-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 U6i8/oh3dNmVOv03FKgZWjh+8LG+o7hpA3ZJKDlRrnz16N2eX+XfR88Vs4Hd4rkd
 7UW2FSh01Xo2tpk3qKR16A==

<SEC-DOCUMENT>0001130319-06-000607.txt : 20060727
<SEC-HEADER>0001130319-06-000607.hdr.sgml : 20060727
<ACCEPTANCE-DATETIME>20060727154205
ACCESSION NUMBER:		0001130319-06-000607
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20060727
FILED AS OF DATE:		20060727
DATE AS OF CHANGE:		20060727

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			ONCOLYTICS BIOTECH INC
		CENTRAL INDEX KEY:			0001129928
		STANDARD INDUSTRIAL CLASSIFICATION:	PHARMACEUTICAL PREPARATIONS [2834]
		IRS NUMBER:				000000000
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		6-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-31062
		FILM NUMBER:		06984485

	BUSINESS ADDRESS:	
		STREET 1:		1167 KENSINGTON CRES NW SUITE 210
		STREET 2:		CALGARY ALBERTA CANADA T2N 1X7
		CITY:			ALBERTA CANADA
		STATE:			A0
		ZIP:			00000
		BUSINESS PHONE:		4036707380

	MAIL ADDRESS:	
		STREET 1:		210 - 1167 KENSINGTON CRES NW
		CITY:			CALGARY
		STATE:			A0
		ZIP:			T2N 1X7
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K
<SEQUENCE>1
<FILENAME>o32490e6vk.htm
<DESCRIPTION>SECOND QUARTER REPORT FOR THE QUARTER ENDED JUNE 30, 2006
<TEXT>
<HTML>
<HEAD>
<TITLE>e6vk</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<HR size="4" noshade color="#000000" style="margin-top: -5px">
<HR size="1" noshade color="#000000" style="margin-top: -10px">

<P align="center" style="font-size: 14pt"><B>SECURITIES AND EXCHANGE COMMISSION<BR>
<DIV align="center" style="font-size: 12pt">Washington, D.C.
20549</DIV></B>


<P align="center" style="font-size: 18pt"><B>Form 6-K</B>

<P align="center" style="font-size: 10pt"><B>Report of Foreign Private Issuer</B>

<P align="center" style="font-size: 10pt"><B>Pursuant to Rule&nbsp;13a-16 or 15d-16<BR>
of the Securities Exchange Act of 1934</B>

<P align="center" style="font-size: 10pt">For the month of July 2006


<P align="center" style="font-size: 10pt">Commission File Number 000-31062

<CENTER>
<P align="center" style="font-size: 24pt"><B>Oncolytics Biotech Inc.</B>
<HR size="1" width="45%" noshade>
<DIV align="center" style="font-size: 10pt"><I>(Translation of registrant&#146;s name into
English)</I>
</DIV>
</CENTER>

<CENTER>
<P align="center" style="font-size: 10pt"><B>Suite&nbsp;210, 1167 Kensington Crescent NW<BR>
Calgary, Alberta, Canada T2N 1X7</B>
<HR size="1" width="45%" noshade>
<DIV align="center" style="font-size: 10pt"><I>(Address of principal executive offices)</I>
</DIV>
</CENTER>

<P style="font-size: 10pt">Indicate by check mark whether the registrant files or will file annual reports
under cover Form&nbsp;20-F or Form&nbsp;40-F.

<CENTER>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="70%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="49%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD align="center" valign="top">Form&nbsp;20-F&nbsp;&nbsp;&nbsp;<FONT
face="wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Form&nbsp;40-F&nbsp;&nbsp;&nbsp;<FONT
face="wingdings">&#254;</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</CENTER>

<P style="font-size: 10pt">Indicate by check mark if the registrant is submitting the Form&nbsp;6-K in paper as
permitted by Regulation&nbsp;S-T Rule&nbsp;101(b)(1):&nbsp;&nbsp;&nbsp;<FONT
face="wingdings">&#111;</FONT>

<P style="font-size: 10pt"><B>Note: </B>Regulation&nbsp;S-T Rule&nbsp;101(b)(1) only permits the submission in paper of a
Form&nbsp;6-K if submitted solely to provide an attached annual report to security
holders.

<P style="font-size: 10pt">Indicate by check mark if the registrant is submitting the Form&nbsp;6-K in paper as
permitted by Regulation&nbsp;S-T Rule&nbsp;101(b)(7):&nbsp;&nbsp;&nbsp;<FONT
face="wingdings">&#111;</FONT>

<P style="font-size: 10pt"><B>Note: </B>Regulation&nbsp;S-T Rule&nbsp;101(b)(7) only permits the submission in paper of a
Form&nbsp;6-K if submitted to furnish a report or other document that the registrant
foreign private issuer must furnish and make public under the laws of the
jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant&#146;s &#147;home country&#148;), or under the rules of the home
country exchange on which the registrant&#146;s securities are traded, as long as
the report or other document is not a press release, is not required to be and
has not been distributed to the registrant&#146;s security holders, and, if
discussing a material event, has already been the subject of a Form&nbsp;6-K
submission or other Commission filing on EDGAR.

<P style="font-size: 10pt">Indicate by check mark whether by furnishing the information contained in this
Form, the registrant is also thereby furnishing the information to the
Commission pursuant to Rule&nbsp;12g3-2(b) under the Securities Exchange Act of
1934.

<CENTER>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="70%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="49%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Yes&nbsp;&nbsp;&nbsp;<FONT
face="wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">No&nbsp;&nbsp;&nbsp;<FONT
face="wingdings">&#254;</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</CENTER>

<P style="font-size: 10pt">If &#147;Yes&#148; is marked, indicate below the file number assigned to the registrant
in connection with Rule&nbsp;12g3-2(b):&nbsp;&nbsp;&nbsp;82&nbsp;-&nbsp;<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>

<P>
<HR size="1" noshade color="#000000" style="margin-top: -2px">
<HR size="4" noshade color="#000000" style="margin-top: -10px">

<P style="font-size: 10pt">&nbsp;

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">Signatures</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "Signatures" -->
<DIV align="left"><A NAME="000"></A></DIV>

<P align="center" style="font-size: 10pt"><B>SIGNATURES</B>

<P style="font-size: 10pt">Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

<P>
<CENTER>
<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR valign="bottom">
    <TD width="50%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD colspan="3" align="left" valign="top"><B>Oncolytics
Biotech Inc.</B><BR>
(Registrant)</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD valign="top">Date: July 26, 2006</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Doug Ball
<HR size="1" noshade width="60%">
Doug Ball<BR>
Chief Financial Officer</TD>
</TR>
</TABLE>
</CENTER>

<P align="center" style="font-size: 10pt">&nbsp;

</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="o32490o3249000.gif" alt="(ONCOLYTICS LOGO)">
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Second Quarter Report</B><BR>
June&nbsp;30, 2006
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.<BR>
TSX: ONC<BR>
NASDAQ: ONCY</B>
</DIV>





