SECOND QUARTER INTERIM FINANCIAL STATEMENTS Document Condensed Interim Consolidated Financial Statements (unaudited) Oncolytics Biotech Inc. For the three and six months ended

Condensed Interim Consolidated Financial Statements

Oncolytics Biotech Inc.

For the three and six months ended June 30, 2023

ONCOLYTICS BIOTECH INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands of Canadian dollars, except share amounts)

See accompanying notes

ONCOLYTICS BIOTECH INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(in thousands of Canadian dollars, except share amounts)

See accompanying notes

ONCOLYTICS BIOTECH INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(in thousands of Canadian dollars)

See accompanying notes

ONCOLYTICS BIOTECH INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands of Canadian dollars)

See accompanying notes

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2023

(in thousands of Canadian dollars, except share amounts and where indicated)

Note 1 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. 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 S.W., Calgary, Alberta, Canada.

We are a clinical-stage biopharmaceutical company developing pelareorep, a safe and well-tolerated intravenously delivered immunotherapeutic agent that activates the innate and adaptive immune systems and weakens tumor defense mechanisms. This improves the ability of the immune system to fight cancer, making tumors more susceptible to a broad range of oncology treatments. Our primary focus is to advance our programs in hormone receptor-positive human epidermal growth factor 2-negative (HR+ HER2-) metastatic breast cancer and advanced metastatic pancreatic ductal adenocarcinoma to phase 3 licensure-enabling studies. In addition, we are exploring opportunities for registrational programs in other gastrointestinal cancers through our GOBLET platform study.

We have not been profitable since our inception and expect to continue to incur substantial losses as we continue our research and development efforts. As at June 30, 2023, we had an accumulated deficit of $432,129. We do not expect to generate significant revenues until and unless pelareorep becomes commercially viable. To date, we have funded our operations mainly through issuing additional capital via public offerings, equity distribution arrangements, and the exercise of warrants and stock options. There can be no assurance that we will be able to raise additional funds through the sale of our common shares. Failure to raise additional capital would have a material adverse impact on our business, results of operations, and financial condition. As at June 30, 2023, we had cash and cash equivalents and marketable securities of $24,351. We believe we have sufficient existing cash resources to fund our presently planned operations for at least the next twelve months. In August 2023, we closed a public offering whereby we raised gross proceeds of US$15,001.

The full extent to which external factors outside of our control, including those related to the coronavirus infectious disease 2019 ( COVID-19 ) pandemic, the global political conflict in Ukraine, and financial institution failures, 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. We considered the potential impact of these events, including global supply chain disruptions, inflation, rising interest rates, and liquidity, when making certain estimates and judgments relating to the preparation of these condensed interim consolidated financial statements. While there was no material impact to our condensed interim consolidated financial statements as at and for the three and six months ended June 30, 2023, our future assessment of the magnitude and duration of COVID-19, conflict in Ukraine, and bank failures, as well as other factors, could result in a material impact to our consolidated financial statements in future reporting periods.

Note 2 Basis of Presentation

Statement of compliance

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ( IFRS ) and in compliance with International Accounting Standard ( IAS ) 34 Interim Financial Reporting as issued by the International Accounting Standards Board ( IASB ).

Our condensed interim consolidated financial statements for the three and six months ended June 30, 2023, were authorized for issue in accordance with a resolution of the Board of Directors on August 13, 2023.

Basis of presentation

These condensed interim consolidated financial statements have been 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.

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

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2023

(in thousands of Canadian dollars, except share amounts and where indicated)

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, 2022.

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

The preparation of our condensed interim consolidated financial statements in conformity with IFRS requires management to make judgments, estimates, and assumptions that affect the amounts reported in the condensed interim consolidated financial statements and accompanying notes. Actual results could differ from such estimates.

Note 3 Material Accounting Policies

The accounting policies applied in these condensed interim consolidated financial statements are the same as those applied in our audited consolidated financial statements for the year ended December 31, 2022.

Adoption of New Accounting Standards

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 became effective on January 1, 2023. Adopting the amendments did not have a material impact on our condensed interim 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 became effective on January 1, 2023. Adopting the amendments did not have a material impact on our condensed interim 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 became effective on January 1, 2023. Adopting the amendments did not have a material impact on our condensed interim consolidated financial statements.

Note 4 Balance Sheet Details

Cash equivalents consist of interest-bearing deposits with our bank totaling $15,117 as at June 30, 2023 (December 31, 2022 - $9,501).

