacturing REOLYSIN and have filed a number of patent applications related to the process. There can be no assurance that we will successfully obtain sufficient patent protection related to our manufacturing process.

New products may not be accepted by the medical community or consumers.

Our primary activity to date has been research and development and we have no experience in marketing or commercializing products. We will likely rely on third parties to market our products, assuming that they receive regulatory approvals. If we rely on third parties to market our products, the commercial success of such product will be subject to a number of risks that may be outside of our control, including:


•	competition in relation to alternative treatments, including efficacy advantages and cost advantages;


•	perceived ease of use;


•	the availability of coverage or reimbursement by third-party payors;


•	uncertainties regarding marketing and distribution support; and


•	distribution or use restrictions imposed by regulatory authorities.

Moreover, there can be no assurance that physicians, patients or the medical community will accept our product, even if it proves to be safe and effective and is approved for marketing by Health Canada, the FDA and other regulatory authorities. A failure to successfully market our product would have a material adverse effect on our revenue.

Our technologies may become obsolete.

The pharmaceutical industry is characterized by rapidly changing markets, technology, emerging industry standards and frequent introduction of new products. The introduction of new products embodying new technologies, including new manufacturing processes and the emergence of new industry standards may render our products obsolete, less competitive or less marketable. The process of developing our products is extremely complex and requires significant continuing development efforts and third party commitments. Our failure to develop new technologies and products and the obsolescence of existing technologies could adversely affect our business.

We may be unable to anticipate changes in our potential customer requirements that could make our existing technology obsolete. Our success will depend, in part, on our ability to continue to enhance our existing technologies, develop new technology that addresses the increasing sophistication and varied needs of the market, and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis. The development of our proprietary technology entails significant technical and business risks. We may not be successful in using our new technologies or exploiting our niche markets effectively or adapting our businesses to evolving customer or medical requirements or preferences or emerging industry standards.

We are highly dependent on third-party relationships for research and clinical trials.

We rely upon third party relationships for assistance in the conduct of research efforts, pre-clinical development and clinical trials, and manufacturing. In addition, we expect to rely on third parties to seek regulatory approvals for and to market our product. Although we believe that our collaborative partners will have an economic motivation to commercialize our product included in any collaborative agreement, the amount and timing of resources diverted to these activities generally is expected to be controlled by the third party. Furthermore, if we cannot maintain these relationships, our business may suffer.

The cost of director and officer liability insurance may increase substantially and may affect our ability to retain quality directors and officers.

We carry liability insurance on behalf of our directors and officers. Given a number of large director and officer liability insurance claims in the US equity markets, director and officer liability insurance has become increasingly more expensive with increased restrictions. Consequently, there is no assurance that we will continue to be offered this insurance or be able to obtain adequate coverage. The inability to acquire the appropriate insurance coverage may limit our ability to attract and maintain directors and officers as required to conduct our business.

We are dependent on our key employees and collaborators.

Our ability to develop the product will depend, to a great extent, on our ability to attract and retain highly qualified scientific personnel and to develop and maintain relationships with leading research institutions. Competition for such personnel and relationships is intense. We are highly dependent on the principal members of our management staff as well as our advisors and collaborators, the loss of whose services might impede the achievement of development objectives. The persons working with us are affected by a number of influences outside of our control. The loss of key employees and/or key collaborators may affect the speed and success of product development.

Barbados law differs from the laws in effect in Canada and the United States and may afford less protection to holders of our securities.

Certain of our assets and intellectual property are held by our wholly-owned subsidiary, Oncolytics Barbados, which is organized under the laws of Barbados. It may not be possible to enforce court judgments obtained in Canada or the United States against Oncolytics Barbados in Barbados based on the civil liabilities provisions of applicable securities laws. In addition, there is some doubt as to whether the courts of Barbados would recognize or enforce judgments of courts in Canada or the United States obtained against us or our directors or officers based on the civil liabilities provisions of Canadian and United States securities laws or hear actions against us or those persons based on such laws.

Changes in law could adversely affect our business and corporate structure.

There can be no assurances that changes will not occur in corporate, tax, property and other laws in Canada and/or Barbados (or the interpretation thereof by regulatory or tax authorities) which may materially and adversely affect our businesses and corporate structure.

We incur some of our expenses in foreign currencies and therefore we are exposed to foreign currency exchange rate fluctuations.

We incur some of our manufacturing, clinical, collaborative and consulting expenses in foreign currencies, primarily the US dollar, the Euro and the British pound (“GBP”). We are therefore exposed to foreign currency rate fluctuations. Also, as we expand to other foreign jurisdictions there may be an increase in our foreign exchange exposure.

We earn interest income on our excess cash reserves and are exposed to changes in interest rates.

We invest our excess cash reserves in investment vehicles that provide a rate of return with little risk to principal. As interest rates change the amount of interest income we earn will be directly impacted.

Our operations may be adversely affected by disruptions to our information technology ("IT") systems, including disruptions from cybersecurity breaches of our IT infrastructure.

We rely on information technology networks and systems, including those of third-party service providers, to process, transmit and store electronic information. In particular, we depend on our information technology infrastructure for a variety of functions, including financial reporting, data management, and email communications. Any of these systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, terrorist attacks, sabotage and similar events. Global cybersecurity threats and incidents can range from uncoordinated individual attempts to gain unauthorized access to our information technology systems to sophisticated and targeted measures known as advanced persistent threats. The ever-increasing use and evolution of technology, including cloud-based computing, creates opportunities for the unintentional dissemination or intentional destruction of confidential information stored in our systems or in non-encrypted portable media or storage devices. We could also experience a business interruption, information theft of confidential information, or reputational damage from industrial espionage attacks, malware or other cyber attacks, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers. Despite the implementation of network security measures and disaster recovery plans, our systems and those of third parties on which we rely may also be vulnerable to computer viruses, break-ins and similar disruptions. If we or our vendors are unable (or are perceived as unable) to prevent such outages and breaches, our operations may be disrupted and our business reputation could be adversely affected.

We expect that risks and exposures related to cybersecurity attacks will remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats.

The Company may fail to achieve and maintain adequate internal control over financial reporting pursuant to the requirements of the Sarbanes-Oxley Act and equivalent Canadian legislation.

The Company documented and tested during its most recent fiscal year its internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”) and equivalent Canadian legislation. SOX requires an annual assessment by management of the effectiveness of the Company’s internal controls over financial reporting and an attestation report by the Company’s independent auditors addressing this assessment, if applicable. The Company may fail to achieve and maintain the adequacy of its internal controls over financial reporting as such standards are modified, supplemented, or amended from time to time, and the Company may not be able to ensure that it can conclude, on an ongoing basis, that it has effective internal controls over financial reporting in accordance with Section 404 of SOX. The Company’s failure to satisfy the requirements of Section 404 of SOX on an ongoing, timely basis could result in the loss of investor confidence in the reliability of its financial statements, which in turn could harm the Company’s business and negatively impact the trading price of the common shares or the market value of its other securities. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm the Company’s operating results or cause it to fail to meet its reporting obligations. Future acquisitions of companies, if any, may provide the Company with challenges in implementing the required processes, procedures and controls in its acquired operations. No evaluation can provide complete assurance that the Company’s internal controls over financial reporting will detect or uncover all failures of persons within the Company to disclose material information otherwise required to be reported. The effectiveness of the Company’s processes, procedures and controls could also be limited by simple errors or faulty judgments. In addition, if the Company expands, the challenges involved in implementing appropriate internal controls over financial reporting will increase and will require that the Company continue to improve its internal controls over financial reporting.

Because the Company is a Canadian Company and some of its directors and officers are resident outside the United States, it may be difficult for investors in the United States to enforce civil liabilities against the Company based solely upon the federal securities laws of the United States.

The Company is a Canadian company, with its principal place of business in Canada. Some of the Company’s directors and officers, including the Company's Chief Executive Officer and Chief Financial Officer, are residents outside the United States and a significant portion of the Company’s assets are located outside the United States. Consequently, it may be difficult for US investors to effect service of process within the United States upon the Company or these directors or officers who are not residents of the United States, or to realize in the United States upon judgments of courts of the United States predicated upon civil liabilities under the US Securities Act of 1933, as amended. Investors should not assume that Canadian courts (1) would enforce judgments of US courts obtained in actions against the Company or such directors or officers predicated upon the civil liability provisions of the US federal securities laws or the securities or “blue sky” laws of any state within the United States or (2) would enforce, in original actions, liabilities against the Company or such directors or officers predicated upon the US federal securities laws or

any such state securities or “blue sky” laws. In addition, the protections afforded by Canadian securities laws may not be available to investors in the United States.

As a foreign private issuer, our shareholders may have less complete and timely data.

The Company is a “foreign private issuer” as defined in Rule 3b-4 under the United States Securities Exchange Act of 1934, as amended (the “US Exchange Act”). Equity securities of the Company are accordingly exempt from Sections 14(a), 14(b), 14(c), 14(f) and 16 of the US Exchange Act pursuant to Rule 3a12-3 of the US Exchange Act. Therefore, the Company is not required to file a Schedule 14A proxy statement in relation to its annual meeting of shareholders. The submission of proxy and annual meeting of shareholder information on Form 6-K may result in shareholders having less complete and timely information in connection with shareholder actions. The exemption from Section 16 rules regarding reports of beneficial ownership and purchases and sales of common shares by insiders and restrictions on insider trading in our securities may result in shareholders having less data and there being fewer restrictions on insiders’ activities in our securities.

The Company is likely a "passive foreign investment company" which may have adverse US federal income tax consequences for US shareholders.

US shareholders of the Common Shares should be aware that the Company believes it was classified as a passive foreign investment company (“PFIC”) for the tax year ended December 31, 2016 , and based on current business plans and financial expectations, the Company anticipates that it may qualify as a PFIC for its current and subsequent taxable years. If the Company is a PFIC for any year during a US shareholder’s holding period, then such US shareholder generally will be required to treat any gain realized upon a disposition of Common Shares, or any so-called “excess distribution” received on its common shares, as ordinary income, and to pay an interest charge on a portion of such gain or distributions, unless the shareholder makes a timely and effective "qualified electing fund" election (“QEF Election”) or a "mark-to-market" election with respect to the Common Shares. A US shareholder who makes a QEF Election generally must report on a current basis its share of the Company's net capital gain and ordinary earnings for any year in which the Company is a PFIC, whether or not the Company distributes any amounts to its shareholders. However, US shareholders should be aware that there can be no assurance that the Company will satisfy the record keeping requirements that apply to a qualified electing fund, or that the Company will supply US shareholders with information that such U.S. shareholders require to report under the QEF Election rules, in the event that the Company is a PFIC and a U.S. shareholder wishes to make a QEF Election. Thus, US shareholders may not be able to make a QEF Election with respect to their Common Shares. A US shareholder who makes the mark-to-market election generally must include as ordinary income each year the excess of the fair market value of the common shares over the taxpayer’s basis therein. This paragraph is qualified in its entirety by the discussion below under the heading “Certain United States Federal Income Tax Considerations.” Each US shareholder should consult its own tax advisor regarding the PFIC rules and the US federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.

Risks related to our Common Shares

We have been delisted from the NASDAQ Capital Market and we have qualified for quotation on the OTCQX® which may adversely affect the liquidity of the Company's common shares.

On October 29, 2015, the Company received notice from the Nasdaq OMX Group ("Nasdaq") stating that, in accordance with Nasdaq listing rules, the Company's shares will be delisted from the Nasdaq Capital Market, effective from the opening of trading on November 5th, 2015, for not maintaining the minimum $1.00 per share required for continued listing under Listing Rule 5550(a)(2).

On October 29, 2015, the Company received notification from OTC Markets Group Inc. that it qualified for quotations in the United States on the OTCQX ^® International ("OTCQX") and quotations commenced on November 5, 2015.

Our share price may be highly volatile.

Market prices for securities of biotechnology companies generally are volatile and the share price for our common shares has been historically volatile. This increases the risk of securities litigation. Factors such as announcements (publicly made or at scientific conferences) of technological innovations, new commercial products, patents, the development of proprietary rights, results of clinical trials, regulatory actions, publications, quarterly financial results, our financial position, public concern over the safety of biotechnology, future sales of shares by us or our current shareholders and other factors could have a significant effect on the market price and volatility of the Common Shares.

Potential dilution of present and prospective shareholdings.

In order to finance future operations and development efforts, the Company may raise funds through the issue of common shares or the issue of securities convertible into common shares. The Company cannot predict the size of future issues of common shares or the issue of securities convertible into common shares or the effect, if any, that future issues and sales of the Company’s common shares will have on the market price of its common shares. Any transaction involving the issue of previously authorized but unissued shares, or securities convertible into shares, would result in dilution, possibly substantial, to present and prospective holders of shares.

The Company does not intend to pay cash dividends in the foreseeable future.

The Company has not declared or paid any dividends since its incorporation. The Company intends to retain earnings, if any, to finance the growth and development of its business and does not intend to pay cash dividends on the Common Shares in the foreseeable future. Any return on an investment in the common shares will come from the appreciation, if any, in the value of the Common Shares. The payment of future cash dividends, if any, will be reviewed periodically by the board of directors and will depend upon, among other things, conditions then existing including earnings, financial condition and capital requirements, restrictions in financing agreements, business opportunities and conditions and other factors.

“Penny stock” rules may make buying or selling our securities difficult, which may make our stock less liquid and make it harder for investors to buy and sell our securities.

On November 5, 2015, we were delisted from the NASDAQ Capital Markets and are now only quoted on an over-the-counter market, the OTCQX International, maintained by OTC Markets, Inc. Trading in our securities is now subject to the SEC’s “penny stock” rules and it is anticipated that trading in our securities will continue to be subject to the penny stock rules for the foreseeable future. The Securities and Exchange Commission has adopted regulations that generally define a penny stock to be any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer who recommends our securities to persons other than prior customers and accredited investors must, prior to the sale, make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by these requirements may discourage broker-dealers from recommending transactions in our securities, which could severely limit the liquidity of our securities and consequently adversely affect the market price for our securities.

ITEM 4. INFORMATION ON THE COMPANY


A.	History and Development of the Company

Oncolytics Biotech Inc. was formed under the Business Corporations Act (Alberta) on April 2, 1998 as 779738 Alberta Ltd. On April 8, 1998, we changed our name to Oncolytics Biotech Inc.

Our principal executive office is located at 210, 1167 Kensington Cres. NW, Calgary, Alberta, Canada, T2N 1X7, telephone (403) 670-7377. Our agent for service in the US is CT Corporation, 111 Eighth Avenue, 13 ^th Floor, New York, New York 10011.

A description of our principal capital expenditures and divestitures and a description of acquisitions of material assets can be found in our MD&A and in the notes to our financial statements included elsewhere in this annual report.


B.	Business Overview

Since our inception in April of 1998, Oncolytics Biotech Inc. has been a development stage company and we have focused our research and development efforts on the development of REOLYSIN, our potential cancer therapeutic. We have not been profitable since our inception and expect to continue to incur substantial losses as we continue research and development efforts. We do not expect to generate significant revenues until, if and when, our cancer product becomes commercially viable.

Our Business

Our potential product for human use, pelareorep (REOLYSIN), an unmodified reovirus, is a first in class systemically administered immune-oncology (I-O) viral agent for the treatment of solid tumors and hematological malignancies.

Summary of Research and Development highlights

Preclinical and Translational Research data to date indicate the following:


•	Pelareorep has anticancer effects in models of metastatic cancers that can prolong survival in these models when using immuno-competent rodents.


•	The survival benefit in animal models can be enhanced when pelareorep is given in combination with chemotherapy, immunotherapy (e.g., checkpoint inhibitors, IMiDs, rituximab, etc.) or radiotherapy.


•	A toxic dose of reovirus T3D has not been reached/established in animal models and infection presents with minimal side-effects.

Clinical data to date indicate the following:


•	More than 1,400 patients have been enrolled in clinical studies conducted in the US, Canada and EU. Of these, more than 1,000 patients received pelareorep, with over 930 via intravenous (IV) administration and over 90 by intratumoral injections (ITu). The remaining patients were randomized to control arms.


•	Pelareorep has been administered as single or multiple doses (intratumoral or intravenous), either as a mono-therapy or in combination with chemotherapy, immunotherapy (e.g., checkpoint inhibitors), and radiotherapy.


•	No Maximum Tolerated Dose (MTD) for intravenous pelareorep as mono-therapy was defined in the two Phase 1 trials (REO 004 and 005). Dose-limiting toxicities (DLTs) were seen in some of the combination trials with pelareorep and chemotherapy, which generally enrolled heavily pre-treated patients.


•	When combined with chemotherapeutic agents, pelareorep does not appear to enhance either the frequency or severity of the adverse effects of the chemotherapeutic agents.

Scientific Background

Pelareorep’s anti-tumor activity is based on three modes of action which are complementary but not interdependent (Figure 1):


•	Selective viral replication in permissive cancer cells which leads to tumor cell lysis.


•	Activation of innate immunity in response to the infection which results in a cascade of chemokines/cytokines causing natural killer (NK) cells to be activated and attack cancer cells.


•	A specific adaptive immune response triggered by tumor- and viral-associated antigens displayed by antigen-presenting cells (APCs, infected tumor cells and/or dendritic cells) to T cells.

Figure 1. Proposed mechanism of action for pelareorep (REOLYSIN).


1.	Direct cell lysis - Reovirus Replication in Permissive Cancer Cells

Selective viral replication and lysis in cancer cells and not normal cells is mediated by the host cellular protein PKR (dsRNA-activated protein kinase). In non-cancer cells that are infected with reovirus, PKR activates in the presence of the virus which in turn inhibits viral gene translation. However, in permissive cancer cells, PKR activation is inhibited, allowing for viral gene translation and eventual cell lysis.

It was originally established that selective lysis with reovirus was mediated by tumor cells with an activated RAS-pathway, since active RAS inhibits PKR activation. However, more recent investigations have revealed that reovirus replication is not just restricted to cells with an active RAS pathway, oncogenic mutations and amplifications in upstream (EGFR) and downstream (BRAF) mediators of the RAS-pathway also allow for viral replication and oncolysis. Moreover, active RAS is known to stimulate over 18 downstream effector proteins, many of which have been shown to facilitate viral replication, such as activation of Raf/MEK/ERK, RalGEF/p38, and JNK signalling pathways. Cells bearing dysfunctional or deleted tumor suppressor genes (p53, ATM and Rb) and or chemo- or radiation-induced cell stress also show increased sensitivity to reovirus replication and lysis.


2.	Induction of Innate Immunity

Preclinical and clinical studies provide compelling lines of evidence that pelareorep functions as an immunogenic agent. Indeed, preclinical studies have demonstrated that the beneficial immunogenic functions of pelareorep can occur independent of viral replication. Pelareorep performs this immunogenic function, in part, by activating dendritic cells, key regulators of both adaptive and innate immunity. Dendritic cells activated by reovirus in turn stimulate the innate antitumor activity of NK (natural killer) cells through the release of proinflammatory cytokines, demonstrating that dendritic cells' recognition of reovirus may trigger a beneficial innate immune response. Similar studies by Steele and colleagues demonstrated that melanoma cells infected with Pelareorep can also produce an innate immune response by the release of inflammatory cytokines. This inflammatory milieu promotes a chemotactic response in NK cells, dendritic cells, and cytotoxic T-cells, altering the tumour microenvironment to support bystander immune-mediated cancer cell death.

A clinical trial with pelareorep (REO 013) provided an opportunity to study human NK cell activation, in humans, in a controlled manner. Ten colorectal cancer patients with liver metastases received between one and five doses of pelareorep prior to surgical

resection of their tumor. NK cell activation peaked 24-48 hours post-infection, coincident with a peak of pro-inflammatory cytokines. NK cells within reovirus-treated blood mononuclear cells were stimulated to kill tumor targets, but not normal hepatocytes. Moreover, NK cells were able to hand-off virus to tumors for direct oncolytic killing. Similarly, NK cells within liver mononuclear cells became selectively cytotoxic towards tumor cells when activated by reovirus. These results showed that reovirus modulates human NK cell activity in vivo and suggest that this may contribute to the therapeutic effect of pelareorep.


3.	Induction of Adaptive Immunity

Adaptive anti-tumor immunity allows for elimination of existing cancer cells and performs constant surveillance, preventing relapse, and increasing patient overall survival. An adaptive immune response requires two signals: a signal from an antigen presenting cell (APC), as well as a co-stimulation signal in the form of cytokines. In the absence of both signals, the adaptive immune response fails. Therapy with pelareorep has the potential to activate both signals. Following its therapeutic administration, pelareorep enhances the expression of ‘foreign’ antigens/markers on tumor cells. Oncolysis of tumor cells exposes tumor-associated antigens (TAAs) and viral-associated antigens (VAAs) for processing and presentation by APCs, such as dendritic cells. Through the combined actions of these immunological events, pelareorep facilitates the display of novel ‘foreign’ antigens on the surface of infected tumor cells and APC. Simultaneously, pelareorep induces an inflammatory response promoting the expression of co-stimulatory molecules and inflammatory cytokines. Together, pelareorep mediated immunological events over-rule tumor antigen presentation impairments and initiate adaptive anti-tumor immunity.

By promoting the expression of novel antigens and the release of inflammatory cytokines, pelareorep, promotes an inflamed tumor phenotype. An inflamed tumor phenotype is characterized by T-cell infiltration, increased expression of chemokines/cytokines, and increased expression of checkpoint ligands. This phenotype correlates with an increase in overall survival and has a positive prognostic value for early stage cancers. In metastatic cancers, an inflamed tumor phenotype is associated with a clinical response to immunotherapies, including immune checkpoint inhibition, cancer vaccines, and adoptive T-cell therapies. By promoting an inflamed tumor phenotype, pelareorep primes an anti-cancer immune response (Figure 2).

Figure 2. Pelareorep (REOLYSIN) primes an anti-cancer immune response

Clinical Development Program

We are directing a clinical development program with the objective of developing REOLYSIN as a human cancer therapeutic. Our clinical development program focuses on the three components of REOLYSIN's mechanism of action and includes the following three pathways:

Direct tumour lysis - Our primary focus has been on the investigation of chemotherapy combination clinical trials investigating the use of different chemotherapy agents in various cancer indications. In 2016, we reported preliminary clinical data from our Randomized Clinical Program which includes the clinical trial collaborations with the Canadian Cancer Trials Group (CCTG, formerly known as the National Cancer Institute of Canada) and the US National Institute of Cancer (NCI). The clinical data reported in 2016 from the CCTG studies showed little to no difference in progression free survival (the primary endpoint) between the test and control arms. However, preliminary survival data reported suggests a potential survival benefit in female patients with colorectal cancer and lung patients with TP53 or EGFR mutations. As well, survival data reported from our NCI pancreatic trial suggests a long term survival benefit when comparing test and control arms at 24 months.


2.	Activation of innate immunity - Our second pathway focuses on the potential of REOLYSIN to stimulate a patient's innate immunity and the potential for an infection to cause a cascade of chemokines/cytokines activating natural killer (NK) cells to attack cancer cells. In 2016, we looked to enter into research collaborations that would combine REOLSYIN with immune modulator therapies (IMiDs).

Activation of adaptive immunity - Our third pathway focuses on the potential for REOLSYIN to cause a specific adaptive immune response triggered by tumor- and viral-associated antigens displayed by antigen-presenting cells (APCs, infected tumor cells and/or dendritic cells) to T cells. In 2016, we commenced our first checkpoint inhibitor clinical trial that investigated the combination of REOLYSIN with pembrolizumab (Keytruda®).

Patents and Trade Secrets

The patent positions and proprietary rights of pharmaceutical and biotechnology firms, including us, are generally uncertain and involve complex legal and factual questions. We believe there will continue to be significant litigation in the industry regarding patent and other intellectual property rights.

Currently, we have over 415 issued patents including 61 issued US. patents. We also have numerous patent applications filed in the US, Canada, and other jurisdictions, but we cannot be certain whether any given patent application filed by us will result in the issuance of a patent or if any given patent issued to us will later be challenged and invalidated. Nor can we be certain whether any given patent that may be issued to us will provide any significant proprietary protection to our product and business.

Litigation or other proceedings may also be necessary to enforce or defend our proprietary rights and patents. In Europe, patents can be revoked through opposition or nullity proceedings. In the United States patents may be revoked or invalidated in court actions or challenged in interference, post-grant review, derivation or re-examination proceedings in the USPTO. Such litigation or proceedings could result in substantial cost or distraction to us, or result in an adverse decision as to our or our licensors’ patent applications and patents.

Our commercial success depends, in part, on not infringing the patents or proprietary rights of others and not breaching licenses granted that may be granted to us. Competitors may have filed patent applications and obtained patents and may in the future file patent applications and obtain patents relevant to our product and technologies. We are not aware of competing intellectual property relating to our REOLYSIN project. While we currently believe that we have the necessary freedom to operate in these areas, there can be no assurance that others will not challenge our position in the future. Litigation to defend our position could be costly and time consuming. We also cannot be certain that we will be successful. We may be required to obtain a license from a prevailing party in order to continue the portion of our business that relates to the proceeding. We may also be required to obtain licenses to other third-party technologies necessary in order to market our products. Such licenses may not be available to us on acceptable terms or on any terms and we may have to discontinue that portion of our business. Any failure to license any technologies required to commercialize our technologies or products at reasonable cost may have a material adverse effect on our business, results of operations, financial condition, cash flow and future prospects. We are not currently involved in any litigation concerning our competitors’ patent applications and patents. We may be involved in such litigation in the future.

We also rely on unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. No assurance can be given that others will not independently develop substantially equivalent proprietary information and techniques, or otherwise gain access to our trade secrets or disclose such technology, or that we can meaningfully protect our rights to our unpatented trade secrets.

We require our employees and consultants to execute confidentiality agreements upon the commencement of employment and consulting relationships with us. These agreements provide that all confidential information developed by or made known to an individual during the course of the employment or consulting relationship generally must be kept confidential. In the case of

employees, the agreements provide that all inventions conceived by the individual, while employed by us, relating to our business are our exclusive property. While we have implemented reasonable business measurements to protect confidential information, these agreements may not provide meaningful protection for our trade secrets in the event of unauthorized use or disclosure of such information.

Business Strategy

Our business strategy is to develop and market REOLYSIN in an effective and timely manner, and access additional technologies at a time and in a manner that we believe is best for our development. We intend to achieve our business strategy by focusing on these key areas:


•	Develop REOLYSIN through our clinical development plan assessing the safety and efficacy in human subjects;


•	Establish collaborations with experts to assist us with scientific and clinical developments of this new potential pharmaceutical product;


•	Implement strategic alliances with selected pharmaceutical and biotechnology companies and selected laboratories, at a time and in a manner where such alliances may complement and expand our research and development efforts on the product and provide sales and marketing capabilities;


•	Utilize our broadening patent base and collaborator network as a mechanism to meet our strategic objectives; and


•	Develop relationships with companies that could be instrumental in assisting us to access other innovative therapeutics.

Our business strategy is based on attaining a number of commercial objectives, which, in turn, are supported by a number of product development goals. Our new product development presently being conducted is primarily of a research and development nature. In the context of this Annual Report, statements of our "belief" are based primarily upon our results derived to date from our research and development program with animals, and early stage human trials, and upon which we believe that we have a reasonable scientific basis to expect the particular results to occur. It is not possible to predict, based upon studies in animals, or early stage human trials, whether a new therapeutic will ultimately prove to be safe and effective in humans. There are no assurances that the particular result expected by us will occur.

At this time we do not intend to become a fully integrated pharmaceutical company with substantial in-house research and development, marketing and distribution or manufacturing capabilities. We are pursuing a strategy of establishing relationships with larger companies as strategic partners. We intend to partner or joint venture with larger pharmaceutical companies that have existing and relevant marketing capability for our products. It is anticipated that future clinical development into large international or pivotal trials would generally occur in conjunction with a strategic partner or partners, who would contribute expertise and financial assistance. In exchange for certain product rights and commitments to market our products, the strategic partners would be expected to share in gross proceeds from the sale of our product or products and potentially share in various market or manufacturing opportunities. The proceeds generated from partnering or joint venturing projects are expected to be distributed on the basis of relative risk taken and resources contributed by each party to the partnership or joint venture.

Regulatory Requirements

The development of new pharmaceuticals is strongly influenced by a country's regulatory environment. The drug approval process in Canada is regulated by Health Canada. The primary regulatory body in the United States is the FDA and in the UK is the Medicines and Healthcare Products Regulatory Agency (the “MHRA”). Similar processes are conducted in other countries by equivalent regulatory bodies. Regulations in each jurisdiction require the licensing of manufacturing facilities and mandate strict research and product testing standards. Companies must establish the safety and efficacy of their products, comply with current Good Manufacturing Practices and submit marketing materials before being allowed to market pharmaceutical products. While we plan to pursue or support the pursuit of the approval of our product, success in acquiring regulatory approval for any product is not assured.

In order to market our pharmaceutical product in Canada, the United States, Europe and other jurisdictions, we must successfully meet the requirements of those jurisdictions. The requirements of the Appropriate Regulatory Authority will generally include the following stages as part of the regulatory process:


•	Pre-Pharmacological Studies - Pre-Pharmacological studies involve extensive testing on laboratory animals to determine if a potential therapeutic product has utility in an in vivo disease model and has any adverse toxicology in a disease model.


•	Investigational New Drug Application - An Investigational New Drug ("IND") Submission, or the equivalent, must be submitted to the appropriate regulatory authority prior to conducting Pharmacological Studies.


•	Pharmacological Studies (or Phase 1 Clinical Trials) - Pharmacological studies are designed to assess the potential harmful or other side effects that an individual receiving the therapeutic compound may experience. These studies, usually short in duration, are often conducted with healthy volunteers or actual patients and use up to the maximum expected therapeutic dose.

•

Therapeutic Studies (or Phase 2 and 3 Clinical Trials) - Therapeutic studies are designed primarily to determine the appropriate manner for administering a drug to produce a preventive action or a significant beneficial effect against a disease. These studies are conducted using actual patients with the condition that the therapeutic is designed to remedy. Prior to initiating these studies, the organization sponsoring the program is required to satisfy a number of requirements via the submission of documentation to support the approval for a clinical trial.


•	New Drug Submission - After all three phases of a clinical trial have been completed, the results are submitted with the original IND Submission to the appropriate regulatory authority for marketing approval. Once marketing approval is granted, the product is approved for commercial sales.

Marketing Approvals

The results of the preclinical and clinical testing, together with manufacturing and controls information, are submitted to regulatory agencies in order to obtain approval to commence commercial sales. In responding to such an application, regulatory agencies may grant marketing approval, request additional information or further research, or deny the application if they determine that the application does not satisfy their regulatory approval criteria. Approval for a pharmaceutical or biologic product may not be granted on a timely basis, if at all, or if granted may not cover all the clinical indications for which approval is sought, or may contain significant limitations in the form of warnings, precautions or contraindications with respect to conditions of use.

Satisfaction of pre-market approval requirements for new drugs and biologics typically takes several years, and the actual time required may vary substantially based upon the type, complexity and novelty of the product or targeted disease. Government regulation may delay or prevent marketing of potential products for a considerable period of time and impose costly procedures upon our activities. Success in early stage clinical trials or with prior versions of products does not assure success in later stage clinical trials. Data obtained from clinical activities are not always conclusive and may be susceptible to varying interpretations that could delay, limit or prevent regulatory approval.

Post-Marketing Regulations

Once approved, regulatory agencies may withdraw the product approval if compliance with pre- and/or post-marketing regulatory standards is not maintained or if problems occur after the product reaches the marketplace. In addition, they may require post-marketing studies, referred to as Phase 4 studies, to monitor the effect of an approved product, and may limit further marketing of the product based on the results of these post-market studies. The FDA and other foreign regulatory agencies have broad post-market regulatory and enforcement powers, including the ability to levy fines and penalties, suspend or delay issuance of approvals, seize or recall products, or withdraw approvals.

Manufacturing Regulations

We use contract toll manufacturers to produce REOLYSIN. Our toll manufacturers are subject to periodic inspection by the FDA, the United States Drug Enforcement Administration, or DEA, and other domestic and foreign authorities where applicable, and must comply with cGMP regulations. Manufacturers of biologics also must comply with general biological product standards. Failure to comply with the statutory and regulatory requirements subjects the manufacturer to possible legal or regulatory action, such as suspension of manufacturing, seizure of product, or mandatory or voluntary recall of a product. Adverse experiences with the product must be reported to the FDA and foreign agencies and could result in the imposition of market restrictions through labeling changes or in product removal. Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety or efficacy of the product occur following approval.

Advertising and Promotion Regulations

With respect to both pre- and post-market product advertising and promotion, the FDA and similar foreign agencies impose a number of complex regulations on entities that advertise and promote pharmaceuticals and biologics, which include, among other things, standards and regulations relating to direct-to-consumer advertising, off-label promotion, industry sponsored scientific and educational activities, and promotional activities involving the Internet. These agencies have very broad enforcement authority and failure to abide by these regulations can result in penalties including the issuance of a warning letter directing the entity to correct deviations from requisite standards, a requirement that future advertising and promotional materials be pre-cleared by the FDA or relevant foreign agencies, and foreign, state and federal civil and criminal investigations and prosecutions.

Other Government Regulations

We are subject to various laws and regulations regarding laboratory practices, the experimental use of animals, and the use and disposal of hazardous or potentially hazardous substances in connection with our research. In each of these areas, as above, the government has broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall products, and withdraw approvals, any one or more of which could have a material adverse effect upon us.

Market and Competition

According to estimates for 2016 from the American Cancer Society, 1.69 million Americans are expected to be diagnosed with cancer in the year, and 595,690 Americans are forecast to die of cancer. In the United States cancer accounts for 25% of all deaths, second only to heart disease. In the United States, the relative lifetime risk of a male developing cancer is 1 in 2 , while for women, this risk is 1 in 3 (Source: American Cancer Society's Cancer Facts & Figures 2015). The World Health Organization estimates the number of deaths in the "More Developed Regions" will increase to 3.28 million patients in 2020 from 2.8 million patients in 2012. (Source: Incidence/mortality data - Ferlay J, Soerjomataram I, Ervik M, Dikshit R, Eser S, Mathers C, Rebelo M, Parkin DM, Forman D, Bray, F. GLOBOCAN 2012 v1.0, Cancer Incidence and Mortality Worldwide: IARC CancerBase No. 11 [Internet]. Lyon, France: International Agency for Research on Cancer; 2013. Available from: http://globocan.iarc.fr, accessed on 18/03/2015).

The costs of this disease state are also significant. In the United States, the American Cancer Society reported in its Cancer Facts & Figures 2016 that the Agency for Healthcare Research and Quality estimated the 2011 direct medical costs for cancer treatment was $88.7 billion . (Source: American Cancer Society's Cancer Facts & Figures 2016).