<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Second Quarter Report</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>For the quarter ended June&nbsp;30, 2006</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Letter to Shareholders</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the second quarter of 2006, Oncolytics achieved several important milestones in its
clinical program, strengthened the board of directors with two new appointments and secured
additional U.S. patents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Significant progress in the clinical program included the conclusion of patient enrolment in the
dose escalation portion of our U.K. Phase I systemic administration trial on patients with
recurrent disease who had previously failed standard therapy and the presentation of interim data
from this trial at the American Society of Clinical Oncology (ASCO)&nbsp;in June&nbsp;2006. The interim data
indicated that REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> can be delivered systemically to various tumour types and cause
virus-mediated tumour responses. The data demonstrated that of the 26 patients treated at the
time the data was compiled, six exhibited measurable evidence of anti-tumour activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Positive data regarding the Company&#146;s Phase I recurrent malignant gliomas trial was also presented
at the ASCO meeting. Of the 12 patients treated in this trial, three survived longer than one
year, and one of these three is still alive approximately 46&nbsp;months after receiving
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> treatment. Just subsequent to the quarter end, Oncolytics announced that it
had started enrolment in its U.S. Phase I/II recurrent malignant gliomas trial.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2006, Oncolytics presented encouraging interim data on our U.K. Phase Ia combination
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>/radiation clinical trial on patients with recurrent disease who had previously
failed standard therapy at the American Association for Cancer Research (AACR)&nbsp;Annual Meeting in
Washington, D.C. The preliminary analysis had demonstrated evidence of local and systemic response
to the combination treatment. Three of the five patients reported on in the analysis experienced
partial tumour responses. Enrolment in the Ia trial was concluded in June, and enrolment in the Ib
combination REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>/radiation trial started just subsequent to the quarter end.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Also at the AACR meeting, Dr.&nbsp;E. Anders Kolb of the Albert Einstein College of Medicine presented a
poster entitled &#147;Reolysin<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>, an unmodified Reovirus, has significant anti-tumor activity
in childhood sarcomas.&#148; The investigators concluded that a clinical trial of systemic reovirus in
pediatric solid tumours is warranted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The company has now treated approximately 100 patients in five completed clinical trials and four
ongoing Phase I or Phase I/II trials. Toxicities have been generally mild and REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
</SUP>has been well tolerated<SUP style="font-size: 85%; vertical-align: text-top"> </SUP>by patients<SUP style="font-size: 85%; vertical-align: text-top"> </SUP>in all of our studies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Oncolytics welcomed two new directors to the board in the last quarter. Dr.&nbsp;Ed Levy is an adjunct
professor at the W. Maurice Young Centre for Applied Ethics at the University of British Columbia,
and a former Senior Vice President of QLT Inc. Until his retirement in 2001, Mr.&nbsp;Ger J. van
Amersfoort was the President and Chief Executive officer of Novartis Canada, a pharmaceutical
company with in excess of $1&nbsp;billion in annual sales and a workforce of 1,500.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2006, Oncolytics secured two additional U.S. patents covering production methods for
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> and methods of identifying the susceptibility of cells to reovirus infection.
The Company now has 17 U.S. patents, two European patents and five Canadian patents covering
reovirus and modified adenovirus and herpes technologies.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">With the recent approval of our first Phase II trial, we are looking forward to initiating our
Phase II clinical program in the second half of 2006 and reporting on results of recently completed
and ongoing trials as they become available.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On behalf of the staff and directors at Oncolytics, I would like to thank all of our stakeholders
for their continued support.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><IMG src="o32490o3249001.gif" alt="-s- Brad Thompson"><BR>
Brad Thompson, PhD<BR>
President and CEO<BR>
July&nbsp;26, 2006

