FIRST QUARTER INTERIM FINANCIAL STATEMENTS Document Condensed Interim Consolidated Financial Statements (unaudited) Oncolytics Biotech Inc.

Condensed Interim Consolidated Financial Statements

Oncolytics Biotech Inc.

March 31, 2022 and 2021

ONCOLYTICS BIOTECH INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in Canadian dollars, except share amounts)

See accompanying notes

ONCOLYTICS BIOTECH INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(in Canadian dollars, except share amounts)

See accompanying notes

ONCOLYTICS BIOTECH INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in Canadian dollars)

See accompanying notes

ONCOLYTICS BIOTECH INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(in Canadian dollars)

See accompanying notes

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in Canadian dollars, except share amounts)

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 condensed interim consolidated financial statements for the period ended March 31, 2022, were authorized for issue in accordance with a resolution of the Board of Directors (the Board ) on May 4, 2022. We are a limited company incorporated and domiciled in Canada. Our shares are publicly traded on the Nasdaq Capital Market and the Toronto Stock Exchange. Our principal place of business is located at 804, 322 11th Avenue SW, Calgary, Alberta, Canada.

We are a development-stage biopharmaceutical company that focuses on the discovery and development of immunotherapeutic products for the treatment of cancers that have not been successfully treated with conventional therapeutics. Our lead product, pelareorep, is an intravenously delivered immunotherapeutic agent that may be a novel treatment for certain types of cancer and may be an alternative to or used in combination with existing cytotoxic or cytostatic therapies. Our clinical development program for pelareorep centers on key immunotherapy combinations. Specifically, immunotherapy combinations in which pelareorep has the potential to provoke specific innate and adaptive immune responses when combined with checkpoint blockade therapy, chemotherapy and or targeted therapies.

The full extent to which the coronavirus infectious disease 2019 ( COVID-19 ) pandemic may directly or indirectly impact our business, results of operations and financial condition, including our ability to finance our operations, expenses, clinical trials, and research and development costs, will depend on future developments that are evolving and highly uncertain, such as the duration and severity of outbreaks, including potential future waves or cycles, and the effectiveness of actions taken to contain and treat COVID-19. We considered the potential impact of COVID-19 when making certain estimates and judgments relating to the preparation of these consolidated financial statements. While there was no material impact to our condensed interim consolidated financial statements as of and for the period ended March 31, 2022, our future assessment of the magnitude and duration of COVID-19, as well as other factors, could result in a material impact to our consolidated financial statements in future reporting periods.

Note 2 Basis of Financial Statement Presentation

Our condensed interim consolidated financial statements include our financial statements and the financial statements of our subsidiaries as at March 31, 2022 and are presented in Canadian dollars, our functional currency.

Our accounts are prepared in accordance with International Financial Reporting Standards ( IFRS ), as issued by the International Accounting Standards Board ( IASB ). 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 condensed interim consolidated financial statements have been prepared in compliance with International Accounting Standard 34 Interim Financial Reporting. The notes presented in these condensed interim consolidated financial statements include only significant events and transactions occurring since our last fiscal year end and are not fully inclusive of all matters required to be disclosed in our annual audited consolidated financial statements. Accordingly, these condensed interim consolidated financial statements should be read in conjunction with our most recent annual audited consolidated financial statements, for the year ended December 31, 2021. We have consistently applied the same accounting policies for all periods presented in these condensed interim consolidated financial statements as those used in our audited consolidated financial statements for the year ended December 31, 2021.

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in Canadian dollars, except share amounts)

Note 3 Significant Accounting Policies

Accounting Standards and Interpretations Issued but Not Yet Effective

IAS 1 Presentation of Financial Statements

In February 2021, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements in which it provides guidance and example to help entities apply materiality judgements to accounting policy disclosures. The amendments apply to annual reporting periods beginning on or after January 1, 2023, with earlier application permitted. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

In February 2021, the IASB issued amendments to IAS 8, in which it introduces a new definition of 'accounting estimates'. The amendments clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Also, the amendments clarify how entities use measurement techniques and inputs to develop accounting estimates. The amendments apply to annual reporting periods beginning on or after January 1, 2023, with earlier application permitted. The adoption of this standard is not expected to have a material impact on our consolidated financial statements.

In May 2021, the IASB issued amendments to IAS 12, which narrows the scope of the initial recognition exception under IAS 12, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences. The amendments apply to annual reporting periods beginning on or after January 1, 2023, with earlier application permitted. The amendments apply prospectively to transactions that occur on or after the beginning of the earliest comparative period presented. We are assessing the impact of adopting this standard on our consolidated financial statements.

Note 4 Cash Equivalents

Cash equivalents consist of interest bearing deposits with our bank totaling $34,402,959 (December 31, 2021 - $39,901,509). The current annual interest rate earned on these deposits is 0.46% (December 31, 2021 - 0.45%).

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in Canadian dollars, except share amounts)

Note 5 Share Capital

Unlimited number of no par value common shares

(a)On June 15, 2020, we entered into an ATM equity distribution agreement with Canaccord Genuity Inc. The ATM allowed us to issue common shares, at prevailing market prices, with an aggregate offering value of up to US$40,000,000 over a 25-month period through the facilities of the Nasdaq Capital Market in the United States. This sales agreement was terminated on March 4, 2021, and no shares were issued during the three months ended March 31, 2022. During the three months ended March 31, 2021, we sold 5,685,097 common shares for gross proceeds of US$18,503,188 at an average price of US$3.25. We received, net of commissions of US$555,096, proceeds of US$17,948,092. In total, we incurred share issue costs (including commissions) of $707,421.