We face substantial competition in the development of products for cancer and other diseases. This competition from other manufacturers of the same types of products and from manufacturers of different types of products designed for the same uses is expected to continue in both US and international markets. Oncolytic virus therapies, our primary focus area, are rapidly evolving areas in the biotechnology industry and are expected to undergo many changes in the coming years as a result of technological advances. We are currently aware of a number of groups that are developing oncolytic virus therapies including early-stage and established biotechnology companies, pharmaceutical companies, academic institutions, government agencies and research institutions. We face competition from all of these groups in areas such as recruiting employees, acquiring technologies that might enhance our ability to commercialize products, establishing relationships with certain research and academic institutions, enrolling patients in clinical trials and seeking program partnerships and collaborations with larger pharmaceutical companies. It is possible that our competitors could achieve earlier market commercialization, could have superior patent protection, or could have safer, more effective or more cost-effective products. These factors could render our potential products less competitive, which could adversely affect our business.

Product Marketing Strategy

The markets for the cancer product being developed by us may be large and could require substantial sales and marketing capability. Before or upon successful completion of the development of a cancer product, we intend to enter into one or more strategic partnerships or other collaborative arrangements with a pharmaceutical company or other company with marketing and distribution expertise to address this need. If necessary, we will establish arrangements with various partners for different geographical areas or specific applications at various times in the development process. Our management and consultants have relevant experience with the partnering process.

Seasonality of Business

Our results of operations have not been materially impacted by seasonality.


C.	Organizational Structure

On December 31, 2016 , we had one material wholly-owned operating subsidiary; Oncolytics Biotech (Barbados) Inc. (“OBB”), a Barbados company. In addition, Oncolytics Biotech (US) Inc., a Delaware corporation, is a material wholly owned subsidiary of OBB.

D. Property, Plants and Equipment

We currently lease our head office in Calgary, Alberta, Canada as well as our office space in Barbados. We do not own or lease any other office space, manufacturing facilities or equipment and do not have any current plans to construct or acquire any facilities.

ITEM 4A. UNRESOLVED STAFF COMMENTS

None.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Our Management Discussion and Analysis (“MD&A”) contains forward-looking statements, including our belief as to the potential of REOLYSIN, a therapeutic reovirus, as a cancer therapeutic and our expectations as to the success of our research and development and manufacturing programs in 2017 and beyond, future financial position, business strategy and plans for future operations, and statements that are not historical facts, involve known and unknown risks and uncertainties, which could cause our actual results to differ materially from those in the forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” .

With respect to the forward-looking statements made within our MD&A, we have made numerous assumptions regarding among other things: our ability to obtain financing to fund our development program, our ability to receive regulatory approval to commence enrollment in our clinical trial program, the final results of our co-therapy clinical trials, our ability to maintain our supply of REOLYSIN and future expense levels being within our current expectations. Investors are cautioned against placing undue reliance on forward-looking statements. We do not undertake to update these forward-looking statements except as required by applicable law.


A.	Operating Results

Please see our 2016 Management Discussion and Analysis in Exhibit 15.1, which is incorporated herein by reference.


B.	Liquidity and Capital Resources

Please see our 2016 Management Discussion and Analysis in Exhibit 15.1, which is incorporated herein by reference.


C.	Research and Development, Patents, and Licenses, etc.

Please see the disclosure in "Item 4. Information on the Company B. Business Overview" for information on the Company’s research and development policies. Our research and development expenses were $9,770,007 , $8,601,864 , and $13,824,252 for 2016 , 2015 and 2014 , respectively.


D.	Trend Information

It is important to note that historical patterns of expenditures cannot be taken as an indication of future expenditures. The amount and timing of expenditures and availability of capital resources vary substantially from period to period, depending on the level of research and development activity being undertaken at any one time and the availability of funding from investors and prospective commercial partners. See our 2016 Management Discussion and Analysis in Exhibit 15.1 for our comparative discussion on our expenditures between 2014 - 2016 and our expectations for 2017 .

Except as disclosed elsewhere in our annual report, we know of no trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our liquidity or capital resources or that would cause reported financial information not necessarily to be indicative of future operating results or financial conditions.


E.	Off-Balance Sheet Arrangements

As at December 31, 2016 , we had not entered into any off-balance sheet arrangements.


F.	Tabular Disclosure of Contractual Obligations

We have the following contractual obligations as at December 31, 2016 :



Contractual Obligations	Payments Due by Period
	Total $	Less than 1 year $	2 -3 years $	4 - 5 years $	After 5 years $
Capital lease obligations	Nil	—	—	—	—
Operating lease ⁽¹⁾	517,647	163,978	207,026	146,643	—
Purchase obligations	1,033,619	1,033,619	—	—	—
Other long term obligations	Nil	—	—	—	—
Total contractual obligations	1,551,266	1,197,597	207,026	146,643	—

Note:


(1)	Our operating leases are comprised of our office leases and exclude our portion of operating costs.

We expect to fund our capital expenditure requirements and commitments with existing working capital.


G.	Safe Harbor

We seek safe harbor for our forward-looking statements contained in Items 5.E and F. See “ Cautionary Note Regarding Forward-Looking Statements”.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES


A.	Directors and Senior Management

The following table sets forth the names and places of residence of all our directors and officers as at December 31, 2016, as well as the positions and offices held by such persons and their principal occupations.



Name and Place of Residence	Position with the Company	Principal Occupation	Director of the Company Since
Matthew C. Coffey, Ph.D. ⁽¹⁾ Alberta, Canada	Interim Chief Executive Officer and Director	Interim Chief Executive Officer of the Company since November 2016. Chief Operating Officer of the Company from 2008 to November 2016. From April 1999 to December 2008, Dr. Coffey held other senior management positions with the Company and is a co-founder of Oncolytics.	May 11, 2011



Name and Place of Residence	Position with the Company	Principal Occupation	Director of the Company Since
George M. Gill, M.D. Maryland, USA	Senior Vice President, Regulatory Affairs & Chief Safety Officer	Prior to taking on the role of Senior Vice President, Regulatory Affairs & Chief Safety Officer, Dr. Gill held senior positions in clinical research and regulatory affairs in the pharmaceutical and biotechnology industries. From 1992-2000 he was VP of Clinical Research with Ligand Pharmaceuticals after serving as head of US Clinical Research with ICI (now AstraZeneca) Prior to that he was VP and Head of World-wide Regulatory Affairs for Bristol-Myers Squibb. He previously was head of Oncology Clinical Research at Hoffmann-La Roche. Dr. Gill holds a B.Sc. in chemistry from Dickinson College in Pennsylvania and an M.D. from the School of Medicine of the University of Pennsylvania in Philadelphia. He began his career as an academic pediatric oncologist at Childrens Hospital of Philadelphia and Boston Childrens Hospital.	N/A
Andres A. Gutierrez, M.D., Ph.D. New Jersey, USA	Chief Medical Officer	Prior to taking on the role of Chief Medical Officer, Dr. Gutierrez held progressively senior clinical development positions designing and implementing both early and later-stage oncology clinical studies at a range of U.S. and European companies including Sellas Life Sciences Group, Bristol-Myers Squibb, Sunesis Pharmaceuticals Inc., Biomarin Pharmaceutical Inc., Proteolix and Oculus Innovative Sciences. Prior to that, he held a series of academic and consulting positions. He received his MD and a PhD in Biomedical Sciences from the National Autonomous University of Mexico.	N/A
Angela Holtham, FCPA, FCMA, ICD.D ⁽²⁾⁽³⁾ Ontario, Canada	Director	After 8 years as the Vice President Finance and Chief Financial Officer of The Hospital for Sick Children (SickKids) in Toronto, Ms. Holtham now holds a number of Board and Audit Committee governance positions in both the public and private sectors in Canada including IBI Group Inc., the Ontario Financing Authority and Plexxus (Hospital Administrative Services). Prior to her position at SickKids, Angela held a number of senior positions in both the for-profit and not-for-profit sectors, including 20 years with Nabisco Canada, the last 5 as Senior Vice President and Chief Financial Officer.	June 18, 2014



Name and Place of Residence	Position with the Company	Principal Occupation	Director of the Company Since
J. Mark Lievonen, CM, FCPA, FCA, LLD ⁽²⁾⁽⁴⁾ Ontario, Canada	Director	Former president of Sanofi Pasteur Limited, a vaccine development, manufacturing and marketing company. Mr. Lievonen has served on a number of industry and not-for-profit boards including Rx&D, BIOTECanada, the Public Policy Forum, the Ontario Institute for Cancer Research, York University and Markham Stouffville Hospital, and is a past Chair of Rx&D, BIOTECanada, the Ontario Genomics Institute, and the Markham Stouffville Hospital Foundation.	April 5, 2004
Kirk J. Look, CA Alberta, Canada	Chief Financial Officer	Chief Financial Officer of the Company since November 2012. From 2003 to November 2012, Mr. Look held the position of Controller with the Company.	N/A
Wayne Pisano, MBA ^(2)(3)(6) New Jersey, USA	Chair of the Board	Mr. Pisano has more than 30 years of experience as a pharmaceutical industry executive and was recognized in 2010 as Pharma Executive of the Year by the World Vaccine Congress. Mr. Pisano is the former president and Chief Executive Officer of Sanofi Pasteur, one of the largest vaccine companies in the world. After retiring from Sanofi Pasteur in 2011, he served as the president and Chief Executive Officer of VaxInnate a privately held biotech company until November 2016. Prior to joining Sanofi Pasteur, he spent 11 years with Novartis (formerly Sandoz). He has a bachelor’s degree in biology from St. John Fisher College, Rochester NY and an MBA from the University of Dayton, Ohio.	May 9, 2013
William G. Rice, Ph.D. ⁽⁴⁾⁽⁵⁾ California, USA	Director	Chairman, President and Chief Executive Officer of Aptose Biosciences Inc. since 2013; from 2003 to present, Chairman, President and Chief Executive Officer of Cylene Pharmaceuticals Inc.; former Senior Scientist and Head of the Drug Mechanism Laboratory at the National Cancer Institute-Frederick Cancer Research and Development Center; former faculty member in the division of Pediatric Hematology and Oncology at Emory University School of Medicine.	June 8, 2015



Name and Place of Residence	Position with the Company	Principal Occupation	Director of the Company Since
Bernd R. Seizinger, M.D., Ph.D. ⁽³⁾⁽⁵⁾ New Jersey, USA and Munich, Germany	Director	Chairman of Oxford BioTherapeutics Limited since 2016; Chairman of Aprea Therapeutics AB since 2015; Executive Chairman of CrytpoMedix Inc. since 2015; Chairman of Opsona from 2009-2016; President and CEO of GPC Biotech from 1998-2009; former VP of Oncology Drug Discovery and VP of Corporate and Academic Alliances at Bristol-Myers Squibb; Senior Faculty Member of Harvard Medical School and Massachusetts General Hospital.	June 8, 2015
Alan J Tuchman, M.D., MBA (FAAN), New York, USA	Chief Neuro Oncology Research Officer	Dr. Tuchman is Clinical Professor of Neurology at New York Medical College and the author of over thirty scientific papers and book chapters. He is currently in the private practice of Neurology in Manhattan and consults to a number of biotechnology and investment firms. He has served as a partner of Xmark Opportunity Partners and as Executive Chairman of Neurophysics, Inc. He was previously the President of the Epilepsy Society of Southern New York as well as Vice Dean for Clinical Affairs at New York Medical College. Dr. Tuchman received his MD degree from the University of Cincinnati, College of Medicine, and completed his Neurology Residency at the Mt Sinai School of Medicine. Dr. Tuchman received his MBA from Columbia University.	N/A

Notes:


1)	Mr. Coffey was appointed President and Chief Executive Officer on January 19, 2017.


2)	Member of the Audit Committee. Ms. Holtham is Chair of this Committee.


3)	Member of the Compensation Committee. Mr. Pisano is Chair of this Committee.


4)	Member of the Governance Committee. Mr. Lievonen is Chair of this Committee.


5)	Member of the Science and Technology Committee. Dr.'s Rice and Seizinger serve as Co-Chairs of this Committee.


6)	Mr. Pisano, as Chair of the Board, serves as an ex-officio member of the Governance and Science and Technology Committees.

As at March 27, 2017 , the directors and senior officers as a group beneficially owned, directly or indirectly, 430,350 of our common shares, representing 0.35% of the issued and outstanding common shares.

Certain of our directors are associated with other companies, which may give rise to conflicts of interest. In accordance with the ABCA, directors who have a material interest in any person who is a party to a material contract or a proposed material contract with us are required, subject to certain exceptions, to disclose that interest and abstain from voting on any resolution to approve that contract. In addition, the directors are required to act honestly and in good faith with a view to the best interests of Oncolytics Biotech Inc.

None of our directors have been a director or officer of a company that went bankrupt in the last 10 years.

None of our directors or officers are related by blood, marriage or adoption to any other director or officer.

We are not aware of any arrangement or understanding with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or officer.


B.	Compensation

Directors

The following table sets forth information concerning the total compensation paid in 2016 to each director.



Name	Fees Earned ($) ⁽¹⁾	Share- Based Awards ($) ⁽²⁾	Option- Based Awards ($) ⁽²⁾	Non-Equity Incentive Plan Compensation ($)	Pension Value ($)	All Other Compensation ($)	Total ($)
Jim Dinning ⁽³⁾	15,000	Nil	Nil	Nil	N/A	Nil	15,000
Angela Holtham	80,457	26,263	Nil	Nil	N/A	Nil	106,720
Mark Lievonen	72,922	26,263	Nil	Nil	N/A	Nil	99,185
Wayne Pisano	75,422	50,691	Nil	Nil	N/A	Nil	126,113
William Rice	71,672	26,263	Nil	Nil	N/A	Nil	97,935
Bob Schultz ⁽⁴⁾	18,955	Nil	Nil	Nil	N/A	Nil	18,955
Bernd Seizinger	57,337	40,169	Nil	Nil	N/A	Nil	97,506

Note:


(1)	Directors are paid fees in US Dollars. These amounts are presented in Canadian dollars and have been converted at a US/CDN exchange rate of $1.3427.


(2)	The value of share based and option based awards are based on the grant date assumptions as disclosed in note 8 " Share Based Payments" in our 2016 audited consolidated financial statements.


(3)	Mr. Dinning resigned as a director on March 10, 2016. Amounts reflect compensation received by Mr. Dinning prior to his resignation.


(4)	Mr. Schultz did not stand for re-election to the Board at the annual general meeting of the Company held on May 5, 2016. Amounts reflect compensation received by Mr. Schultz prior to this date.

Officers

Summary Compensation Table

The following table sets forth information concerning the total compensation paid to our officers in 2016 .



Name and principal position	Year	Salary $	Share- based awards $ ⁽¹⁾	Option- based awards $ ⁽¹⁾	Bonus $	Non-equity incentive plan compensation $	Pension value $	All other compensation $ ⁽²⁾	Total compensation $

Dr. Matthew C. Coffey ⁽³⁾⁽⁴⁾	2016	406,714	125,400	—	101,678	N/A	N/A	59,674	693,466
Interim Chief Executive	2015	380,107	N/A	173,307	79,822	N/A	N/A	57,039	690,275
Officer and Chief Operating Officer	2014	370,475	N/A	—	—	N/A	N/A	54,950	425,425

Dr. Bradley G.	2016	519,401	N/A	—	—	N/A	N/A	1,402,387	1,921,788
Thompson ⁽³⁾⁽⁴⁾	2015	551,937	N/A	287,113	154,542	N/A	N/A	71,215	1,064,807
Former Chief Executive Officer	2014	537,950	N/A	—	—	N/A	N/A	69,029	606,979

Kirk J. Look	2016	325,584	79,800	—	81,396	N/A	N/A	52,981	539,761
Chief Financial Officer	2015	319,200	N/A	109,556	67,032	N/A	N/A	52,014	547,802
	2014	284,200	N/A	—	—	N/A	N/A	48,466	332,666

Dr. Andres A.	2016	68,684	78,000	23,285	—	N/A	N/A	6,354	176,323
Gutierrez ⁽⁵⁾⁽⁶⁾	2015	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A
Chief Medical Officer	2014	N/A	N/A	N/A	N/A	N/A	N/A	N/A	N/A

Dr. George Gill ⁽⁶⁾	2016	455,028	N/A	—	—	N/A	N/A	42,090	497,118
Senior Vice President,	2015	438,371	N/A	81,695	61,371	N/A	N/A	40,549	621,986
Regulatory Affairs & Chief Safety Officer	2014	367,452	N/A	—	—	N/A	N/A	33,990	401,442

Dr. Alan J. Tuchman ⁽⁶⁾⁽⁷⁾	2016	210,722	N/A	—	—	N/A	N/A	19,492	230,214
Chief Neuro Oncology	2015	202,990	N/A	37,906	28,418	N/A	N/A	18,777	288,091
Research Officer	2014	165,825	N/A	—	—	N/A	N/A	15,339	181,164

Notes:


(1)	The value of share and option based awards are based on the grant date assumptions as disclosed in note 8 " Share Based Payments" in our 2016 audited consolidated financial statements.


(2)	The dollar amounts set forth under this column are related to contributions to the officer's respective retirement savings plan and amounts provided for health care benefits by the Company. With regards to Dr. Thompson, the amount also includes a retirement allowance of $1,330,828, which will be paid over twelve months beginning December 2016.


(3)	On November 2, 2016, Dr. Thompson resigned as President and Chief Executive Officer and Dr. Coffey was appointed Interim President and Chief Executive Officer. Dr. Coffey was appointed President and Chief Executive Officer on January 19, 2017.


(4)	None of the compensation paid to Dr. Thompson and Dr. Coffey related to their roles as directors of the Company.


(5)	Dr. Gutierrez was appointed Chief Medical Officer of the Company on October 31, 2016.


(6)	US Employees are paid salaries, bonuses and other compensation in US Dollars. These amounts are presented in Canadian dollars and have been converted at a US/CDN exchange rate of $1.3427, 1.3840 and $1.1601 for the years 2016, 2015 and 2014, respectively.


(7)	Dr. Tuchman was formerly the Senior VP, Medical and Clinical Affairs of the Company. Dr. Tuchman became the Chief Neuro Oncology Research Officer of the Company on October 31, 2016.

Narrative Discussion

We have entered into employment agreements with each of the following Executive Officers (each an "Employment Agreement"). Pursuant to the terms of the Employment Agreements,



Name and principal position	Year	Salary $

Dr. Matthew C. Coffey	2017	430,000
Chief Executive Officer

Kirk J. Look, C.A.	2017	345,000
Chief Financial Officer

Dr. Andres A. Gutierrez ⁽¹⁾	2017	300,000
Chief Medical Officer

Dr. George Gill, MD ⁽¹⁾	2017	338,890
Senior Vice President, Regulatory Affairs and Chief Safety Officer

Dr. Alan J Tuchman, MD, MBA (FAAN) ⁽¹⁾	2017	156,939
Chief Neuro Oncology Research Officer

Note 1: US Employees are paid in US Dollars and salaries above for those US employees are presented in US dollars.

Further, each Executive Officer is entitled to additional benefits and performance-based bonuses. As well, the Employment Agreements provide that each Executive Officer is subject to certain confidentiality and non-competition restrictions during and following the course of their respective employment with the Company. Each Employment Agreement shall continue until terminated by either party in accordance with the notice provisions thereof.

The Company does not provide pension plan benefits to its Executive Officers and employees. The Company does not currently have a stock appreciation rights plan.

Termination of Employment or Change of Control

The following table reflects amounts payable to the Executive Officers (other than Dr. Thompson who resigned as President and Chief Executive Officer of the Company on November 2, 2016) based on each Executive Officer's employment agreement assuming that their employment was terminated on December 31, 2016 without cause or due to a change of control of the Company.



Name	Termination without Cause Severance ⁽¹⁾ $	Change of Control Severance ⁽²⁾ $

Dr. Matthew C. Coffey Chief Executive Officer	492,235	984,470

Kirk J. Look, C.A. Chief Financial Officer	400,223	800,445

Dr. Andres A. Gutierrez ⁽³⁾ Chief Medical Officer	328,500	657,000

Dr. George Gill, MD ⁽³⁾ Senior Vice President, Clinical and Regulatory Affairs	370,987	741,974

Dr. Alan J Tuchman, MD, MBA (FAAN) ⁽³⁾ Chief Neuro Oncology Officer	172,206	344,412

Notes:

(1)

As at December 31, 2016 , all options granted to Officers had fully vested except for the options granted on December 1, 2015 and November 10, 2016. As a result, all Officers shall be entitled to exercise all or any part of their vested Options, within the period ending on the earlier of the date of expiration of the Option and the 90th day after the date such Officer is terminated unless otherwise approved by the Board of Directors.


(2)	On a change of control of the Company, the Officers shall be entitled to exercise all or a part of their Options, whether vested or not, within the period ending on the earlier of the date of expiration of the Option and the 90th day after the date such Officer is terminated.


(3)	US Employees are paid in US Dollars and are presented in US dollars.


C.	Board Practices

Our directors are elected by the shareholders at each Annual General Meeting (or Annual Special Meeting) and typically hold office until the next meeting, at which time they may be re-elected or replaced. Casual vacancies on the board are filled by the remaining directors and the persons filling those vacancies hold office until the next Annual General Meeting (or Annual Special Meeting), at which time they may be re-elected or replaced. The officers are appointed by the Board of Directors and hold office indefinitely at the pleasure of the Board of Directors.



Name and Place of Residence	Position with the Corporation	Director of the Corporation Since	Date of Expiration of Current Term of Office
Matthew C. Coffey Ph.D Alberta, Canada	President and Chief Executive Officer and Director	May 11, 2011	Date of 2017 Annual General Meeting of the Shareholders
Angela Holtham FCPA, FCMA, ICD.D Ontario, Canada	Director	June 18, 2014	Date of 2017 Annual General Meeting of the Shareholders
J. Mark Lievonen, CM, FCPA, FCA, LLD Ontario, Canada	Director	April 5, 2004	Date of 2017 Annual General Meeting of the Shareholders
Wayne Pisano, MBA New Jersey, USA	Chair and Director	May 9, 2013	Date of 2017 Annual General Meeting of the Shareholders
William G. Rice, Ph.D. California, USA	Director	June 8, 2015	Date of 2017 Annual General Meeting of the Shareholders
Bernd R. Seizinger, M.D., Ph.D. New Jersey, USA and Munich Germany	Director	June 8, 2015	Date of 2017 Annual General Meeting of the Shareholders

Directors’ Contracts

We receive a director’s consent from each of the independent directors upon their acceptance of their director’s position. We also enter into an Indemnity Agreement and Directors Confidentiality and Intellectual Property Assignment Agreement with each director.

The Company does not have any contracts with any of its directors which provide for benefits upon the termination of employment.

Compensation of Directors

Each director who is not a salaried employee of the Company is entitled to the following fees:

Annual Retainer (USD):

Board chair annual retainer $80,000

Audit Committee chair retainer $60,000

Governance & Compensation Committee chair retainers $50,000

All other directors’ retainer $40,000

Additional Retainer for Non-Chair Directors Serving on the Following Board Committees (USD):

Audit $10,000

Governance $5,000

Compensation $5,000

Science & Technology $15,000

Directors, annually, may opt to take up to 100% of their respective annual retainer in restricted share awards.

Restricted Share Units

In addition to the combined retainer, the Corporation will grant annually $20,000 of restricted share awards that will vest over a three year period. The annual restricted share unit award will be granted on October 1 of each year.

We also grant to directors, from time to time, stock options in accordance with the Option Plan and the reimbursement of any reasonable expenses incurred by them while acting in their directors' capacity. During the year ended December 31, 2016, total compensation of $561,414 was paid to the independent directors which consisted of fee payments of $391,765 , share based awards of $169,649 and option based awards of $0 .

Compensation Committee

The Corporation has formed a compensation committee (the “ Compensation Committee ”) which consists of two outside, independent directors, Dr. Seizinger and Ms. Holtham, and Mr. Pisano, the Chair of the Board. Mr. Pisano is the Chair of the Compensation Committee. No member of the Compensation Committee has been an employee officer of the Company or any of its affiliates.

The objectives of the Corporation’s compensation arrangements are: (i) to attract and retain key personnel; (ii) to encourage commitment to the Corporation and its goals; (iii) to align executive interests with those of its shareholders; and (iv) to reward executives for performance in relation to overall corporate progress goals.

The key elements of the compensation program are the base salary, health benefits, and payments allocated to employees to be directed by them to their personal retirement accounts. Bonuses and the granting of Options (as defined herein) and Share Awards (as defined herein) are also part of the Corporation’s compensation program and are based on corporate performance. Part of corporate performance includes goals and objectives that are determined based on the strategic planning and budgeting process, which is conducted at least annually. The elements of the compensation plan are intended to reward performance, and the various elements are intended to provide a blend of short-term and long-term incentives to align the interests of management and the shareholders.

In arriving at its recommendations for compensation, the Compensation Committee considers the long-term interests of the Corporation as well as its current stage of development and the economic environment within which it operates. The market for biotechnology companies in the development phase is challenging. Based on these factors, the Compensation Committee recognized the need to strike a balance between compensation to retain employees and resources expended to maintain operations. In the past, the Compensation Committee has engaged specialist consultants to assist in benchmarking its compensation practices and provide recommendations to the committee with respect to compensation for directors and officers, however, no such consultant was engaged in 2016.

Following a review of the risks in the Corporation’s compensation policies and practices, the Compensation Committee found no risks that are reasonably likely to have a material adverse effect on the Corporation. The Compensation Committee’s role of approving the compensation policies and practices includes considering whether the compensation policies and practices could encourage an officer of the Company to take inappropriate or excessive risks.

Under the Corporation’s corporate trading policy, insiders (including officers and directors) are not permitted to hedge their position in Common Shares, Options, Share Awards, deferred share units, performance share units, debentures or other debt instruments by use of any financial instrument, which would include but is not limited to options, puts, calls, warrants or short sells, designed to benefit the holder from a change in the market value of the Common Shares of the Corporation.

For 2016 , the following guidelines were employed by the Board in granting bonuses, Options and Share Awards to the Corporation’s executive and senior officers. For 2017 , similar guidelines are expected to be applied.

Annual Bonus, Option Grants and Share Award Grants

Each of the Chief Executive Officer and Chief Financial Officer of the Corporation is eligible for a cash bonus of up to 40% of his base salary, the Chief Medical Officer is eligible for a cash bonus of up to 35% of his base salary and the other senior officers are eligible for a cash bonus of up to 15 to 20% of their respective base salaries. In addition, when available, the officers are eligible for a combination of Option and Share Award grants. The amount of each grant is determined and approved by the Board with the actual bonus provided and the number of Options and Share Awards granted based upon the overall performance of the Corporation as assessed by the Compensation Committee and approved by the Board. The overall performance of the Corporation is determined by the annual goals and objectives approved by the Board and includes specific objectives with respect to the clinical, manufacturing, and intellectual property plans in combination with financial goals. Previous grants are taken into account when considering new grants of Options and Share Awards.

Compensation Committee Mandate


1.	Policy Statement

It is the policy of Oncolytics Biotech Inc. (the "Corporation") to establish and maintain a Compensation Committee (the "Committee"), composed entirely of independent directors, to assist the Board of Directors of the Corporation (the "Board") in carrying out its responsibility for the Corporation’s human resources and compensation policies and processes. The Committee will be provided with resources commensurate with the duties and responsibilities assigned to it by the Board, including

administrative support. If determined necessary by the Committee, it will have the discretion to investigate and conduct reviews of any human resource or compensation matter including the standing authority to retain experts and special counsel.


2.	Composition of Committee

(a)

The Committee shall consist of a minimum of three (3) directors. The Board shall appoint the members (“Members”) of the Committee and may seek the advice and assistance of the Governance Committee in identifying qualified candidates. The Board shall appoint one Member of the Committee to be the Chair of the Committee, or delegate such authority to appoint the Chair of the Committee to the Committee.


(b)	The Chair of the Committee shall be responsible for the leadership of the Committee, including preparing or approving the agenda, presiding over the meetings, and making committee assignments.

(c)

Each director appointed to the Committee by the Board shall be an outside director who is unrelated. An outside, unrelated director is a director who meets the requirements of NASDAQ Rule 5605 and National Instrument 58-101 who is independent of management and is free from any interest, any business or other relationship which could, or could reasonably be perceived, to materially interfere with the director’s ability to be independent of management and to act with a view to the best interests of the Corporation, including, but not limited to the source of compensation of such director, including any consulting, advisory or other compensatory fee paid by the Corporation to such director and whether such director is affiliated with the Corporation, a subsidiary of the Corporation or an affiliate of a subsidiary of the Corporation other than interests and relationships arising from shareholding. In determining whether a director is independent of management, the Board shall make reference to the then current legislation, rules, policies and instruments of applicable regulatory authorities.

(d)

Each Member shall be appointed by the Board annually at the next scheduled meeting of the Board following the AGM. The Members will be appointed to hold office until the next annual general meeting of shareholders or until their successors are appointed. The Board may remove a Member at any time and may fill any vacancy occurring on the Committee. A Member may resign at any time and a Member will automatically cease to be a Member upon ceasing to be a director.


(e)	The Chair of the Board shall be an ex officio Member of the committee.


3.	Meetings of the Committee


(a)	The Committee shall meet a minimum of once per year at such time and place as may be designated by the Chair of the Committee and whenever a meeting is requested by the Board, a Member of the Committee, or the Chief Executive Officer of the Corporation (the "CEO").


(b)	Notice of each meeting of the Committee shall be given to each Member of the Committee. The CEO shall attend each meeting of the Committee whenever requested to do so by a Member of the Committee.


(c)	Notice of a meeting of the Committee shall:


(i)	be in writing, including by electronic communication facilities;


(ii)	state the nature of the business to be transacted at the meeting in reasonable detail;


(iii)	to the extent practicable, be accompanied by copies of documentation to be considered at the meeting; and


(iv)	be given at least two business days prior to the time stipulated for the meeting or such shorter period as the Members of the Committee may permit.


(d)	A quorum for the transaction of business at a meeting of the Committee shall consist of a majority of the Members of the Committee.


(e)	A Member or Members of the Committee may participate in a meeting of the Committee by means of such telephonic, electronic or other communication facilities, as permits all persons participating in the meeting to communicate adequately with each other. A Member participating in such a meeting by any such means is deemed to be present at the meeting.

(f)

In the absence of the Chair of the Committee, the Members of the Committee shall choose one of the Members present to be Chair of the meeting. If the Board has appointed a Corporate Secretary, the Corporate Secretary shall be the secretary of the meeting. If the Board has not appointed a Corporate Secretary, the Members of the Committee shall choose one of the persons present to be the secretary of the meeting or may have another person who is not a Member of the Committee present to record the minutes of the meeting.


(g)	Minutes shall be kept of all meetings of the Committee and shall be signed by the Chair and the secretary of the meeting. Minutes of the meetings of the Committee shall be distributed to members of the Committee, to other members of the Board and, with the exception of “ in camera ” items, to the Chief Executive Officer and Chief Financial Officer.


4.	Duties and Responsibilities of the Committee


(a)	The Committee shall, at the earliest opportunity after each meeting, report to the Board the results of its activities and any reviews undertaken and make recommendations to the Board as deemed appropriate.


(b)	The Committee’s primary duties and responsibilities are to review and make recommendations to the Board in respect of:


(i)	human resource policies, practices and structures (to monitor consistency with the Corporation’s goals and near and long-term strategies, support of operational effectiveness and efficiency, and maximization of human resources potential);


(ii)	compensation policies and guidelines;


(iii)	management incentive and perquisite plans and any non-standard remuneration plans;


(iv)	senior management, executive and officer appointments and their compensation;


(v)	management succession plans, management training and development plans, termination policies and termination arrangements; and


(vi)	Board compensation matters.


(c)	In carrying out its duties and responsibilities, the Committee shall:


(i)	annually assess and make a recommendation to the Board with regard to the competitiveness and appropriateness of the compensation package of the CEO, all other officers of the Corporation and such other key employees of the Corporation or any subsidiary of the Corporation as may be identified by the CEO and approved by the Committee (collectively, the "Designated Employees");


(ii)	annually review the performance goals and criteria for the CEO and evaluate the performance of the CEO against such goals and criteria and recommend to the Board the amount of regular and incentive compensation to be paid to the CEO;


(iii)	annually, review and make a recommendation to the Board regarding the CEO’s performance evaluation of Designated Employees and the CEO’s recommendations with respect to the amount of regular and incentive compensation to be paid to such Designated Employees;


(iv)	review and make a recommendation to the Board regarding any employment contracts or arrangements with each of the Designated Employees, including any retiring allowance arrangements or any similar arrangements to take effect in the event of a termination of employment;


(v)	periodically, review the compensation philosophy statement of the Corporation and make recommendations for change to the Board as considered necessary;


(vi)	from time to time, review and make recommendations to the Board in respect of the design, benefit provisions, investment options and text of applicable pension, retirement and savings plans or related matters;


(vii)	annually, in conjunction with the Corporation’s general and administrative budget, review and make recommendations to the Board regarding compensation guidelines for the forthcoming budget period;


(viii)	when requested by the CEO, review and make recommendations to the Board regarding short term incentive or reward plans and, to the extent delegated by the Board, approve awards to eligible participants;


(ix)	review and make recommendations to the Board regarding incentive stock option plans or any other long term incentive plans and to the extent delegated by the Board, approve grants to participants and the magnitude and terms of their participation;


(x)	as required, fulfill the obligations assigned to the Committee pursuant to any other employee benefit plans approved by the Board;


(xi)	annually, prepare or review the report on executive compensation required to be disclosed in the Corporation’s information circular or any other human resource or compensation matter required to be publicly disclosed by the Corporation;


(xii)	annually, review and make a recommendation to the Board regarding the compensation of the Board of Directors;

(xiii)

as determined in the sole discretion of the Committee, retain independent advice in respect of human resources and compensation matters from a compensation consultant, legal counsel or other advisor (the “Advisor”) and, if deemed necessary by the Committee, meet separately with the Advisor; the Committee shall be directly responsible for the appointment, compensation and oversight of the work of the Advisor retained by the Committee;


(xiv)	select, or receive advice from, an Advisor to the Committee, other than in-house legal counsel, after taking into consideration the following factors:


(i)	the provision of other services to the Corporation by the entity that employs the Advisor ;


(ii)	the amount of fees received from the Corporation by the entity that employs the Advisor, as a percentage of the total revenue of the entity that employs the Advisor;


(iii)	the policies and procedures of the entity that employs the Advisor that are designed to prevent conflicts of interest;


(iv)	any business or personal relationship of the Advisor with a member of the Board;


(v)	any stock of the Corporation owned by the Advisor; and


(vi)	any business or personal relationship of the Advisor or the entity employing the Advisor with an executive officer of the Corporation;

provided however, none of the above factors shall prevent the Committee from retaining any Advisor as the Committee deems appropriate, in its sole discretion, after consideration of the above factors.


(xv)	review and consider the implications of the risks associated with the Corporation’s compensation policies and practices, specifically, situations that could potentially encourage an insider to expose the Corporation to inappropriate or excessive risks; and


(xvi)	assess, on an annual basis, the adequacy of this Mandate and the performance of the Committee.