</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>July&nbsp;26, 2006</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL<BR>
CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This discussion and analysis should be read in conjunction with the unaudited financial
statements of Oncolytics Biotech Inc. as at and for the three and six months ended June&nbsp;30, 2006
and 2005, and should also be read in conjunction with the audited financial statements and
Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations (&#147;MD&#038;A&#148;)
contained in our annual report for the year ended December&nbsp;31, 2005. The financial statements have
been prepared in accordance with Canadian generally accepted accounting principles (&#147;GAAP&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>FORWARD-LOOKING STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following discussion contains forward-looking statements, within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, including our
belief as to the potential of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> as a cancer therapeutic and our expectations as
to the success of our research and development and manufacturing programs in 2006 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<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> as a cancer treatment, the
success and timely completion of clinical studies and trials, our ability to successfully
commercialize REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>, uncertainties related to the research, development and
manufacturing of pharmaceuticals, uncertainties related to competition, changes in technology, the
regulatory process and general changes to the economic environment. Investors should consult our
quarterly and annual filings with the Canadian and U.S. 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>OVERVIEW</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Oncolytics Biotech Inc. is a Development Stage Company</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>, 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>General Risk Factors</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">operations. Many factors (e.g. competition, patent protection, appropriate regulatory approvals)
can influence the revenue and product profitability potential.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In developing a pharmaceutical product, we rely upon our employees, contractors, consultants and
collaborators and other third party relationships, including our ability to obtain appropriate
product liability insurance. There can be no assurance that these reliances and relationships will
continue as required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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 being made by Oncolytics.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>REOLYSIN </I></B><SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> <B><I>Development Update for the Second Quarter of 2006</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We continue to develop our lead product REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> as a possible cancer therapy. Our goal each
year is to advance REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> through the various steps and stages of development
required for potential pharmaceutical products. In order to achieve this goal, we actively manage
the development of our clinical trial program, our pre-clinical and collaborative programs, our
manufacturing process and supply, and our intellectual property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Clinical Trial Program</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>U.K. Phase I Systemic Administration Clinical Trial</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2006, we completed patient enrollment in the dose escalation portion
of our U.K. phase I systemic delivery clinical trial and presented positive interim results at the
American Society of Clinical Oncology Annual Meeting (&#147;ASCO&#148;) in Atlanta Georgia. The primary
objective of our UK Phase I trial was to determine the maximum tolerated dose (&#147;MTD&#148;), dose
limiting toxicity (&#147;DLT&#148;), and safety profile of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> when administered
systemically to patients. A secondary objective was to examine any evidence of anti-tumour
activity. Eligible patients included those who had been diagnosed with advanced or metastatic solid
tumours that were refractory (have not responded) to standard therapy or for which no curative
standard therapy exists.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A total of 30 patients were treated in the escalating frequency and dosage portion of the trial to
a maximum daily dose of 1x10<SUP style="font-size: 85%; vertical-align: text-top">11</SUP> TCID<SUB style="font-size: 85%; vertical-align: text-bottom">50</SUB>. As of the presentation at ASCO, these
30 patients had received 65 courses of therapy, for a total of 284 daily treatments. Patients were
entered into the study at the following dose levels (all TCID<SUB style="font-size: 85%; vertical-align: text-bottom">50</SUB>): 1x10<SUP style="font-size: 85%; vertical-align: text-top">8</SUP> for 1
day, 1x10<SUP style="font-size: 85%; vertical-align: text-top">8</SUP> for 3&nbsp;days, 1x10<SUP style="font-size: 85%; vertical-align: text-top">8</SUP>, 3x10<SUP style="font-size: 85%; vertical-align: text-top">8</SUP>, 1x10<SUP style="font-size: 85%; vertical-align: text-top">9</SUP>,
3x10<SUP style="font-size: 85%; vertical-align: text-top">9</SUP>, 1x10<SUP style="font-size: 85%; vertical-align: text-top">10</SUP> and 3x10<SUP style="font-size: 85%; vertical-align: text-top">10</SUP> for five days, and 1x10<SUP style="font-size: 85%; vertical-align: text-top">11</SUP> for
three days. An MTD was not reached and the treatment appears to have been well tolerated by the
patients.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Toxicities possibly related to REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> treatment in this trial were generally mild (grade 1 or 2)
and have included chills, fever, headache, cough, runny nose, sore throat and fatigue. Transient
grade 3 toxicities include lymphopenia, neutropenia and troponin I. These symptoms were more
frequently observed from day two of treatment and usually lasted less than six hours.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Of the cohorts whose patients have completed treatment (seven), anti-tumour activity was noted in
patients with colorectal, prostate, pancreatic, bladder, and NSCL cancer. Patients were assessed
with CTR scans, and where possible tumour marker assessment, and histopathology of tumour biopsies.
Two patients with colorectal cancer had tumour stabilization (one for three months, the other
classified as stable disease at six months) and had CEA tumour marker reduction of 27% and 60%
respectively. One patient with metastatic prostate cancer had stable disease at four months, had a
50% decrease in PSA, and had extensive product-induced necrosis with associated intratumoural viral
replication in metastatic lesions in the lymph nodes. One patient with metastatic bladder cancer
had stable disease at four months and had a minor tumour response in a metastatic lesion in a lymph
node (reduction from 2.5 to 1.9 cm). A patient with pancreatic cancer and a patient with NSCL
cancer had stable disease at four months.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Phase Ia Combination REOLYSIN</I></B><SUP style="font-size: 85%; vertical-align: text-top"><B><I><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></I></B></SUP><B><I>/Radiation Clinical Trial</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2006, we completed patient enrollment and presented interim results at
the American Association of Cancer Research (&#147;AACR&#148;) annual meeting in Washington D.C. The primary
objective of this trial was to determine the MTD, DLT, and safety profile of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>
when administered intratumourally to patients receiving radiation treatment. A secondary objective
was to examine any evidence of anti-tumour activity. Eligible patients included those who had been
diagnosed with advanced or metastatic solid tumours that were refractory (have not responded) to
standard therapy or for which no curative standard therapy exists.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A total of 11 patients were treated in this Phase Ia trial with two intratumoural treatments of
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> at dosages of 1x10<SUP style="font-size: 85%; vertical-align: text-top">8</SUP>, 1x10<SUP style="font-size: 85%; vertical-align: text-top">9</SUP>, or 1x10<SUP style="font-size: 85%; vertical-align: text-top">10</SUP>
TCID<SUB style="font-size: 85%; vertical-align: text-bottom">50</SUB> with a constant localized radiation dose of 20 Gy in five fractions. Preliminary
results in the first seven patients were presented and showed that the combination of intratumoural
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> and radiation was well-tolerated and an MTD had not been reached. Most
toxicities were mild, generally grade 1 and 2, and included fever, sweating and skin erythema. One
patient in the second cohort developed grade 3 fatigue and grade 2 flu-like symptoms and could not
receive the second REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> injection. There was no evidence that the
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> injections exacerbated the acute reactions expected from the radiation. There
was also no evidence of viral shedding in the blood, urine, stool or sputum on day eight
post-REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> injection.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interim analysis also showed evidence of local responses and an indication of systemic effects.
Amongst the first five patients that completed treatment, three patients had partial tumour
responses. There was one case of progressive disease at one month, one case of stable disease at
one month, two cases of partial responses at one, two and three months and one case of stable
disease at one and two months, which became a pathological partial response at three months. CT
scans from the treated lymph node tumour in the first patient in the trial clearly show the partial
response, which has now lasted for over eight months. A metastatic tumour in this patient that was
outside the radiation field also showed a partial response.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Other Clinical Trial Activity</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We continued to enroll patients in our U.S. systemic delivery trial and worked with our principal
investigator in an effort to commence patient enrollment in our U.S. Phase I/II recurrent malignant
glioma trial (see <I>&#147;Recent 2006 Progress&#148;</I>).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Manufacturing and Process Development</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We currently have sufficient REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> to supply our clinical trial program presently
underway. In the second quarter of 2006, we focused our process development activity on examining
ways of improving process yields and increasing production scale. We then began to transfer the
results of this process development activity to our cGMP (&#147;current Good Manufacturing Practices&#148;)
manufacturer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Pre-Clinical Trial and Collaborative Program</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We perform pre-clinical studies and engage in collaborations to help support our clinical trial
programs and expand our intellectual property base. We continue with studies examining the
interaction between the immune system and the reovirus, the use of the reovirus as a co-therapy
with existing chemotherapeutics and radiation, the use of new RAS active viruses as potential
therapeutics, and to investigate new uses for the reovirus as a therapeutic.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the second quarter of 2006, a poster by Dr.&nbsp;E. Anders Kolb was presented at the AACR annual
meeting in Washington D.C. The investigators tested reovirus against various pediatric sarcoma
cell lines <I>in vitro </I>and <I>in vivo</I>. In all tumour lines evaluated, the reovirus exhibited significant
antitumour activity. The investigators concluded that REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> demonstrates excellent
anti-tumor activity <I>in vitro </I>and <I>in vivo </I>in childhood sarcoma cell lines, and that these promising
results suggest that a clinical trial of systemic reovirus in pediatric solid tumours is warranted.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Intellectual Property</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the second quarter of 2006, two U.S. patents were issued. At the end of the second quarter of
2006, we had been issued a total of 17 U.S., five Canadian and two European patents. We also have
other patent applications filed in the U.S., Europe and Canada and other jurisdictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Financial Impact</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We estimated at the beginning of 2006 that our monthly cash usage for the year would be
approximately $1,500,000. Our cash usage for the first half of 2006 was $5,561,588 from operating
activities and $386,084 for the purchases of intellectual property and capital assets. Our net
loss for the six month period ending June&nbsp;30, 2006 was $5,982,250. We expect that our monthly cash
usage will increase to be in line with our estimate towards the end of 2006 as we progress into our
Phase II clinical trial program, commence patient enrollment and increase our manufacturing
activities to supply our clinical trials and improve our security of supply. We now believe our
average monthly cash usage will be approximately $1,250,000 for 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cash Resources</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We exited the second quarter of 2006 with cash resources totaling $34,500,995 (see <I>&#147;Liquidity and
Capital Resources&#148;)</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Expected REOLYSIN</I></B><SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> <B><I>Development for the Remainder of 2006</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the remainder of 2006, we expect to continue to enroll patients in our existing clinical
trials and we believe that patient enrollment will be substantially completed in our two systemic
delivery trials and our REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in combination with radiation therapy trial. We plan to file
additional clinical trial applications in 2006 that focus on specific cancer indications and
drug/treatment combinations. We believe that our additional trials will be Phase II trials and
Phase II trials with an initial small safety dose escalation component.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the remainder of 2006, we expect to finish the transfer of our updated manufacturing process to
our cGMP manufacturer. Once this transfer is complete we will commence with our planned production
runs in order to supply our expanding clinical trial program. We also expect to undertake
activities associated with improving our security of supply.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Recent 2006 Progress</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On July&nbsp;18, 2006, we received a letter of approval from the U.K. Medicines and Healthcare
products Regulatory Agency (&#147;MHRA&#148;) for its Clinical Trial Application (&#147;CTA&#148;) to begin a Phase II
clinical trial to evaluate the anti-tumour effects of intratumoural administration of
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> in combination with low-dose radiation in patients with advanced cancers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The trial is an open-label, single-arm, multi-centre Phase II study of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>
delivered via intratumoural injection to patients during treatment with low-dose radiotherapy. Up
to 40 evaluable patients, including approximately 20 patients with head and neck and esophageal
cancers, and approximately 20 patients with other advanced cancers, will be treated with two
intratumoural doses of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> at 1x1010 TCID<SUB style="font-size: 85%; vertical-align: text-bottom">50</SUB> with a constant localized
radiation dose of 20 Gy in five consecutive daily fractions. Eligible patients include those who
have been diagnosed with advanced or metastatic cancers including head, neck and esophageal tumours
that are refractory (have not responded) to standard therapy or for which no curative standard
therapy exists
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The primary objective of the trial is to assess the anti-tumour activity of the combination of
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> and low dose radiotherapy in treated and untreated lesions. Secondary
objectives include the evaluation of viral replication, immune response to the virus and to
determine the safety and tolerability of intratumoural administration of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> in
patients with advanced cancers who are receiving radiation treatment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On July&nbsp;11, 2006, we announced that we began patient enrolment in our clinical trial to investigate
the use of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> for patients with recurrent malignant gliomas. This clinical trial
is an open-label dose escalation Phase I/II trial in which a single dose of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> is
administered by infusion to patients with recurrent malignant gliomas that are refractory to
standard therapy. The administration involves the stereotactically-guided placement of a needle
into the tumour, through which REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> will be administered or infused into the tumour
mass and surrounding tissue using a pump. The primary objective of the study is to determine the
MTD, DLT and safety profile of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP>. Secondary objectives include the evaluation of
viral replication, immune response to the virus and any evidence of anti-tumour activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On July&nbsp;10, 2006, we announced the commencement of patient enrolment in our Phase Ib U.K. clinical
trial investigating REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> in combination with radiation therapy as a treatment for
patients with advanced cancers. The Phase Ib trial will treat patients with a range of two to six
intratumoural doses of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> at 1x10<SUP style="font-size: 85%; vertical-align: text-top">10</SUP> TCID<SUB style="font-size: 85%; vertical-align: text-bottom">50</SUB> with a constant
radiation dose of 36 Gy in 12 fractions. The primary objective of the Phase Ib trial is to
determine the MTD, DLT, and safety profile of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> when administered
intratumourally to patients receiving radiation treatment. A secondary objective is to examine any
evidence of anti-tumour activity. Eligible patients include those who have been diagnosed with
advanced or metastatic solid tumours that are refractory (have not responded) to standard therapy
or for which no curative standard therapy exists. An additional group of patients is planned to be
treated at the maximum dose regimen reached in the Ib trial.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>SECOND QUARTER RESULTS OF OPERATIONS</B><BR>
<B><I>(for the three months ended June&nbsp;30, 2006 and 2005)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net loss for the three month period ending June&nbsp;30, 2006 was $2,987,714 compared to $2,954,720 for
the three month period ending June&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Research and Development Expenses (&#147;R&#038;D&#148;)</I></B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Manufacturing and related process development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>648,351</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,022,235</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>685,265</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">549,505</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pre-clinical trial and research collaboration expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>235,302</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other R&#038;D expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>391,701</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">299,232</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,960,619</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,050,707</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the second quarter of 2006, R&#038;D decreased to $1,960,619 compared to $2,050,707 for the second
