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

Condensed Interim Consolidated Financial Statements

Oncolytics Biotech Inc.

September 30, 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 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 SW, 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 program in hormone receptor-positive human epidermal growth factor 2-negative (HR+ HER2-) metastatic breast cancer to a phase 3 licensure-enabling study. In addition, we are exploring gastrointestinal registration program opportunities through our GOBLET platform study.

We have not been profitable since our inception and expect to continue to incur substantial losses as we continue research and development efforts. As at September 30, 2022, we had an accumulated deficit of $409,696,122. We do not expect to generate significant revenues until, and unless, pelareorep becomes commercially viable. To date, we have funded our operations mainly through the issuance of additional capital via public offerings, equity distribution arrangements, and through 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 September 30, 2022, we had cash and cash equivalents of $32,362,063, and we believe we have sufficient existing cash resources to fund our presently planned operations for at least the next twelve months.

The full extent to which external factors outside of our control, including those related to the coronavirus infectious disease 2019 ("COVID-19") pandemic and the global political conflict in Ukraine, 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, and rising interest rates, 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 nine months ended September 30, 2022, our future assessment of the magnitude and duration of COVID-19 and conflict in Ukraine, 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 nine months ended September 30, 2022, were authorized for issue in accordance with a resolution of the Board of Directors on November 3, 2022.

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 annual audited consolidated financial statements. Accordingly, these condensed interim consolidated financial statements

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in Canadian dollars, except share amounts)

should be read in conjunction with our most recent annual audited consolidated financial statements for the year ended December 31, 2021.

Our condensed interim consolidated financial statements include our financial statements and the financial statements of our subsidiaries as at September 30, 2022 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 Significant 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, 2021.

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 $29,949,747 (December 31, 2021 - $39,901,509). The current annual interest rate earned on these deposits is 2.80% (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. During the nine months ended September 30, 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 nine months ended September 30, 2022. As at September 30, 2022, there were 64,035 warrants remaining (December 31, 2021 - 64,035). During the nine months ended September 30, 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 allowed 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 nine months ended September 30, 2022, we sold 2,719,770 (September 30, 2021 - 2,715,932) common shares for gross proceeds of US$4,560,307 (September 30, 2021 - US$8,654,892) at an average price of US$1.68 (September 30, 2021 - US$3.19). We received, net of commissions of US$136,809 (September 30, 2021 - US$259,647), proceeds of US$4,423,498 (September 30, 2021 - US$8,395,245). In total, we incurred share issue costs (including commissions) of $209,278 (September 30, 2021 - $539,657). This sales agreement was terminated on June 16, 2022.

(d)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$65,000,000 over a 25-month period through the facilities of the Nasdaq Capital Market in the United States. During the nine months ended September 30, 2022, we sold 893,990 common shares for gross proceeds of US$1,082,928 at an average price of US$1.21. We received, net of commissions of US$32,488, proceeds of US$1,050,440. In total, we incurred share issue costs (including commissions) of $348,111.

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in Canadian dollars, except share amounts)

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, which were classified as equity. These warrants expired on June 1, 2022, and were transferred to contributed surplus on the interim consolidated statement of financial position upon expiry. There was no cash flow impact as a result of the warrant expiry.

The following table summarizes our outstanding equity warrants

Note 6 Share-Based Compensation

Our stock option activity for the nine months ended September 30, 2022 and 2021 was as follows

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

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in Canadian dollars, except share amounts)

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.

The estimated fair value of stock options granted during the nine months ended September 30, 2022 and 2021 were 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. Our RSU activity for the nine months ended September 30, 2022 and 2021 was as follows

We have reserved 5,870,644 common shares for issuance relating to our outstanding equity compensation plans. Our share-based compensation expense was $499,924 and $1,629,016 for the three and nine months ended September 30, 2022, respectively (September 30, 2021 - $1,006,920 and $2,697,238, respectively).

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 and nine months ended September 30, 2022 of 58,325,075 and 57,529,973, respectively (September 30, 2021 - 54,960,650 and 53,003,541, 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 $16,800,000 for activities mainly related to our clinical trial, manufacturing, and translational science programs, which are expected to occur over the next three years. We are able to cancel most of these agreements with notice.

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 September 30, 2022, we recorded US$278,268 ($381,421) (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.

ONCOLYTICS BIOTECH INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(in Canadian dollars, except share amounts)

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.

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 September 30, 2022 was as follows