(d)	In addition to the foregoing, the Committee shall undertake on behalf of the Board such other initiatives as may be necessary or desirable to assist the Board in discharging its responsibility for the Corporation’s human resources development, performance evaluation, compensation and succession planning programs are in place and operating effectively.


(e)	The Committee shall assess, on an annual basis, the adequacy of this Mandate and the performance of the Committee.


5.	Reporting

The Committee shall, at the earliest opportunity after each meeting, report to the Board the results of its activities and any reviews undertaken and make recommendations to the Board as deemed appropriate.


6.	External Advisors

If, in order to properly discharge its function, duties and responsibilities, it is necessary, in the opinion of the Committee that the Committee obtains the advice and counsel of external advisors, the Chair shall, at the request of the Committee, engage the necessary experts. The Committee shall keep the Board apprised of both the selection of experts and the expert’s findings through the Committee’s regular reports to the Board.


7.	Date of Mandate

This Mandate was last reviewed, amended and approved by the Board on March 9, 2017.

Audit Committee

The Corporation has formed an Audit Committee in accordance with Section 3(a)(58)(A) of the United States Securities Exchange Act of 1934, as amended ("Exchange Act"), consisting of three independent directors pursuant to the Rule 5605(a)(2) of the NASDAQ Capital Market and Rule 10A-3 of the Exchange Act: Ms. Angela Holtham, Mr. Lievonen and Mr. Pisano, none of whom are nor have been employees or officers of the Company or any of its affiliates. Ms. Holtham is presently the Chair of the Audit Committee. Each Audit Committee member is financially literate.

Audit Committee Mandate


1.	Policy Statement

It is the policy of Oncolytics Biotech Inc. (the "Corporation") to establish and maintain an Audit Committee, composed entirely of independent directors, to assist the Board of Directors (the "Board") in carrying out their oversight responsibility for the Corporation’s internal controls, financial reporting and financial risk management processes. The Audit Committee will be provided with resources commensurate with the duties and responsibilities assigned to it by the Board including administrative support. If determined necessary by the Audit Committee, it will have the discretion to institute investigations of improprieties, or suspected improprieties within the scope of its responsibilities, including the standing authority to retain special counsel or experts.


2.	Composition of the Committee


(a)	The Audit Committee shall consist of a minimum of three (3) directors. The Board shall appoint the members (“Members”) of the Audit Committee and may seek the advice and assistance of the Governance Committee in identifying qualified candidates. The Board shall appoint one Member of the Audit Committee to be the Chair

of the Audit Committee, or delegate such authority to appoint the Chair of the Audit Committee to the Audit Committee.


(b)	The Chair of the Committee shall be responsible for leadership of the Committee, including preparing or approving the agenda, presiding over the meetings, and making committee assignments.

(c)

Each director appointed to the Audit Committee by the Board shall be an outside director who is unrelated and independent. An outside, unrelated and independent director is a director who meets the requirements of NASDAQ Rule 5605(a)(2) and National Instrument 52-110. A director appointed to the audit committee shall also meet the requirements of NASDAQ Rule 5605(c)(2) and Rule 10A-3(b)(1) of the United States Securities Exchange Act of 1934, as amended. Such director shall be independent of management and free from any interest, any business or other relationship which could, or could reasonably be perceived, to materially interfere with the director’s ability to act with a view to the best interests of the Corporation, other than interests and relationships arising from shareholding. In determining whether a director is independent of management, the Board shall make reference to the abovementioned rules and any applicable revisions thereto, and any additional relevant and then current legislation, rules, policies and instruments of applicable regulatory authorities.

(d)

Each Member of the Audit Committee shall be financially literate. In order to be financially literate, a director must be, at a minimum, able to read and understand financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by the Corporation's financial statements. At least one Member shall have accounting or related financial management expertise, meaning the ability to analyze and interpret a full set of financial statements, including the notes attached thereto, in accordance with generally accepted accounting principles and shall be a “financial expert” as defined in Item 407 of Regulation S-K promulgated by the U.S. Securities and Exchange Commission and “financially sophisticated” as defined in NASDAQ Rule 5605(c)(2).


(e)	In determining whether a Member of the Audit Committee is financially literate or has accounting or related financial expertise, reference shall be made to the then current legislation, rules, policies and instruments of applicable regulatory authorities.

(f)

Each Member of the Audit Committee shall be appointed by the Board annually at the next scheduled meeting of the Board following the AGM. The Members will be appointed to hold office until the next annual general meeting of shareholders or until their successors are appointed. The Board may remove a Member at any time and may fill any vacancy occurring on the Audit Committee. A Member may resign at any time and a Member will automatically cease to be a Member upon ceasing to be a director.


(g)	The Chair of the Board shall be an ex officio Member of the committee.


3.	Meetings of the Committee

(a)

The Audit Committee shall convene a minimum of four times each year at such times and places as may be designated by the Chair of the Audit Committee and whenever a meeting is requested by the Board, a Member of the Audit Committee, the auditors, or senior management of the Corporation. Scheduled meetings of the Audit Committee shall correspond with the review of the year-end and quarterly financial statements and management discussion and analysis.


(b)	Notice of each meeting of the Audit Committee shall be given to each Member of the Audit Committee and to the auditors, who shall be entitled to attend each meeting of the Audit Committee and shall attend whenever requested to do so by a Member of the Audit Committee.


(c)	Notice of a meeting of the Audit Committee shall:


(i)	be in writing, including by electronic communication facilities;


(ii)	state the nature of the business to be transacted at the meeting in reasonable detail;


(iii)	to the extent practicable, be accompanied by copies of documentation to be considered at the meeting; and


(iv)	be given at least two business days prior to the time stipulated for the meeting or such shorter period as the Members of the Audit Committee may permit.


(d)	A quorum for the transaction of business at a meeting of the Audit Committee shall consist of a majority of the Members of the Audit Committee. However, it shall be the practice of the Audit Committee to require review, and, if necessary, approval of certain important matters by all Members of the Audit Committee.


(e)	A Member or Members of the Audit Committee may participate in a meeting of the Audit Committee by means of such telephonic, electronic or other communication facilities, as permits all persons participating in the meeting to communicate adequately with each other. A Member participating in such a meeting by any such means is deemed to be present at the meeting.


(f)	In the absence of the Chair of the Audit Committee, the Members of the Audit Committee shall choose one of the Members present to be Chair of the meeting. If the Board has appointed a Corporate Secretary, the Corporate Secretary shall be the secretary of the meeting. If the Board has not appointed a Corporate Secretary, the Members

of the Committee shall choose one of the persons present to be the secretary of the meeting or may have another person who is not a Member of the Committee present to record the minutes of the meeting.


(g)	A member of the Board, senior management of the Corporation and other parties may attend meetings of the Audit Committee; however the Audit Committee (i) shall, at each meeting, meet with the external auditors independent of other individuals other than the Audit Committee and (ii) may meet separately with management.


(h)	The Chief Executive Officer and the Chief Financial Officer shall each attend meetings of the Audit Committee when requested to do so by a Member of the Audit Committee.


(i)	Minutes shall be kept of all meetings of the Audit Committee and shall be signed by the Chair and the secretary of the meeting. Minutes of the meetings of the Audit Committee shall be distributed to Members of the Audit Committee, to other members of the Board and, with the exception of “ in camera ” items, to the Chief Executive Officer and Chief Financial Officer.


4.	Duties and Responsibilities of the Committee


(a)	The Audit Committee’s primary duties and responsibilities are to:


(i)	identify and monitor the management of the principal risks that could impact the financial reporting of the Corporation;


(ii)	monitor the integrity of the Corporation’s financial reporting process and system of internal controls regarding financial reporting and accounting compliance;

(iii)

monitor the independence and performance of the Corporation’s external auditors. This will include receipt, review and evaluation, at least annually, of a formal written statement from the independent auditors confirming their independence, and qualifications, including their compliance with the requirements of the relevant oversight boards and actively engage in a dialogue with the auditors with respect to any disclosed relationships or services that may impact objectivity and independence of the auditors and take, or recommend that the full board take, appropriate action to oversee the independence of the external auditors;


(iv)	deal directly with the external auditors to pre-approve external audit plans, other services (if any) and fees;


(v)	directly oversee the external audit process and results (in addition to items described in Section 4(d) below);


(vi)	provide an avenue of communication among the external auditors, management and the Board;


(vii)	carry out a review designed to ensure that an effective "whistle blowing" procedure exists to permit stakeholders to express any concerns to an appropriately independent individual;


(viii)	pre-approve any related party transactions to be entered into by the Company, and ensure appropriate disclosure thereof;


(ix)	ensure financial disclosure incorporates inclusion of any material correcting adjustments required by the external auditors; and


(x)	require and ensure that the external auditors are directly responsible to the Audit Committee, to whom they report.


(b)	The Audit Committee shall have the authority to:


(i)	inspect any and all of the books and records of the Corporation and its affiliates;


(ii)	discuss with the management of the Corporation and its affiliates, any affected party and the external auditors, such accounts, records and other matters as any Member of the Audit Committee considers necessary and appropriate;


(iii)	engage independent counsel and other advisors as it determines necessary to carry out its duties. The Audit Committee shall keep the Board apprised of both the selection of experts and the expert’s findings through the Audit Committee’s regular reports to the Board;


(iv)	communicate directly with the external auditors; and


(v)	set and pay the compensation for (A) any external auditor engaged for the purpose of preparing or issuing an audit report or performing other audit, review, or attest services for the Corporation, (b) any advisors employed by the Audit Committee, and (C) ordinary administrative expenses of the Audit Committee.


(c)	The Audit Committee shall, at the earliest opportunity after each meeting, report to the Board the results of its activities and any reviews undertaken and make recommendations to the Board as deemed appropriate.


(d)	The Audit Committee shall:


(i)	review the audit plan with the Corporation’s external auditors and with management;


(ii)	review with the independent auditors the matters required to be discussed relating to the conduct of the audit, including (a) the proposed scope of their examination, with emphasis on accounting and financial areas where the Committee, the independent auditors or management believes special attention should

be directed; (b) the results of their audit, including their audit findings report and resulting letter, if any, of recommendations for management; (c) their evaluation of the adequacy and effectiveness of the Company’s internal controls over financial reporting; (d) significant areas of disagreement, if any, with management; (e) co-operation received from management in the conduct of the audit; (f) significant accounting, reporting, regulatory or industry developments affecting the Company; and (g) review any proposed changes in major accounting policies or principles proposed or contemplated by the independent auditors or management, the presentation and impact of material risks and uncertainties and key estimates and judgements of management that may be material to financial reporting;


(iii)	review with management and with the external auditors material financial reporting issues arising during the most recent fiscal period and the resolution or proposed resolution of such issues;


(iv)	review any problems experienced or concerns expressed by the external auditors in performing an audit, including any restrictions imposed by management or material accounting issues on which there was a disagreement with management;


(v)	review with senior management the process of identifying, monitoring and reporting the principal risks affecting financial reporting;

(vi)

review audited annual financial statements (including management discussion and analysis) and related documents in conjunction with the report of the external auditors and obtain an explanation from management of all material variances between comparative reporting periods. Without restricting the generality of the foregoing, the committee will discuss with management and the independent auditors to the extent required, any issues and disclosure requirements regarding (a) the use of “pro forma” or “adjusted” non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies, (b) any off balance sheet arrangements, and (c) any going concern qualification.


(vii)	consider and review with management, the internal control memorandum or management letter containing the recommendations of the external auditors and management’s response, if any, including an evaluation of the adequacy and effectiveness of the internal financial controls of the Corporation and subsequent follow-up to any identified weaknesses;


(viii)	review with financial management and the external auditors the quarterly unaudited financial statements, management discussion and analysis, letter to shareholders and press release (all to be considered the “Quarterly Financial Reports”) and recommend the Quarterly Financial Reports to the Board for approval by the Board before release to the public;


(ix)	before release, review and if appropriate, recommend for approval by the Board, all public disclosure documents containing audited or unaudited financial information, including any prospectuses, financial statements, including the notes thereto, annual reports, annual information forms, management discussion and analysis and press releases; and


(x)	oversee, any of the financial affairs of the Corporation or its affiliates, and, if deemed appropriate, make recommendations to the Board, external auditors or management.


(e)	The Audit Committee shall:


(i)	evaluate the independence and performance of the external auditors;


(ii)	recommend the nomination of the external auditors to the Board for appointment by the shareholders at the Corporation’s annual general meeting;


(iii)	recommend the discharge of the external auditor when circumstances warrant;


(iv)	monitor the rotation of the audit partner of the external auditors as required by applicable law or regulations;


(v)	consider the recommendations of management in respect of the appointment of the external auditors;

(vi)

pre-approve all non-audit services to be provided to the Corporation or its subsidiary entities by its external auditors, or the external auditors of affiliates of the Corporation subject to the over-riding principle that the external auditors not being permitted to be retained by the Corporation to perform specifically listed categories of non-audit services as set forth by the Securities and Exchange Commission as well as internal audit outsourcing services, financial information systems work and expert services. Notwithstanding, the foregoing the pre-approval of non-audit services may be delegated to a Member of the Audit Committee, with any decisions of the Member with the delegated authority reporting to the Audit Committee at the next scheduled meeting;


(vii)	approve the engagement letter for non-audit services to be provided by the external auditors or affiliates, together with estimated fees, and considering the potential impact of such services on the independence of the external auditors;


(viii)	when there is to be a change of external auditors, review all issues and provide documentation related to the change, including the information to be included in the Notice of Change of Auditors and

documentation required pursuant to the then current legislation, rules, policies and instruments of applicable regulatory authorities and the planned steps for an orderly transition period; and


(ix)	review all reportable events, including disagreements, unresolved issues and consultations, as defined by applicable securities policies, on a routine basis, whether or not there is to be a change of external auditors.


(f)	The Audit Committee shall enquire into and determine the appropriate resolution of any conflict of interest in respect of audit or financial matters, which are directed to the Audit Committee by any member of the Board, a shareholder of the Corporation, the external auditors, or senior management.


(g)	The Audit Committee shall review the Corporation’s accounting and reporting of revenues, costs, liabilities and contingencies.


(h)	The Audit Committee shall establish and maintain procedures for:


(i)	the receipt, retention and treatment of complaints received by the Corporation regarding accounting, internal controls, or auditing matters; and


(ii)	the confidential, anonymous submission by employees of the Corporation or concerns regarding questionable accounting or auditing matters.


(i)	The Audit Committee shall review and approve the Corporation's hiring policies regarding partners and employees and former partners and employees of the present and former external auditors.


(j)	The Audit Committee shall review with the Corporation's legal counsel, on no less than an annual basis, any legal matter that could have a material impact on the Corporation's financial statements, and any enquiries received from regulators, or government agencies.


(k)	The Audit Committee shall review with management and the Corporation’s external auditors, on no less than an annual basis, any taxation matters that could have a material impact on the Corporation’s financial statements.


(l)	The Audit Committee, through the Chair, shall receive notice from management of any instance of non-trivial fraud or other failure or weakness of the control system promptly upon management becoming aware of such.


(m)	The Audit Committee shall review and approve the signing authority for the Corporation at least annually or when a change is required.


(n)	The Audit Committee shall assess, on an annual basis, the adequacy of this Mandate and the performance of the Audit Committee.


5.	Reporting


6.	Date of Mandate

This Mandate was last reviewed and approved by the Board on March 9, 2017.


D.	Employees

The following table sets out the number of our employees at the end of each of the last three fiscal years by activity and geographic location.



Activity	2016	2015	2014
Research and development	12	12	13
Operating	9	9	9
Total	21	21	22



Geographic location	2016	2015	2014
Canada	14	15	15
United States of America	3	2	3
Other	4	4	4
Total	21	21	22


E.	Share Ownership

The following table sets out the share ownership and options held of our directors and officers as of March 27, 2017 .



	Common Shares	% of Ownership ⁽¹⁾	Options ⁽²⁾	Exercise Price	Expiry Date	% of Outstanding ⁽³⁾
Officers
Dr. Bradley G. Thompson ⁽⁴⁾	672,900	**	149,160	2.22	November 15, 2017
			50,000	3.06	November 15, 2017
			215,000	6.72	November 15, 2017
			18,000	4.31	November 15, 2017
			240,000	3.89	November 15, 2017
			240,000	4.21	November 15, 2017
			360,000	1.74	November 15, 2017
			608,000	0.42	November 15, 2017
			1,880,160			1.93	%

Dr. Matthew C. Coffey	288,550	**	33,333	2.22	December 12, 2017
			30,000	3.06	December 8, 2019
			115,000	6.72	December 14, 2020
			18,000	4.31	July 27, 2021
			125,000	3.89	December 14, 2021
			125,000	4.21	December 17, 2022
			240,000	1.74	December 11, 2023
			734,000	0.42	December 1, 2025
			400,000	0.28	January 16, 2027
			1,820,333			1.60	%

Kirk J. Look	38,700	**	9,000	2.22	December 12, 2017
			10,000	3.06	December 8, 2019
			25,000	6.72	December 14, 2020
			35,000	3.89	December 14, 2021
			200,000	2.00	November 13, 2022
			40,000	4.21	December 17, 2022
			160,000	1.74	December 11, 2023
			464,000	0.42	December 1, 2025
			300,000	0.28	January 16, 2027
			1,243,000			0.97	%

Dr. Andres A. Gutierrez	—	**	150,000	0.26	November 10, 2026
			150,000			**

Dr. George Gill	30,000	**	16,667	2.22	December 12, 2017
			15,000	3.06	December 8, 2019
			25,000	6.72	December 14, 2020



			35,000	3.89	December 14, 2021
			40,000	4.21	December 17, 2022
			80,000	1.74	December 11, 2023
			250,000	0.42	December 1, 2025
			461,667			**

Dr. Alan J. Tuchman	100	**	10,000	2.85	May 11, 2020
			50,000	2.32	October 1, 2022
			15,000	4.21	December 17, 2022
			55,000	1.74	December 11, 2023
			116,000	0.42	December 1, 2025
			246,000			**

Directors
Angela Holtham	30,000	**	50,000	1.46	June 18, 2024
			50,000			**

Mark Lievonen	23,000	**	17,500	2.22	December 12, 2017
			17,500	3.06	December 8, 2019
			30,000	6.72	December 14, 2020
			35,000	3.89	December 14, 2021
			35,000	4.21	December 17, 2022
			35,000	1.74	December 11, 2023
			170,000			**

Wayne Pisano	20,000	**	50,000	2.89	May 9, 2023
			30,000	1.74	December 11, 2023
			80,000			**

William Rice	—	**	50,000	0.80	June 8, 2025
			50,000			**

Bernd Seizinger	—	**	50,000	0.80	June 8, 2025
			50,000			**

TOTAL:	430,350		4,321,000

** Less than 1% ownership

Notes:


1)	Based on 121,258,222 common shares issued and outstanding on March 24, 2017 .


2)	Options exercisable to acquire common shares.


3)	Ownership percentage assumes aggregate beneficial ownership of common shares, common shares acquirable upon exercise of options and fully diluted shares outstanding of 132,262,378 .


4)	Dr. Thompson resigned as President and Chief Executive Officer on November 2, 2016.

Restricted Share Units

The following table sets out the restricted share units held by our directors as of March 27, 2017 .



	RSUs Granted	RSUs Vested	RSUs Unvested
Angela Holtham	229,586	—	229,586
Mark Lievonen	229,586	—	229,586
Wayne Pisano	359,982	—	359,982
William Rice	229,586	—	229,586
Bernd Seizinger	274,089	—	274,089
	1,322,829	—	1,322,829

Performance Share Units

The following table sets out the performance share units held by our officers as of March 27, 2017 .



	PSUs Granted	PSUs Vested	PSUs Unvested
Matthew Coffey	330,000	—	330,000
Kirk Look	210,000	—	210,000
Andres Gutierrez	300,000	—	300,000
	840,000	—	840,000

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS


A.	Major Shareholders

We are not directly or indirectly owned or controlled by another corporation(s) or by any foreign government. To the knowledge of our directors and senior officers, as at March 27, 2017 , we are not aware of any shareholder who beneficially owns, directly or indirectly, or exercises control or direction over, our common shares carrying more than 5% of the voting rights.

Shares Held in the United States

The following table indicates, as of February 28, 2017 , the total number of common shares issued and outstanding, the approximate total number of holders of record of common shares, the number of holders of record of common shares with US addresses, the portion of the outstanding common shares held by US holders of record, and the percentage of common shares held by US holders of record. This table does not indicate beneficial ownership of common shares.



Total Number of Holders of Record	Total Number of Common Shares Issued and Outstanding	Number of US Holders of Record	Number of Common Shares Held by US Holders of Record	Percentage of Common Shares Held by US Holders of Record
192	121,258,222	51	47,730,085	39.36	%

Change of Control

As of March 27, 2017 , there were no arrangements known to the Company which may, at a subsequent date, result in a change of control of the Company.

Control by Others

To the best of the Company’s knowledge, the Company is not directly or indirectly owned or controlled by another corporation, any foreign government, or any other natural or legal person, severally or jointly.


B.	Related Party Transactions

We have entered into employment contracts with each of our officers (see Item 6). Since the beginning of the fiscal year ended December 31, 2016 up to March 27, 2017 , we did not enter into any other related party transactions and we do not have any loans outstanding with any officer, director or major shareholder.


C.	Interests of Experts and Council

Not Applicable

ITEM 8. FINANCIAL INFORMATION


A.	Consolidated Statements and Other Financial Statements

Financial Statements

The consolidated financial statements filed as part of this annual report are filed under Item 18.

Legal Proceedings

The directors and the management of the Company do not know of any material, active or pending, legal proceedings against them; nor is the Company involved as a plaintiff in any material proceeding or pending litigation.

The directors and the management of the Company know of no active or pending proceedings against anyone that might materially adversely affect an interest of the Company.

Dividend Policy

The Company has not paid any dividends on its common shares. The Company may pay dividends on its common shares in the future if it generates profits. Any decision to pay dividends on common shares in the future will be made by the board of directors on the basis of the earnings, financial requirements and other conditions existing at such time.


B.	Significant Changes

There have been no significant changes to our annual financial statements.

ITEM 9. THE OFFER AND LISTING


A.	Offering and Listing Details

Our Common Shares are traded on the TSX under the symbol ONC. As well, effective November 5, 2015, our Common Shares commenced quotations on the OTCQX International ("OTCQX") under the symbol ONCYF. Prior to November 5, 2015 our Common Shares traded on the NASDAQ Capital Market under the symbol ONCY. On November 5, 2015, our Common Shares were delisted from the NASDAQ. The last reported sales price of our common shares on March 24, 2017 on the TSX was Cdn $0.60 and on the OTCQX was US $0.45 . The following table sets forth the high and low per share sales prices for our common shares on the OTCQX, the NASDAQ and TSX for the periods indicated. In relation to the OTCQX, the following quotations reflect inter-dealer prices without retail mark-up, mark-down or commission and may not represent actual transactions. The following table sets forth the range of high and low bid prices during the periods indicated on the OTCQX.



Common Shares
	OTCQX		NASDAQ		TSX
	High	Low	High	Low	High	Low
2012	N/A	N/A	5.58	1.72	5.59	1.70
2013	N/A	N/A	4.93	1.45	4.94	1.54
2014	N/A	N/A	1.99	0.40	2.20	0.45
2015	0.37	0.24	1.16	0.29	1.44	0.35
2016	0.57	0.15	N/A	N/A	0.75	0.21

2015
Quarter 1	N/A	N/A	1.16	0.42	1.44	0.53
Quarter 2	N/A	N/A	0.80	0.50	1.05	0.60
Quarter 3	N/A	N/A	0.70	0.45	0.94	0.61
Quarter 4	0.37	0.24	0.46	0.29	0.60	0.35

2016
Quarter 1	0.43	0.25	N/A	N/A	0.56	0.36
Quarter 2	0.57	0.34	N/A	N/A	0.75	0.44
Quarter 3	0.37	0.25	N/A	N/A	0.49	0.34
Quarter 4	0.25	0.15	N/A	N/A	0.33	0.21
September	0.30	0.25	N/A	N/A	0.39	0.34
October	0.25	0.22	N/A	N/A	0.33	0.30
November	0.23	0.15	N/A	N/A	0.29	0.21
December	0.23	0.15	N/A	N/A	0.30	0.21

2017
January	0.23	0.20	N/A	N/A	0.30	0.26
February	0.31	0.21	N/A	N/A	0.40	0.27
March (1 – 24)	0.48	0.27	N/A	N/A	0.64	0.36

Market Price Volatility of Common Shares

Market prices for the securities of biotechnology companies, including our securities, have historically been highly volatile, and the market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. Factors, such as fluctuations in our operating results, the aftermath of our public announcements, and general market conditions, can have an adverse effect on the market price of our common shares and other securities.


B.	Plan of Distribution

Not Applicable


C.	Markets

Our Common Shares, no par value, are traded/quoted on the OTCQX and the TSX under the symbol “ONCYF" and “ONC”, respectively.


D.	Selling Shareholders

Not Applicable


E.	Dilution

Not Applicable


F.	Expenses of the Issue

Not Applicable

ITEM 10. ADDITIONAL INFORMATION


A.	Share Capital

Not Applicable


B.	Memorandum and Articles of Association

Articles of Continuance

We are governed by our amended articles of incorporation (the "Articles") under the Business Corporations Act of Alberta (the “Act”) and by our by-laws (the "By-laws"). Our Alberta corporate access number is 207797382. Our Articles provide that there are no restrictions on the business we may carry on or on the powers we may exercise. Companies incorporated under the Act are not required to include specific objects or purposes in their articles or by-laws.

Directors

Subject to certain exceptions, including in respect of voting on any resolution to approve a contract that relates primarily to the director's remuneration, directors may not vote on resolutions to approve a material contract or material transaction if the director is a party to such contract or transaction. The directors are entitled to remuneration as shall from time to time be determined by the Board of Directors with no requirement for a quorum of independent directors. The directors have the ability under the Act to exercise our borrowing power, without authorization of the shareholders. The Act permits shareholders to restrict this authority through a company's articles or by-laws (or through a unanimous shareholder agreement), but no such restrictions are in place for us. Our Articles and By-laws do not require directors to hold shares for qualification.

Rights, Preferences and Dividends Attaching to Shares

The holders of common shares have the right to receive dividends if and when declared. Each holder of common shares, as of the record date prior to a meeting, is entitled to attend and to cast one vote for each common share held as of such record date at such annual and/or special meeting, including with respect to the election or re-election of directors. Subject to the provisions of our By-laws, all directors may, if still qualified to serve as directors, stand for re-election. The numbers of our Board of Directors are not replaced at staggered intervals but are elected annually.

On a distribution of assets on a winding-up, dissolution or other return of capital (subject to certain exceptions) the holders of common shares shall have a right to receive their pro rata share of such distribution. There are no sinking fund or redemption provisions in respect of the common shares. Our shareholders have no liability to further capital calls as all shares issued and outstanding are fully paid and non-assessable.

No other classes of shares are currently permitted to be issued.

Action Necessary to Change the Rights of Shareholders

The rights attaching to the different classes of shares may be varied by special resolution passed at a meeting of that class's shareholders.

Annual and Special Meetings of Shareholders

Under the Act and our By-laws, we are required to mail a Notice of Meeting and Management Information Circular to registered shareholders not less than 21 days and not more than 50 days prior to the date of the meeting. Such materials must be filed concurrently with the applicable securities regulatory authorities in Canada and the US Subject to certain provisions of the By-laws, a quorum of two or more shareholders in person or represented by proxy holding or representing by proxy not less than five

(5%) percent of the total number of issued and outstanding shares enjoying voting rights at such meeting is required to properly constitute a meeting of shareholders. Shareholders and their duly appointed proxies and corporate representatives are entitled to be admitted to our annual and/or special meetings.

Limitations on the Rights to Own Shares

The Articles do not contain any limitations on the rights to own shares. Except as described below, there are currently no limitations imposed by Canadian federal or provincial laws on the rights of non-resident or foreign owners of Canadian securities to hold or vote the securities held. There are also no such limitations imposed by the Articles and By-laws with respect to our common shares.

Disclosure of Share Ownership

In general, under applicable securities regulation in Canada, a person or company who beneficially owns, directly or indirectly, voting securities of an issuer or who exercises control or direction over voting securities of an issuer or a combination of both, carrying more than 10% of the voting rights attached to all the issuer's outstanding voting securities is an insider and must, within 10 days of becoming an insider, file a report in the required form effective the date on which the person became an insider. The report must disclose any direct or indirect beneficial ownership of, or control or direction over, securities of the reporting issuer. Additionally, securities regulation in Canada provides for the filing of a report by an insider of a reporting issuer whose holdings change, which report must be filed within 10 days from the day on which the change takes place.

The rules in the US governing the ownership threshold above which shareholder ownership must be disclosed are more stringent than those discussed above. Section 13 of the Exchange Act imposes reporting requirements on persons who acquire beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange Act) of more than 5% of a class of an equity security registered under Section 12 of the Exchange Act. In general, such persons must file, within 10 days after such acquisition, a report of beneficial ownership with the SEC containing the information prescribed by the regulations under Section 13 of the Exchange Act. This information is also required to be sent to the issuer of the securities and to each exchange where the securities are traded.

Other Provisions of Articles and By-laws

There are no provisions in the Articles or By-laws:


•	delaying or prohibiting a change in control of our company that operate only with respect to a merger, acquisition or corporate restructuring;


•	discriminating against any existing or prospective holder of shares as a result of such shareholder owning a substantial number of shares;


•	requiring disclosure of share ownership; or


•	governing changes in capital, where such provisions are more stringent than those required by law.


C.	Material Contracts

We have employment contracts with each of our officers as summarized in Item 6B. Other than these employment contracts, we have not entered into any other contract other than in the ordinary course of business over the last two years.


D.	Exchange Controls

Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of our securities, except as discussed below in Section E, Taxation .

Restrictions on Share Ownership by Non-Canadians

There are no limitations under the laws of Canada or in our organizational documents on the right of foreigners to hold or vote securities of our company, except that the Investment Canada Act (the "Investment Canada Act") may require review and approval by the Minister of Industry (Canada) of certain acquisitions of "control" of our Company by a "non-Canadian."

Investment Canada Act

Under the Investment Canada Act, transactions exceeding certain financial thresholds, and which involve the acquisition of control of a Canadian business by a non-Canadian, are subject to review and cannot be implemented unless the Minister of Industry and/or, in the case of a Canadian business engaged in cultural activities, the Minister of Canadian Heritage, are satisfied that the transaction is likely to be of "net benefit to Canada". If a transaction is subject to review (a "Reviewable Transaction"), an application for review must be filed with the Investment Review Division of Industry Canada and/or the Department of Canadian Heritage prior to the implementation of the Reviewable Transaction. The responsible Minister is then required to determine whether the Reviewable Transaction is likely to be of net benefit to Canada taking into account, among other things, certain factors specified in the Investment Canada Act and any written undertakings that may have been given by the applicant. The Investment Canada Act contemplates an initial review period of up to 45 days after filing; however, if the responsible Minister has not completed the review by that date, the Minister may unilaterally extend the review period by up to 30 days (or such longer period as may be agreed to by the applicant and the Minister) to permit completion of the review. Direct acquisitions of control of most Canadian businesses by or from World Trade Organization ("WTO") investors are reviewable under the Investment Canada Act only if, in the case of an acquisition of voting securities, the value of the worldwide assets of the Canadian business or, in the case of an acquisition of substantially all the assets of a Canadian business, the value of those assets exceed C$295 million for the year 2008 (this figure is adjusted annually to reflect inflation). Indirect acquisitions (e.g., an acquisition of a US corporation with a Canadian subsidiary) of control of such businesses by or from WTO investors are not subject to review, regardless of the value of the Canadian businesses' assets. Significantly lower review thresholds apply where neither the investor nor the Canadian business is WTO investor controlled or where the Canadian business is engaged in uranium mining, certain cultural businesses, financial services or transportation services.

Even if the transaction is not reviewable because it does not meet or exceed the applicable financial threshold, the non-Canadian investor must still give notice to Industry Canada and, in the case of a Canadian business engaged in cultural activities, Canadian Heritage, of its acquisition of control of a Canadian business within 30 days of its implementation.

Competition Act

The Competition Act (Canada) (the "Competition Act") requires that a pre-merger notification filing be submitted to the Commissioner of Competition (the "Commissioner") in respect of proposed transactions that exceed certain financial and other thresholds. If a proposed transaction is subject to pre-merger notification, a pre-merger notification filing must be submitted to the Commissioner and a waiting period must expire or be waived by the Commissioner before the transaction may be completed. The parties to a proposed transaction may choose to submit either a short-form filing (in respect of which there is a 14-day statutory waiting period) or a long-form filing (in respect of which there is a 42-day statutory waiting period). However, where the parties choose to submit a short-form filing, the Commissioner may, within 14 days, require that the parties submit a long-form filing, in which case the proposed transaction generally may not be completed until 42 days after the long-form filing is submitted by the parties.

The Commissioner may, upon request, issue an advance ruling certificate ("ARC") in respect of a proposed transaction where she is satisfied that she would not have sufficient grounds on which to apply to the Competition Tribunal for an order under the merger provisions of the Competition Act. If the Commissioner issues an ARC in respect of a proposed transaction, the transaction is exempt from the pre-merger notification provisions. In addition, if the transaction to which the ARC relates is substantially completed within one year after the ARC is issued, the Commissioner cannot seek an order of the Competition Tribunal under the merger provisions of the Competition Act in respect of the transaction solely on the basis of information that is the same or substantially the same as the information on the basis of which the ARC was issued.

If the Commissioner is unwilling to issue an ARC, she may nevertheless issue a "no action" letter waiving notification and confirming that she is of the view that grounds do not then exist to initiate proceedings before the Competition Tribunal under the merger provisions of the Competition Act with respect to the proposed transaction, while preserving, during the three years following completion of the proposed transaction, her authority to initiate proceedings should circumstances change.

Regardless of whether pre-merger notification is required, the Commissioner may apply to the Competition Tribunal (a special purpose tribunal) for an order under the merger provisions of the Competition Act. If the Competition Tribunal finds that the transaction is or is likely to prevent or lessen competition substantially, it may order that the parties not proceed with the transaction or part of it or, in the event that the transaction has already been completed, order its dissolution or the disposition of some of the assets or shares involved. In addition, the Competition Tribunal may, with the consent of the person against whom the order is directed and the Commissioner, order that person to take any other action as is deemed necessary to remedy any substantial lessening or prevention of competition that the Competition Tribunal determines would or would likely result from the transaction.


E.	Taxation

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relating to the acquisition, ownership and disposition of Common Shares.

This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder arising from and relating to the acquisition, ownership, and disposition of Common Shares. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including, without limitation, specific tax consequences to a U.S. Holder under an applicable income tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any U.S. Holder. This summary does not address the U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences to U.S. Holders of the acquisition, ownership, and disposition of Common Shares. In addition, except as specifically set forth below, this summary does not discuss applicable tax reporting requirements. Each prospective U.S. Holder should consult its own tax advisors regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of Common Shares.