quarter of 2005. The decrease in R&#038;D was due to the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Manufacturing &#038; Related Process Development (&#147;M&#038;P&#148;)</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Product manufacturing expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>124,110</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">949,169</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Technology transfer expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>273,214</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Process development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>251,027</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,066</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Manufacturing and related process development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>648,351</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,022,235</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our M&#038;P expenses for the second quarter of 2006 decreased to $648,351 compared to $1,022,235 for
the second quarter of 2005. Our process development studies, that had been ongoing since 2005,
resulted in improvements in virus concentrations within a more robust production process.
Consequently, in the second quarter of 2006 we focused on transferring the production process
changes to our cGMP manufacturer prior to commencing new production runs. As a result, our product
manufacturing expenses for the second quarter of 2006 decreased to $124,110 compared to $949,169
for the second quarter of 2005 which was offset by increases in technology transfer and process
development expenses to $273,214 and $251,027, respectively compared to $nil and $73,066,
respectively for the second quarter of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Clinical Trial Program</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Direct clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>643,786</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">463,812</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>41,479</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,693</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>685,265</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">549,505</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2006, our direct clinical trial expenses increased to $643,786
compared to $463,812 for the second quarter of 2005. In the second quarter of 2006, we incurred
direct patient costs in our three ongoing clinical trials compared to only two enrolling clinical
trial studies in the second quarter of 2005. As well in the second quarter of 2006, we incurred
clinical site start up costs associated with our U.S. recurrent malignant glioma trial.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Pre-Clinical Trial Expenses and Research Collaborations</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research collaboration expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>235,302</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pre-clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pre-clinical trial expenses and research collaborations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>235,302</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">179,735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2006, our research collaboration expenses were $235,302 compared to
$179,735 for the second quarter of 2005. Our research collaboration activity continues to focus on
the interaction of the immune system and the reovirus, the use of the reovirus as a co-therapy with
existing chemotherapeutics and radiation, the use of new RAS active viruses as potential
therapeutics, and to investigate new uses of the reovirus as a therapeutic.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Research and Development Expenses</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">R&#038;D consulting fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>31,371</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,865</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">R&#038;D salaries and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>286,767</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,901</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other R&#038;D expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>73,563</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,466</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>391,701</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">299,232</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2006, our R&#038;D consulting fees decreased to $31,371 compared to $89,865
in 2005. In the second quarter of 2005 we incurred consulting costs associated with our initial
two U.S. clinical trial applications. In the second quarter of 2006, we did not incur this type of
consulting service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our R&#038;D salaries and benefits costs were $286,767 in the second quarter of 2006 compared to
$166,901 in the second quarter of 2005. The increase is a result of increases in compensation
levels along with the hiring of our Chief Medical Officer in the third quarter of 2005.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Operating Expenses</I></B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Public company related expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>664,917</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">576,031</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Office expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>240,176</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,480</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>905,093</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">769,511</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2006, our public company related expenses increased to $664,917
compared to $576,031 for the second quarter of 2005. In the second quarter of 2006, we incurred
executive search consulting fees associated with the appointment of our two new directors that were
not incurred in the second quarter of 2005. As well, we have increased our investor relations
activity in the second quarter of 2006 compared to the second quarter of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2006, our office expenses increased to $240,176 compared to $193,480
for the second quarter of 2005. Our office expenses have increased due to increased compensation
levels and a general increase in office costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Stock Based Compensation</I></B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>222,376</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,404</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Stock based compensation for the second quarter of 2006 increased to $222,376 compared to $8,404
for the second quarter of 2005. In the second quarter of 2006, we incurred stock based
compensation associated with the issue and immediate vesting of stock options to our two newly
appointed directors and the vesting of previously granted options. In 2005, stock based
compensation was recorded relating to the vesting of previously granted options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>YEAR TO DATE RESULTS OF OPERATIONS</B><BR>
<B><I>(for the six months ended June&nbsp;30, 2006 and 2005)</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net loss for the six month period ending June&nbsp;30, 2006 was $5,982,250 compared to $5,331,769 for
the six month period ending June&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Research and Development Expenses (&#147;R&#038;D&#148;)</I></B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Manufacturing and related process development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,500,141</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,860,843</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,189,239</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">781,852</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pre-clinical trial and research collaboration expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>424,531</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">415,925</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other R&#038;D expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>763,030</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">622,351</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,876,941</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,680,971</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the six month period ending June&nbsp;30, 2006, R&#038;D increased to $3,876,941 compared to $3,680,971
for 2005. The increase in R&#038;D was due to the following:
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Manufacturing &#038; Related Process Development (&#147;M&#038;P&#148;)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Product manufacturing expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>776,183</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,795,135</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Technology transfer expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>273,214</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Process development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>450,744</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,708</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Manufacturing and related process development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,500,141</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,860,843</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our M&#038;P expenses for the six month period ending June&nbsp;30, 2006 decreased to $1,500,141 compared to
$1,860,843. In the first part of 2006, we completed the production runs that were ongoing at the
end of 2005, providing us with sufficient product to complete our existing Phase I clinical trials.
At the same time our process development activity helped improve the virus yields from our
manufacturing process. This prompted us to transfer the improvements in our process to our cGMP
manufacturer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the first part of 2005, we were focused on the production of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in order to supply the
clinical trials enrolling at that time and to provide a supply for the two U.S. monotherapy and the
U.K. combination trials approved in the first half of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We continue to believe that our product manufacturing expenses for 2006 will be in line with 2005.
We expect that the technology transfer will be completed in the third quarter of 2006 and we
believe that our cGMP production run yields will improve. We believe that if there is a sufficient
improvement in our cGMP manufacturing yields we may be able to reduce the number of production runs
required to supply our clinical trial program. This potential reduction in the number of cGMP
production runs may be offset by activities we expect to undertake to improve on our security of
supply.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Clinical Trial Program</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Direct clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,100,626</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">696,159</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>88,613</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,693</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,189,239</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">781,852</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the six month period ending June&nbsp;30, 2006, our direct clinical trial expenses increased to
$1,100,626 compared to $696,159 for the six month period ending June&nbsp;30, 2005. In the first half
of 2006, we incurred direct patient costs in our three ongoing clinical trials along with clinical
site start up costs associated with our U.S. recurrent malignant glioma trial. In 2005, we were
incurring direct patient costs associated with two enrolling clinical trial studies along with
clinical site start up costs associated with our REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></SUP> in combination with radiation
therapy study in the U.K. in the first half of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We expect our clinical trial expenses will continue to increase for the remainder of 2006 compared
to 2005. The increase in these expenses is expected to arise from enrollment in our existing
clinical trial program and expansion into Phase II clinical trials.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Pre-Clinical Trial Expenses and Research Collaborations</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research collaboration expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>381,738</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">363,158</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pre-clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42,793</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,767</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pre-clinical trial expenses and research collaborations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>424,531</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">415,925</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the six month period ending June&nbsp;30, 2006, our research collaboration expenses were $381,738
compared to $363,158 for the six month period ending June&nbsp;30, 2005. Our research collaboration
activity
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">continues to focus on the interaction of the immune system and the reovirus, the use of the
reovirus as a co-therapy with existing chemotherapeutics and radiation, the use of new RAS active
viruses as potential therapeutics, and to investigate new uses of the reovirus as a therapeutic.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the six month period ending June&nbsp;30, 2006, our pre-clinical trial expenses were $42,793
compared to $52,767 for the six month period ending June&nbsp;30, 2005. The frequency of our
pre-clinical trial expenses change from period to period as we move through our clinical trial
program. As well, we may increase our pre-clinical activity depending on the results of our
research collaborations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the remainder of 2006, we still expect that pre-clinical trial expenses and research
collaborations will remain consistent compared to 2005. We expect to continue expanding our
collaborations in order to provide support for our expanding clinical trial program. However, in
our efforts to enter into additional combination therapy clinical trials we may be required to
perform additional pre-clinical trial studies which could increase these costs compared to 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Research and Development Expenses</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">R&#038;D consulting fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>64,326</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,869</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">R&#038;D salaries and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>607,892</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375,337</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quebec scientific research and experimental development refund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(52,344</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other R&#038;D expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>143,156</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>763,030</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">622,351</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the six month period ending June&nbsp;30, 2006, our R&#038;D consulting fees decreased to $64,326
compared to $165,869 in 2005. In the first part of 2005 we incurred consulting costs associated
with our initial two U.S. clinical trial applications. In 2006 we have not incurred this type of
consulting service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our R&#038;D salaries and benefits costs were $607,892 for the six month period ending June&nbsp;30, 2006
compared to $375,337 for the six month period ending June&nbsp;30, 2005. The increase is a result of
increases in salary levels along with the hiring of our Chief Medical Officer in the third quarter
of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We expect that our Other Research and Development Expenses for the remainder of 2006 will remain
consistent with 2005. We expect that salaries and benefits will increase as 2006 should include a
complete year of salary and benefit costs for our Chief Medical Officer. This increase should be
offset by a decline in our R&#038;D consulting fees as we do not expect to require the same level of
consulting services in 2006 as we incurred in 2005. However, we may choose to engage additional
consultants to assist us in the development of protocols and regulatory filings for our additional
combination therapy and phase II clinical trial studies, possibly causing our R&#038;D consulting
expenses to increase.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Operating Expenses</I></B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Public company related expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,499,636</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,094,134</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Office expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>523,393</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">431,693</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,023,029</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,525,827</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the six month period ending June&nbsp;30, 2006, our public company related expenses increased to
$1,499,636 compared to $1,094,134 for the six month period ending June&nbsp;30, 2005. The increase in
public company related expenses was a result of incurring executive search consulting fees
associated with the appointment of two new directors and an increase in our investor relations
activity in 2006 compared to 2005.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the six month period ending June&nbsp;30, 2006, our office expenses increased to $523,393
compared to $431,693 for the six month period ending June&nbsp;30, 2005. Our office expenses have
increased due to increased compensation levels and a general increase in office costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Stock Based Compensation</I></B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>259,209</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,779</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Stock based compensation for the six month period ending June&nbsp;30, 2006 increased to $259,209
compared to $21,779 for the six month period ending June&nbsp;30, 2005. In the first half of 2006, we
incurred stock based compensation associated with the issue and immediate vesting of stock options
to our two newly appointed directors and the vesting of previously granted options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Commitments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As at June&nbsp;30, 2006, we are committed to payments totaling $2,026,000 during the remainder of 2006
for activities related to clinical trial activity and collaborations. All of these committed
payments are considered to be part of our normal course of business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>SUMMARY OF QUARTERLY RESULTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following unaudited quarterly information is presented in thousands of dollars except for