(b)On August 16, 2019, pursuant to an underwritten public offering, 4,619,773 units were sold at a purchase price of US$0.81 per unit. Each unit included one common share with a fair value of US$0.54 and one common share purchase warrant with a fair value of US$0.27. These warrants were classified as a financial liability. Each common share purchase warrant entitled the holder to purchase one common share at an exercise price of US$0.90 until August 16, 2024. No warrants were exercised during the three months ended March 31, 2022. During the three months ended March 31, 2021, our share capital included fair value of $455,670 in addition to gross proceeds of US$181,550 for the 201,722 warrants that were exercised.

(c)On March 5, 2021, we entered into an ATM equity distribution agreement with Canaccord Genuity Inc. The ATM allows us to issue common shares, at prevailing market prices, with an aggregate offering value of up to US$80,000,000 over a 16-month period through the facilities of the Nasdaq Capital Market in the United States. During the three months ended March 31, 2022, we sold 2,431,300 (March 31, 2021 - 628,122) common shares for gross proceeds of US$4,174,022 (March 31, 2021 - US$1,937,063) at an average price of US$1.72 (March 31, 2021 - US$3.08). We received, net of commissions of US$125,221 (March 31, 2021 - US$58,112), proceeds of US$4,048,801 (March 31, 2021 - US$1,878,951). In total, we incurred share issue costs (including commissions) of $176,410 (March 31, 2021 - $266,826).

On June 1, 2017, pursuant to an underwritten public offering, 16,445,000 units were sold for gross proceeds of $11,511,500. Each unit included one common share and one common share purchase warrant. Following the 2018 share consolidation, 9.5 common share purchase warrants entitled the holder to purchase one common share in the capital of the Company until June 1, 2022, at an exercise price of approximately $9.025. These warrants were classified as equity.

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in Canadian dollars, except share amounts)

The following table summarizes our outstanding equity warrants

(1) Exercisable into 1,730,894 common shares.

Note 6 Share-Based Compensation

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

The following table summarizes information about the stock options outstanding and exercisable at March 31, 2022

Option grants vest either immediately or annually over periods ranging from one to three years.

We use the Black-Scholes valuation model to estimate fair value. 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 benchmark bond yield rates 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.

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in Canadian dollars, except share amounts)

The estimated fair value of stock options granted during the period was determined using the following weighted average assumptions

Incentive Share Award Plan

Restricted Share Units ( RSUs )

We have granted RSUs to non-employee directors through our incentive share award plan. Grants of RSUs to non-employee directors vest either immediately, on the third anniversary date from the grant date or when the director ceases to be a member of the board. We have also granted RSUs to certain officers and employees of the Company. Grants of RSUs to certain officers and employees of the Company vest over a three-year period. The following RSUs are outstanding at March 31

We have reserved 5,750,169 common shares for issuance relating to our outstanding equity compensation plans. Our share-based compensation was $638,981 for the three months ended March 31, 2022 (March 31, 2021 - $658,076).

Note 7 Loss Per Common Share

Loss per common share is calculated using net loss for the period and the weighted average number of common shares outstanding for the three months ended March 31, 2022 of 56,576,462 (March 31, 2021 - 49,666,585). The effect of any potential exercise of our stock options and warrants outstanding during the period has been excluded from the calculation of diluted loss per common share, as it would be anti-dilutive.

We are committed to payments totaling $18,763,403 for activities mainly related to our clinical trial, manufacturing and translational science programs which are expected to occur over the next three years.

Our commitments include the committed payments related to our co-development agreement with Merck KGaA, Darmstadt, Germany, and Pfizer Inc ( Pfizer ), known as BRACELET-1, as this phase 2 clinical trial is jointly funded by Oncolytics and Pfizer. As at March 31, 2022, we recorded US$1,847 ($2,308) (December 31, 2021 - US$616,855 ($782,049)) in other receivables related to BRACELET-1 cost from Pfizer per the terms of the collaboration agreement and nil (December 31, 2021 - US$277,866 ($352,279)) in other liabilities representing future trial costs to be incurred.

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.

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in Canadian dollars, except share amounts)

Our portfolio of leases consists of office spaces with initial lease terms generally between 3 to 6 years. We currently do not have leases with residual value guarantees or leases not yet commenced to which we are committed. We have variable lease payments related to office space lease operating costs that are not material. Lease liabilities have been measured by discounting future lease payments using our incremental borrowing rate as rates implicit in the leases were not readily determinable.

Our total undiscounted lease liability as at March 31, 2022 is as follows

Note 9 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 and cash and cash equivalents in the definition of capital.

We do not have any debt other than accounts payable and accrued liabilities and lease liabilities. We also have commitments and potential contingent obligations relating to the completion of our research and development of pelareorep.

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 June 12, 2020, 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 either Canada, the U.S. or both. Under a 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 subject to change, 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.

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

ONCOLYTICS BIOTECH INC.