No legal opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the “IRS”) has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in this summary. In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the conclusions described in this summary.

Scope of this Summary

Authorities

This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations (whether final, temporary, or proposed), published rulings of the IRS, published administrative positions of the IRS, the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the “Canada-U.S. Tax Convention”), and U.S. court decisions that are applicable, and, in each case, as in effect and available, as of the date of this document. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied retroactively. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation.

U.S. Holders

For purposes of this summary, the term "U.S. Holder" means a beneficial owner of Common Shares that is for U.S. federal income tax purposes:


•	an individual who is a citizen or resident of the United States;


•	a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia;


•	an estate whose income is subject to U.S. federal income taxation regardless of its source; or


•	a trust that (1) is subject to the primary supervision of a court within the U.S. and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.

U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed

This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders that: (a) are tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) are financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies; (c) are broker-dealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting method; (d) have a “functional currency” other than the U.S. dollar; (e) own Common Shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (f) acquire Common Shares in connection with the exercise of employee stock options or otherwise as compensation for services; (g) hold Common Shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes); or (h) own, have owned or will own (directly, indirectly, or by

attribution) 10% or more of the total combined voting power of the outstanding shares of the Company. This summary also does not address the U.S. federal income tax considerations applicable to U.S. Holders who are: (a) U.S. expatriates or former long-term residents of the U.S.; (b) persons that have been, are, or will be a resident or deemed to be a resident in Canada for purposes of the Income Tax Act (Canada) (the “Tax Act”); (c) persons that use or hold, will use or hold, or that are or will be deemed to use or hold Common Shares in connection with carrying on a business in Canada; (d) persons whose Common Shares constitute “taxable Canadian property” under the Tax Act; or (e) persons that have a permanent establishment in Canada for the purposes of the Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions under the Code, including, but not limited to, U.S. Holders described immediately above, should consult their own tax advisors regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of Common Shares.

If an entity or arrangement that is classified as a partnership (or other “pass-through” entity) for U.S. federal income tax purposes holds Common Shares, the U.S. federal income tax consequences to such entity or arrangement and the partners (or other owners or participants) of such entity or arrangement generally will depend on the activities of the entity or arrangement and the status of such partners (or owners or participants). This summary does not address the tax consequences to any such partner (or owner or participants). Partners (or other owners or participants) of entities or arrangements that are classified as partnerships or as “pass-through” entities for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership and disposition of Common Shares.

Passive Foreign Investment Company Rules

PFIC Status of the Company

If the Company were to constitute a “passive foreign investment company” under the meaning of Section 1297 of the Code (a “PFIC”, as defined below) for any year during a U.S. Holder’s holding period, then certain potentially adverse rules may affect the U.S. federal income tax consequences to a U.S. Holder as a result of the acquisition, ownership and disposition of Common Shares. The Company believes that it was classified as a PFIC for the tax year ended December 31, 2014, and based on current business plans and financial expectations, the Company anticipates that it may be a PFIC for its current tax year and subsequent tax years. The determination of whether any corporation was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. In addition, whether any corporation will be a PFIC for any tax year depends on the assets and income of such corporation over the course of each such tax year and, as a result, cannot be predicted with certainty as of the date of this document. Accordingly, there can be no assurance that the IRS will not challenge any determination made by the Company (or any subsidiary of the Company) concerning its PFIC status. Each U.S. Holder should consult its own tax advisors regarding the PFIC status of the Company and each subsidiary of the Company.

In any year in which the Company is classified as a PFIC, a U.S. Holder will be required to file an annual report with the IRS containing such information as Treasury Regulations and/or other IRS guidance may require. In addition to penalties, a failure to satisfy such reporting requirements may result in an extension of the time period during which the IRS can assess a tax. U.S. Holders should consult their own tax advisors regarding the requirements of filing such information returns under these rules, including the requirement to file an IRS Form 8621.

The Company generally will be a PFIC if, for a tax year, (a) 75% or more of the gross income of the Company is passive income (the “PFIC income test”) or (b) 50% or more of the value of the Company’s assets either produce passive income or are held for the production of passive income, based on the quarterly average of the fair market value of such assets (the “PFIC asset test”). “Gross income” generally includes all sales revenues less the cost of goods sold, plus income from investments and from incidental or outside operations or sources, and “passive income” generally includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions.

For purposes of the PFIC income test and PFIC asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and PFIC asset test described above, and assuming certain other requirements are met, “passive income” does not include certain interest, dividends, rents, or royalties that are received or accrued by the Company from certain “related persons” (as defined in Section 954(d)(3) of the Code) also organized in Canada, to the extent such items are properly allocable to the income of such related person that is not passive income.

Under certain attribution rules, if the Company is a PFIC, U.S. Holders will generally be deemed to own their proportionate share of the Company’s direct or indirect equity interest in any company that is also a PFIC (a ‘‘Subsidiary PFIC’’), and will generally be subject to U.S. federal income tax on their proportionate share of (a) any “excess distributions,” as described below, on the

stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of the stock of a Subsidiary PFIC by the Company or another Subsidiary PFIC, both as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In addition, U.S. Holders may be subject to U.S. federal income tax on any indirect gain realized on the stock of a Subsidiary PFIC on the sale or disposition of Common Shares. Accordingly, U.S. Holders should be aware that they could be subject to tax under the PFIC rules even if no distributions are received and no redemptions or other dispositions of Common Shares are made.

Default PFIC Rules Under Section 1291 of the Code

If the Company is a PFIC for any tax year during which a U.S. Holder owns Common Shares, the U.S. federal income tax consequences to such U.S. Holder of the acquisition, ownership, and disposition of Common Shares will depend on whether and when such U.S. Holder makes an election to treat the Company and each Subsidiary PFIC, if any, as a “qualified electing fund” or “QEF” under Section 1295 of the Code (a “QEF Election”) or makes a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market Election”). A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a “Non-Electing U.S. Holder.”

A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code (described below) with respect to (a) any gain recognized on the sale or other taxable disposition of Common Shares and (b) any “excess distribution” received on the Common Shares. A distribution generally will be an “excess distribution” to the extent that such distribution (together with all other distributions received in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or during a U.S. Holder’s holding period for the Common Shares, if shorter).

Under Section 1291 of the Code, any gain recognized on the sale or other taxable disposition of Common Shares (including an indirect disposition of the stock of any Subsidiary PFIC), and any “excess distribution” received on Common Shares or with respect to the stock of a Subsidiary PFIC, must be ratably allocated to each day in a Non-Electing U.S. Holder’s holding period for the respective Common Shares. The amount of any such gain or excess distribution allocated to the tax year of disposition or distribution of the excess distribution and to years before the entity became a PFIC, if any, would be taxed as ordinary income (and not eligible for certain preferred rates). The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax rate applicable to ordinary income in each such year, and an interest charge would be imposed on the tax liability for each such year, calculated as if such tax liability had been due in each such year. A Non-Electing U.S. Holder that is not a corporation must treat any such interest paid as “personal interest,” which is not deductible.

If the Company is a PFIC for any tax year during which a Non-Electing U.S. Holder holds Common Shares, the Company will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether the Company ceases to be a PFIC in one or more subsequent tax years. A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above), but not loss, as if such Common Shares were sold on the last day of the last tax year for which the Company was a PFIC.

QEF Election

A U.S. Holder that makes a timely and effective QEF Election for the first tax year in which the holding period of its Common Shares begins generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to its Common Shares. A U.S. Holder that makes a timely and effective QEF Election will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the net capital gain of the Company, which will be taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary earnings of the Company, which will be taxed as ordinary income to such U.S. Holder. Generally, “net capital gain” is the excess of (a) net long-term capital gain over (b) net short-term capital loss, and “ordinary earnings” are the excess of (a) “earnings and profits” over (b) net capital gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each tax year in which the Company is a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by the Company. However, for any tax year in which the Company is a PFIC and has no net income or gain, U.S. Holders that have made a QEF Election would not have any income inclusions as a result of the QEF Election. If a U.S. Holder that made a QEF Election has an income inclusion, such a U.S. Holder may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest paid will be treated as “personal interest,” which is not deductible.

A U.S. Holder that makes a timely and effective QEF Election with respect to the Company generally (a) may receive a tax-free distribution from the Company to the extent that such distribution represents “earnings and profits” of the Company that were previously included in income by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in the Common Shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of Common Shares.

The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely. A QEF Election will be treated as “timely” if such QEF Election is made for the first year in the U.S. Holder’s holding period for the Common Shares in which the Company was a PFIC. A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such year. If a U.S. Holder does not make a timely and effective QEF Election for the first year in the U.S. Holder’s holding period for the Common Shares, the U.S. Holder may still be able to make a timely and effective QEF Election in a subsequent year if such U.S. Holder meets certain requirements and makes a “purging” election to recognize gain (which will be taxed under the rules of Section 1291 of the Code discussed above) as if such Common Shares were sold for their fair market value on the day the QEF Election is effective. If a U.S. Holder makes a QEF Election but does not make a “purging” election to recognize gain as discussed in the preceding sentence, then such U.S. Holder shall be subject to the QEF Election rules and shall continue to be subject to tax under the rules of Section 1291 discussed above with respect to its Common Shares. If a U.S. Holder owns PFIC stock indirectly through another PFIC, separate QEF Elections must be made for the PFIC in which the U.S. Holder is a direct shareholder and the Subsidiary PFIC for the QEF rules to apply to both PFICs.

A QEF Election will apply to the tax year for which such QEF Election is timely made and to all subsequent tax years, unless such QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax year, the Company ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years in which the Company is not a PFIC. Accordingly, if the Company becomes a PFIC in another subsequent tax year, the QEF Election will be effective and the U.S. Holder will be subject to the QEF rules described above during any subsequent tax year in which the Company qualifies as a PFIC.

U.S. Holders should be aware that there can be no assurances that the Company will satisfy the record keeping requirements that apply to a QEF, or that the Company will supply U.S. Holders with information that such U.S. Holders are required to report under the QEF rules, in the event that the Company is a PFIC. Thus, U.S. Holders may not be able to make a QEF Election with respect to their Common Shares. Each U.S. Holder should consult its own tax advisors regarding the availability of, and procedure for making, a QEF Election.

A U.S. Holder makes a QEF Election by attaching a completed IRS Form 8621, including a PFIC Annual Information Statement, to a timely filed United States federal income tax return. However, if the Company does not provide the required information with regard to the Company or any of its Subsidiary PFICs, U.S. Holders will not be able to make a QEF Election for such entity and will continue to be subject to the rules of Section 1291 of the Code discussed above that apply to Non-Electing U.S. Holders with respect to the taxation of gains and excess distributions.

Mark-to-Market Election

A U.S. Holder may make a Mark-to-Market Election only if the Common Shares are marketable stock. The Common Shares generally will be “marketable stock” if the Common Shares are regularly traded on (a) a national securities exchange that is registered with the Securities and Exchange Commission, (b) the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure, and surveillance requirements, and meets other requirements and the laws of the country in which such foreign exchange is located, together with the rules of such foreign exchange, ensure that such requirements are actually enforced and (ii) the rules of such foreign exchange effectively promote active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, such stock generally will be “regularly traded” for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. Provided that the Common Shares are “regularly traded” as described in the preceding sentence, the Common Shares are expected to be marketable stock. However, each U.S. Holder should consult its own tax advisor in this regard.

A U.S. Holder that makes a Mark-to-Market Election with respect to its Common Shares generally will not be subject to the rules of Section 1291 of the Code discussed above with respect to such Common Shares. However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first tax year of such U.S. Holder’s holding period for the Common Shares for which the Company is a PFIC and such U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, the Common Shares.

A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which the Company is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the Common Shares, as of the close of such tax year over (b) such U.S. Holder’s adjusted tax basis in such Common Shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal to the excess, if any, of (a) such U.S. Holder’s adjusted tax basis in the Common

Shares, over (b) the fair market value of such Common Shares (but only to the extent of the net amount of previously included income as a result of the Mark-to-Market Election for prior tax years).

A U.S. Holder that makes a Mark-to-Market Election generally also will adjust such U.S. Holder’s tax basis in the Common Shares to reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition of Common Shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or ordinary loss (not to exceed the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over (b) the amount allowed as a deduction because of such Mark-to-Market Election for prior tax years). Losses that exceed this limitation are subject to the rules generally applicable to losses provided in the Code and Treasury Regulations.

A U.S. Holder makes a Mark-to-Market Election by attaching a completed IRS Form 8621 to a timely filed United States federal income tax return. A Mark-to-Market Election applies to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless the Common Shares cease to be “marketable stock” or the IRS consents to revocation of such election. Each U.S. Holder should consult its own tax advisors regarding the availability of, and procedure for making, a Mark-to-Market Election.

Although a U.S. Holder may be eligible to make a Mark-to-Market Election with respect to the Common Shares, no such election may be made with respect to the stock of any Subsidiary PFIC that a U.S. Holder is treated as owning, because such stock is not marketable. Hence, the Mark-to-Market Election will not be effective to avoid the application of the default rules of Section 1291 of the Code described above with respect to deemed dispositions of Subsidiary PFIC stock or excess distributions from a Subsidiary PFIC to its shareholder.

Other PFIC Rules

Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers of Common Shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate reorganizations). However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which Common Shares are transferred.

Certain additional adverse rules may apply with respect to a U.S. Holder if the Company is a PFIC, regardless of whether such U.S. Holder makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S. Holder that uses Common Shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such Common Shares.

Special rules also apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC. Subject to such special rules, foreign taxes paid with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit. The rules relating to distributions by a PFIC and their eligibility for the foreign tax credit are complicated, and a U.S. Holder should consult with its own tax advisors regarding the availability of the foreign tax credit with respect to distributions by a PFIC.

The PFIC rules are complex, and each U.S. Holder should consult its own tax advisors regarding the PFIC rules and how the PFIC rules may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.

General Rules Applicable to the Ownership and Disposition of Common Shares

The following discussion describes the general rules applicable to the ownership and disposition of the Common Shares but is subject in its entirety to the special rules described above under the heading “Passive Foreign Investment Company Rules.”

Distributions on Common Shares

A U.S. Holder that receives a distribution, including a constructive distribution, with respect to a Common Share will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of the current and accumulated “earnings and profits” of the Company, as computed for U.S. federal income tax purposes. A dividend generally will be taxed to a U.S. Holder at ordinary income tax rates if the Company is a PFIC for the tax year of such distribution or the preceding tax year. To the extent that a distribution exceeds the current and accumulated “earnings and profits” of the Company, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder's tax basis in the Common Shares and thereafter as gain from the sale or exchange of such Common Shares.

(See “Sale or Other Taxable Disposition of Common Shares” below). However, the Company may not maintain the calculations of its earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder may have to assume that any distribution by the Company with respect to the Common Shares will constitute ordinary dividend income. Dividends received on Common Shares by corporate U.S. Holders generally will not be eligible for the “dividends received deduction.” Subject to applicable limitations and provided the Company is eligible for the benefits of the Canada-U.S. Tax Convention, dividends paid by the Company to non-corporate U.S. Holders, including individuals, generally will be eligible for the preferential tax rates applicable to long-term capital gains for dividends, provided certain holding period and other conditions are satisfied, including that the Company not be classified as a PFIC in the tax year of distribution or in the preceding tax year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisors regarding the application of such rules.

Sale or Other Taxable Disposition of Common Shares

Upon the sale or other taxable disposition of Common Shares, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the U.S. dollar value of cash received plus the fair market value of any property received and such U.S. Holder's tax basis in such Common Shares sold or otherwise disposed of. A U.S. Holder’s tax basis in Common Shares generally will be such holder’s U.S. dollar cost for such Common Shares. Gain or loss recognized on such sale or other disposition generally will be long-term capital gain or loss if, at the time of the sale or other disposition, the Common Shares have been held for more than one year.

Preferential tax rates currently apply to long-term capital gain of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gain of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code.

Additional Considerations

Additional Tax on Passive Income

Certain U.S. Holders that are individuals, estates or trusts (other than trusts that are exempt from tax) will be subject to a 3.8% tax on all or a portion of their “net investment income,” which includes dividends on the Common Shares and net gains from the disposition of the Common Shares. Further, excess distributions treated as dividends, gains treated as excess distributions under the PFIC rules discussed above, and mark-to-market inclusions and deductions are all included in the calculation of net investment income.

Treasury Regulations provide, subject to the election described in the following paragraph, that solely for purposes of this additional tax, that distributions of previously taxed income will be treated as dividends and included in net investment income subject to the additional 3.8% tax. Additionally, to determine the amount of any capital gain from the sale or other taxable disposition of Common Shares that will be subject to the additional tax on net investment income, a U.S. Holder who has made a QEF Election will be required to recalculate its basis in the Common Shares excluding QEF basis adjustments.

Alternatively, a U.S. Holder may make an election which will be effective with respect to all interests in controlled foreign corporations and QEFs held in that year or acquired in future years. Under this election, a U.S. Holder pays the additional 3.8% tax on QEF income inclusions and on gains calculated after giving effect to related tax basis adjustments. U.S. Holders that are individuals, estates or trusts should consult their own tax advisors regarding the applicability of this tax to any of their income or gains in respect of the Common Shares.

Receipt of Foreign Currency

The amount of any distribution paid to a U.S. Holder in foreign currency, or on the sale, exchange or other taxable disposition of Common Shares, generally will be equal to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whether such foreign currency is converted into U.S. dollars at that time). A U.S. Holder will have a basis in the foreign currency equal to its U.S. dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method. Each U.S. Holder should consult its own U.S. tax advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.

Foreign Tax Credit

Subject to the PFIC rules discussed above, a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on the Common Shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian income tax. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder’s income that is subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year.

Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” Generally, dividends paid by a foreign corporation should be treated as foreign source for this purpose, and gains recognized on the sale of stock of a foreign corporation by a U.S. Holder should be treated as U.S. source for this purpose, except as otherwise provided in an applicable income tax treaty, and if an election is properly made under the Code. However, the amount of a distribution with respect to the Common Shares that is treated as a “dividend” may be lower for U.S. federal income tax purposes than it is for Canadian federal income tax purposes, resulting in a reduced foreign tax credit allowance to a U.S. Holder. In addition, this limitation is calculated separately with respect to specific categories of income. The foreign tax credit rules are complex, and each U.S. Holder should consult its own U.S. tax advisors regarding the foreign tax credit rules.

Backup Withholding and Information Reporting

Under U.S. federal income tax law, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. Holders that hold certain specified foreign financial assets in excess of certain thresholds. The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity. U.S. Holders may be subject to these reporting requirements unless their Common Shares are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders should consult with their own tax advisors regarding the requirements of filing information returns, including the requirement to file an IRS Form 8938.

Payments made within the U.S., or by a U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of, Common Shares will generally be subject to information reporting and backup withholding tax, at the rate of 28%, if a U.S. Holder (a) fails to furnish such U.S. Holder’s correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However, certain exempt persons generally are excluded from these information reporting and backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner.

The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S. Holder. A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess a tax and, under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder should consult its own tax advisors regarding the information reporting and backup withholding rules.

THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE ACQUISITION, OWNERSHIP, AND DISPOSITION OF COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR OWN PARTICULAR CIRCUMSTANCES.


F.	Dividends and Paying Agents

Not Applicable


G.	Statements by Experts

Not Applicable


H.	Documents on Display

We are subject to the informational requirements of the Exchange Act and file reports and other information with the SEC. You may read and copy any of our reports and other information at, and obtain copies upon payment of prescribed fees from, the Public Reference Room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. In addition, the SEC maintains a Website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC at http://www.sec.gov. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

We are required to file reports and other information with the securities commissions in Canada. You are invited to read and copy any reports, statements or other information, other than confidential filings, that we file with the provincial securities commissions. These filings are also electronically available from the Canadian System for Electronic Document Analysis and Retrieval ("SEDAR") (http://www.sedar.com), the Canadian equivalent of the SEC's electronic document gathering and retrieval system.

We "incorporate by reference" information that we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this Form 20-F and more recent information automatically updates and supersedes more dated information contained or incorporated by reference in this Form 20-F.

As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements to shareholders.

We will provide without charge to each person, including any beneficial owner, to whom a copy of this annual report has been delivered, on the written or oral request of such person, a copy of any or all documents referred to above which have been or may be incorporated by reference in this annual report (not including exhibits to such incorporated information that are not specifically incorporated by reference into such information). Requests for such copies should be directed to us at the following address: Oncolytics Biotech Inc., 210 – 1167 Kensington Crescent, NW, Calgary, Alberta, Canada, T2N 1X7, Attention: Kirk Look. Telephone (403) 670 - 7377. Facsimile (403) 283-0858 EMAIL: info@oncolytics.ca.


I.	Subsidiary Information

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Foreign Currency Risk

We operate primarily in Canada, the US, the U.K. and Europe. Therefore, we are exposed to foreign currency risk associated with our expenses outside of Canada. We do not use financial derivative instruments to manage this market risk.

Interest Rate Risk

The primary objective of our policy for the investment of temporary cash surpluses is the protection of principal, and, accordingly, we generally invest in investment-grade debt securities with varying maturities. As it is our intent and policy to hold these investments until maturity, we do not have a material exposure to interest rate risk.

We do not currently have any long-term debt, nor do we currently utilize interest rate swap contracts to hedge against interest rate risk.

We do not use financial instruments for trading purposes and are not parties to any leverage derivatives. We do not currently engage in hedging transactions. See “Currency and Exchange Rates” and Item 4 – “Information on the Company”.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES.


A.	Debt Securities

Not Applicable


B.	Warrants and Rights

Not Applicable


C.	Other Securities

Not Applicable


D.	American Depository Shares

The Company’s Common Shares are not represented by American Depository Receipts.

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES.

None

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.


A.	Modification of Instruments Defining Rights of Security Holders

None


B.	Modification or Issuance of Other Class of Securities

None


C.	Withdrawal or Substitution of Security

None


D.	Change of Trustee or Paying Agent

None


E.	Use of Proceeds

There has been no change to the information provided in our first annual report on Form 20-F.

ITEM 15. CONTROLS AND PROCEDURES


A.	Evaluation of Disclosures and Procedures

It is the conclusion of our Chief Executive Officer and Chief Financial Officer that our Company's disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)), based on their evaluation of these controls and procedures as of the end of the period covered by this annual report, are effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.


B.	Management's Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by the board of directors, management and other personnel, to

provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Reporting Standards as issued by the International Accounting Standards Board ("IFRS"), and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of the Company are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Management, including the Company’s Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016 . In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, 2013 Framework, (COSO) in Internal Control-Integrated Framework. Based on this assessment, management believes that, as of December 31, 2016 , the Company’s internal control over financial reporting was effective based on those criteria.


C.	Attestation Report of the Registered Public Accounting Firms

In accordance with Securities and Exchange Commission’s rules, this Annual Report does not include an attestation report of the Company's independent registered public accounting firm regarding the Company's internal control over financial reporting.


D.	Changes in Internal Controls over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the period that is covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 16 . [RESERVED]

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our Board has determined that each of the Audit Committee members, Angela Holtham, Wayne Pisano, and Mark Lievonen, is a financial expert and each is independent pursuant to the Rule 5605(d)(2) of the NASDAQ Capital Market and Rule 10A-3 of the Exchange Act.

ITEM 16B. CODE OF ETHICS

Our Board of Directors has adopted a Code of Ethics for our Chief Executive Officer, Chief Financial Officer and Accounting Officer that applies to our Chief Executive Officer, Chief Financial Officer and Controller. A copy of this Code of Ethics may be found on the Company’s website at http://www.oncolyticsbiotech.com. Requests for such copies should be directed to us at the following address: Oncolytics Biotech Inc., 210 – 1167 Kensington Crescent, NW, Calgary, Alberta, Canada, T2N 1X7, Attention: Kirk Look Telephone (403) 670 - 7377. Facsimile (403) 283-0858 EMAIL: info@oncolyticsbiotech.com.

There were no amendments to our Code of Ethics during the fiscal year ended December 31, 2016 . We did not grant any waivers to the provisions of our Code of Ethics during the fiscal year ended December 31, 2016 .

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees and Services

During the financial years ended December 31, 2016 , 2015 , and 2014 , Ernst & Young LLP received the following fees:



	2016	2015	2014
Item	$	$	$
Audit fees	163,910	291,509	277,405
Audit-related fees ^(1),(3)	152,145	105,017	156,811
Tax fees ⁽²⁾	40,843	23,861	24,890
All other fees	—	—	—

Notes:


1)	Includes review of interim financial statements, accounting consultations and subscription to on-line accounting services.


2)	Comprised of tax return preparation, scientific research and development return and other tax consultation fees.


3)	Includes fees associated with matters relating to the provision of a consent letter for various filings.

Audit Fees

Audit fees were for professional services rendered by Ernst & Young, LLP for the audit of our annual financial statements and services provided in connection with statutory and regulatory filings or engagements.

Audit-Related Fees

Audit-related fees were for assurance and related services reasonably related to the performance of the audit or review of the annual statements and are not reported under the heading Audit Fees above. These services consisted of accounting consultations, assistance with prospectus filings and assistance with preparations for compliance with section 404 of the Sarbanes-Oxley Act of 2002.

Tax Fees

Tax fees were for tax compliance and professional tax consultations.

All Other Fees

Other fees are for products and services other than those described under the headings Audit Fees, Audit-Related Fees and Tax Fees above.

The Audit Committee pre-approves all audit services to be provided to us by our independent auditors. The Audit Committee’s policy regarding the pre-approval of non-audit services to be provided to us by our independent auditors is that all such services shall be pre-approved by the Audit Committee or by the Chair of the Audit Committee, who must report all such pre-approvals to the Audit Committee at their next meeting following the granting thereof. Non-audit services that are prohibited to be provided to us by our independent auditors may not be pre-approved. In addition, prior to the granting of any pre-approval, the Audit Committee or the Chair, as the case may be, must be satisfied that the performance of the services in question will not compromise the independence of the independent auditors.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

None

ITEM 16E. PURCHASE OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASES

None

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTS

None

ITEM 16G. CORPORATE GOVERNANCE

None

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

PART III

ITEM 17. FINANCIAL STATEMENTS.

Not applicable.

ITEM 18 FINANCIAL STATEMENTS

The financial statements appear on pages F-1 through F-24.

ITEM 19. EXHIBITS.

The following exhibits are filed as part of this annual report:



EXHIBIT NUMBER	DESCRIPTION
	Constating Documents
1.1 ^(a)	Articles of Incorporation
1.2 ^(a)	By-laws

	Material Contracts
4.1 ^(b)	Services Agreement, dated October 16, 2002, between the Company and its Senior Vice President, Clinical and Regulatory Affairs, George Gill
4.2 ^(c)	Amending Agreement No. 1, dated January 6, 2005, to the Services Agreement between the Company and its Senior Vice President, Clinical and Regulatory Affairs, George Gill, dated October 16, 2001
4.3 ^(c)	Employment Agreement, dated January 12, 2007, between the Company and its Vice President, Intellectual Property, Mary Ann Dillahunty
4.4 ^(c)	Executive Employment Agreement, dated May 29, 2007, between the Company and its Chief Scientific Officer, Matthew Coffey
4.5 ^(c)	Executive Employment Agreement, dated May 29, 2007, between the Company and its Chief Medical Officer, Dr. Karl Mettinger
4.6 ^(c)	Executive Employment Agreement, dated May 30, 2007, between the Company and its Chief Financial Officer, Douglas Ball
4.7 ^(c)	Executive Employment Agreement, dated June 6, 2007, between the Company and its Chief Executive Officer, Bradley Thompson
4.8 ^(c)	Amending Agreement No. 1, dated December 3, 2007, to the Employment Agreement between the Company and its Vice President, Intellectual Property, Mary Ann Dillahunty, dated January 12, 2007
4.9 ^(d)	Amendment No. 1, dated March 7, 2008, to the Executive Employment Agreement between the Company and its Chief Financial Officer, Douglas Ball, dated May 30, 2007
4.10 ^(d)	Amendment No.1, dated March 7, 2008, between the Company and its Chief Scientific Officer, Matthew Coffey, dated May 29, 2007
4.11 ^(d)	Amendment No. 1, dated March 7, 2008, to the Executive Employment Agreement between the Company and its Chief Executive Officer, Bradley Thompson, dated June 6, 2007
4.12 ^(d)	Amendment No. 1, dated March 20, 2008, to the Employment Agreement between the Company and its Vice President, Intellectual Property, Mary Ann Dillahunty, dated January 12, 2007
4.13 ^(d)	Amendment No. 1, dated March 28, 2008, to the Executive Employment Agreement between the Company and its Chief Medical Officer, Dr. Karl Mettinger, dated May 29, 2007
4.14 ^(d)	Amendment No. 2, dated March 31, 2008, to the Services Agreement between the Company and its Senior Vice President, Clinical and Regulatory Affairs, George Gill, dated October 16, 2001
4.15 ^(d)	Executive Employment Agreement, dated January 26, 2009, between Oncolytics Biotech (U.S.) Inc. and its Chief Medical Officer, Dr. Karl Mettinger
4.16 ^(d)	Executive Employment Agreement, dated January 22, 2009 between the Company and its Vice President, Intellectual Property, Mary Ann Dillahunty.
4.17 ^(e)	Amendment No. 2, dated January 1, 2011, to the Executive Employment Agreement between the Company and its Chief Executive Officer, Bradley Thompson, dated June 6, 2007
4.18 ^(f)	Employment Agreement, dated January 1, 2011 between the Company and its Senior Vice President, Clinical and Regulatory Affairs, George Gill.
4.19 ^(f)	Executive Employment Agreement, dated November 10, 2011 between the Company and its Senior Vice President of Clinical Development and Chief Medical Officer, Gerard T. Kennealey.
4.20 ^(g)	Executive Employment Agreement, dated March 22. 2013, between the Company and its Chief Operating Officer, Matthew Coffey
4.21 ^(g)	Executive Employment Agreement, dated September 27, 2012, between Oncolytics Biotech (U.S.) Inc. and its Senior Vice President, Medical and Clinical Affairs Chief Medical Officer, Dr. Alan Tuchman
4.22 ^(g)	Executive Employment Agreement, dated March 22, 2013, between the Company and its Chief Financial Officer, Kirk Look
4.23 ^(g)	Executive Employment Agreement, dated March 22, 2013, between the Company and its Chief Executive Officer, Bradley Thompson
4.24 ^(h)	Amending Agreement, dated March 12, 2014, between the Company and its Chief Executive Officer, Bradley Thompson
4.25 ^(h)	Amending Agreement, dated March 12, 2014, between the Company and its Chief Financial Officer, Kirk Look
4.26 ^(h)	Amending Agreement, dated March 12, 2014, between the Company and its Chief Operating Officer, Matthew Coffey
4.27 ⁽ⁱ⁾	Amending Agreement, dated March 12, 2015, between Oncolytics Biotech (U.S.) Inc. and its Senior Vice President, Medical and Clinical Affairs Chief Medical Officer, Dr. Alan Tuchman
4.28 ⁽ⁱ⁾	Amending Agreement, dated March 12, 2015, between Oncolytics Biotech (U.S.) Inc. and its Vice President, Intellectual Property, Mary Ann Dillahunty.
4.29 ⁽ⁱ⁾	Amending Agreement, dated March 12, 2015, between the Company and its Chief Executive Officer, Bradley Thompson
4.30 ⁽ⁱ⁾	Amending Agreement, dated March 12, 2015, between Oncolytics Biotech (U.S.) Inc. and its Senior Vice President, Clinical and Regulatory Affairs, George Gill.
4.31 ⁽ⁱ⁾	Amending Agreement, dated March 12, 2015, between the Company and its Chief Financial Officer, Kirk Look
4.32 ⁽ⁱ⁾	Amending Agreement, dated March 12, 2015, between the Company and its Chief Operating Officer, Matthew Coffey
4.33 ^(j)	Amending Agreement, dated March 8, 2016, between the Company and its Chief Executive Officer, Bradley Thompson
4.34 ^(j)	Amending Agreement, dated March 8, 2016, between the Company and its Chief Financial Officer, Kirk Look
4.35 ^(j)	Amending Agreement, dated March 8, 2016, between the Company and its Chief Operating Officer, Matthew Coffey
4.36 ^(j)	Amending Agreement, dated November 10, 2015, between Oncolytics Biotech (U.S.) Inc. and its Senior Vice President, Medical and Clinical Affairs Chief Medical Officer, Dr. Alan Tuchman
4.37 ^(j)	Amending Agreement, dated March 8, 2016, between Oncolytics Biotech (U.S.) Inc. and its Senior Vice President, Medical and Clinical Affairs Chief Medical Officer, Dr. Alan Tuchman
4.38 ^(j)	Amending Agreement, dated March 8, 2016, between Oncolytics Biotech (U.S.) Inc. and its Senior Vice President, Clinical and Regulatory Affairs, George Gill.
4.39	Executive Employment Agreement, dated October 27, 2016, between Oncolytics Biotech (U.S.) Inc. and its Chief Medical Officer, Dr. Andres Gutierrez.
4.40	Amending Agreement, dated February 23, 2017, between the Company and its Chief Executive Officer, Matthew Coffey.
4.41	Amending Agreement, dated February 23, 2017, between the Company and its Chief Financial Officer, Kirk Look.
4.42	Settlement Agreement and Release, dated December 5, 2016 between the Company and its former Chief Executive Officer, Brad Thompson.

	Subsidiaries
8.0	List of subsidiaries

	Certifications
12.1	Certificate of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2	Certificate of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1	Certificate of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2	Certificate of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

	Other Exhibits
15.1	The Registrant's Management's Discussion and Analysis for the Year Ended December 31, 2016
15.2	Consent of Ernst & Young LLP

(a) Previously filed with the SEC on Form 20-F dated June 14, 2002

(b) Previously filed with the SEC on Form 20-F dated June 27, 2003

(d) Previously filed with the SEC on Form 20-F dated March 6, 2009.

(e) Previously filed with the SEC on Form 20-F dated March 24, 2011.

(f) Previously filed with the SEC on Form 20-F dated March 23, 2012.

(g) Previously filed with the SEC on Form 20-F dated March 22, 2013.

(h) Previously filed with the SEC on Form 20-F dated March 19, 2014.

(i) Previously filed with the SEC on Form 20-F dated March 19, 2015.

(j) Previously filed with the SEC on Form 20-F dated March 24, 2016.

SIGNATURE

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Date: March 27, 2017

ONCOLYTICS BIOTECH INC.



/s/ Matthew Coffey	/s/ Kirk Look
Matthew Coffey, Ph.D	Kirk Look, CA
Chief Executive Officer	Chief Financial Officer

Consolidated Financial Statements

Oncolytics Biotech ^® Inc.

December 31, 2016 and 2015

STATEMENT OF MANAGEMENT’S RESPONSIBILITY

Management is responsible for the preparation and presentation of the consolidated financial statements, Management’s Discussion and Analysis (“MD&A”) and all other information in the Annual Report.