per share amounts:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dec.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Sept.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dec.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Sept.</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="33" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Revenue</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>335</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>292</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>160</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>211</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>168</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>245</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>205</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>194</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px"><B>Net loss</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(2), (5)</B></SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,988</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,995</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,941</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,510</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,955</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,377</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,992</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,096</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px"><B>Basic and diluted loss per common share</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(2), (5)</B></SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.08</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.08</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.12</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.11</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.09</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.07</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.14</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>0.11</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total assets</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(3), (6)</B></SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>40,828</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43,660</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>46,294</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34,538</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38,081</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>40,519</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>39,489</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>29,471</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total cash</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(4), (6)</B></SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34,501</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>37,687</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>40,406</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28,206</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>31,975</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34,713</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>33,919</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23,806</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total long-term debt</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(7)</B></SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash dividends declared</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(8)</B></SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Revenue is comprised of interest income and income from short term investments.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Included in net loss and net loss per share between June&nbsp;2006 and Sept 2004 is a
quarterly gain (loss)&nbsp;on sale of investment of $nil, $nil, $nil, $nil, $nil, $765, $nil,
and ($12,817), respectively.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Subsequent to the acquisition of Oncolytics Biotech Inc. by SYNSORB in April&nbsp;1999, we
applied push down accounting. See note 2 to the audited financial statements for 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Included in total cash are cash and cash equivalents plus short-term investments.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Included in net loss and loss per common share between June&nbsp;2006 and Sept 2004 are
quarterly stock based compensation expenses of $222,376, $36,833, $38,152, $4,173, $8,404,
$13,375, $1,870,596, and $48,878, respectively.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>We issued 50,000 common shares in 2006 for cash proceeds of $42,500 (2005 &#150; 4,321,252
common shares for cash proceeds of $18,789,596; 2004 &#150; 4,685,775 common shares for
$23,495,961). In addition, 21,459 common shares were issued in September&nbsp;2004 as partial
consideration for the cancellation of a portion of our contingent payments (see note 10 to
the audited financial statements for 2005).</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>The long-term debt recorded represents repayable loans from the Alberta Heritage
Foundation.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>We have not declared or paid any dividends since incorporation.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>LIQUIDITY AND CAPITAL RESOURCES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Liquidity</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As at June&nbsp;30, 2006, we had cash and cash equivalents (including short-term investments) and
working capital positions of $34,500,995 and $33,646,199, respectively compared to $40,406,167 and
$39,301,444, respectively for December&nbsp;31, 2005. The decrease in 2006 reflects cash usage from
operating activities and purchases of intellectual property of $5,561,588 and $365,036,
respectively with no cash inflows from financing activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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. For the remainder of 2006, we are
expecting to expand our clinical trial program to include additional co-therapy clinical trials and
Phase II clinical trials. We are also expecting to continue with our collaborative studies
pursuing support for our future clinical trial program. Therefore, we will also need to ensure
that we have enough REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> to supply our potentially expanding clinical trial and collaborative
programs. We are now estimating that our monthly cash usage will increase towards $1,500,000 per
month with our average monthly cash usage for 2006 to be approximately $1,250,000 and we believe
our existing capital resources are adequate to fund our current plans for research and development
activities into 2008. Factors that will affect our anticipated average monthly burn rate include,
but are not limited to, the number of manufacturing runs and activities required to supply our
clinical trial program and the cost of each run, the number of clinical trials ultimately approved,
the timing of patient enrollment in the approved clinical trials, the actual costs incurred to
support each clinical trial, the number of treatments each patient will receive, the timing of the
U.S. National Cancer Institute&#146;s R&#038;D activity, and the level of pre-clinical activity undertaken.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the event that we choose to seek additional capital, we will look to fund additional capital
requirements primarily through the issue of additional equity. We recognize the challenges and
uncertainty inherent in the capital markets and the potential difficulties we might face in raising
additional capital. Market prices and market demand for securities in biotechnology companies are
volatile and there are no assurances that we will have the ability to raise funds when required.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Capital Expenditures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We spent $365,036 on intellectual property in the second quarter of 2006 compared to $464,759 in
the second quarter of 2005. The change in intellectual property expenditures reflects the timing
of filing costs associated with our expanded patent base. As well, we have benefited from a
stronger Canadian dollar as our patent costs are typically incurred in U.S. currency. In the
second quarter of 2006, two U.S. patents were issued bringing our total patents issued to 17 in the
U.S., five in Canada and two in Europe.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Investing Activities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under our Investment Policy, we are permitted to invest in short-term instruments with a rating no
less than R-1 (DBRS)&nbsp;with terms less than two years. We have $27,276,688 invested under this
policy and we are currently earning interest at an effective rate of 3.86% (2005 &#150; 3.22%).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>OTHER MD&#038;A REQUIREMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have 36,386,748 common shares outstanding at July&nbsp;26, 2006. If all of our warrants
(2,672,000) and options (3,584,550) were exercised we would have 42,643,298 common shares
outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Additional information relating to Oncolytics Biotech Inc. is available on SEDAR at <U>www.sedar.com</U>.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Financial Statements
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Oncolytics Biotech Inc.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">June&nbsp;30, 2006
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>BALANCE SHEETS</B><BR>
<B><I>(unaudited)</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As at,
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,224,307</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,511,357</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>27,276,688</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,894,810</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>54,147</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,390</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>997,778</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">540,368</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35,552,920</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,993,925</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Property and equipment</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>156,750</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189,863</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Intellectual property</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,118,355</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,110,538</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>40,828,025</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,294,326</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,906,721</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,692,481</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Alberta Heritage Foundation loan</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shareholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share capital <I>&#091;note 2&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Authorized: unlimited number of common shares
Issued: 36,286,748 (December&nbsp;31, 2005 &#150; 36,236,748)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>84,596,904</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,341,212</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants <I>&#091;note 2&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,216,740</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,429,932</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contributed surplus <I>&#091;note 3&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,672,452</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,413,243</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deficit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(56,714,792</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(50,732,542</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38,771,304</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,451,845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>40,828,025</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,294,326</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>See accompanying notes</I>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>STATEMENTS OF LOSS AND DEFICIT</B><BR>
<B><I>(unaudited)</I></B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Cumulative</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Six Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Six Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>from inception</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>on April 2,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ending June</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ending June</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ending June</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ending June</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1998 to June</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>30, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>30, 2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>30, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>30, 2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>30, 2006</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Revenue</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rights revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">310,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>626,910</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">412,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>334,688</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,196,106</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>626,910</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">412,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>334,688</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,506,106</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,876,941</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,680,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,960,619</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,050,707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,712,446</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,023,029</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,525,827</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>905,093</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">769,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,113,720</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock based compensation <I>&#091;note 3&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>259,209</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>222,376</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,021,308</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign exchange loss/gain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(7,832</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,219</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">605,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization &#150; intellectual property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>427,119</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381,818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>216,679</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,589,910</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization &#150; property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30,694</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,416</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">385,740</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,609,160</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,745,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,322,402</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,122,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,428,870</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Loss before the following:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,982,250</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,332,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,987,714</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,954,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55,922,764</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Gain on sale of BCY LifeSciences Inc.</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(765</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(299,403</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Loss on sale of Transition Therapeutics Inc.</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,156,685</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Loss before taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,982,250</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,331,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,987,714</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,954,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,780,046</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Capital tax</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Future income tax recovery</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,115,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net loss for the period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,982,250</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,331,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,987,714</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,954,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,714,792</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Deficit, beginning of period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>50,732,542</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,950,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>53,727,078</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,327,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Deficit, end of period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>56,714,792</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,282,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>56,714,792</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,282,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,714,792</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Basic and diluted loss per share</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.16</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.08</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Weighted average number of shares</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>36,250,836</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,559,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>36,264,770</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,849,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>See accompanying notes</I>
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>STATEMENTS OF CASH FLOWS</B><BR>
<B><I>(unaudited)</I></B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Cumulative</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>from inception</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Six Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Six Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>on April 2,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period Ending</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period Ending</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ending June</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ending June</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1998 to June</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>30, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>30, 2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>30, 2006</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>OPERATING ACTIVITIES</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss for the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(5,982,250</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,331,769</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(2,987,714</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,954,720</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(56,714,792</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct non-cash items</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization &#150; intellectual property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>427,119</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">381,818</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>216,679</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,589,910</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization &#150; property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>30,694</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,292</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,416</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">385,740</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>259,209</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>222,376</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,021,308</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other non-cash items <I>&#091;note 4&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,383,537</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net changes in non-cash working capital <I>&#091;note 4&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(296,360</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(567,132</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(57,516</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">796,639</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(5,561,588</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,747,066</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(3,100,375</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,785,502</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(46,537,658</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>INVESTING ACTIVITIES</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intellectual property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(365,036</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(464,759</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(134,088</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(167,363</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,021,706</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other capital assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(21,048</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,220</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,333</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,622</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(608,559</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(539,878</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,333,838</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(290,435</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(125,959</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(47,623,918</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Redemption of short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,158,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,747,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,258,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,303,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,928,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investment in BCY LifeSciences Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">464,602</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investment in Transition Therapeutics Inc<I>.