In 2019, we entered into a co-development agreement with Merck KGaA, Darmstadt, Germany, and Pfizer Inc ( Pfizer ), known as BRACELET-1. This phase 2 clinical trial is jointly funded by Oncolytics and Pfizer. As at June 30, 2023, we recorded $418 (US$316) (December 31, 2022 - $488 (US$360)) in other receivables related to BRACELET-1 cost due from Pfizer.

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2023

(in thousands of Canadian dollars, except share amounts and where indicated)

In 2022, we paid deposits to our manufacturer related to the production of pelareorep required for our clinical trial program. We classify the related prepaid expenses as current or non-current based on the timing of when we expect to receive services. As at June 30, 2023, we recorded $1,817 in current prepaid expenses and $227 in non-current prepaid expenses (December 31, 2022 - $1,327 and $998, respectively).

Accounts payable and accrued liabilities

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. The weighted-average rate applied was 15%.

During the six months ended June 30, 2023, we extended the office lease for one of our subsidiaries, for which we recorded an addition of $282 to the lease liability and right-of-use asset. Under the terms of the lease, we have the option to extend the lease term for an additional three years. We did not include the extension option in the lease term as we were not reasonably certain to exercise the option.

Our total undiscounted lease liabilities as at June 30, 2023, were as follows

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2023

(in thousands of Canadian dollars, except share amounts and where indicated)

Note 6 Share Capital

Unlimited number of no par value common shares

(a)On March 5, 2021, 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$80,000 over a 16-month period through the facilities of the Nasdaq Capital Market in the United States. This distribution agreement was terminated on June 16, 2022. During the six months ended June 30, 2022, we sold 2,719,770 common shares for gross proceeds of $5,744 (US$4,560) at an average price of $2.11 (US$1.68). We received proceeds of $5,572 (US$4,423) after commissions of $172 (US$137). In total, we incurred share issue costs (including commissions) of $209.

(b)On June 17, 2022, 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$65,000 over a 25-month period through the facilities of the Nasdaq Capital Market in the United States. During the six months ended June 30, 2023, we sold 4,205,240 (June 30, 2022 - 54,915) common shares for gross proceeds of $9,128 (US$6,764) (June 30, 2022 - $75 (US$58)) at an average price of $2.17 (US$1.61) (June 30, 2022 - $1.37 (US$1.06)). We received proceeds of $8,854 (US$6,561) (June 30, 2022 - $73 (US$56)) after commissions of $274 (US$203) (June 30, 2022 - $2 (US$2)). In total, we incurred share issue costs (including commissions) of $307 (June 30, 2022 - $269).

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2023

(in thousands of Canadian dollars, except share amounts and where indicated)

Note 7 Share-Based Compensation

(a)Our amended and restated Stock Option Plan and Share Award Plan (collectively, the Equity Incentive Plans ) were approved by our shareholders at the annual general meeting of shareholders on May 9, 2023. Pursuant to our Equity Incentive Plans, we may grant stock options, restricted share awards, and performance share awards. The number of common shares reserved for issuance under our Equity Incentive Plans in aggregate shall not exceed 14% of the total number of issued and outstanding common shares from time to time. At June 30, 2023, we reserved 9,198,252 common shares for issuance relating to our Equity Incentive Plans. Our share-based compensation expense was $242 and $559 for the three and six months ended June 30, 2023, respectively (June 30, 2022 - $490 and $1,129, respectively).

(b)Our stock option activity for the six months ended June 30 was as follows

The following table summarizes information about the stock options outstanding and exercisable at June 30, 2023

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. 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

For the three and six months ended June 30, 2023

(in thousands of Canadian dollars, except share amounts and where indicated)

The estimated fair value of stock options granted during the six months ended June 30 were determined using the following weighted average assumptions

Note 8 Loss Per Common Share

Loss per common share is calculated by dividing net loss for the period and the weighted average number of common shares outstanding for the three and six months ended June 30, 2023 of 64,467,908 and 63,412,091, respectively (June 30, 2022 - 57,669,167 and 57,125,833, respectively). 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 approximately $15,800 for activities mainly related to our clinical trial and manufacturing programs, which are expected to occur over the next three years. We are able to cancel most of these agreements with notice.

Note 10 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, including our clinical trial program, product manufacturing, administrative costs, and intellectual property expansion and protection. We include shareholders' equity, cash and cash equivalents, and marketable securities in the definition of capital.