In management’s opinion, the accompanying consolidated financial statements have been properly prepared within reasonable limits of materiality and in accordance with the appropriately selected International Financial Reporting Standards as issued by the International Accounting Standards Board consistently applied and summarized in the consolidated financial statements.

The MD&A has been prepared in accordance with the requirements of securities regulators as applicable to Oncolytics Biotech Inc.

The consolidated financial statements and information in the MD&A generally include estimates that are necessary when transactions affecting the current accounting period cannot be finalized with certainty until future periods. Based on careful judgments by management, such estimates have been properly reflected in the accompanying consolidated financial statements and MD&A. The MD&A also includes information regarding the impact of current transactions and events, sources of liquidity and capital resources and risks and uncertainty. Actual results in the future may differ materially from our present assessment of this information because future events and circumstances may not occur as expected.

Systems of internal controls, including organizational and procedural controls and internal controls over financial reporting, assessed as reasonable and appropriate in the circumstances, are designed and maintained by management to provide reasonable assurance that assets are safeguarded from loss or unauthorized use and to produce reliable records for financial purposes.

We, as the Chief Executive Officer and Chief Financial Officer, will certify to our annual filings with the CSA and the SEC as required in Canada by National Instrument 52-109 (Certification of Disclosure in Issuers’ Annual Interim Filings) and in the United States by the Sarbanes-Oxley Act.

The external auditors conducted an independent examination of corporate and accounting records in accordance with generally accepted auditing standards to express their opinion on the consolidated financial statements. Their examination included such tests and procedures as they considered necessary to provide reasonable assurance that the consolidated financial statements are presented fairly. The external auditors have full and free access to our Board of Directors and its Committees to discuss audit, financial reporting and related matters.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control. The Board exercises this responsibility through the Audit Committee of the Board. This Committee meets with management and the external auditors to satisfy itself that management’s responsibilities are properly discharged and to review the consolidated financial statements and MD&A before they are presented to the Board of Directors for approval.



/s/ Matt Coffey	/s/ Kirk Look

Matt Coffey, Ph.D	Kirk Look, CA
Chief Executive Officer	Chief Financial Officer

F-1

INDEPENDENT AUDITORS' REPORT OF REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of Oncolytics Biotech Inc.

We have audited the accompanying consolidated financial statements of Oncolytics Biotech Inc. , which comprise the consolidated statements of financial position as at December 31, 2016 and 2015 , and the consolidated statements of loss and comprehensive loss, changes in equity and cash flows for each of the years in the three-year period ended December 31, 2016 , and a summary of significant accounting policies and other explanatory information.

Management's responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Oncolytics Biotech Inc. as at December 31, 2016 and 2015 , and its financial performance and cash flows for each of the years in the three-year period ended December 31, 2016 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.




Calgary, Canada
March 9, 2017	Chartered Professional Accountants

F-2

ONCOLYTICS BIOTECH INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION



As at December 31,	Notes	2016 $		2015 $
Assets
Current assets
Cash and cash equivalents	5	12,034,282		24,016,275
Short-term investments	5	2,088,800		2,060,977
Accounts receivable		54,406		340,059
Prepaid expenses		260,841		506,669
Total current assets		14,438,329		26,923,980
Non-current assets
Property and equipment	6	319,955		459,818
Total non-current assets		319,955		459,818

Total assets		14,758,284		27,383,798
Liabilities And Shareholders’ Equity
Current Liabilities
Accounts payable and accrued liabilities		4,068,664		2,709,492
Total current liabilities		4,068,664		2,709,492
Commitments and contingencies	10, 11 and 16
Shareholders’ equity
Share capital Authorized: unlimited Issued: December 31, 2016 – 121,258,222 December 31, 2015 – 118,151,622	7	262,321,825		261,324,692
Contributed surplus	8	26,643,044		26,277,966
Accumulated other comprehensive income		554,060		760,978
Accumulated deficit		(278,829,309	)	(263,689,330	)
Total shareholders’ equity		10,689,620		24,674,306
Total liabilities and equity		14,758,284		27,383,798

See accompanying notes



On behalf of the Board:
/s/ Angela Holtham	/s/ Wayne Pisano
Director	Director

F-3

ONCOLYTICS BIOTECH INC.

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS



For the years ending December 31,	Notes	2016 $		2015 $		2014 $
Expenses
Research and development	8, 18, 19	9,770,007		8,601,864		13,824,252
Operating	8, 18, 19	5,524,500		5,315,837		4,998,694
Loss before the following		(15,294,507	)	(13,917,701	)	(18,822,946	)
Interest		163,902		197,859		210,390
Loss before income taxes		(15,130,605	)	(13,719,842	)	(18,612,556	)
Income tax recovery (expense)	12	(9,374	)	(3,153	)	(6,779	)
Net loss		(15,139,979	)	(13,722,995	)	(18,619,335	)
Other comprehensive income items that may be reclassified to net loss
Translation adjustment		(206,918	)	480,935		200,345
Net comprehensive loss		(15,346,897	)	(13,242,060	)	(18,418,990	)
Basic and diluted loss per common share	9	(0.13	)	(0.12	)	(0.21	)
Weighted average number of shares (basic and diluted)		119,880,200		112,613,845		87,869,149

See accompanying notes

F-4

ONCOLYTICS BIOTECH INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY



	Share Capital $		Warrants $		Contributed Surplus $		Accumulated Other Comprehensive Income $		Accumulated Deficit $		Total $
As at December 31, 2013	228,612,564		376,892		24,491,212		79,698		(231,347,000	)	22,213,366

Net loss and other comprehensive income	—		—		—		200,345		(18,619,335	)	(18,418,990	)
Issued, pursuant to Share Purchase Agreement	8,861,652		—		—		—		—		8,861,652
Issued, pursuant to "At the Market" Agreement	1,468,668		—		—		—		—		1,468,668
Expired warrants	—		(376,892	)	376,892		—		—		—
Share based compensation	—		—		980,325		—		—		980,325
Share issue costs	(1,285,828	)	—		—		—		—		(1,285,828	)
As at December 31, 2014	237,657,056		—		25,848,429		280,043		(249,966,335	)	13,819,193

Net loss and other comprehensive income	—		—		—		480,935		(13,722,995	)	(13,242,060	)
Issued, pursuant to Share Purchase Agreement	4,371,687		—		—		—		—		4,371,687
Issued, pursuant to "At the Market" Agreement	20,049,693		—		—		—		—		20,049,693
Share based compensation	—		—		429,537		—		—		429,537
Share issue costs	(753,744	)	—		—		—		—		(753,744	)
As at December 31, 2015	261,324,692		—		26,277,966		760,978		(263,689,330	)	24,674,306

Net loss and other comprehensive income	—		—		—		(206,918	)	(15,139,979	)	(15,346,897	)
Issued, pursuant to incentive share award plan	41,000		—		(41,000	)	—		—		—
Issued, pursuant to "At the Market" Agreement	1,456,296		—		—		—		—		1,456,296
Share based compensation	—		—		406,078		—		—		406,078
Share issue costs	(500,163	)	—		—		—		—		(500,163	)
As at December 31, 2016	262,321,825		—		26,643,044		554,060		(278,829,309	)	10,689,620

See accompanying notes

F-5

ONCOLYTICS BIOTECH INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS



For the years ending December 31,	Notes	2016 $		2015 $		2014 $

Operating Activities
Net loss for the year		(15,139,979	)	(13,722,995	)	(18,619,335	)
Amortization - property and equipment		162,233		180,411		163,501
Share based compensation	8, 18, 19	406,078		429,537		980,325
Unrealized foreign exchange (gain) loss	18	(139,810	)	(816,319	)	242,542
Net change in non-cash working capital	15	2,233,865		(1,105,464	)	(2,443,988	)
Cash used in operating activities		(12,477,613	)	(15,034,830	)	(19,676,955	)
Investing Activities
Acquisition of property and equipment	6	(23,527	)	(108,268	)	(152,750	)
Redemption (purchase) of short-term investments	5	(27,823	)	(29,292	)	(30,041	)
Cash used in investing activities		(51,350	)	(137,560	)	(182,791	)
Financing Activities
Proceeds from Share Purchase Agreement	7	—		4,305,396		7,830,409
Proceeds from "At the Market" equity distribution agreement	7	956,133		19,362,240		1,214,083
Cash provided by financing activities		956,133		23,667,636		9,044,492
(Decrease) increase in cash		(11,572,830	)	8,495,246		(10,815,254	)
Cash and cash equivalents, beginning of year		24,016,275		14,152,825		25,220,328
Impact of foreign exchange on cash and cash equivalents		(409,163	)	1,368,204		(252,249	)
Cash and cash equivalents, end of year		12,034,282		24,016,275		14,152,825

See accompanying notes

F-6

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

Note 1: Incorporation and Nature of Operations

Oncolytics Biotech Inc. was incorporated on April 2, 1998 under the Business Corporations Act (Alberta) as 779738 Alberta Ltd. On April 8, 1998, we changed our name to Oncolytics Biotech Inc.

Our consolidated financial statements for the year ended December 31, 2016 , were authorized for issue in accordance with a resolution of the Board of Directors (the "Board") on March 9, 2017 . We are a limited company incorporated and domiciled in Canada. Our shares are publicly traded and our registered office is located at 210, 1167 Kensington Crescent NW, Calgary, Alberta, Canada.

We are a development stage biopharmaceutical company that focuses on the discovery and development of pharmaceutical products for the treatment of cancers that have not been successfully treated with conventional therapeutics. Our lead product, REOLYSIN ^® , is a potential immuno-oncology viral-agent that may be a novel treatment for certain types of cancer and may be an alternative to existing cytotoxic or cytostatic therapies. Our clinical development program for REOLYSIN emphasizes three pillars: chemotherapy combinations to trigger selective tumor lysis; immuno-therapy combinations to produce adaptive immune responses; and immune modulator (IMiD) combinations to facilitate innate immune responses.

Note 2: Basis of Financial Statement Presentation

Our consolidated financial statements include our financial statements and the financial statements of our subsidiaries Oncolytics Biotech (Barbados) Inc., Oncolytics Biotech (US) Inc., and Oncolytics Biotech (UK) Inc. and are presented in Canadian dollars, our functional currency.

The accounts are prepared on the historical cost basis, except for certain assets and liabilities which are measured at fair value as explained in the notes to these financial statements.

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

Basis of consolidation

Our accounts include the accounts of Oncolytics Biotech Inc. and our subsidiaries. Subsidiaries are entities over which we have control which is achieved when we are exposed, or have the rights, to variable returns from our involvement with the investee and has the ability to affect those returns through our power to govern. Accounting policies of subsidiaries are consistent with our accounting policies and all intra-group transactions, balances, income and expenses are eliminated on consolidation.

A change in ownership interest of a subsidiary, without a change in control, is accounted for as an equity transaction.

Note 3: Summary of Significant Accounting Policies

The consolidated financial statements have, in management's opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below.

Property and equipment

Property and equipment are recorded at cost. Depreciation is provided on bases and at rates designed to amortize the cost of the assets over their estimated useful lives. Depreciation is recorded using the declining balance method at the following annual rates:



Office equipment and furniture	20%
Medical equipment	20%
Computer equipment	30%
Leasehold improvements	Straight-line over the term of the lease

F-7

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

Foreign currency translation

The financial statements for each of our subsidiaries are prepared using their functional currency. Our presentation currency is the Canadian dollar which is also Oncolytics Biotech Inc.'s functional currency. Foreign currency transactions are translated into the functional currency using exchange rates prevailing at the dates of the transactions. Exchange differences resulting from the settlement of such transactions and from the translation at exchange rates ruling at the statement of financial position date of monetary assets and liabilities denominated in currencies other than the functional currency are recognized directly in the consolidated statement of loss and comprehensive loss.

Exceptions to this are where the monetary items form part of the net investment in a foreign operation and the foreign operation's functional currency is the local currency. These exchange differences are initially recognized in equity. The statement of financial position of foreign operations is translated into Canadian dollars using the exchange rate at the statement of financial position date and the income statements are translated into Canadian dollars using the average exchange rate for the period. Where this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, the exchange rate on the transaction date is used. Exchange differences on translation into Canadian dollars are recognized as a separate component of equity. On disposal of a foreign operation, any cumulative exchange differences held in equity are transferred to the consolidated statement of loss and comprehensive loss.

Research and development costs

Research costs are expensed as incurred, net of recoveries. Development costs that meet specific criteria related to technical, market and financial feasibility will be capitalized. To date, all development costs have been expensed.

Investment tax credits

Investment tax credits ("ITCs") relating to qualifying scientific research and experimental development expenditures that are refundable are accounted for as a reduction in research and development expenditures. ITCs that are non-refundable, but are recoverable against future taxes payable, are accrued only when there is reasonable assurance that the credits will be realized.

ITCs are subject to technical and financial review by the Canadian tax authorities on a project-by-project basis. Therefore, amounts ultimately received may vary significantly from the amounts recorded. Any such differences are recorded as an adjustment to the recognized amount in the year the review by the Canadian tax authority is completed and the results are made known to us.

Loss per common share

Basic loss per common share is determined using the weighted average number of common shares outstanding during the period.

We use the treasury stock method to calculate diluted loss per common share. Under this method, diluted loss per common share is computed in a manner consistent with basic loss per common share except that the weighted average common shares outstanding are increased to include additional common shares from the assumed exercise of options and warrants, if dilutive. The number of additional common shares is calculated by assuming that any outstanding “in the money” options and warrants were exercised at the later of the beginning of the period or the date of issue and that the proceeds from such exercises were used to acquire shares of common stock at the average market price during the reporting period.

Share based payments

Stock option plan

We have one stock option plan (the “Option Plan”) available to officers, directors, employees, consultants and suppliers with grants under the Option Plan approved from time to time by our Board of Directors (the “Board”). Under the Option Plan, the exercise price of each option is set at equal to or higher than the trading price of our stock on the date of grant in accordance with Toronto Stock Exchange guidelines. Vesting is provided for at the discretion of the Board and the expiration of options is to be no greater than 10 years from the date of grant. Exercised stock options are settled with common shares issued from treasury.

F-8

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

We use the fair value based method of accounting for stock option awards granted under the Option Plan. We recognize compensation expense and a corresponding adjustment to contributed surplus equal to the fair value of the stock options granted using the Black Scholes Option Pricing Model. The fair value of stock options with a graded vesting schedule is determined based on different expected lives for the options that vest each year, as it would be if the award were viewed as several separate awards, each with a different vesting date, and it is accounted for over the respective vesting period taking into consideration forfeiture estimates. Compensation expense is adjusted for subsequent changes in management’s estimate of the number of options that are expected to vest.

Share based payments to non-employees are measured at the date we obtain the goods or the date the counterparty renders the service.

Incentive share award plan

Our incentive share award plan (the "Share Plan") is available to directors, officers and employees. Under our Share Plan, performance share units and restricted share units may be approved from time to time by the Board. Performance share units ("PSUs") are an award to eligible employees to which common shares shall be issued based upon achieving the applicable performance criteria. Restricted share units ("RSUs") are an award to non-employee directors to which common shares shall be issued in accordance with the Share Plan.

We recognize compensation expense and a corresponding adjustment to contributed surplus equal to the market value of our common shares at the date of grant based on the number of PSUs/RSUs expected to vest, recognized over the term of the vesting period. Compensation expense is adjusted for subsequent changes in management’s estimate of the number of PSUs/RSUs that are expected to vest. The effect of these changes is recognized in the period of the change.

Financial instruments

Financial assets

Financial assets are comprised of cash and cash equivalents, accounts receivable, and short-term investments. Financial assets are initially recorded at fair market value and are classified as follows:

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and interest bearing deposits with our bank and have been designated as held for trading.

Accounts receivable

Accounts receivable have been classified as loans and receivables.

Short-term investments

We determine the appropriate classification of our short-term investments at the time of purchase and re-evaluate such classification as of each reporting date. We classify our short-term investments as held-to-maturity as we have the positive intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at original cost, adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest rate method. Such amortization and interest on securities classified as held-to-maturity are included in interest income.

Impairment of financial assets

We assess at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred loss event) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated.

F-9

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

Financial liabilities

Trade accounts payable

Trade accounts payable are non interest-bearing and recorded at fair market value. They are classified as other financial liabilities and are subsequently measured at amortized cost using the effective interest rate method.

Fair Value Measurement

Fair value is the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants, at the measurement date. In determining the fair value measurement of our financial instruments we prioritize the related inputs used in measuring fair value into the following hierarchy:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;

Level 3 - Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.

Transaction Costs

Transaction costs are expensed as incurred for financial instruments designated as held for trading. Transaction costs for other financial instruments are recognized as part of the financial instrument's carrying value.

Deferred income taxes

We follow the liability method of accounting for income taxes. Under the liability method, deferred income taxes are recognized for the difference between financial statement carrying values and the respective income tax basis of assets and liabilities (temporary differences). Deferred income tax assets and liabilities are measured using substantively enacted income tax rates and laws expected to apply in the years in which temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is charged or credited to income, except when it is related to items charged or credited to either other comprehensive income or directly to equity.

Accounting Standards and Interpretations Issued but Not Yet Effective

IFRS 9 - Financial Instruments

In July 2014, on completion of the impairment phase of the project to reform accounting for financial instruments and replace IAS 39 Financial Instruments: Recognition and Measurement , the IASB issued the final version of IFRS 9 Financial Instruments. IFRS 9 includes guidance on the classification and measurement of financial assets and financial liabilities and impairment of financial assets (i.e. recognition of credit losses).

Under the classification and measurement requirements for financial assets, financial assets must be classified and measured at either amortized cost or at fair value through profit or loss or through other comprehensive income, depending on the basis of the entity’s business model for managing the financial asset and the contractual cash flow characteristics of the financial asset.

The classification requirements for financial liabilities are unchanged from IAS 39. IFRS 9 requirements address the problem of volatility in net earnings arising from an issuer choosing to measure certain liabilities at fair value and require that the portion of the change in fair value due to changes in the entity’s own credit risk be presented in other comprehensive income, rather than within net earnings.

The new requirements for impairment of financial assets introduce an expected loss impairment model that requires more timely recognition of expected credit losses. IAS 39 impairment requirements are based on an incurred loss model where credit losses are not recognized until there is evidence of a trigger event. IFRS 9 is effective for annual periods beginning on or after January 1, 2018 with early application permitted. We are assessing the impact of adopting this standard on our consolidated financial statements.

F-10

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

IFRS 16 - Leases

In January 2016, the IASB issued IFRS 16 - Leases (“IFRS 16”), which replaces IAS 17 - Leases (“IAS 17”) and related interpretations. IFRS 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, unless the lease term is 12-months or less or the underlying asset has a low value. IFRS 16 substantially carries forward the lessor accounting in IAS 17 with the distinction between operating leases and finance leases being retained. IFRS 16 will be applied retrospectively for annual periods beginning on or after January 1, 2019. Early adoption is permitted under certain circumstances. We are assessing the potential impact of adopting this standard on our consolidated financial statements.

Note 4: Significant Judgments, Estimates and Assumptions

Judgments

The preparation of our consolidated financial statements requires us to make judgments, estimates and assumptions that affect the reported amount of expenses, assets, liabilities, and the disclosure of contingent liabilities, at the end of the reporting period. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

Estimates and assumptions

Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates and such differences could be significant. Significant estimates made by management affecting our consolidated financial statements include:

Share based payments

Part of our share based payment expense is measured by reference to the fair value of our stock options at the date at which they are granted. Estimating fair value for granted stock options requires determining the most appropriate valuation model which is dependent on the terms and conditions of the grant. This estimate also requires determining the most appropriate inputs to the valuation model including the expected life of the option, volatility, dividend yield, and rate of forfeitures and making assumptions about them. The value of the share based payment expense for the year along with the assumptions and model used for estimating fair value for share based compensation transactions are disclosed in Note 8.

Taxes

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable income. Currently, we are accumulating tax loss carry forward balances in various tax jurisdictions creating a deferred tax asset. Deferred tax assets are recognized for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Management judgment is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.

To date we have determined that none of our deferred tax assets should be recognized. Our deferred tax assets are mainly comprised of our net operating losses from prior years, prior year research and development expenses, and non-refundable investment tax credits. These tax pools relate to entities that have a history of losses, have varying expiry dates, and may not be used to offset taxable income within our other subsidiaries. As well, there are no taxable temporary differences or any tax planning opportunities available that could partly support the recognition of these losses as deferred tax assets.

Note 5: Cash Equivalents and Short Term Investments

Cash Equivalents

Cash equivalents consist of interest bearing deposits with our bank totaling $ 10,679,992 ( December 31, 2015 – $21,742,300 ). The current annual interest rate earned on these deposits is 0.96% ( December 31, 2015 – 0.76% ).

F-11

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

Short-Term Investments

Short-term investments which consist of guaranteed investment certificates are liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. The objectives for holding short-term investments are to invest our excess cash resources in investment vehicles that provide a better rate of return compared to our interest bearing bank account with limited risk to the principal invested. We intend to match the maturities of these short-term investments with the cash requirements of the Company’s activities and treat these as held-to-maturity short-term investments.



	Face Value $	Original Cost $	Accrued Interest $	Carrying Value $	Fair Value $	Effective Interest Rate %
December 31, 2016
Short-term investments	2,088,800	2,088,800	—	2,088,800	2,088,800	1.41%
December 31, 2015
Short-term investments	2,060,977	2,060,977	—	2,060,977	2,060,977	1.35%

Fair value is determined by using published market prices provided by our investment advisor.

Note 6: Property and Equipment



	Medical Equipment	Computer Equipment	Office Furniture	Office Equipment	Leasehold Improvements	Total
Cost
As at December 31, 2014	191,566	624,095	208,543	86,295	425,709	1,536,208
Additions, net of foreign exchange impact	6,304	61,182	5,542	1,669	40,156	114,853
As at December 31, 2015	197,870	685,277	214,085	87,964	465,865	1,651,061
Additions, net of foreign exchange impact	—	20,098	—	1,502	770	22,370
As at December 31, 2016	197,870	705,375	214,085	89,466	466,635	1,673,431

Amortization
As at December 31, 2014	119,635	452,640	114,927	52,381	271,249	1,010,832
Amortization for the year	13,842	52,605	12,456	6,378	95,130	180,411
As at December 31, 2015	133,477	505,245	127,383	58,759	366,379	1,191,243
Amortization for the year	11,492	48,929	10,241	5,408	86,163	162,233
As at December 31, 2016	144,969	554,174	137,624	64,167	452,542	1,353,476

Net book value
As at December 31, 2016	52,901	151,201	76,461	25,299	14,093	319,955
As at December 31, 2015	64,393	180,032	86,702	29,205	99,486	459,818

F-12

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

Note 7: Share Capital

Authorized:

Unlimited number of no par value common shares



Issued:	Shares			Warrants
	Number	Amount $		Number		Equity Amount $
Balance, December 31, 2013	84,803,818	228,612,564		303,945		376,892
Issued pursuant to Share Purchase Agreement ^(a)	7,037,216	8,861,652		—		—
Issued pursuant to "At the Market" sales agreement ^(b)	1,671,460	1,468,668		—		—
Expiry of warrants	—	—		(303,945	)	(376,892	)
Share issue costs	—	(1,285,828	)	—		—
Balance, December 31, 2014	93,512,494	237,657,056		—		—
Issued pursuant to Share Purchase Agreement ^(a)	5,778,674	4,371,687		—		—
Issued pursuant to "At the Market" sales agreement ^(b)	18,860,454	20,049,693		—		—
Share issue costs	—	(753,744	)	—		—
Balance, December 31, 2015	118,151,622	261,324,692		—		—
Issued pursuant to incentive share award plan	100,000	41,000		—		—
Issued pursuant to "At the Market" equity distribution agreement ^(c)	3,006,600	1,456,296
Share issue costs	—	(500,163	)	—		—
Balance, December 31, 2016	121,258,222	262,321,825		—		—

(a)

In 2014, we entered into a share purchase agreement (the "Share Purchase Agreement") with Lincoln Park Capital Fund, LLC ("LPC") to sell up to US$26,000,000 of common stock. Subject to the terms and conditions of the Share Purchase Agreement and at our sole discretion, we may sell up to US$26.0 million worth of common shares to LPC over the 30-month term. The purchase price of the common shares was based on prevailing market prices of our common shares immediately preceding the notice of a sale without any fixed discount. Subject to the Share Purchase Agreement, we controlled the timing and amount of each investment and LPC was obligated to make such purchases, if and when elected. The Share Purchase Agreement did not impose any upper price limit restrictions, negative covenants or restrictions on our future financing activities, but required that we maintained our NASDAQ listing. Under the Share Purchase Agreement, we issued an initial commitment fee of 292,793 common shares to LPC valued at fair value of US$455,000. An additional 292,793 common shares was to be issued on a pro rata basis under the terms of the Share Purchase Agreement as an additional commitment fee.

On October 20, 2014, we reached an agreement to amend the Share Purchase Agreement. The specific amendments included allowing the Company to sell shares to LPC at the Company's sole option independent of the closing price of the Common Stock, increasing the number of shares that may have been sold to LPC at certain price levels and changed the way the number of Commitment Shares issuable was to be calculated. In consideration of the amendments to the Agreement, the Company issued 146,397 shares of Common Stock to LPC.

In 2015, under the terms of the amended Share Purchase Agreement, we issued 5,778,674 common shares (2014 - 7,037,216 common shares) for net proceeds of approximately US$3.5 million (2014 - US$7.1 million). As part of the shares issued, we issued 78,674 commitment shares (2014 - 536,254 commitment shares consisting of 292,793 initial commitment fee common shares, 146,397 commitment shares in consideration for the October 2014 amendments, and 97,064 additional commitment

F-13

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

fee common shares). The commitment shares have been valued at fair value of US$50,024 (2014 - US$654,267 ) and have been recorded as additional share issue costs. On November 5, 2015, we were delisted from the NASDAQ Capital Market and as a result we were unable to sell common shares under the Share Purchase Agreement.

(b)

On October 24, 2014, we entered into an "at-the-market" ("ATM") equity distribution agreement with Canaccord Genuity Inc. acting as sole agent. Under the terms of the distribution agreement, we were able to, from time to time, sell shares of our common stock having an aggregate offering value of up to US$20 million through Canaccord Genuity Inc. directly to investors in the US through our NASDAQ listing. We were able to determine, at our sole discretion, the timing and number of shares to be sold under this ATM facility. During 2015, we issued 18,860,454 common shares (2014 - 1,671,460 common shares) for net proceeds of approximately US$15.5 million (2014 - US$1.1 million). On November 5, 2015, we were delisted from the NASDAQ Capital Market and as a result we were unable to sell common shares under our existing ATM.

(c)

On February 25, 2016, we entered into a new ATM equity distribution agreement with Canaccord Genuity Inc. acting as our sole agent with an aggregate offering value of up to $4.6 million which allows us to sell our common shares through the facilities of the Toronto Stock Exchange or other "marketplace” (as defined in National Instrument 21-101 Marketplace Operation) in Canada (our "Canadian ATM"). Subject to the terms of our Canadian ATM, we are able to determine, at our sole discretion, the timing and number of shares to be sold under this ATM facility. During 2016, we sold 3,006,600 common shares for gross proceeds of $ 1,456,296 . We incurred share issue costs which included costs to establish our Canadian ATM facility of $ 500,163 .

Note 8: Share Based Payments

Stock Option Plan

We have issued stock options to acquire common stock through our stock option plan of which the following are outstanding at December 31 :



	2016			2015			2014
	Stock Options		Weighted Average Exercise Price $	Stock Options		Weighted Average Exercise Price $	Stock Options		Weighted Average Exercise Price $
Outstanding, beginning of the year	8,561,394		2.17	5,446,394		3.19	5,918,678		3.75
Granted during the year	1,572,000		0.28	3,280,000		0.43	500,000		1.26
Forfeited during the year	(737,500	)	0.65	(100,000	)	1.69	—		—
Expired during the year	(721,667	)	3.61	(65,000	)	1.49	(972,284	)	5.56
Exercised during the year	—		—	—		—	—		—
Outstanding, end of the year	8,674,227		1.83	8,561,394		2.17	5,446,394		3.19
Options exercisable, end of the year	6,729,643		2.27	6,476,394		2.73	4,841,060		3.37

F-14

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

The following table summarizes information about the stock options outstanding and exercisable at December 31, 2016 :



Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price $	Number Exercisable	Weighted Average Exercise Price $
$0.26-$0.41	1,972,000	9.60	0.31	809,416	0.35
$0.42-$0.57	2,172,000	8.92	0.42	1,390,000	0.42
$0.58-$1.87	1,622,667	7.00	1.56	1,622,667	1.56
$1.88-$3.95	1,592,560	4.10	3.04	1,592,560	3.04
$3.96-$6.72	1,315,000	4.98	5.33	1,315,000	5.33
	8,674,227	7.23	1.83	6,729,643	2.27

Non-exercisable options vest either annually over periods ranging from one to three years or after the completion of certain performance criteria.

The estimated fair value of stock options issued during the year was determined using the Black Scholes Option Pricing Model using the following weighted average assumptions and fair value of options:



	2016	2015	2014

Risk-free interest rate	0.82%	0.63%	1.05%
Expected hold period to exercise	3.0 years	3.0 years	2.7 years
Volatility in the price of the Company's shares	94.84%	90%	72.55%
Rate of forfeiture	3.67%	3.67%	2.5%
Dividend yield	Nil	Nil	Nil
Weighted average fair value of options	$0.17	$0.24	$0.54

We use historical data to estimate the expected dividend yield and expected volatility of our stock in determining the fair value of the stock options. The risk-free interest rate is based on the Government of Canada marketable bond rate in effect at the time of grant and the expected life of the options represents the estimated length of time the options are expected to remain outstanding.

Incentive Share Award Plan

We have issued restricted share units to non-employee directors through our incentive share award plan. Grants of restricted share units to non-employee directors vest either on the third anniversary date from the grant date or when the director ceases to be a member of the board. The following restricted share units are outstanding at December 31 :



	2016		2015	2014
Outstanding, beginning of the year	368,831		—	—
Granted during the year	1,053,998		368,831	—
Forfeited during the year	—		—	—
Vested during the year	(100,000	)	—	—
Outstanding, end of the year	1,322,829		368,831	—

(1) The weighted average fair value of the restricted share units granted was $0.31 in 2016 (2015 - $0.40).

We have also issued performance share units to certain officers of the Company. Grants of performance share units require completion of certain performance criteria and cliff vest after three years or vest over a three year period, depending on the grant. Grants will vest immediately upon a change of control of the Company. If the officer ceases employment with the Company,

F-15

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

vesting occurs on a pro rata basis prior to the third anniversary of the grant but after the first anniversary. The following performance share units are outstanding at December 31 :



	2016		2015	2014
Outstanding, beginning of the year	—		—	—
Granted during the year	1,500,000		—	—
Forfeited during the year	(660,000	)	—	—
Outstanding, end of the year	840,000		—	—

(1) The weighted average fair value of the performance share units granted was $ 0.36 in 2016.

We have reserved 11,312,394 common shares for issuance relating to our outstanding equity compensation plans. Compensation expense related to stock options granted to employees, directors and consultants, restricted share units to independent directors and performance share units to certain officers for the year ended December 31, 2016 was $406,078 ( 2015 - $429,537 ; 2014 - $980,325 ).

Note 9: Loss Per Common Share

Loss per common share is calculated using net loss for the year and the weighted average number of common shares outstanding for the year ended December 31, 2016 of 119,880,200 ( 2015 - 112,613,845 ; 2014 - 87,869,149 ). The effect of any potential exercise of our stock options and warrants outstanding during the year has been excluded from the calculation of diluted loss per common share, as it would be anti-dilutive.

Note 10: Commitments

We are committed to payments totaling $1,033,619 during 2017 for activities related to our clinical trial, manufacturing and collaboration programs.

We are committed to rental payments (excluding our portion of operating costs and rental taxes) under the terms of our office leases. Annual payments under the terms of these leases are as follows:



	Amount $
2017	163,978
2018	103,513
2019	103,513
2020	103,513
2021	43,130
	517,647

Under a clinical trial agreement entered into with the Alberta Cancer Board (“ACB”), we have agreed to repay the amount funded under the agreement together with a royalty, to a combined maximum amount of $400,000 plus an overhead repayment of $100,000, upon sales of a specified product. We agreed to repay the ACB in annual installments in an amount equal to the lesser of: (a) 5% of gross sales of a specified product; or (b) $100,000 per annum once sales of a specified product commence.

Note 11: Contingencies

Assumption Agreement

In 1999, we entered into an agreement that assumed certain obligations (the “Assumption Agreement”) in connection with a Share Purchase Agreement (the “Agreement”) between SYNSORB and our former shareholders to make milestone payments and royalty payments.

F-16

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

As of December 31, 2016 , a milestone payment was still outstanding for $1.0 million, due within 90 days of the first receipt from an Appropriate Regulatory Authority, for marketing approval to sell REOLYSIN ^® to the public or the approval of a new drug application for REOLYSIN ^® .

This milestone payment, when payable, will be accounted for as research and development expense and will not be deductible for income tax purposes.

In addition to the milestone payment, payments may become due and payable in accordance with the Agreement upon realization of sales of REOLYSIN ^® . If we receive royalty payments or other payments as a result of entering into partnerships or other arrangements for the development of the reovirus technology, we are obligated to pay to the founding shareholders 11.75% of the royalty payments and other payments received. Alternatively, if we develop the reovirus treatment to the point where it may be marketed at a commercial level, the payments referred to in the foregoing sentence will be amended to a royalty payment of 2.35% of Net Sales received for such products.

BRI “Work in Kind” Contribution

We entered into an engineering and process development agreement with the Biotechnology Research Institute of the National Research Council of Canada (“BRI”). The terms of this Agreement include a “work in kind” contribution from BRI. In exchange for this “work in kind” contribution, we agreed to provide a royalty, contingent upon receiving Sales Revenue, at the lesser of 0.5% of Sales Revenue or $20,000 per year. The total royalty under this Agreement is equal to two times the “work in kind” contribution. As of December 31, 2016 , we estimate that the accumulated work in kind totals approximately $301,000 .