</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,532,343</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,232,038</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,058,456</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,839,810</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000,707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(30,328,492</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>FINANCING ACTIVITIES</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Alberta Heritage Foundation loan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from exercise of warrants and stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42,500</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,308,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42,500</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">232,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,009,568</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from private placements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,137,385</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from public offerings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B><FONT style="font-family: Symbol">&#190;</FONT></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,793,504</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42,500</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,308,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42,500</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">232,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,090,457</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Increase (decrease)&nbsp;in cash and cash equivalents during the period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,712,950</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,497,235</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>781,935</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(552,395</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,224,307</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents, beginning of the period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,511,357</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,408,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,442,372</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,463,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><FONT style="font-family: Symbol">&#190;</FONT></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents, end of the period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,224,307</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,911,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,224,307</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,911,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,224,307</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>See accompanying notes</I>
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">June&nbsp;30, 2006 <I>(unaudited)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>1.&nbsp;ACCOUNTING POLICIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These unaudited interim financial statements do not include all of the disclosures included in
the Company&#146;s annual financial statements. Accordingly, these unaudited interim financial
statements should be read in conjunction with the Company&#146;s most recent annual financial
statements. The information as at and for the year ended December&nbsp;31, 2005 has been derived from
the Company&#146;s audited financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accounting policies used in the preparation of these unaudited interim financial statements
conform with those used in the Company&#146;s most recent annual financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>2.&nbsp;SHARE CAPITAL</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Authorized:</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Unlimited number of common shares
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>Issued</B>:</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Warrants</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,915,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,643,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,855,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,347,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issued for cash pursuant to December&nbsp;29, 2005
private placement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,176,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,920,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,908,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">771,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,417,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(771,252</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(329,984</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expired warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,496,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,219,288</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,496,514</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">297,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share issue costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,689,398</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,236,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,341,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,784,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,429,932</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expired warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213,192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(112,800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(213,192</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, June&nbsp;30, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>36,286,748</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>84,596,904</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,672,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,216,740</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">June&nbsp;30, 2006 <I>(unaudited)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the Company&#146;s outstanding warrants as at June&nbsp;30, 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Outstanding,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Granted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Exercised</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Expired</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Remaining</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Beginning of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>During the</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>During the</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>During the</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Outstanding,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Contractual</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>the Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>End of Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Life (years)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$5.65
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">320,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">320,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.50</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$6.15
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,600,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,600,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.50</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$7.06
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">112,800</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(112,800</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">&#151;
</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$8.00
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">752,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">752,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.40</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,784,800</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(112,800</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,672,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.19</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" valign="top" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.&nbsp;STOCK BASED COMPENSATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Stock Option Plan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has issued stock options to acquire common stock through its stock option plan of
which the following are outstanding at June&nbsp;30:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Share Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Share Price</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,634,550</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.66</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,805,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted during period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>100,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3.85</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised during period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(50,000</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>0.85</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(260,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.85</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,684,550</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.69</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,545,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercisable at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,452,050</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4.79</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,477,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.67</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">June&nbsp;30, 2006 <I>(unaudited)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes information about the stock options outstanding and exercisable
at June&nbsp;30, 2006:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Range of Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Contractual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Prices</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Life (years)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$0.75 - $1.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">582,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">582,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.85</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$1.65 - $2.37</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">281,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">261,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.85</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$2.70 - $3.50</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">728,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">528,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$4.00 - $5.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,240,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,228,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.86</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$6.77 - $9.76</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">708,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">708,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.66</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$12.15 - $13.50</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.63</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,684,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,452,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.79</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The outstanding options vest annually or after the completion of certain milestones. The
Company has reserved 3,662,461 common shares for issuance relating to outstanding stock options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As the Company is following the fair value based method of accounting for stock options, the
Company recorded compensation expense of $222,376 and $259,209 for the three and six month periods
ending June&nbsp;30, 2006, respectively (June&nbsp;30, 2005 $8,404 and $21,779, respectively) with respect to
the granting of options in the period and vesting of options issued in prior periods with an
offsetting credit to contributed surplus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The estimated fair value of stock options issued during the six month period ending June&nbsp;30, 2006
was determined using the Black-Scholes model using the following weighted average assumptions and
fair value of options:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>4.24</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>3.27</B></TD>
    <TD nowrap><B>%</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected hold period to exercise</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right"><B>3.5 years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right"><B>3.5 years</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Volatility in the price of the Company&#146;s shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>64</B></TD>
    <TD nowrap><B>%</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>64</B></TD>
    <TD nowrap><B>%</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right"><B>Zero</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right"><B>Zero</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average fair value of options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1.86</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>1.51</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO FINANCIAL STATEMENTS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">June&nbsp;30, 2006 <I>(unaudited)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>4.&nbsp;ADDITIONAL CASH FLOW DISCLOSURE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Net Change In Non-Cash Working Capital</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">For the periods ending:</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center" style="font-weight: bold"><B>Six</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Six</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center" style="font-weight: bold"><B>Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Cumulative</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center" style="font-weight: bold"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>from inception</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center" style="font-weight: bold"><B>Ending</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ending</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ending</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ending</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>on April 2,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center" style="font-weight: bold"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>1998 to June</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center" style="font-weight: bold"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>30, 2006</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="font-weight: bold">&nbsp;</TD>
    <TD nowrap align="center" style="font-weight: bold">&nbsp;</TD>
    <TD colspan="3" nowrap align="center" style="font-weight: bold">$</TD>
    <TD nowrap align="center" style="font-weight: bold">&nbsp;</TD>
    <TD colspan="3" nowrap align="center" style="font-weight: bold">$</TD>
    <TD nowrap align="center" style="font-weight: bold">&nbsp;</TD>
    <TD colspan="3" nowrap align="center" style="font-weight: bold">$</TD>
    <TD nowrap align="center" style="font-weight: bold">&nbsp;</TD>
    <TD colspan="3" nowrap align="center" style="font-weight: bold">$</TD>
    <TD nowrap align="center" style="font-weight: bold">&nbsp;</TD>
    <TD colspan="3" nowrap align="center" style="font-weight: bold">$</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Change in:</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="font-weight: bold">&nbsp;</TD>
    <TD align="right"><B>(6,757</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20,164</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>63,164</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27,347</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(54,147</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="font-weight: bold">&nbsp;</TD>
    <TD align="right"><B>(457,410</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(504,909</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(470,182</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(339,147</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(997,778</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="font-weight: bold">&nbsp;</TD>
    <TD align="right"><B>214,240</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">594,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(109,214</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,906,721</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in non-cash working capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="font-weight: bold">&nbsp;</TD>
    <TD align="right"><B>(249,927</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(516,232</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(90,465</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">854,796</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net change associated with investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="font-weight: bold">&nbsp;</TD>
    <TD align="right"><B>(46,433</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(50,900</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(58,157</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net change associated with operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="font-weight: bold">&nbsp;</TD>
    <TD align="right"><B>(296,360</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B>(567,132</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(57,516</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">796,639</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000"><B>Other Non-Cash Items</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Six Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Six Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Month</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Cumulative</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ending</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ending</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ending</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ending</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>from inception</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>June 30,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>on April 2, 1998</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>to June 30, 2006</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>$</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign exchange loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,650</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">425,186</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Donation of medical equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,069</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on sale of Transition Therapeutics Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,156,685</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on sale of BCY LifeSciences Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(765</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(299,403</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cancellation of contingent payment obligation settled in common shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Future income tax recovery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,115,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,383,537</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5. COMPARATIVE FIGURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain comparative figures have been reclassified to conform with the current period&#146;s
presentation.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Shareholder Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For public company filings please go to www.sedar.com or contact us at:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Oncolytics Biotech Inc.<BR>
Suite&nbsp;210, 1167 Kensington Crescent NW<BR>
tel: 403.670.7377 fax: 403.283.0858<BR>
Calgary, Alberta, Canada T2N 1X7<BR>
www.oncolyticsbiotech.com

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Officers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Brad Thompson, PhD</B><BR>
Chairman, President and CEO<BR>
<B>Doug Ball, CA</B><BR>
Chief Financial Officer<BR>
<B>Matt Coffey, PhD</B><BR>
Chief Scientific Officer<BR>
<B>Karl Mettinger, MD, PhD</B><BR>
Chief Medical Officer<BR>
<B>George Gill, MD</B><BR>
Senior Vice President, Clinical and Regulatory Affairs

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Brad Thompson, PhD</B><BR>
Chairman, President and CEO, Oncolytics Biotech Inc.<BR>
<B>Doug Ball, CA</B><BR>
CFO, Oncolytics Biotech Inc.<BR>
<B>Ger van Amersfoort</B><BR>
Biotech Consultant<BR>
<B>William. A. Cochrane, OC, MD</B><BR>
Biotech Consultant<BR>
<B>Jim Dinning</B><BR>
Chairman, Western Financial Group<BR>
<B>Ed Levy, PhD</B><BR>
Adjunct Professor, University of British Columbia<BR>
<B>J. Mark Lievonen, CA</B><BR>
President, Sanofi Pasteur Limited<BR>
<B>Bob Schultz, FCA</B><BR>
Chairman, Rockwater Capital Corporation<BR>
<B>Fred Stewart, QC</B><BR>
President, Fred Stewart and Associates Inc.