Note 12: Income Taxes

The provision for income taxes recorded in the consolidated financial statements differs from the amount which would be obtained by applying the statutory income tax rate to the loss before income taxes as follows:



	2016		2015		2014
Loss before income taxes	(15,130,605	)	(13,719,842	)	(18,612,556	)
Statutory Canadian corporate tax rate	27.00	%	26.00	%	25.00	%
Anticipated tax recovery	(4,085,263	)	(3,567,159	)	(4,653,139	)
Foreign jurisdiction tax rate difference	2,184,796		2,659,145		3,319,210
Employee stock based compensation	109,641		111,680		245,081
Change in tax rate	—		(1,336,941	)	—
Adjustment to opening tax pools	(39,569	)	(1,339,467	)	(316,193	)
Other permanent differences	100,525		23,620		(48,092	)
Change in deferred tax benefits deemed not probable to be recovered	1,739,557		3,455,622		1,462,572
Deferred income tax recovery	—		—		—
Current income taxes	9,687		6,500		9,439
Adjustment in respect to prior periods	(313	)	(3,347	)	(2,660	)
Net current tax expense	9,374		3,153		6,779

F-17

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

As at December 31, 2016 , we have the following non-capital losses for income tax purposes in Canada:



Expiry	$
2026	9,809,000
2027	12,170,000
2029	4,009,000
2030	4,774,000
2031	4,343,000
2032	2,873,000
2033	2,457,000
2034	2,472,000
2035	3,125,000
2036	6,457,000
	52,489,000

As at December 31, 2016 , we have the following non-refundable federal investment tax credits for income tax purposes in Canada:



Expiry	$
2020	189,000
2021	471,000
2022	465,000
2023	361,000
2024	228,000
2025	271,000
2026	520,000
2027	596,000
2028	622,000
2029	173,000
2030	91,000
2031	114,000
2032	381,000
2033	487,000
2034	270,000
2035	182,620
2036	45,007
	5,466,627

As well, we have unclaimed scientific research and experimental development expenditures available to reduce future years’ taxable income of approximately $27,300,000 . We have not recorded the potential benefits of these tax pools in these consolidated financial statements.

F-18

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

Deferred tax assets are recognized, to the extent that it is probable that taxable income will be available, against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilized. The components of our unrecognized deferred tax asset are as follows:



	2016 $	2015 $	2014 $
Net operating losses carried forward	17,821,631	15,950,044	13,130,052
Scientific research and experimental development	7,394,707	7,278,284	6,424,359
Investment tax credits	3,990,664	3,987,214	4,083,046
Undepreciated capital costs in excess of book value of property and equipment and intellectual property	1,908,654	1,839,107	1,720,154
Share issue costs	432,659	619,066	655,787
Net capital losses carried forward	7,598	7,598	7,035
Unrecognized deferred tax asset	31,555,913	29,681,313	26,020,433

Note 13: Capital Disclosures

Our objective when managing capital is to maintain a strong statement of financial position. We achieve our objective by obtaining adequate cash resources to support planned activities which include the clinical trial program, product manufacturing, administrative costs and intellectual property expansion and protection. We include shareholders’ equity, cash and cash equivalents and short-term investments in the definition of capital.



	2016 $	2015 $
Cash and cash equivalents	12,034,282	24,016,275
Short-term investments	2,088,800	2,060,977
Shareholders’ equity	10,689,620	24,674,306

We do not have any debt other than trade accounts payable and we have potential contingent obligations relating to the completion of our research and development of REOLYSIN ^® .

In managing our capital, we estimate our future cash requirements by preparing a budget and a multi-year plan annually for review and approval by our Board . The budget establishes the approved activities for the upcoming year and estimates the costs associated with these activities. The multi-year plan estimates future activity along with the potential cash requirements and is based on our assessment of our current clinical trial progress along with the expected results from the coming year’s activity. Budget to actual variances are prepared and reviewed by management and are presented quarterly to the Board.

Historically, funding for our plan is primarily managed through the issuance of additional common shares and common share purchase warrants that upon exercise are converted to common shares. Management regularly monitors the capital markets attempting to balance the timing of issuing additional equity with our progress through our clinical trial program, general market conditions, and the availability of capital. There are no assurances that funds will be made available to us when required.

On February 16, 2016, we renewed our short form base shelf prospectus (the “Base Shelf”) that qualifies for distribution of up to $150,000,000 of common shares, subscription receipts, warrants, or units (the “Securities”) in Canada. Under our Base Shelf, we may sell Securities to or through underwriters, dealers, placement agents or other intermediaries and also may sell Securities directly to purchasers or through agents, subject to obtaining any applicable exemption from registration requirements. The distribution of Securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, at market prices prevailing at the time of sale, or at prices related to such prevailing market prices to be negotiated with purchasers and as set forth in an accompanying Prospectus Supplement.

F-19

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

Renewing our Base Shelf provides us with additional flexibility when managing our cash resources as, under certain circumstances, it shortens the time period required to close a financing and is expected to increase the number of potential investors that may be prepared to invest in our company. Funds received from a Prospectus Supplement will be used in line with our Board approved budget and multi-year plan. Our renewed Base Shelf expires on March 16, 2018 and allowed us to enter into our Canadian ATM equity distribution agreement (see Note 7). We use this equity arrangement to assist us in achieving our capital objective.

We are not subject to externally imposed capital requirements and there have been no changes in how we define or manage our capital in 2016.

Note 14: Financial Instruments

Our financial instruments consist of cash and cash equivalents, short-term investments, accounts receivable, and accounts payable. As at December 31, 2016 , there are no significant differences between the carrying values of these amounts and their estimated market values.

Credit risk

Credit risk is the risk of financial loss if a counterparty to a financial instrument fails to meet its contractual obligations. We are exposed to credit risk on our cash and cash equivalents and short-term investments in the event of non-performance by counterparties, but we do not anticipate such non-performance. Our maximum exposure to credit risk at the end of the period is the carrying value of our cash and cash equivalents and short-term investments.

We mitigate our exposure to credit risk by maintaining our primary operating and investment bank accounts with Schedule I banks in Canada. For our foreign domiciled bank accounts, we use referrals or recommendations from our Canadian banks to open foreign bank accounts and these accounts are used solely for the purpose of settling accounts payable or payroll.

We also mitigate our exposure to credit risk by restricting our portfolio to investment grade securities with short-term maturities and by monitoring the credit risk and credit standing of counterparties. Currently, 100% of our short-term investments are in guaranteed investment certificates.

Interest rate risk

Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates. We are exposed to interest rate risk through our cash and cash equivalents and our portfolio of short-term investments. We mitigate this risk through our investment policy that only allows investment of excess cash resources in investment grade vehicles while matching maturities with our operational requirements.

Fluctuations in market rates of interest do not have a significant impact on our results of operations due to the short term to maturity of the investments held.

Currency risk

Currency risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. In the normal course of our operations, we are exposed to currency risk from the purchase of goods and services primarily in the U.S., the U.K. and the European Union. In addition, we are exposed to currency risk to the extent cash is held in foreign currencies from either the purchase of foreign currencies or when we receive foreign currency proceeds from financing activities. The impact of a $0.01 increase in the value of the U.S. dollar against the Canadian dollar would have decreased our net loss in 2016 by approximately $2,913 . The impact of a $0.10 increase in the value of the British pound against the Canadian dollar would have increased our net loss in 2016 by approximately $10,499 . The impact of a $0.10 increase in the value of the Euro against the Canadian dollar would have decreased our net loss in 2016 by approximately $3,010 .

We mitigate our foreign exchange risk by maintaining sufficient foreign currencies, through the purchase of foreign currencies or receiving foreign currencies from financing activities, to settle our foreign accounts payable.

F-20

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

Balances in foreign currencies at December 31, 2016 are as follows:



	US dollars $		British pounds £		Euro €
Cash and cash equivalents	4,629,766		31,295		32,565
Accounts payable	(134,059	)	(10,837	)	—
	4,495,707		20,458		32,565

Liquidity risk

Liquidity risk is the risk that we will encounter difficulty in meeting obligations associated with financial liabilities. We manage liquidity risk through the management of our capital structure as outlined in Note 13. Accounts payable are all due within the current operating period.

Note 15: Additional Cash Flow Disclosures

Net Change In Non-Cash Working Capital



	2016 $	2015 $		2014 $
Change in:
Accounts receivable	285,653	(148,308	)	(85,898	)
Prepaid expenses	245,828	(215,116	)	70,190
Accounts payable and accrued liabilities	1,359,172	(664,505	)	(2,634,664	)
Non-cash impact of foreign exchange	343,212	(77,535	)	206,384
Change in non-cash working capital related to operating activities	2,233,865	(1,105,464	)	(2,443,988	)

Other Cash Flow Disclosures



	2016 $	2015 $	2014 $
Cash interest received	163,902	197,859	210,390
Cash taxes paid	4,468	3,421	9,715

Note 16: Indemnification of Officers and Directors

Our corporate by-laws require that, except to the extent expressly prohibited by law, we will indemnify our officers and directors against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment reasonably incurred in respect of any civil, criminal or administrative action or proceeding as it relates to their services to the Company. The by-laws provide no limit to the amount of the indemnification. We have purchased directors’ and officers’ insurance coverage to cover claims made against the directors and officers during the applicable policy periods. The amounts and types of coverage have varied from period to period as dictated by market conditions. We believe that we have adequate insurance coverage; however, there is no guarantee that all indemnification payments will be covered under our existing insurance policies.

There is no pending litigation or proceeding involving any of our officers or directors as to which indemnification is being sought, nor are we aware of any threatened litigation that may result in claims for indemnification.

F-21

ONCOLYTICS BIOTECH INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2016

Note 17: Economic Dependence

We are economically dependent on our toll manufacturers. We primarily use one toll manufacturer in the US to produce the clinical grade REOLYSIN ^® required for our clinical trial program. Any significant disruption of the services provided by our primary toll manufacturer has the potential to delay the progress of our clinical trial program. We have used another toll manufacturer in the U.K. that has also produced clinical grade REOLYSIN ^® at a smaller scale. We have attempted to mitigate this risk by producing sufficient REOLYSIN ^® in advance of patient enrollment in a particular clinical trial.

Note 18: Other Expenses and Adjustments

We present our expenses based on the function of each expense and therefore include realized foreign exchange gains and losses, unrealized non-cash foreign exchange gains and losses and non-cash stock based compensation associated with research and development activity as a component of research and development expenses and amortization of property and equipment and stock based compensation associated with operating activities as a component of operating expenses.



	2016 $	2015 $		2014 $
Included in research and development expenses:
Realized foreign exchange loss (gain)	104,851	238,709		273,996
Unrealized non-cash foreign exchange (gain) loss	67,109	(816,319	)	242,542
Non-cash share based compensation	233,919	257,016		588,658

Included in operating expenses
Amortization of property and equipment	162,233	180,411		163,501
Non-cash share based compensation	172,159	172,521		391,667
Office minimum lease payments	148,600	196,601		94,888

Note 19: Related Party Transactions

Compensation of Key Management Personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling our activities as a whole. We have determined that key management personnel consists of the members of the Board of Directors along with certain officers of the Company.



	2016 $	2015 $	2014 $
Short-term employee compensation and benefits	2,753,553	2,941,342	2,535,167
Termination benefits	1,330,828	—	—
Share-based payments	372,008	353,419	771,438
	4,456,389	3,294,761	3,306,605

F-22

EMPLOYMENT AGREEMENT

THIS AGREEMENT made the 27th day of October, 2016.

BETWEEN:

ONCOLYTICS BIOTECH (U.S.), INC.

("OBUS")

-and-

Andres Gutierrez

(the "Employee")

WHEREAS:


A.	OBUS and its Affiliates are engaged in the business of developing pharmaceutical products;


B.	OBUS has made an offer of employment to the Employee, subject to the terms and conditions contained herein, and subject to the termination of the Services Agreement concurrent with the commencement of employment under this Agreement;


C.	The Employee is prepared to accept the offer of employment;

NOW THEREFORE the parties agree as follows:


Section 1 -	Definitions and Interpretation

(1) In this Agreement the following defined terms shall have the meanings indicated:

(a)

”Affiliate” means any entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with a party. For the purposes of this definition, control shall mean: (i) the direct or indirect ownership of fifty percent (50%) or more of the voting stock of a corporation; or (ii) the direct or indirect ownership of fifty (50%) or more of the ownership interest of any other entity; or (iii) the ability to elect a majority of the directors of the entity;


(b)	"Business" means the business currently carried on by OBUS and its Affiliates, which is the development, testing, marketing and sale of pharmaceutical products together with such additional business as OBUS or its Affiliates may decide to undertake from time to time;


(c)	"Commencement Date" means October 31, 2016;


(d)	“Good Reason” means any one of the following events occurring on or after the Commencement Date:


(i)	Any reduction in the Employee’s then existing annual base compensation and benefits, unless comparable reductions are made for all other executive employees of Oncolytics;


(ii)	Any material diminution of the Employee’s duties, responsibilities, authority or reporting structure, excluding for this purpose an isolated or inadvertent action not taken in bad faith which is remedied by Oncolytics immediately after notice thereof is given by the Employee;


(iii)	Any request that the Employee relocate to a work site that would increase the Employee’s one-way commute distance by more than eighty (80) kilometers from the Employee’s then principal residence, unless the Employee accepts such relocation opportunity; or


(iv)	Any material breach by Oncolytics of its obligations under this agreement that is not remedied within thirty (30) days of written notice of such breach from the Employee;


(e)	"Confidential Information" means all confidential information of OBUS and its Affiliates, and includes:


(i)	any data or information directly or indirectly related to the Business or arising directly or indirectly in the course of, or derived from the Employee's employment with OBUS whether

related to products, equipment, inventions, ideas, designs, methods, systems, improvements, processes, research or otherwise;


(ii)	any technical or scientific know-how;


(iii)	financial and sales information, customer lists, pricing policies, lists of suppliers, proprietary computer programs in any format whatsoever, programming techniques, the manner of plans or methods of operation and the like relating to the Business;


(iv)	patent applications, drawings, blueprints, manuals, letters, notebooks, reports and all other materials (written or otherwise) related to the Business or to the agents, joint venturers or contractors of OBUS or its Affiliates; and


(v)	any information provided to or received by OBUS or its Affiliates on a confidential basis;

(f)

"Intellectual Property" means all information, data, designs, processes, software, algorithms and inventions, including those that may be the subject of patent, copyright, industrial design, trademarks, trade secret or other forms of legal protection, made, conceived or developed by the Employee during the term of employment with OBUS, whether alone or jointly with others and whether during or after regular working hours, that relates to or in any way pertains to or connects with any matter developed, or under investigation or development by OBUS or its Affiliates, or related to the Business;


(g)	"Termination Event" means:


(i)	breach by the Employee of any material provision of this Agreement;


(ii)	material violation by the Employee of any statutory or common law duty of loyalty to OBUS and its Affiliates;


(iii)	the commission of a criminal offence by the Employee against OBUS or its Affiliates; and


(iv)	personal or professional conduct of the Employee which in the reasonable and good faith judgment of OBUS may significantly injure OBUS' Business or interfere with the Employee's job performance.

(2) This Agreement shall be governed by and construed in accordance with the laws of California.


(3)	The parties shall with reasonable diligence take all action, do all things, attend or cause their representatives to attend all meetings and execute all further documents, agreements and assurances as may be required from time to time in order to carry out the terms and conditions of this Agreement in accordance with their true intent.

(4) The following schedules are attached to and form part of this Agreement:

Schedule "A" - Job Description

Schedule "B" - Benefits


Section 2 -	Employment

(1) OBUS agrees to employ the Employee in the position of Chief Medical Officer and the Employee accepts the employment, starting on the Commencement Date.

(2) The Employee shall perform the duties and responsibilities associated with the position of Chief Medical Officer including those set out on the Job Description attached as Schedule "A". The Employee may, from time to time, be assigned or undertake additional duties and responsibilities consistent with those generally appropriate for a Chief Medical Office and the Employee's duties and responsibilities may be modified or expanded from time to time.

(3) The Employee shall perform the duties and responsibilities set out in Section 2(2):


(a)	diligently, faithfully and to the best of the Employee's ability; and


(b)	in the best interests of OBUS.

(4) The Employee shall comply with the terms, conditions and requirements of OBUS' Policy Manual and benefit plans, as the same may be amended, revised or added to from time to time.


Section 3 -	Remuneration

(1) OBUS shall pay to the Employee a salary of Three Hundred Thousand ($300,000.00) United States dollars per annum, exclusive of bonuses, benefits and other compensation, payable in equal installments of Twelve Thousand Five Hundred ($12,500.00) United States Dollars on the fifteenth (15) and last day of each month.

(2) OBUS shall, on or before the anniversary date of this Agreement in each year, evaluate and set the Employee's salary for the next ensuing year.

(3) OBUS shall reimburse the Employee for all reasonable out-of-pocket expenses incurred by the Employee in the performance of the Employee's obligations under this Agreement, subject to OBUS' policies then in force.

(4) OBUS shall be entitled to withhold from any payments made to the Employee any amounts that OBUS is required to withhold pursuant to any Act in force that relates to income tax, social security, medicare or pension in any jurisdiction under which such payments are required to be made by or on behalf of the Employee.


Section 4 -	Benefits and Equity Compensation

The Employee shall be entitled to participate in benefit plans described in Schedule "B" and in other benefit plans instituted or as amended by OBUS from time to time.

Restricted Share Units

The Employee shall be granted 300,000 restricted share units (“RSU’s”) on the Commencement Date under Oncolytics Biotech Inc.’s Incentive Award Plan. The RSU’s will vest one third after two years from the Commencement Date with the remaining two thirds vesting three years after the Commencement Date.

Stock Options

The Employee shall be granted 150,000 stock options on the Commencement Date under Oncolytics Biotech Inc.’s Stock Option Plan. These options will be priced on the Commencement Date and 50,000 stock options will vest immediately followed by 50,000 vesting after 12 months from the Commencement Date with the final 50,000 vesting after 18 months from the Commencement Date.


Section 5 -	Vacations

The Employee shall, in addition to all statutory holidays, be entitled to twenty (20) Business Days paid vacation during each twelve (12) month period of employment under this Agreement. The Employee's vacation time shall be governed by applicable policies of OBUS.


Section 6 -	Place of Employment

The Employee shall be based within the greater metropolitan area of [to be determined] , and shall perform the majority of his employment obligations within that area.

The Employee will make provision in his homes for an office space in which he can conduct OBUS’ business. The Employee will provide furnishings and equipment for these offices, including computers with internet capability, fax machines with dedicated business phone lines and such other items as are required to properly perform his duties.

The Employee shall be available to travel within the United States and outside the United States as required to fulfill his duties and responsibilities.


Section 7 -	Confidential Information

(1) The Employee confirms that the Confidential Information is the sole and exclusive property of OBUS or its Affiliates and is held by the Employee in trust for the benefit of OBUS and its Affiliates. The Employee shall use the Employee's best efforts and exercise utmost diligence to protect and safeguard the Confidential Information. Neither during the period of employment by OBUS nor thereafter for a period of three years shall the Employee, directly or indirectly, use or disclose to any other person any Confidential Information, whether or not acquired, learned or obtained

or developed by the Employee alone or in conjunction with others, except as such disclosure or use may be required in connection with the employment with OBUS or as may be agreed to in writing by OBUS.

(2) Subsection 7(1) shall not apply to Confidential Information that:


(a)	is in the public domain at the time of its disclosure, or which, after disclosure, becomes part of the public domain other than by disclosure by the Employee;


(b)	the Employee can show was in the Employee's possession at the time of disclosure and was not acquired from OBUS or its Affiliates; or


(c)	was received by the Employee from a third party without a covenant of confidentiality, provided such third party is under no obligation of confidentiality with respect to the Confidential Information.

(3) The Employee shall keep informed of OBUS' policies and procedures for safeguarding OBUS' property including, without limitation, the Confidential Information and the confidentiality thereof, and will strictly comply therewith at all times. The Employee shall not, except as required in the course of the employment with OBUS, remove from OBUS' premises any OBUS property including, without limitation, Confidential Information. The Employee shall, immediately upon termination of employment with OBUS, return to OBUS all of OBUS' property in the Employee's possession, including, without limitation, all tangible parts of or relating to the Confidential Information as is in the Employee's possession or under the Employee's control without retaining any copies or record thereof or any other mechanical means that, alone or in combination with other means, would permit the Employee to reproduce or make available the Confidential Information.

(4) The Employee shall advise any future employer, associate or affiliate that the Employee has signed this Agreement and is bound by its terms and conditions.

Section 8 - Intellectual Property

(1) The Employee confirms that any and all Intellectual Property shall be the sole and exclusive property of OBUS or its Affiliates and shall be assigned by the Employee to OBUS, or its nominee. The Employee agrees to disclose promptly to OBUS or its nominee any and all Intellectual Property and to execute written assignments of the Employee's right, title and interest in and to the Intellectual Property to OBUS or its nominee.

(2) With respect to any Intellectual Property, the Employee also agrees:


(a)	to assist OBUS or its nominee in preparing any necessary copyright and patent applications, including Canadian and foreign applications, covering the Intellectual Property;


(b)	to sign and deliver all such applications and their assignment to OBUS or its nominee; and


(c)	generally to give all information and testimony, to co-operate with OBUS and its solicitors, to sign all lawful papers, and to do all lawful things that may be needed or requested by OBUS to obtain, extend, reissue, maintain or enforce copyrights or patents covering the Intellectual Property.

(3) OBUS shall bear all expenses that are incurred in obtaining, extending, reissuing, maintaining and enforcing any and all copyrights or patents in respect of the Intellectual Property assigned to OBUS or its nominee by the Employee, and in the vesting and perfecting of title thereto in OBUS or its nominee and shall pay the Employee reasonable compensation for any time that OBUS may require the Employee to expend in order to accomplish the above subsequent to the termination of employment with OBUS.

(4) The Employee hereby waives in favour of OBUS and its Affiliates, all moral rights in any and all copyright works authored or co-authored by the Employee during the term of this Agreement that directly relate to the Business of OBUS or its Affiliates.

Section 9 - Term and Termination

(1) The Employee's employment under this Agreement shall commence on the Commencement Date and shall continue until terminated in accordance with this Section 9.

(2) Subject to Sections 9(3) and (4), and notwithstanding any other provision contained herein to the contrary, the employment relationship between the Employee and OBUS arising out of this Agreement shall terminate upon forty-five (45) days notice being given to OBUS by the Employee or immediately upon notice being given to the Employee by OBUS.

(3) If OBUS is entitled to terminate this Agreement for cause, or as the result of a Termination Event, OBUS shall not be required to compensate the Employee in respect of such termination or provide any period of notice in lieu of compensation with respect to such termination.

(4) Subject to Section 9(5), if this Agreement is terminated by OBUS at any time other than pursuant to Section 9(3), or if this Agreement is terminated by the Employee for Good Reason, the Employee shall be entitled to severance payment equal to twelve (12) months salary. The severance payment as provided pursuant to this Section 9(4) shall include an amount equal to the value of all benefits to which the Employee would otherwise have been entitled during the notice period.

(5) Notwithstanding Section 9(4), if there is a change of control of OBUS, as defined herein, and if this Agreement is terminated by OBUS at any time within one (1) year following the change of control other than pursuant to Section 9(3), the Employee shall be entitled to severance payment equal to twice that determined pursuant to Section 9(4).

For the purposes of this section 9(5), “change of control” means any amalgamation, merger or other corporation reorganization which results in any change in the present effective voting control of OBUS, or will result in a change of the person or persons who own or control sufficient voting shares in OBUS to elect a majority of the directors of OBUS, or will result in a person acquiring sufficient voting shares in OBUS to elect a majority of the directors of OBUS, or any sale, lease, exchange, partnership, or other transfer (in one transaction or a series of transactions) of all or substantially all of the assets of OBUS or a plan of liquidation of OBUS and/or an agreement for the sale or liquidation of OBUS is approved and completed, or the Board of Directors determines in its sole discretion the a change of control has occurred, whether or not any event described has occurred or is contemplated.

(6) The Employee acknowledges and agrees that notice or payment in lieu thereof, in accordance with Section 9(4) shall be and is conclusively deemed to be reasonable compensation for termination of this Agreement and hereby waives any claim or potential claim that the Employee now has or may hereafter have, against OBUS for further compensation or notice other than that provided by the terms of this Agreement.

(7) The Employee confirms that:


(a)	any breach of this Agreement or unauthorized disclosure of Confidential Information may result in irreparable harm to the Business of OBUS or its Affiliates and considerable monetary damages to OBUS and its Affiliates;


(b)	the damages suffered by OBUS may be difficult to establish; and


(c)	interim and permanent injunctions may be the only suitable remedy for OBUS;

but nothing herein shall in any way limit or restrict any other remedies available to OBUS at law or in equity including an action for damages.

(8) Termination of the Employee's employment with OBUS for any reason whatsoever shall not terminate the Employee's obligations under Sections 7, 8 and 10 of this Agreement.

Section 10 - Non-Competition

(1) The Employee shall not, during the term of this Agreement, engage, hold an interest in or have any involvement, either directly or indirectly, in any business entity, venture or undertaking if such would materially interfere with or conflict with the Employee's duties and obligations to OBUS as provided for under this Agreement, provided that the acquisition of a non-control position in publicly traded companies will not contravene this Section.

(2) The Employee shall not, during the term of this Agreement, and for a period of one (1) year following the termination or expiration of this Agreement, either individually or in partnership or jointly or in conjunction with any

person, firm or corporation as principal, employee, partner, director or as a shareholder or investor (if actually involved in the management of a business which is competitive with the Business of OBUS or its Affiliates) carry on or be engaged in any business which is directly competitive with the Business of OBUS or its Affiliates.

(3) The parties agree that all of the restrictions contained in Subsection 10(2) hereof are reasonable and valid, and that all defences to the strict enforcement thereof by OBUS are hereby waived by the Employee.

(4) The Employee agrees that the remedy at law for any breach by the Employee of the provisions of this Section 10 may be inadequate and that in the event of such breach, OBUS may make an application to a court of competent jurisdiction for an order granting OBUS temporary, permanent or both kinds of injunctive relief against the Employee, without the necessity of proving actual damage to OBUS.

(5) The Employee agrees that any waiver by OBUS of a breach of this Agreement by the Employee shall only be a waiver with respect to the particular breach giving rise to the waiver.

Section 11 - Notices

All notices, reports, invoices, payments and formal communications (collectively referred to as "Notices") required or permitted to be given hereunder shall be in writing and shall be delivered personally or sent by prepaid registered mail or facsimile transmission to the following address or such other address as the relevant party may notify from time to time:

TO: OBUS

ONCOLYTICS BIOTECH (U.S.), INC.

Attention: President

WITH COPY TO:

ONCOLYTICS BIOTECH INC.

Suite 210, 1167 Kensington Crescent N.W.

Calgary, Alberta

T2N 1X7

Attention: President

TO: Employee

Andres Gutierrez

7 Lombard Ave

Lawrence Township NJ 08648

U.S.A.

Notices sent by prepaid registered mail shall be deemed to be received by the addressee on the seventh day (excluding Saturdays, Sundays, Statutory Holidays and any period of postal disruption) following the mailing thereof. Notices personally served shall be deemed to be received when actually delivered, provided such delivery shall be during normal business hours.


Section 12 -	Enurement

This Agreement shall enure to the benefit of and be binding upon the parties hereto and:


(a)	in the case of OBUS, its successors and permitted assigns; and


(b)	in the case of the Employee, his heirs, executors, administrators or other personal representatives.

IN WITNESS WHEREOF the parties have executed this Agreement as of the day and year first above written.



ONCOLYTICS BIOTECH (U.S.), INC.
Per:	/s/ Alan Tuchman
	Alan Tuchman President
Per:	/s/ Gilles Gosselin
	Gilles Gosselin CFO

/s/ Floriane Riouall /s/ Andres Gutierrez

Witness Andres Gutierrez

SCHEDULE "A"

JOB DESCRIPTION

Insert job description

SCHEDULE "B"

BENEFITS

Deferred Compensation:

Employee shall, if qualified to do so, be entitled to allocate a portion of his salary to a 401(K) Plan established for the Employee, up to the prescribed maximum, and in accordance with the requirements thereof.

Benefit Plan Alternatives:

Alternative 1:

Employee can elect to receive an additional amount of 9.25% of base salary. Such amount shall be the employee’s full Health Benefit Allocation, and shall be taxable in accordance with the relevant regulations.

Alternative 2:

Employee can elect to direct (the lesser of the maximum available or allowable by the employee under the Flexible Spending Plan), a portion of the Health Benefit Allocation (9.25% of base salary) to a Flexible Spending Account, and receive the remainder (9.25% of base salary less the amount directed to the Flexible Spending Account) of the Health Benefit Allocation as a taxable amount in accordance with the relevant regulations.

Alternative 3:

Whether or not the Employee elects to participate in Alternative 2, the Employee can also elect to participate in an individual Health Insurance Program utilizing any amount still remaining from the Health Benefit Allocation. Any additional amounts required to be paid for this Program would be drawn from Employee’s net pay.

AMENDING AGREEMENT

THIS AMENDING AGREEMENT made effective as of the 23 ^rd day of February, 2017.

BETWEEN:

ONCOYLYTICS BIOTECH INC.,

("ONCOLYTICS")

- and -

MATTHEW C. COFFEY,

(the "Employee")

WHEREAS the Employee is an officer of Oncolytics whose terms of employment are set forth in the Executive Employment Agreement ("Employment Agreement") dated effective January 1, 2013;

AND WHEREAS Oncolytics and the Employee wish to amend the Employment Agreement;

NOW THEREFORE in consideration of the mutual covenants contained in this Amending Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, it is agreed as follows:


1	Interpretation

This Amending Agreement is supplemental to and shall form one agreement with the Employment Agreement, and the Employment Agreement and this Amending Agreement shall be read together and have effect so far as practicable as though all the provisions thereof and hereof were contained in one instrument. In this Amending Agreement, including the recitals hereto, unless there is something within the subject matter or context inconsistent therewith, expressions herein, unless otherwise defined herein, have the same meanings as the corresponding expressions defined in the Employment Agreement.


2	Amendment to the Employment Agreement

The Employment Agreement Section 2 - Employment is amended as follows:


(1)	Oncolytics confirms the employment of the Employee in the position of President and Chief Executive Officer and the Employee accepts the employment, effective January 1 ^st , 2017;

(2) The Employee shall perform the duties and responsibilities associated with the position of President and Chief Executive Officer. The Employee may from time to time, be assigned or undertake additional duties and responsibilities consistent with those generally appropriate for a President and Chief Executive Officer, and the Employee’s duties and responsibilities may be modified or expanded from time to time.

The Employment Agreement Section 3 - Remuneration is amended as follows:


(1)	Commencing January 1, 2017, Oncolytics shall pay to the Employee a salary of FOUR HUNDRED THIRTY THOUSAND ($430,000.00) CANADIAN DOLLARS per annum, exclusive of bonuses, benefits and other compensation, payable in equal installments of SEVENTEEN THOUSAND NINE HUNDRED SIXTEEN DOLLARS and SIXTY-SEVEN CENTS ($17,916.67) on the 15 ^th and last day of each month.


3	Confirmation

The parties hereto hereby acknowledge and confirm that, except as specifically amended by the provisions of this Amending Agreement, all of the terms and conditions contained in the Employment Agreement are and shall remain in full force and effect, unamended, in accordance with the provisions thereof.


4	Miscellaneous


(a)	This Agreement shall be governed by and construed in accordance with the laws in force in the Province of Alberta. The parties hereby submit to the jurisdiction of the Courts of Alberta.


(b)	The parties shall with reasonable diligence take all action, do all things, attend or cause their representatives to attend all meetings and execute all further documents, agreements and assurances as may be required from time to time in order to carry out the terms and conditions of this Agreement in accordance with their true intent.

IN WITNESS WHEREOF the parties hereto have executed this Amending Agreement as of the date and year first above written.



	ONCOLYTICS BIOTECH INC.
	Per:	/s/ Wayne Pisano

Per:		/s/ Kirk Look

/S/ Floriane Riouall /S/ Matthew Coffey

___________________________ ________________________________

Witness MATTHEW COFFEY

SCHEDULE "A"

JOB DESCRIPTION

The Employee shall perform the duties and responsibilities associated with the position of President and Chief Executive Officer.

AMENDING AGREEMENT

THIS AMENDING AGREEMENT made effective as of the 23 ^rd day of February, 2017.

BETWEEN:

ONCOYLYTICS BIOTECH INC.,

("ONCOLYTICS")

- and -

KIRK LOOK,

(the "Employee")

WHEREAS the Employee is an officer of Oncolytics whose terms of employment are set forth in the Executive Employment Agreement ("Employment Agreement") dated effective January 1, 2013;

AND WHEREAS Oncolytics and the Employee wish to amend the Employment Agreement;


1	Interpretation


2	Amendment to the Employment Agreement

The Employment Agreement Section 3 - Remuneration is amended as follows:


(1)	Commencing January 1, 2017, Oncolytics shall pay to the Employee a salary of THREE HUNDRED FORTY-FIVE THOUSAND ($345,000.00) CANADIAN DOLLARS per annum, exclusive of bonuses, benefits and other compensation, payable in equal installments of FOURTEEN THOUSAND THREE HUNDRED SEVENTY-FIVE DOLLARS ($14,375.00) on the 15 ^th and last day of each month.


3	Confirmation


4	Miscellaneous


(a)	This Agreement shall be governed by and construed in accordance with the laws in force in the Province of Alberta. The parties hereby submit to the jurisdiction of the Courts of Alberta.


(b)	The parties shall with reasonable diligence take all action, do all things, attend or cause their representatives to attend all meetings and execute all further documents, agreements and assurances as may be required from time to time in order to carry out the terms and conditions of this Agreement in accordance with their true intent.

IN WITNESS WHEREOF the parties hereto have executed this Amending Agreement as of the date and year first above written.



	ONCOLYTICS BIOTECH INC.
	Per:	/s/ Wayne Pisano

Per:		/s/ Matt Coffey

/S/ Floriane Riouall /S/ Kirk Look

___________________________ ________________________________

Witness KIRK LOOK

Settlement Agreement

THIS AGREEMENT is made this 5th day of December, 2016

B E T W E E N:

BRADLEY GEORGE THOMPSON

(“ Employee ”)

- and -

ONCOLYTICS BIOTECH INC.

(“ Employer” )

Background:

A. Employee’s employment was terminated by Employer; and

B. Employee and Employer have agreed to terms and conditions providing for payments and other valuable consideration to Employee by Employer in exchange for Employee executing this agreement and its schedules (“collectively the “ Agreement ”).

THE PARTIES THEREFORE AGREE AS FOLLOWS:


1.	Employee confirms that upon receipt of the first payment under Paragraph 2 below, he will have received from Employer all of his statutory entitlements including but not limited to vacation pay.

Employer will pay Employee a total severance payment of CAD $1,330,828 (minus required deductions). This amount will be paid in 12 monthly installments of $110,902 (minus required deductions ) . At Employee’s request, the installments will be taxed at the usual taxation rate (rather than the 30% retiring allowance rate) without CPP and EI deductions. Employee agrees to indemnify and save Employer harmless from and against any and all actions, causes of action, claims, proceedings, applications, complaints and demands whatsoever arising from or related to such taxation. The first payment will be made upon this Agreement being fully executed, and will made via cheque to Employee. All remaining payments will be made via direct deposit to Employee’s bank account on or before the 15 ^th of the month, commencing on January 15, 2017.


3.	Employee will immediately resign from Employer Board of Directors and will execute all documentation to effect such resignation.

Notwithstanding the terms of Employer’s Stock Option Plan, Employer will extend the term of 1,880,160 of Employee’s outstanding stock options to the earlier of: (i) the date of the expiration of the applicable option period; and (ii) 5:00 p.m. (Calgary time) on the date of the last payment outlined in paragraph 2 above. An aggregate of 608,000 of Employee’s options which are not scheduled to vest until December 1, 2017 (as to 304,000 options) and December 1, 2018 (as to the remaining 304,000 options) will not be extended and will terminate in accordance with their terms. The option schedule is set out in Schedule “B”.


5.	All share awards granted to Employee under Employer’s Incentive Share Award Plan and the resolution of the Board of Directors of Employer dated September 9, 2016, shall have immediately terminated effective as of November 2, 2016.


6.	Employee confirms that he will adhere to the terms of his employment agreement, including but not limited to the confidentiality and non-competition covenants.


7.	Employee can keep the electronics in his possession that were supplied to him as part of his employment. Employee will ensure that no Employer confidential information is retained on such devices.


8.	The mosaic which is Employee’s property can be removed from Employer’s office by Employee. Employee is responsible for all associated costs.


9.	Employer will issue a press release in the following form:

Oncolytics Biotech ^® Inc. Announces Change to Board of Directors

CALGARY, AB, November xx, 2016 --- Oncolytics Biotech ^® Inc. (“Oncolytics” or the “Company”) (TSX: ONC) (OTCQX: ONCYF) (FRA: ONY) today announced that Dr. Brad Thompson has resigned from Oncolytics board of directors effective immediately.


10.	Employee will execute the release agreement attached as Schedule “A” (the “ Release ”) and return an originally executed copy to Employer. Nothing in this Agreement or the Release is intended to prevent Employee from communicating in good faith with the any securities regulatory authority regarding violations of securities laws by the Employer.


11.	Employee acknowledges that he has received independent legal advice from McLennan Ross LLP with respect to the terms and conditions of this Agreement and that he fully understands them. Employee voluntarily accepts the terms and conditions of this Agreement for the purpose of making full and final compromise, adjustment and settlement of all claims as aforesaid.


12.	Employee will not disclose this Agreement or the terms of settlement contained in this Agreement to any person or corporation except to the extent that such disclosure is required by law or to the extent necessary to permit him to obtain legal and/or financial advice in connection with this Agreement.


13.	This Agreement will enure to the benefit of and be binding upon the heirs, executors, administrators and legal personal representative of Employee and the successors and permitted assigns of Employer respectively.


14.	This Agreement will be governed by and construed in accordance with the laws of the Province of Alberta and the laws of Canada applicable in Alberta.


15.	Employee acknowledges receipt of a copy of this Agreement duly signed by Employer.


16.	This Agreement may be executed in counterparts and by facsimile and electronic (pdf) transmission.

IN WITNESS WHEREOF the parties have executed this Agreement.



SIGNED, AND DELIVERED	)
in the presence of:	)
	)
Michael Aasen	)	/s/ Brad Thompson		(s)
Witness	)	BRADLEY GEORGE THOMPSON


		ONCOLYTICS BIOTECH INC.
	Per:		/s/ Wayne Pisano

SCHEDULE “A”

WHEREAS:

(a) the employment of BRADLEY GEORGE THOMPSON (the “ Employee ”) with ONCOLYTICS BIOTECH INC. (the “ Employer ”) has ceased; and

(b) the Employee has agreed to accept for good consideration the terms of settlement outlined in the settlement agreement to which this Release and Indemnity is attached as Schedule “A” (the “ Settlement Terms ”) in full settlement of all Claims (as defined below);

NOW THEREFORE THIS RELEASE AND INDEMNITY WITNESSES that, in consideration of the Settlement Terms and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Employee agrees as follows:

1. Release and Indemnity

Subject to Paragraph 9 below, the Employee hereby:

(a) releases and forever discharges:

(i) the Employer, its directors, officers, trustees, insurers, shareholders, employees, contractors and agents;

(ii) all corporations associated or affiliated with the Employer, their directors, officers, trustees, insurers, shareholders, employees, contractors and agents; and

(iii) the respective heirs, executors, administrators, other legal representatives, predecessors, successors and assigns of the aforesaid corporations, individuals and other entities

(individually, a “ Releasee ” and, collectively, the “ Releasees ”) from any and all actions, causes of action, claims, proceedings, applications, complaints and demands whatsoever, whether known or unknown, that have arisen or that may arise at any time in the future (individually, a “ Claim ” and, collectively, the “ Claims ”) and, without limiting the generality of the foregoing, all Claims arising from the employment of the Employee with the Employer or the termination, resignation, or cessation of such employment, including all Claims, contractual, statutory or otherwise, under any benefit plan in which the Employee participated or may have been entitled to participate during his employment and all Claims for salary, wages, commissions, incentive compensation, bonuses, discrimination, mental distress, stock options, share awards, RSUs, shares or other securities, benefits, overtime pay, vacation pay, holiday pay, any other form of remuneration, perquisites, termination pay, severance pay, compensation in lieu of notice, damages for wrongful dismissal, payments, rights, or benefits under the Workers’ Compensation Act (Alberta) any other forms of damages and reinstatement in employment, and including any express or implied right under any contract of employment, the common law, or any applicable statute or regulation, including without limitation the Employment Standards Code (Alberta), the Labour Relations Code (Alberta), the Alberta Human Rights Act , and the Workers’ Compensation Act (Alberta);

(b) agrees he is aware of his rights under human rights legislation, and confirms he is not and does not intend to assert such rights or advance a Claim under human rights legislation

relating to his employment with the Employer or the resignation, termination or cessation of such employment, and hereby releases and forever discharges the Releasees from any such Claims;

(c) agrees, for the benefit of the Releasees, not to make any Claim or take any proceeding with respect to any matter released and discharged herein that may result in any Claim arising against any Releasee for contribution or indemnity or other relief;

(e) agrees to indemnify and save harmless the Releasees from and against any and all Claims under the Income Tax Act (Canada), any applicable provincial income tax statutes, including any regulations made thereunder, and any other statutes or regulations, for or in respect of any failure on the part of the Releasees to withhold income tax from all or any part of the said consideration and any Losses arising from any such Claims;

(f) agrees to keep the terms of this Release and Indemnity and the Settlement Terms and the discussions leading up to them completely confidential, and not to disclose the terms of this Release and Indemnity, the Settlement Terms and the discussions leading up to them except to the extent disclosure is required by law or to the extent necessary to permit him to obtain legal and/or financial advice in connection with the Settlement Terms;

(g) acknowledges and agrees that the Releasees other than the Employer are intended to be third party beneficiaries of this Release and Indemnity and, as such, each of such Releasees are entitled to enjoy the benefits of this Release and Indemnity and have the right to independently enforce the terms of this Release and Indemnity directly against the Employee; and

(h) to the extent necessary to entitle the Releasees to enjoy the benefits of this Release and Indemnity, appoints the Employer as the trustee for such Releasees of the provisions of this Release and Indemnity that are for their benefit.

2. Independent Legal Advice

The Employee declares he has received independent legal advice with respect to the Settlement Terms as well as this Release and Indemnity and fully understands them. The Employee hereby voluntarily accepts the Settlement Terms for the purpose of making full and final compromise, adjustment and settlement of all Claims referred to above.

3. Compliance with the Settlement Terms

This Release and Indemnity will not apply to any Claims the Employee may have relating to the failure or the refusal of the Employer to comply with the Settlement Terms.

4. No Admission of Liability

The Employee understands and agrees that neither the Settlement Terms nor anything contained herein nor the payment of the said consideration will be construed as an admission of liability by the Releasees.

5. Governing Law

This Release and Indemnity is governed by and will be construed in accordance with the laws of the Province of Alberta and the laws of Canada applicable therein.

6. Benefit

This Release and Indemnity will enure to the benefit of and be binding upon the Employee and the Releasees and their respective heirs, executors, administrators, other legal representatives, successors and assigns.

7. Return of Property

The Employee agrees that all written and electronic documents, drawings, manuals, letters, notebooks, reports, files, records and similar collections of confidential or proprietary information of the Employer (collectively the “ Documents ”) are the property of the Employer and confirms that he has returned and delivered all such Documents to the Employer without making or retaining copies of same. The Employee also confirms that he has returned all Employer property he had in his possession. The Employee further agrees and acknowledges that the Employer has returned all of the Employee’s personal property to Employee.

8. Non-Disparagement

The Employee agrees not to do or say anything that a reasonable person would expect to diminish, impugn, or constrain the Employer’s good will or good reputation or that of any employee, officer or director of the Employer. The Employee agrees not to disparage or seek to injure the Employer’s reputation or the reputation of any employee, officer or director of the Employer. The Employee agrees to refrain from making negative statements regarding the Employer’s methods of doing business, the quality, wisdom or effectiveness of the Employer’s business policies and practices, or the quality of the Employer’s employees, officers, agents, products or services.

9 . Exclusions

This Release does not apply to (a) the Employee’s rights as a shareholder of the Employer, or (b) any rights that the Employee may already have under the Employer’s D&O insurance policies.

10. Entire Agreement

This Release and Indemnity along with the Settlement Terms constitute the entire agreement between the Employer and the Employee with respect to the subject matter hereof. The Settlement Terms are contractual and not a mere recital.

IN WITNESS WHEREOF BRADLEY GEORGE THOMPSON has executed this Release and Indemnity at Calgary, Alberta on December 5, 2016.



SIGNED AND DELIVERED	)
in the presence of:	)
	)
/s/ Michael Aasen	)	/s/ Brad Thompson
Witness	)	BRADLEY GEORGE THOMPSON

SCHEDULE “B”

LIST OF SUBSIDIARIES

2016



Name	Jurisdiction
Oncolytics Biotech (Barbados) Inc.	Barbados
Oncolytics Biotech (US) Inc.	Delaware

EXHIBIT 12.1

CERTIFICATION

I, Matthew Coffey, certify that:


1.	I have reviewed this annual report on Form 20-F of Oncolytics Biotech Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;


4.	The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and


5.	The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.



Date:	March 27, 2017	/s/ Matthew Coffey
		Matthew Coffey, PhD Chief Executive Officer Principal Executive Officer

EXHIBIT 12.2

CERTIFICATION

I, Kirk Look, certify that:

1. I have reviewed this annual report on Form 20-F of Oncolytics Biotech Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting; and


5.	The company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company's auditors and the audit committee of the company's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company's ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company's internal control over financial reporting.



Date:	March 27, 2017	/s/ Kirk Look
		Kirk Look, CA Chief Financial Officer Principal Accounting and Financial Officer

EXHIBIT 13.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Oncolytics Biotech Inc. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2016 as filed with the Securities and Exchange Commission on the date here of (the “Report”), I, Matthew Coffey, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Matthew Coffey

_________________________________

Matthew Coffey, PhD

Chief Executive Officer

Principal Executive Officer

March 27, 2017

A signed original of this written statement required by Section 906 has been provided to Oncolytics Biotech Inc. and will be retained by Oncolytics Biotech Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EXHIBIT 13.2

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report of Oncolytics Biotech Inc. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2016 as filed with the Securities and Exchange Commission on the date here of (the “Report”), I, Kirk Look, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Kirk Look

__________________________________

Kirk Look, CA

Chief Financial Officer

Principal Accounting and Financial Officer

March 27, 2017

MANAGEMENT DISCUSSION & ANALYSIS

2016

ONCOLYTICS BIOTECH INC.

MANAGEMENT DISCUSSION & ANALYSIS

2016

TABLE OF CONTENTS



Basis of Presentation	1
Forward-Looking Statements	1
REOLYSIN ^® Development For 201 6	1
Clinical Trial Program	2
Manufacturing and Process Development	4
Intellectual Property	5
Financing Activity	5
Financial Impact	5
Cash Resources	5
REOLYSIN ^® Development For 2017	5
Accounting Policies	5
Critical Accounting Policies	5
Future Accounting Changes	6
Significant Estimates	7
Selected Annual Information	7
Results of Operations	8
Summary of Quarterly Results	12
Fourth Quarter	12
Fourth Quarter - Review of Operations	12
Liquidity and Capital Resources	14
Off-Balance Sheet Arrangements	16
Transactions with Related Parties	16
Financial Instruments and Other Instruments	16
Risk Factors Affecting Future Performance	17
Other MD&A Requirements	21

March 9, 2017

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BASIS OF PRESENTATION

Our Management Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our 2016 audited consolidated financial statements and notes thereto, which have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). This MD&A along with our consolidated financial statements for the year ended December 31, 2016 , were authorized for issue in accordance with a resolution of the Board of Directors (the "Board") on March 9, 2017 .

FORWARD-LOOKING STATEMENTS

The following discussion contains forward-looking statements, within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended and under applicable Canadian provincial securities legislation. Forward-looking statements, including our belief as to the potential of REOLYSIN ^® , a therapeutic reovirus, as a cancer therapeutic and our expectations as to the success of our research and development and manufacturing programs in 2017 and beyond, future financial position, business strategy and plans for future operations, and statements that are not historical facts, involve known and unknown risks and uncertainties, which could cause our actual results to differ materially from those in the forward-looking statements.

Such risks and uncertainties include, among others, the need for and availability of funds and resources to pursue research and development projects, the efficacy of REOLYSIN as a cancer treatment, the success and timely completion of clinical studies and trials, our ability to successfully commercialize REOLYSIN, uncertainties related to the research, development and manufacturing of REOLYSIN, uncertainties related to competition, changes in technology, the regulatory process and general changes to the economic environment.

With respect to the forward-looking statements made within this MD&A, we have made numerous assumptions regarding among other things: our ability to obtain financing to fund our development program, our ability to receive regulatory approval to commence enrollment in our clinical trial program, the final results of our co-therapy clinical trials, our ability to maintain our supply of REOLYSIN and future expense levels being within our current expectations.

Investors should consult our quarterly and annual filings with the Canadian and US securities commissions for additional information on risks and uncertainties relating to the forward-looking statements. Forward-looking statements are based on assumptions, projections, estimates and expectations of management at the time such forward-looking statements are made, and such assumptions, projections, estimates and/or expectations could change or prove to be incorrect or inaccurate. Investors are cautioned against placing undue reliance on forward-looking statements. We do not undertake to update these forward-looking statements except as required by applicable law.

REOLYSIN Development Update For 2016

Oncolytics Biotech Inc. is a Development Stage Company

Since our inception in April of 1998, Oncolytics Biotech ^® Inc. has been a development stage company and we have focused our research and development efforts on the development of REOLYSIN, our potential cancer therapeutic. We have not been profitable since our inception and expect to continue to incur substantial losses as we continue research and development efforts. We do not expect to generate significant revenues until, and unless, our cancer product becomes commercially viable.

Our goal each year is to advance REOLYSIN through the various steps and stages of development required for potential pharmaceutical products. In order to achieve this goal, we believe that we have to actively manage the development of our clinical trial program, our pre-clinical and collaborative programs, our manufacturing process and REOLYSIN supply, and our intellectual property.

Clinical Trial Program

We began 2016 with an overall clinical program mainly comprised of six randomized Phase 2 clinical trials (our "Randomized Studies") and a program investigating the use of immuno-therapies. Towards the end of 2016, we adopted an evolving understanding of REOLYSIN and a new clinical development plan based on our growing library of clinical data and our understanding of how REOLYSIN acts as an immuno-oncology viral agent. The plan is made up of three paths, with each clearly based on a target element of REOLYSIN’s mechanism of action: direct tumour lysis; innate immune response; and adaptive immune response. These mechanisms, working in concert, result in the lysis of cells and the release of chemical signals that attract immune cells to the tumour and results in an inflamed tumor phenotype. The result is the long-term education of the patient’s immune system to identify and attack cancer cells.

We understand that REOLYSIN behaves like many other immuno-oncology agents, where patients may derive little or no benefit in terms of progression-free survival (PFS) or response rate (RR), but may see a meaningful improvement in overall survival (OS). In 2016, we reported data from a series of sponsored randomized studies that supported our thinking around REOLYSIN’s mechanism of action. While these were initially designed by the sponsors several years ago, and all used PFS as the primary endpoint, they served to provide us with valuable data. In a U.S. based National Cancer Institute (NCI) randomized Phase 2 study of patients with pancreatic cancer (NCI-8601), we saw a higher percentage of patients surviving two years in the test arm versus the control arm. As well, we saw a higher percentage of two year survival in patients that started in the control arm and crossed-over to the test arm compared to those who did not cross over. In a randomized Phase 2 study sponsored by the Canadian Cancer Trials Group (CCTG, formerly the National Cancer Institute of Canada Clinical Trials Group) in advanced or metastatic colorectal cancer (IND 210), we also saw a trend to improvement in OS for female patients in the test arm versus the control arm based on an interim analysis.

Path #1 - Direct Tumour Lysis

Our first clinical development path focuses on direct tumour lysis and is based on the clinical data from our randomized chemotherapy combination trials. We have demonstrated a strong trend showing a two-year survival benefit in patients with pancreatic cancer in two clinical studies and are planning to take advantage of this survival data and existing orphan drug designations to seek regulatory advice in the U.S. and Europe to establish a clear path to registration in pancreatic cancer.

Path #2 - Innate Immune Response

The second path involves the combination of immune modulatory drugs (IMiDs) with REOLYSIN to enhance the innate immune response against the tumor. We expect to be able to announce collaborations in this path in the second quarter of 2017 that combine REOLYSIN with IMiDS and investigate whether the addition of REOLYSIN can enhance the benefit of this class of agents.

Path #3 - Adaptive Immune Response

Our third clinical development path focuses on the adaptive immune response, a long-term, durable and learned response. This creates a vaccination-like response that, through lysis of the tumor by the virus, educates the body’s immune cells to target and attack unique cancer antigens. We believe that REOLYSIN in combination with checkpoint inhibitors - immunological agents that enhance the adaptive immune response - will act synergistically to provide enhanced overall survival to patients. Early in 2016, we announced that the first patients had been treated in our Phase 1b study of pembrolizumab (KEYTRUDA ^® ) in combination with REOLYSIN and chemotherapy in patients with advanced pancreatic adenocarcinoma. This study is enrolling patients 18 years or older with histologically confirmed advanced or metastatic pancreatic adenocarcinoma who have failed, or did not tolerate, first line treatment. It is an open-label Phase 1b trial designed to determine the safety and dose-limiting toxicities of REOLYSIN ^® and chemotherapy (gemcitabine or irinotecan or fluorouracil, at the treating physician's preference) in combination with pembrolizumab. Secondary endpoints include overall response rate and progression free survival by immune-related response criteria; overall survival; and effects of REOLYSIN and pembrolizumab when administered in combination as determined by analysis of pre- and post-treatment treatment biopsies and blood-based immune markers. Following an initial six to nine patient safety run-in, up to an additional 15 patients may be enrolled for further evaluation of safety and efficacy.

Our focus will be to work towards product registration via the first path of the clinical development plan. The objectives of paths two and three are to enhance the exposure of REOLYSIN to leading pharmaceutical companies working in immuno-oncology and enhance the market opportunities for our agent; that process is underway.

Path #1 - Direct Tumour Lysis - Clinical Trial Results

Randomized Colorectal Cancer Study

In 2016, we announced preliminary data from our CCTG randomized Phase 2 clinical trial of REOLYSIN in combination with FOLFOX-6 and bevacizumab (Avastin ^® ) in patients with advanced or metastatic colorectal cancer. This preliminary analysis was presented at the June 2016 American Society of Clinical Oncology ("ASCO") Annual Meeting held in Chicago, IL.



	Objective Response Rate (%)		Progression Free Survival (months)		Median Overall Survival (months) ¹
	Test	Control	Test	Control	Test	Control
Female Patients	63.2 (n=19)	23.8 (n=21)	7.43 (n=19)	8.08 (n=21)	19.3 (n=19)	14.5 (n=21)
Male Patients	46.9 (n=32)	41.9 (n=31)	7.33 (n=32)	9.26 (n=31)	15.4 (n=32)	15.7 (n=31)
Overall	52.9 (n=51)	34.6 (n=52)	7.33 (n=51)	9.13 (n=52)	15.57 (n=51)	15.21(n=52)

Note: 1. This was an interim analysis, as 62 (60.2%) patients out of a total of 103 patients were alive at the time of data cut-off.

The abstract authored by CCTG, reported that the overall test arm had an objective response rate of 52.9% (n=51) versus 34.6% (n=52) in the control arm (p=0.06) and reported on a pre-planned analysis, as specified in the protocol, of patient responses by gender. The female patients in the test arm had an objective response rate of 63.2% (n=19) versus 23.8% (n=21) in the control arm (p=0.0054). The male patients in the test arm had an objective response rate of 46.9% (n=32) versus 41.9% (n=31) in the control arm (p=0.6747). The abstract also noted that, of grade 3 or higher adverse events, there was less abdominal pain (3.5% versus 17.3%, p=0.02), more hypertension (26.3% versus 3.8%, p=0.001) and more proteinuria (22.8% versus 1.9%, p=0.001) in the test arm than the control arm.

Randomized Lung Cancer Study

In 2016, we announced that the CCTG presented preliminary data from our randomized CCTG Phase 2 lung cancer study of REOLYSIN. Patients with non-squamous cell histology were treated with REOLYSIN given in combination with pemetrexed (Arm A) versus pemetrexed alone (Arm B). Patients with squamous cell histology were treated with REOLYSIN given in combination with docetaxel (Arm C) versus docetaxel alone (Arm D). This preliminary analysis was presented at the June 2016 Annual ASCO meeting held in Chicago, IL.



	Median Progression Free Survival (months)			Median Overall Survival (months)
	Test Arms (Arm A+C) (95% CI)	Control Arms (Arm B+D) (95% CI)	Hazard Ratio (95% CI)	Test Arms (Arm A+C) (95% CI)	Control Arms (Arm B+D) (95% CI)	Hazard Ratio (95% CI)
EGFR ¹	5.16 (0.76-8.71) (n=8)	4.63 (1.51-7.03) (n=5)	0.54 (0.13-2.22)	18.66 (1.38-26.84) (n=8)	7.49 (4.63-16.79) (n=5)	0.37 (0.08-1.71)
TP53 ¹	4.07 (2.63-6.21) (n=24)	2.40 (1.28-2.99) (n=21)	0.58 (0.31-1.08)	8.74 (6.83-13.93) (n=23)	6.14 (3.02-8.18) (n=21)	0.55 (0.28-1.07)
Female Patients	3.98 (2.66-5.39) (n=41)	2.84 (1.51-4.34) (n=34)	0.59 (0.36-0.98)	8.38 (5.36-10.38) (n=41)	7.59 (5.59-10.45) (n=34)	0.85 (0.49-1.46)
Male Patients	2.56 (1.45-3.94) (n=36)	2.69 (2.46-4.24) (n=41)	1.34 (0.83-2.14)	7.66 (4.37-10.94) (n=36)	7.26 (4.86-10.78) (n=41)	1.0 (0.60-1.68)
Overall	2.96 (2.56-4.17) (n=77)	2.83 (2.50-3.98) (n=75)	0.93 (0.66-1.31)	8.12 (5.85-9.40) (n=77)	7.39 (5.72-9.43) (n=75)	0.94 (0.64-1.37)

Note: 1. Mutated.

The investigators concluded that REOLYSIN was reasonably well tolerated at the dose and schedule administered with pemetrexed or docetaxel and that no new safety signals were seen. They also noted it was of interest that female patients in the REOLYSIN-containing arms did better than in the standard treatment arms and that in a subgroup analysis that EGFR mutation and p53 mutation status was associated with a trend to improved progression free survival.

Randomized Pancreatic Cancer Study

In 2016, we further analyzed the overall survival data from our randomized Phase 2 clinical trial in combination with carboplatin and paclitaxel in patients with pancreatic cancer (NCI-8601). The study was sponsored by the NCI. Our updated analysis is based on data collected up to August 2, 2016.

We performed an intent-to-treat analysis of overall survival on patients with confirmed treatment regimes, as assessed by the percentage of patients surviving for two and three years. The analysis showed a higher percentage of patients surviving two and three years for patients randomized to the test arm or for those patients that crossed over to the test arm compared to those patients that stayed on the control arm.



Arm	Median OS (months)	1-year OS (%)	2-year OS (%)	3-year OS (%)
Stayed on Control (n = 20)	7.0	28	6	—
Randomized to Test (n = 36)	7.9	34	20	7
Crossed over to Test (n = 17)	11.8	33	13	7

Randomized Ovarian Cancer

In 2016, we announced an update to our randomized Phase 2 clinical trial investigating REOLYSIN in combination with paclitaxel in patients with ovarian cancer (GOG-0186H). The study is sponsored by the NCI and the update included data from a Gynecologic Oncology Group ("GOG") study summary report and followed a presentation made by the principal investigator regarding the study at the Society of Gynecologic Oncology's Annual Meeting on Women's Cancer which ran from March 19-22, 2016 in San Diego, CA.

A PFS analysis, stratified by measurable disease and platinum-free interval (test arm: n = 54, 43 events (progressions), and control arm: n = 54, 48 events), was performed and demonstrated a median PFS of 4.4 months for the test arm, and 4.3 months for the control arm.

An interim OS analysis (test arm: n = 54, 32 events (deaths), and control arm: n = 54, 32 events (deaths)) was performed and demonstrated a median OS of 12.9 months for the test arm, and 15.0 months for the control arm. The OS was an interim analysis, as 44 (41%) patients out of a total of 108 patients were alive at the time of analysis.

This study is a randomized Phase 2 clinical trial of paclitaxel versus paclitaxel plus REOLYSIN in patients with persistent or recurrent, ovarian, fallopian tube or primary peritoneal cancer. Patients received paclitaxel on days 1, 8 and 15 of each 28-day treatment cycle, with either REOLYSIN (test arm) or placebo (control arm) administered on days 1 through 5. One hundred and eight patients were randomized (1:1, 54 patients in the control arm, 54 patients in the test arm). The NCI study did not stratify on entry according to PD-L1 levels or infiltrating CD8+ T lymphocyte levels, nor were either of those levels measured post-treatment. However, pre-treatment tumour biopsies were taken from the majority of patients. The primary objectives are PFS and toxicity. The secondary objectives are median OS by treatment group, median PFS by treatment group, and tumour response as measured by RECIST criteria and CA-125 antigen levels.

Manufacturing and Process Development

Throughout 2016, we supplied our clinical trial program with previously filled and labeled product from our existing supply of REOLYSIN. As well, we continued our validation activities designed to demonstrate that our manufacturing process for the commercial production of REOLYSIN is robust and reproducible as part of a process validation master plan. Process validation is required to ensure that the resulting product meets required specifications and quality standards and will form part of the Company’s submission to regulators, including the FDA, for product approval.

Intellectual Property

At the end of 2016 , we had been issued over 415 patents including 61 US and 20 Canadian patents as well as issuances in other jurisdictions. We have an extensive patent portfolio covering the oncolytic reovirus that we use in our clinical trial program including a composition of matter patent that expires in 2028. Our patent portfolio also includes methods for treating proliferative disorders using modified adenovirus, HSV, parapoxvirus and vaccinia virus.

Financing Activity

Canadian "At the Market" Equity Distribution Agreement

On February 26, 2016, we entered into an "at-the-market" equity distribution agreement with Canaccord Genuity Inc. acting as sole agent in Canada (our "Canadian ATM"). Under the terms of the distribution agreement, we may, from time to time, sell shares of our common stock having an aggregate offering value of up to $4.6 million through Canaccord Genuity Inc. Sales of common shares, if any, pursuant to the Canadian ATM, will be made in transactions that are deemed to be "at-the-market distributions", through the facilities of the Toronto Stock Exchange or other "marketplace" (as defined in National Instrument 21-101 Marketplace Operation) in Canada. We will determine, at our sole discretion, the timing and number of shares to be sold under this ATM facility. During the year ending December 31, 2016, we sold 3,006,600 commons shares for gross proceeds of $1,456,296 . We incurred share issue costs which included costs to establish our Canadian ATM facility of $500,163 .

Financial Impact

We estimated that our cash requirements for 2016 to fund our operations would be approximately between $14.0 - $15.0 million. Our cash usage for the year was $12,477,613 for operating activities and $23,527 for the acquisition of property and equipment. Our net loss for the year was $15,139,979 .

Cash Resources

We exited 2016 with cash, cash equivalents and short-term investments totaling $14,123,082 (see “Liquidity and Capital Resources”) .

Expected REOLYSIN Development For 2017

Our planned 2017 development activity for REOLYSIN focuses on our clinical development plan and is made up of our three clinical paths, manufacturing, and intellectual property programs. Our primary objective in 2017 is to work towards product registration using chemo-therapy combinations while investigating synergies with immuno-therapies including checkpoint inhibitors and immune modulators. We expect any expansion with immunotherapies to be done through research collaborations requiring us to mainly provide product.

Our 2017 manufacturing program includes continued production of 100-litre cGMP production runs along with the related fill, labeling, packaging and shipping of REOLYSIN to our various clinical sites. We also plan to continue progressing through our process validation master plan and related conformity testing in 2017. Finally, our intellectual property program includes filings for additional patents along with monitoring activities required to protect our patent portfolio.

We currently estimate the cash requirements to fund our operations for 2017 will be approximately $12 million, but will depend on our ultimate clinical program. (see “Liquidity and Capital Resources” ).

Our Accounting Policies

In preparing our financial statements we use IFRS as issued by the International Accounting Standards Board. IFRS requires that we make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available in selecting our accounting policies. Our selection of accounting policies, along with our estimates and assumptions affect the reported amounts of our assets and liabilities at the date of the financial statements and the reported amounts of expenses during the periods presented.

Critical Accounting Policies

In preparing our financial statements, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets at the date of the financial statements and the reported amounts of expenses during the periods presented. Significant estimates are used for, but not limited to, the treatment of our research and development expenditures, the assessment of realizable value of long-lived assets and the calculation of stock based compensation (see Note 4 " Significant Judgments, Estimates and Assumptions ") of our audited consolidated financial statements.

The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

Research and Development

Research costs are expensed as incurred. Development costs that meet specific criteria related to technical, market and financial feasibility will be capitalized. To date, all of our activities have been expensed.

We account for our research and development activity in conjunction with the IAS 38 "Intangible Assets" of IFRS. IAS 38 makes a distinction between the research phase of a project and the development phase of an internal project and requires that all costs incurred during the research phase are to be expensed. However, an intangible asset arising from the development phase of an internal project shall be recognized if, and only if, we can demonstrate all of the following:


1.	The technical feasibility of completing the intangible asset so that it will be available for use or sale.


2.	Our intention to complete the intangible asset and use or sell it.


3.	Our ability to use or sell the intangible asset.


4.	How the intangible asset will generate probable future economic benefits. Among other things, that we can demonstrate the existence of a market for our product that results from the use of the intangible asset or of the intangible asset itself.


5.	The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.


6.	The ability to measure reliably the expenditure attributable to the intangible asset during its development.

We believe that we do not meet all of the above criteria and for this reason, our research and development costs are expensed and not capitalized. We will monitor our progress against these criteria and will capitalize our development costs once we can conclude we meet the above criteria.

Future Accounting Changes

Accounting Standards and Interpretations Issued but Not Yet Effective

IFRS 9 - Financial Instruments

1, 2018 with early application permitted. We are assessing the impact of adopting this standard on our consolidated financial statements.

IFRS 16 - Leases

Significant Estimates

Share Based Payments

As required by IFRS, share based payments are to be recorded at their fair value at the date of grant. We have chosen to use the Black Scholes Option Pricing Model (“Black Scholes” or the “Model”) to calculate the fair value of our stock options and warrants. Though there are other models available to calculate the option values (for example, the binomial model), Black Scholes is currently widely used and accepted by other publicly traded companies. Therefore, we have concluded that Black Scholes is the appropriate option pricing model to use for our stock options at this time.

Black Scholes uses inputs in its calculation of fair value that require us to make certain estimates and assumptions. For 2016 , we used the following weighted average assumptions for the calculation of the fair value of the stock options granted during the year:



	2016

Risk-free interest rate	0.82%
Expected hold period to exercise	3.0 years
Volatility in the price of the Company's shares	94.84%
Rate of forfeiture	3.67%
Dividend yield	Nil
Weighted average fair value of options	$0.17

A change in these estimates and assumptions will impact the value calculated by the model. For instance, the volatility in the price of our shares is based on the quoted trading price. We assume that weekly trading prices best reflect our trading price volatility. However, an entity can choose between daily, weekly, or monthly trading prices in the volatility calculation.

The Model also uses an expected hold period to exercise in its calculation of fair value. When we are estimating the expected hold period to exercise we take into consideration past history, the current trading price, the volatility of our common shares and the progress in our clinical program. Our conclusions resulted in an expected hold period for the stock options issued in 2016 to be 3.0 years and we believe this is an appropriate estimate. However, our options have a 10-year life and given the fluctuations in our stock price the expected hold period could be different.

Consequently, in complying with IFRS and selecting what we believe are the most appropriate assumptions under the circumstances, we have recorded non-cash share based payment expense for the year of $406,078 . However, given the above discussion, this expense could have been different and still be in accordance with IFRS.

Selected Annual Information



	2016 $		2015 $		2014 $
Revenue	—		—		—
Consolidated net loss ⁽¹⁾	(15,139,979	)	(13,722,995	)	(18,619,335	)
Basic and diluted loss per share ^{(1), (2)}	(0.13	)	(0.12	)	(0.21	)
Total assets ⁽²⁾	14,758,284		27,383,798		17,193,190
Cash dividends declared per share ⁽³⁾	Nil		Nil		Nil
Notes:
(1) Included in consolidated net loss and loss per common share for 2016, 2015, and 2014 are share based payment expenses of $406,078, $429,537 and $980,325, respectively.
(2) We issued 3,106,600 common shares for net cash proceeds of $1.0 million in 2016 (2015 - 24,639,128 common shares for net cash proceeds of $23.7 million; 2014 - 8,708,676 common shares for net cash proceeds of $9.0 million).
(3) We have not declared or paid any dividends since incorporation.

Results of Operations

Net loss for the year was $15,139,979 compared to $13,722,995 and $18,619,335 for the years ending December 31, 2015 and December 31, 2014 , respectively.

Research and Development Expenses (“R&D”)



	2016 $		2015 $		2014 $
Clinical trial expenses	1,620,114		1,323,610		4,983,644
Manufacturing and related process development expenses	1,725,835		2,306,024		2,705,296
Intellectual property expenditures	1,096,097		1,032,227		1,077,552
Research collaboration expenses	369,469		698,909		621,936
Other R&D expenses	4,553,816		4,098,180		3,703,798
Scientific research and development refund	(1,203	)	(62,144	)	(84,762	)
Foreign exchange loss (gain)	171,960		(1,051,958	)	228,130
Share based payments	233,919		257,016		588,658
Research and development expenses	9,770,007		8,601,864		13,824,252

Clinical Trial Program

Clinical trial expenses include those costs associated with our Clinical Development Plan which primarily included our randomized phase 2 studies investigating cancer cell lysis (Path #1) and adaptive immune response (Path #3). Included in clinical trial expenses are direct patient enrollment costs, contract research organization (“CRO”) expenses, clinical trial site selection and initiation costs, data management expenses and other costs associated with our clinical trial program.

During 2016 , our clinical trial expenses were $1,620,114 compared to $1,323,610 and $4,983,644 for the years ended December 31, 2015 and December 31, 2014 , respectively. In 2016, our clinical activities mainly related to the patient enrollment in our checkpoint inhibitor pancreatic cancer study investigating pembrolizumab (KEYTRUDA ^® ) in combination with REOLYSIN along with costs

associated with the completion of enrollment in our randomized Phase 2 studies. As well, during the three year period 2014 - 2016 we benefited from the use of Third Party Trials which has allowed us to operate a broad clinical program at a lower overall cost.

In 2015, our clinical trial program activities declined compared to 2014 as we completed enrollment in our Randomized Studies and closed out fully enrolled clinical trials.

We expect our clinical trial expenses to increase in 2017 compared to 2016. In 2017, we expect to finalize our registration path and complete the regulatory filings necessary to support and commence enrollment in a registration study as part of Path #1 of our Clinical Development Plan. As well, we expect to expand Path #2 and Path #3 of our Clinical Development Plan to include both checkpoint inhibitors and immune modulators (IMiDs).

Manufacturing & Related Process Development (“M&P”)

M&P expenses include product manufacturing and process development activities. Product manufacturing expenses include third party direct manufacturing costs, quality control testing, fill, label and packaging costs and are net of any recoveries that are received from any R&D collaborators. Process development expenses include costs associated with studies that examine components of our manufacturing process looking for improvements and costs associated with the creation of our process validation master plan and related conformity testing.



	2016 $	2015 $	2014 $
Product manufacturing expenses	1,162,446	1,618,165	1,713,649
Process development expenses	563,389	687,859	991,647
Manufacturing and related process development expenses	1,725,835	2,306,024	2,705,296

Our M&P expenses for 2016 were $1,725,835 compared to $2,306,024 and $2,705,296 for the years ending December 31, 2015 and December 31, 2014 . During 2016, our production manufacturing activities have mainly related to supplying our clinical program with sufficient product including related shipping and storage activities. These costs have been partially offset by recoveries from a development collaboration. During 2015, our production manufacturing activities remained relatively consistent compared to 2014 and mainly related to supplying our Clinical Programs with sufficient REOLYSIN. These activities also included the fill, labeling and lot release testing of product and the shipping and storage of our bulk and vialed product.

Our process development expenses for 2016 were $563,389 compared to $687,859 and $991,647 for the years ending December 31, 2015 and December 31, 2014 , respectively. During the years ending 2016, 2015, and 2014 our process development activities focused on our validation master plan. In 2016, these activities included stability, scale up and process optimization studies. In 2015 and 2014, our process development activities also included assay development and validation studies.

We expect our M&P expenses for 2017 to increase compared to 2016. In 2017, we expect to fill, label and store sufficient product in preparation for a registration study. We also expect to continue to perform conformity testing related to our process validation master plan.

Intellectual Property Expenses

Intellectual property expenses include legal and filing fees associated with our patent portfolio.

Our intellectual property expenses for 2016 were $1,096,097 compared to $1,032,227 and $1,077,552 for the years ending December 31, 2015 and December 31, 2014 , respectively. The change in intellectual property expenditures reflects the timing of filing costs associated with our expanded patent base. At the end of 2016 , we had been issued over 415 patents including 61 US and 20 Canadian patents, as well as issuances in other jurisdictions. We expect that our intellectual property expenses will remain consistent in 2017 compared to 2016.

Research Collaborations

Research collaborations are intended to expand our intellectual property related to REOLYSIN and identify potential licensing opportunities arising from our technology base.

During 2016 , our research collaboration expenses were $369,469 compared to $698,909 and $621,936 for the years ending December 31, 2015 and December 31, 2014 , respectively. In 2016, our research collaborations included biomarker studies along with studies investigating the interaction of the immune system and REOLYSIN. In 2015 and 2014, our research collaborations also included the use of the reovirus as a co-therapy with existing chemotherapeutics and radiation.

We expect that our research collaborations in 2017 will remain consistent with 2016. We expect to complete our ongoing collaborative program carried over from 2016 and will continue to be selective in the types of new collaborations we enter into in 2017.

Other Research and Development Expenses

Other research and development expenses include compensation expenses for employees (excluding stock based compensation), consultant fees, travel and other miscellaneous R&D expenses.



	2016 $	2015 $	2014 $
R&D consulting fees	186,221	229,427	247,685
R&D salaries and benefits	4,138,235	3,388,272	2,989,970
Other R&D expenses	229,360	480,481	466,143
Other research and development expenses	4,553,816	4,098,180	3,703,798

In 2016 , our Other Research and Development expenses were $4,553,816 compared to $4,098,180 and $3,703,798 for the years ending December 31, 2015 and December 31, 2014 , respectively. During the years ending 2016, 2015 and 2014, our Other Research and Development activities focused on supporting our Clinical Program which includes our Randomized Program, our Checkpoint Inhibitor Program along with other Third Party trials and clinical trials sponsored by Oncolytics. R&D salaries and benefits in 2016 included a retirement allowance of $1,330,828 paid to the previous Chief Executive Officer in November 2016. Normalizing for the allowance, our R&D salaries and benefits declined compared to 2015 as a result of a drop in head count that occurred during the second half of 2015. With the completion of enrollment in our CCTG trials in 2015 and the close out of completed Company sponsored studies, our Other R&D expenses continued to decline. As well, in 2014, cash bonuses were not paid to officers or employees but were paid in 2015 and 2016.

Normalizing for the retirement allowance, we expect that our Other R&D expenses in 2017 will remain consistent with 2016.

Scientific Research and Development Refund



	2016 $		2015 $		2014 $
Scientific research and development refund	(1,203	)	(62,144	)	(84,762	)

In 2016 , 2015 , and 2014 , we received Alberta and Quebec scientific research and development refunds totaling $1,203 , $62,144 , and $84,762 , respectively. During the three year period 2014-2016, our qualified expenditures for scientific research and development refunds in Canada have declined.

Foreign Exchange (Gain) Loss

For the year ending December 31, 2016 , our foreign exchange (gain) loss was $171,960 compared to $(1,051,958) for the year ending December 31, 2015 and $228,130 for the year ending December 31, 2014 . The foreign exchange losses incurred in 2016 and 2014 were primarily a result of the fluctuations in the US dollar, Euro and Pound Sterling exchange rates. In 2015, our foreign exchange gain was primarily a result of the strengthening of the US dollar and that the proceeds from our financing activities were in US dollars.

Share Based Payments

Non-cash share based payments for the year ending December 31, 2016 , was $233,919 compared to $257,016 and $588,658 for the years ending December 31, 2015 and December 31, 2014 , respectively. We incurred stock based compensation associated with the grant of stock options and performance share units to employees associated with our research and development activities.

Operating Expenses



	2016 $	2015 $	2014 $
Public company related expenses	3,172,676	2,932,436	2,761,374
Office expenses	2,017,432	2,030,469	1,682,152
Amortization of property and equipment	162,233	180,411	163,501
Share based payments	172,159	172,521	391,667
Operating expenses	5,524,500	5,315,837	4,998,694

Public company related expenses include costs associated with investor relations and business development activities, legal and accounting fees, corporate insurance, director fees and transfer agent and other fees relating to our U.S. and Canadian stock listings. In 2016 , we incurred public company related expenses of $3,172,676 compared to $2,932,436 and $2,761,374 for the years ending December 31, 2015 and December 31, 2014 , respectively. In 2016, our public company related expenses increased due to investor relations activities compared to 2015. In 2015, the costs associated with our public company listing fees, our investor relations activities, associated professional fees and the cost of our Annual General Meeting increased compared to 2014.

Office expenses include compensation costs (excluding share based payments), office rent, and other office related costs. In 2016 , we incurred office expenses of $2,017,432 compared to $2,030,469 and $1,682,152 for the years ending December 31, 2015 and December 31, 2014 , respectively. In 2016 and 2015, our office expenses remained relatively consistent. In 2015, our office expenses increased compared to 2014 mainly due to the cash bonuses paid to officers and employees.

In 2016 , our non-cash share based payment expenses were $172,159 compared to $172,521 and $391,667 for the year ending December 31, 2015 and December 31, 2014 , respectively. In 2016 , 2015 and 2014, we incurred stock based compensation associated with stock option grants to officers and employees, grants of restricted share units to the board of directors, grants of performance share units to certain officers and the vesting of previously granted stock options.

We expect our operating expenses in 2017 to decrease compared to 2016.

Summary of Quarterly Results



	2016								2015
	Dec.		Sept.		June		March		Dec.		Sept.		June		March
Revenue	—		—		—		—		—		—		—		—
Net loss ⁽²⁾	5,210		3,332		2,581		4,017		3,497		2,824		3,850		3,552
Basic and diluted loss per common share ⁽²⁾	$	0.04	$	0.03	$	0.02	$	0.03	$	0.03	$	0.02	$	0.03	$	0.04
Total assets ⁽³⁾	14,758		18,437		21,368		23,023		27,384		31,001		33,190		31,445
Total cash ^{(1), (3)}	14,123		17,702		20,410		22,322		26,077		30,023		32,079		30,639
Total long-term debt	—		—		—		—		—		—		—		—
Cash dividends declared ⁽⁴⁾	Nil		Nil		Nil		Nil		Nil		Nil		Nil		Nil


(1)	Included in total cash are cash and cash equivalents plus short-term investments.


(2)	Included in net loss and loss per common share between December 2016 and January 2015 are quarterly share based payment expenses

(recovery) of $106,443 , $98,369, $119,626, $81,640, $248,101, $10,791, $55,675, and $114,970, respectively.


(3)	We issued 3,106,600 common shares for net cash proceeds of $1.0 million in 2016 ( 2015 - 24,639,128 common shares for net cash proceeds of $23.7 million ).


(4)	We have not declared or paid any dividends since incorporation.

Fourth Quarter

Statement of loss for the three month period ended December 31, 2016 and 2015 :



For the three month periods ending December 31,	2016 $		2015 $
Expenses
Research and development	3,411,185		1,999,987
Operating	1,816,183		1,535,025
Loss before the following	(5,227,368	)	(3,535,012	)
Interest	27,053		44,546
Loss before income taxes	(5,200,315	)	(3,490,466	)
Income taxes	(9,707	)	(6,456	)
Net loss	(5,210,022	)	(3,496,922	)
Other comprehensive gain (loss) - translation adjustment	61,423		103,875
Net comprehensive loss	(5,148,599	)	(3,393,047	)
Basic and diluted loss per common share	(0.04	)	(0.03	)
Weighted average number of shares (basic and diluted)	121,145,249		118,121,424

Fourth Quarter Review of Operations

For the three month period ended December 31, 2016 our net loss was $5,210,022 compared to $3,496,922 for the three month period ended December 31, 2015 .

Research and Development Expenses (“R&D”)



	2016 $		2015 $
Clinical trial expenses	184,755		202,214
Manufacturing and related process development expenses	450,149		185,104
Intellectual property expenses	269,025		217,097
Research collaboration expenses	177,794		199,118
Other R&D expenses	2,346,052		1,291,464
Scientific research and development refund	—		344
Foreign exchange (gain)	(60,097	)	(262,150	)
Share based payments	43,507		166,796
Research and development expenses	3,411,185		1,999,987

Clinical Trial Expenses



	2016 $	2015 $
Clinical trial expenses	184,755	202,214

During the fourth quarter of 2016 , our clinical trial expenses were $184,755 compared to $202,214 for the fourth quarter of 2015 . In the fourth quarter of 2016 , our clinical trial program activities related primarily to the patient enrollment in our checkpoint inhibitor pancreatic cancer study investigating pembrolizumab (KEYTRUDA ^® ) in combination with REOLYSIN. As well, we incurred costs associated with the completion of enrollment in our other Company sponsored clinical trials. In the fourth quarter of 2015, our clinical trial program activities related to completing enrollment in our Randomized Studies and closing out fully enrolled clinical trials while implementing our Clinical Development Plan.

Manufacturing & Related Process Development Expenses (“M&P”)



	2016 $	2015 $
Product manufacturing expenses	353,605	57,319
Process development expenses	96,544	127,785
Manufacturing and related process development expenses	450,149	185,104

During the fourth quarter of 2016 , our M&P expenses were $450,149 compared to $185,104 for the fourth quarter of 2015 . During the fourth quarter of 2016, our product manufacturing costs mainly related to shipping and storage costs of our bulk and vialed product. During the fourth quarter of 2015, our product manufacturing costs also related to the fill, labeling and lot release testing of product to be used in our clinical trial program. In 2015, these costs were partially offset by recoveries from a development collaboration.

Our process development activity for the fourth quarter of 2016 related to stability studies compared to assay development, optimization, validation and stability studies in the fourth quarter of 2015.

Intellectual Property Expenses



	2016 $	2015 $
Intellectual property expenses	269,025	217,097

Our intellectual property expenses for the fourth quarter of 2016 were $269,025 compared to $217,097 for the fourth quarter of 2015 . The change in intellectual property expenditures reflects the timing of filing costs associated with our expanded patent base. At the end of the fourth quarter of 2016 , we had been issued over 415 patents including 61 US and 20 Canadian patents, as well as issuances in other jurisdictions.

Research Collaboration Expenses



	2016 $	2015 $
Research collaboration expenses	177,794	199,118

Our research collaboration expenses were $177,794 in the fourth quarter of 2016 compared to $199,118 for the fourth quarter of 2015 . During the fourth quarter of 2016, our research collaborations were primarily focused on biomarker studies. During the fourth quarter of 2015, our research collaborations included biomarker studies along with studies investigating the interaction of the immune system and REOLYSIN and the use of REOLYSIN as a co-therapy with existing chemotherapeutics and radiation.

Other Research and Development Expenses



	2016 $	2015 $
R&D consulting fees	45,190	63,203
R&D salaries and benefits	2,225,080	1,138,266
Other R&D expenses	75,782	89,995
Other research and development expenses	2,346,052	1,291,464

Our other research and development expenses were $2,346,052 in the fourth quarter of 2016 compared to $1,291,464 in the fourth quarter of 2015 . In the fourth quarter of 2016, our salaries and benefits costs included a retirement allowance of $1,330,828 paid to the previous chief executive officer.

Share Based Payments



	2016 $	2015 $
Share based payments	43,507	166,796

During the fourth quarters of 2016 and 2015 , we incurred share based payment expense associated with the grant of stock options to officers and employees associated with our research and development activities.

Operating Expenses



	2016 $	2015 $
Public company related expenses	911,811	737,889
Office expenses	813,834	670,163
Amortization of property and equipment	27,602	45,668
Share based payments	62,936	81,305
Operating expenses	1,816,183	1,535,025

Our operating expenses in the fourth quarter of 2016 were $1,816,183 compared to $1,535,025 for the fourth quarter of 2015 . Public company related expenses include costs associated with investor relations, business development and financial advisory activities, legal and accounting fees, corporate insurance, director fees and transfer agent and other fees relating to our Canadian and U.S. stock listings. During the fourth quarter of 2016 our public company related expenses were $ 911,811 compared to $ 737,889 for the fourth quarter of 2015. The increase was due to an increase in professional fees in the fourth quarter of 2016 compared to the fourth quarter of 2015.

Office expenses include compensation costs (excluding share based payments), office rent, and other office related costs. During the fourth quarter of 2016, our office expenses were $ 813,834 compared to $ 670,163 for the third quarter of 2015. During the fourth quarter of 2016, compensation costs increased as a result of severance payments to an employee.

Liquidity and Capital Resources

2016 Financing Activities

Canadian "At the Market" Equity Distribution Agreement

During 2016 , we issued 3,006,600 common shares for net proceeds of $ 956,133 .

2015 Financing Activities

US Share Purchase Agreement

During 2015, under the terms of the Share Purchase Agreement, we issued 5,778,674 common shares for net proceeds of approximately US$3.5 million. As well, we issued 78,674 commitment shares with a fair value of US$50,024 which has been recorded as additional share issue costs.

"At the Market" Equity Distribution Agreement

During 2015, we issued 18,860,454 common shares for net proceeds of approximately US$15.5 million.

NASDAQ Listing

In October, 2015, we received notice from the NASDAQ OMX Group (“NASDAQ”) stating that, in accordance with NASDAQ listing rules, our common shares would be delisted from the NASDAQ Capital Market, effective from the opening of trading on November 5, 2015 for not maintaining the minimum $1.00 per share required for continued listing under Listing Rule 5550(a)(2). As a result, effective November 5, 2015, we were no longer able to use our Share Purchase Agreement or our ATM which were both conditional on maintaining a NASDAQ listing.

Liquidity

As at December 31, 2016 and 2015 , we had cash and cash equivalents, short-term investments and working capital positions as follows:



	2016 $	2015 $
Cash and cash equivalents	12,034,282	24,016,275
Short-term investments	2,088,800	2,060,977
Working capital position	10,369,665	24,214,488

The decrease in our cash and cash equivalent and short term investment positions reflects the cash usage from our operating activities of $12.5 million along with the cash provided by our financing activities of $1.0 million for the year ending December 31, 2016 .

We desire to maintain adequate cash and short-term investment reserves to support our planned activities which include our clinical trial program, product manufacturing, administrative costs, and our intellectual property expansion and protection. To date, we have funded our operations mainly through the issue of additional capital via public and private offerings and through the exercise of warrants and stock options. In February 2016, we were able to raise funds through our Canadian ATM (our "Financing Arrangement"). During 2015, we were able to raise funds through our Share Purchase Agreement with LPC and our "at the market" equity distribution agreement with Canaccord Genuity Inc.

We have no assurances that we will be able to raise additional funds through the sale of our common shares, consequently, we will continue to evaluate all types of financing arrangements. In an effort to be able to evaluate all types of financing arrangements, we maintain a current short form base shelf prospectus (the “Base Shelf”) that qualifies for distribution of up to $150,000,000 of common shares, subscription receipts, warrants, or units (the “Securities”). We renewed our Base Shelf on February 16, 2016 which allows us to sell Securities to or through underwriters, dealers, placement agents or other intermediaries and also may sell Securities directly to purchasers or through agents, subject to obtaining any applicable exemption from registration requirements. The distribution of Securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, at market prices prevailing at the time of sale, or at prices related to such prevailing market prices to be negotiated with purchasers and as set forth in an accompanying Prospectus Supplement. Our Base Shelf expires on March 16, 2018.

Maintaining our Base Shelf provides us with additional flexibility when managing our cash resources as, under certain circumstances, it shortens the time period required to close a financing and is expected to increase the number of potential investors that may be prepared to invest in our company. By utilizing our Base Shelf, we were able to enter into our Financing Arrangement.

Our Financing Arrangement provides us with access to, subject to the respective terms and conditions, $4.6 million of which we have raised gross proceeds of approximately $1.5 million. We expect to continue to access our Financing Arrangement to help support our current clinical trial, manufacturing, intellectual property and collaboration programs.

We anticipate that the expected cash usage from our operations in 2017 will be approximately $12 million. We continue to manage our research and development plan with the objective of ensuring optimal use of our existing resources. Additional activities continue to be subject to adequate resources and we believe we will have sufficient cash resources and access to additional cash resources through our Financing Arrangements to fund our presently planned operations into 2017. Factors that will affect our anticipated cash usage in 2017, and for which additional funding might be required include, but are not limited to, expansion of our clinical trial program, the timing of patient enrollment in our approved clinical trials, the actual costs incurred to support each clinical trial, the number of treatments each patient will receive, the timing of R&D activity with our clinical trial research collaborations, the number, timing and costs of manufacturing runs required to conclude the validation process and supply product to our clinical trial program, and the level of collaborative activity undertaken.

We are not subject to externally imposed capital requirements and there have been no changes in how we define or manage our capital in 2016.

Contractual Obligations

We have the following contractual obligations as at December 31, 2016 :



Contractual Obligations	Payments Due by Period
	Total $	Less than 1 year $	2 -3 years $	4 - 5 years $	More than 5 years $
Capital lease obligations	Nil	—	—	—	—
Operating lease ⁽¹⁾	517,647	163,978	207,026	146,643	—
Purchase obligations	1,033,619	1,033,619	—	—	—
Other long term obligations	Nil	—	—	—	—
Total contractual obligations	1,551,266	1,197,597	207,026	146,643	—

Note:

1. Our operating leases are comprised of our office leases and exclude our portion of operating costs.

We expect to fund our capital expenditure requirements and commitments with existing working capital.

Investing Activities

Under our Investment Policy, we are permitted to invest in short-term instruments with a rating no less than R-1 (DBRS) with terms less than two years. Our portfolio consists of guarantee investment certificates. As of December 31, 2016 , we had $2.1 million invested under this policy, currently earning interest at an effective rate of 1.41% .

Off-Balance Sheet Arrangements

As at December 31, 2016 , we had not entered into any off-balance sheet arrangements.

Transactions with Related Parties

In 2016 , 2015 and 2014 , we did not enter into any related party transactions other than compensation paid to Key Management Personnel disclosed in Note 19 of our audited consolidated financial statements.

Financial Instruments and Other Instruments

Our financial instruments consist of cash and cash equivalents, short-term investments, accounts receivable and accounts payable. As at December 31, 2016 , there are no significant differences between the carrying values of these amounts and their estimated market values. These financial instruments expose us to the following risks:

Credit risk

Credit risk is the risk of financial loss if a counter-party to a financial instrument fails to meet its contractual obligations. We are exposed to credit risk on our cash and cash equivalents and short-term investments in the event of non-performance by counterparties, but we do not anticipate such non-performance. Our maximum exposure to credit risk at the end of the period is the carrying value of our cash and cash equivalents and short-term investments.

Interest rate risk

Fluctuations in market rates of interest do not have a significant impact on our results of operations due to the short term to maturity of the investments held.

Currency risk

Currency risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. We are exposed to currency risk from the purchase of goods and services primarily in the US, the U.K and the European Union and to the extent cash is held in foreign currencies. The impact of a $0.01 increase in the value of the US dollar against the Canadian dollar would have decreased our net loss in 2016 by approximately $2,913 . The impact of a $0.10 increase in the value of the British pound against the Canadian dollar would have increased our net loss in 2016 by approximately $10,499 . The impact of a $0.10 increase in the value of the Euro against the Canadian dollar would have decreased our net loss in 2016 by approximately $3,010 .

We mitigate our foreign exchange risk through the purchase of foreign currencies in sufficient amounts to settle our foreign accounts payable.

Balances in foreign currencies at December 31, 2016 are as follows:



	US dollars $		British pounds £		Euro €
Cash and cash equivalents	4,629,766		31,295		32,565
Accounts payable	(134,059	)	(10,837	)	—
	4,495,707		20,458		32,565

Liquidity risk

Liquidity risk is the risk that we will encounter difficulty in meeting obligations associated with financial liabilities. We manage liquidity risk through the management of our capital structure as outlined in the notes to our audited financial statements. Accounts payable are all due within the current operating period.

Risk Factors Affecting Future Performance

General Risk Factors

Prospects for biotechnology companies in the research and development stage should generally be regarded as speculative. It is not possible to predict, based upon studies in animals, or early studies in humans, whether a new therapeutic will ultimately prove to be safe and effective in humans, or whether necessary and sufficient data can be developed through the clinical trial process to support a successful product application and approval.

If a product is approved for sale, product manufacturing at a commercial scale and significant sales to end users at a commercially reasonable price may not be successful. There can be no assurance that we will generate adequate funds to continue development, or will ever achieve significant revenues or profitable operations. Many factors (e.g. competition, patent protection, appropriate regulatory approvals) can influence the revenue and product profitability potential.

In developing a pharmaceutical product, we rely upon our employees, contractors, consultants and collaborators and other third party relationships, including the ability to obtain appropriate product liability insurance. There can be no assurance that this reliance and these relationships will continue as required.

In addition to developmental and operational considerations, market prices for securities of biotechnology companies generally are volatile, and may or may not move in a manner consistent with the progress we have made or are making.

Our product REOLYSIN is in the research and development stage and will require further development and testing before it can be marketed commercially.

Prospects for companies in the biotechnology industry generally may be regarded as uncertain given the nature of the industry and, accordingly, investments in biotechnology companies should be regarded as speculative. We are currently in the research and development stage on one product, REOLYSIN, for human application, the riskiest stage for a company in the biotechnology industry. It is not possible to predict, based upon studies in animals, or early studies in humans, whether REOLYSIN will prove to be safe and effective in humans. REOLYSIN will require additional research and development, including extensive clinical testing, before we will be able to obtain the approval of the United States Food and Drug Administration (the “FDA”) or from similar regulatory authorities in other countries to market REOLYSIN commercially. There can be no assurance that the research and development programs conducted by us will result in REOLYSIN or any other products becoming commercially viable products, and in the event that any product or products result from the research and development program, it is unlikely they will be commercially available for a number of years.

To achieve profitable operations, we, alone or with others, must successfully develop, introduce and market our products. To obtain regulatory approvals for products being developed for human use, and to achieve commercial success, human clinical trials must demonstrate that the product is safe for human use and that the product shows efficacy. Unsatisfactory results obtained from a particular study relating to a program may cause us to abandon our commitment to that program or the product being tested. No assurances can be provided that any current or future animal or human test, if undertaken, will yield favorable results. If we are unable to establish that REOLYSIN is a safe, effective treatment for cancer, we may be required to abandon further development of the product and develop a new business strategy.

There are inherent risks in pharmaceutical research and development.

Pharmaceutical research and development is highly speculative and involves a high and significant degree of risk. The marketability of any product developed by us will be affected by numerous factors beyond our control, including:


•	the discovery of unexpected toxicities or lack of sufficient efficacy of products which make them unattractive or unsuitable for human use;


•	preliminary results as seen in animal and/or limited human testing may not be substantiated in larger controlled clinical trials;


•	manufacturing costs or other factors may make manufacturing of products impractical and non-competitive;


•	proprietary rights of third parties or competing products or technologies may preclude commercialization;


•	requisite regulatory approvals for the commercial distribution of products may not be obtained; and


•	other factors may become apparent during the course of research, up-scaling or manufacturing which may result in the discontinuation of research and other critical projects.

Our product under development has never been manufactured on a commercial scale, and there can be no assurance that such products can be manufactured at a cost or in a quantity to render such products commercially viable. Production and utilization of our products may require the development of new manufacturing technologies and expertise. The impact on our business in the event that new manufacturing technologies and expertise are required to be developed is uncertain. There can be no assurance that we will successfully meet any of these technological challenges, or others that may arise in the course of development.

Pharmaceutical products are subject to intense regulatory approval processes.

The FDA in the United States and other relevant regulatory authorities may deny approval of a new drug application (“NDA”) or its equivalent in the relevant jurisdiction if required regulatory criteria are not satisfied, or may require additional testing. Product approvals may be withdrawn if compliance with regulatory standards are not maintained or if problems occur after the product reaches the market. The FDA may require further testing and surveillance programs to monitor the pharmaceutical product that has been commercialized. Non-compliance with applicable requirements can result in fines and other judicially imposed sanctions, including product withdrawals, product seizures, injunction actions and criminal prosecutions.

In addition to our own pharmaceuticals, we may supply active pharmaceutical ingredients and advanced pharmaceutical intermediates for use in or with our customers' other drug products. The final drug products in which the pharmaceutical ingredients and advanced pharmaceutical intermediates are used, however, are subject to regulation for safety and efficacy by the FDA and other jurisdictions, as the case may be. Such products must be approved by such agencies before they can be commercially marketed. The process of obtaining regulatory clearance for marketing is uncertain, costly and time consuming. We cannot predict how long the necessary regulatory approvals will take or whether our customers will ever obtain such approval for their products. To the extent that our customers do not obtain the necessary regulatory approvals for marketing new products, our product sales could be adversely affected.

The pharmaceutical regulatory regime in Europe and other countries is, by and large, generally similar to that of Canada and the United States. We could face similar risks in these other jurisdictions, as the risks described above.

Our operations and products may be subject to other government manufacturing and testing regulations.

The products anticipated to be manufactured by us will have to comply with the FDA's cGMP and other FDA and local government guidelines and regulations, including other international regulatory requirements and guidelines. Additionally, certain of our customers may require the manufacturing facilities contracted by us to adhere to additional manufacturing standards, even if not required by the FDA. Compliance with cGMP regulations requires manufacturers to expend time, money and effort in production, and to maintain precise records and quality control to ensure that the product meets applicable specifications and other requirements. The FDA and other regulatory bodies periodically inspect drug-manufacturing facilities to ensure compliance with applicable cGMP requirements. If the manufacturing facilities contracted by us fail to comply with the cGMP requirements, the facilities

may become subject to possible FDA or other regulatory action and manufacturing at the facility could consequently be suspended. We may not be able to contract suitable alternative or back-up manufacturing facilities on terms acceptable to us or at all.

We are subject to regulation by governments in many jurisdictions and, if we do not comply with healthcare, drug, manufacturing and environmental regulations, among others, our existing and future operations may be curtailed, and we could be subject to liability.

In addition to the regulatory approval process, we may be subject to regulations under local, provincial, state, federal and foreign law, including requirements regarding occupational health, safety, laboratory practices, environmental protection and hazardous substance control, and may be subject to other present and future local, provincial, state, federal and foreign regulations.

Our products may fail or cause harm, subjecting us to product liability claims, which are uninsured.

The sale and use of our products entail risk of product liability. We currently do not have any product liability insurance. There can be no assurance that we will be able to obtain appropriate levels of product liability insurance prior to any sale of our pharmaceutical products. An inability to obtain insurance on economically feasible terms or to otherwise protect against potential product liability claims could inhibit or prevent the commercialization of products developed by us. The obligation to pay any product liability claim or a recall of a product could have a material adverse effect on our business, financial condition and future prospects.

Our technologies may become obsolete.

The pharmaceutical industry is characterized by rapidly changing markets, technology, emerging industry standards and frequent introduction of new products. The introduction of new products embodying new technologies, including new manufacturing processes, and the emergence of new industry standards may render our products obsolete, less competitive or less marketable. The process of developing our products is extremely complex and requires significant continuing development efforts and third party commitments. Our failure to develop new technologies and products and the obsolescence of existing technologies could adversely affect our business.

We may be unable to anticipate changes in our potential customer requirements that could make our existing technology obsolete. Our success will depend, in part, on our ability to continue to enhance our existing technologies, develop new technology that addresses the increasing sophistication and varied needs of the market, and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis. The development of our proprietary technology entails significant technical and business risks. We may not be successful in using our new technologies or exploiting the respective niche markets effectively or adapting our businesses to evolving customer or medical requirements or preferences or emerging industry standards.

We have no operating revenues and a history of losses.

To date, we have not generated sufficient revenues to offset our research and development costs and accordingly have not generated positive cash flow or made an operating profit. As of December 31, 2016 , we had an accumulated deficit of $278.8 million and we incurred net losses of $15.1 million , $13.7 million and $18.6 million , for the years ended December 31, 2016 , 2015 and 2014 , respectively. We anticipate that we will continue to incur significant losses during 2017 and in the foreseeable future. We do not expect to reach profitability at least until after successful and profitable commercialization of one or more of our products. Even if one or more of our products are profitably commercialized, the initial losses incurred by us may never be recovered.

We may need additional financing in the future to fund the research and development of our products and to meet our ongoing capital requirements.

We anticipate that we may need additional financing in the future to fund research and development and to meet our ongoing capital requirements. The amount of future capital requirements will depend on many factors, including continued scientific progress in our drug discovery and development programs, progress in our pre-clinical and clinical evaluation of drug candidates, time and expense associated with filing, prosecuting and enforcing our patent claims and costs associated with obtaining regulatory approvals. In order to meet such capital requirements, we will consider contract fees, collaborative research and development

arrangements, and additional public or private financings (including the incurrence of debt and the issuance of additional equity securities) to fund all or a part of particular programs as well as potential partnering or licensing opportunities. There can be no assurance that additional funding will be available or, if available, that it will be available on acceptable terms. If adequate funds are not available on terms favorable to us, we may have to reduce substantially or eliminate expenditures for research and development, testing, production and marketing of our proposed product, or obtain funds through arrangements with corporate partners that require us to relinquish rights to certain of our technologies or product. There can be no assurance that we will be able to raise additional capital if our current capital resources are exhausted.

The cost of director and officer liability insurance may continue to increase substantially or may not be available to us and may affect our ability to retain quality directors and officers.

We carry liability insurance on behalf of our directors and officers. Given a number of large director and officer liability insurance claims in the US equity markets, director and officer liability insurance had until recently become increasingly more expensive with increased restrictions. Consequently, there is no assurance that we will continue to be offered this insurance or be able to obtain adequate coverage. The inability to acquire the appropriate insurance coverage will limit our ability to attract and maintain directors and officers as required to conduct our business.

We incur some of our expenses in foreign currencies and therefore are exposed to foreign currency exchange rate fluctuations.

We incur some of our manufacturing, clinical, collaborative and consulting expenses in foreign currencies, primarily the US dollar, the Pound Sterling and the Euro. We are therefore exposed to foreign currency rate fluctuations. Also, as we expand to other foreign jurisdictions there may be an increase in our foreign exchange exposure.

We earn interest income on our excess cash reserves and are exposed to changes in interest rates.

We invest our excess cash reserves in investment vehicles that provide a rate of return with little risk to principle. As interest rates change the amount of interest income we earn will be directly impacted.

Other MD&A Requirements

We have 121,258,222 common shares outstanding at March 9, 2017 . If all of our options, restricted share units and performance share units ( 11,004,156 ) were exercised we would have 132,262,378 common shares outstanding.

Our 2016 Annual Information Form on Form 20-F will be available on www.sedar.com.

Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures :

Our chief executive and financial officers reviewed and evaluated our disclosure controls and procedures. Based on that evaluation, they have concluded that our disclosure controls and procedures are effective in providing them with timely material information relating to the Company.

Management's Annual Report on Internal Control Over Financial Reporting :

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, and has designed such internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of financial statements for external purposes in accordance with International Financial Reporting Standards.

Management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls and procedures over financial reporting will prevent all error and all fraud. A control system can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving our stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has evaluated the design and operation of our internal control over financial reporting as of December 31, 2016 , and has concluded that such internal control over financial reporting is effective as of December 31, 2016 . There are no material weaknesses that have been identified by management in this regard. This assessment was based on criteria for effective internal

control over financial reporting described in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework).

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the last fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent the use of our report dated March 9, 2017 with respect to the consolidated financial statements of Oncolytics Biotech Inc. (“Oncolytics”) as at December 31, 2016 and 2015 and for each of the years in the three year period ended December 31, 2016, included in the Annual Report on Form 20-F of Oncolytics for the year ended December 31, 2016, as filed with the United States Securities Exchange Commission (“SEC”).

We also consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-171625 and 333-205708) of our report dated March 9, 2017 with respect to the consolidated financial statements of Oncolytics as at December 31, 2016 and 2015 and for each of the years in the three year period ended December 31, 2016, included in the Annual Report on Form 20-F of Oncolytics for the year ended December 31, 2016, as filed with the SEC.



Calgary, Canada
March 27, 2017		Chartered Accountants