</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.<BR>
Suite&nbsp;210, 1167 Kensington Crescent NW, Calgary, AB T2N 1X7<BR>
Phone: (403)&nbsp;670.7377 Fax: (403)&nbsp;283.0858<BR>
www.oncolyticsbiotech.com</B>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>2
<FILENAME>o32490o3249000.gif
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 o32490o3249000.gif
M1TE&.#EA(P)W`.8``.7DX;Z\N?OZ^=73T-W;V?KZ^-/1SLK&PO;V]/O[^NKH
MY?S\^PH*"]C6T^WLZ<S)Q=O9UM'.R_CX]L_,R?7T\DQ*2G5R<CP[.D-"0L/`
MO>#>V_3S\:2@G1L:&O'P[H6#@963D:ZKJ&-A8;.PK20B(HB&A!,3$ZFFI+NY
MMJ&=FP0%!>SJZ.?FX\;&Q::CH+FVLUU:69Z;F,"]NN/AWZNIIC0R,GAU<RPJ
M*E1248Z+B6UJ:;"MJ[:SL*:DHGY[>?#N[&AF9/KY^'QX=?+Q[X%^>V!=6FMH
M9IR9EI&.C(R(AH.`?921CS@U-7-P;F)@7L7"P,?$P7!M;)B6E/[]_>[MZTA&
M1/GX]U!-2UA55#DX-T`^/%-03DI(1EM85J>EI$-`/K^_OS`N+2<F)NOIYP8&
M!S(P+Q\>'J.AGR$@("DH)V%@8`<("186%_W]_0X-#OW]_/[___[^_?W\_/S\
M_/W^_??W]OW^_OS]_!`0$?O\^P\/#U%/3QD8&/[^_@,$!/___R'Y!```````
M+``````C`G<```?_@'^"@X2%AH>(AW"+<'U]"6]QCI..;8R4<5-]4W%O?8F@
MH:*CI*6FIZBIJJNLK:ZOL+&RL[2UMJZ,<'9OD`)S=GV\"W-S4\9O<Y()"7)R
M;W*3M]+3U-76U]C9VMO<W8JY;PMMRQ(>+`0#!NKK$"P_$@G!SG%M<M[W^/GZ
M^_S]_O^)<M%!P$*&$BP8:J`Q0<:/"C\0_;@Q$Z8*CA(!"`Q9M@"@QX\@0XH<
M2;)6GS9_4+XI$&P%APIIUCB,2+.F33]KS%1!,D/<G#8GVZ",L^!3R:-(DRI=
MRO15N`1M@LP8$86)GIM8LT)404;%&A)8>D#8L"`!G3>1C#9=R[:MV[?\_PH$
MJ7/@PP4&*AX^U,J79EZ]#,)8"."@4QM/<!,K7LRX,2HJ+[K@V4NFX<R^F&MR
M97"!`XNR<1R+'DVZM,A'!9@]0S#BAF7-L#/'QJHB#9$9!>04$&I,3D?3P(,+
M'QZK3Y`$!0ILX*'%#>V'#;GZ(>/&#9X.3"I<X<)="PD3U=?D=?CZ9EX225@D
M$+"@+&+B\./+GR_HD8`$/*Z(WVMS[YH.7P"!!`T3`$!!`3_)(91005"PP@`C
MQ!!%%3']Q9]??@1&`Q7+G*06?2"&*")<CP!@`Q\.75B3&S6(@(0,%"R`5AQT
ME+5`,VB]T<8<14TAXQ16-""%"%F8<)E?X^D!P_\#<R1`SXA01BGE:8]8$0`3
M?/V'10H`Q..(((T$\V%]1GT2AR13_-$'`"<`849T$8T7$0E'4,!,F%/FJ>>>
MVD"U@A#.J1C1&DRDH$`;9\93W$\>C)"%&PQ`U)5?:V@QPS)QS#$FGYQVZJDJ
M03SQ17DTD:%'%B]XD``Q"GX)2S#+!"'!!$7@,:E?E95Q0A`L;?KIK\`&.\@9
M9NAU$PXT;,`C<D7U00=*L!`E8P(R4O`"%B;(25Y>?!!!`5#"ABONE%,@V@<Q
M"*1@I&9<W>###YX(M0DEM'#R1R=]Q.%`"EE8IJ(;1#A`S'V^CFOPP:0]DV\"
M'OAP%;MN8*%!`O<<)@#_"S9,MD9Y7A4!@``%+)`FPB27[%@?<`C0!P5&;(RK
M"C>$4(<`$MP#1Q!R2"#``37(Q.X5728`A\E$%^V6F`@X$:F**G`Q@)/!W$.M
M%<X4`(`%D<8)$0-7:("RT6"'C51R"!C!,41X"+&!HOEHHB8]?=3A1;'CZ44&
M%QHH"%7!8O?M=S<)U"'$A>/Q<40=18$DP`LW[*675WL<>N/?E%?>C15',.#S
M5BJ(X0*B4`WM$7(3,+$Y5UP9`>][EK?N^BTT\%%936(<$,0;$OS$=SYE6:'!
M%7("E@0"KKYN_/&I]"'''6UDT('C>9'!!`%`?5(\0)004(6V7)FP!-0[[H[\
M__C(/[*``EJ4RI49$80C/D`)$)#%36E,H.!A[Y.OO^5PK*=#UG'J0`#@(([\
M^6,!`C!`&31SMQ^(;`ZBVY\$RR>'$:QA<Q#A0PH$\`<\(45Y=8""&>(4/1O4
M04<33*'KT,(,`)!@*]/!R?"@];6D.&(**9A,31B`@D>H\(>4NX\`/*`#SOT%
M""O@D5OJH`0&D$H+"F`;$*=HM*K%KC+288`8`+``HKBE#6,`'J604(#04/&,
M)EO&#ZK0E;]0AP<"X`6TV'*8"71`,V(P`!KW2#(Y).`#`$R1$<QRO;4\(P$I
MP$OPC/`M'460CY#TU!SJ4"S:#2%Q<$'+`NK`QN#I8?\"RP!7)$?)J3AP0#PT
M8<`9J&7`DM##1P80`RHC@H,$!$%3I,QEE"BQ`EG6A`M1G.-;\N6(!#1!D1$Q
MP03@ILMFAD@H<9##"<B`RH>X801M$%DK21*--CP@#9H1@8RVZ<QR+B88;:!`
MX_A#AB;<3DR-.1<12&4""$C1G/@$SC@28,&Z94@&"Z"#)!RS@"`TP#DT6<,J
M\\E0?2Y##>ST`P8VT(DX/%(QU%H`$2Y$!@S,`&4U;*A(%<,+#2QP4&0(0;/(
MF91E%."@;=S:"U!6O9':]"WCB$$@_2`&LK!4*<]"AA:DHQ<;L`0.K+NI4IF2
M`!S8!`ASX&!I(!&$`,R2*S7_(,"\?KK4KN;C#2Q``^$VPE4;'B8./R`!1W>@
MID)Z]:T@Z4,,W*"M+!1%:*691!Q@8!,=K$J4<`WL1_J@@_*0(0H9+>M2VK"$
M64($`]ETFV`G^X\$,"%X#!@!`O86G`4TX(XTZ4`0:DK9TNZ#!7<TU@T:T`:5
M"<<X%S"L!LZD6-/:%A8M6-I68%`'^#Q""#8I@0])T8?=".!^]=#1>H;6B%"8
MKPWE$LH;IK`>5Q13`'4HER9.HK*RR.$^U'I#6XF"2U0\0D%!4-ZJBD(41!UF
M`<"81".$4I1ZM"=YMDQ`=.NQ#(JUHDEEE`3<SG3<?9:"N[I9D([Z\!M#M,$*
MO$#N_X(F3.$*6WA!5D".5!/16@0@@![2S28SDM>(./S5>D/SA/+*XJ4.#L./
M1`E"%UOI"*(((#1R^$DFUCN'>PG%#JVM@QP$VH:0\8(0+NC*:SYP4>"TYPP[
MK0):#'@2`KC@REAV00@`,%^W%H+!"PA!ECG`@SIXV13/B.H"$$"`#+B@!$8H
M0@6^H(4O7*$+3@!"#D*0`0U08`YR()YY6YN<!%B!`&!PP0?B?`4,T-G.,`""
M#U(0@`%X(#6((^TIX-"&"/2``UCN003*RXI@:.#*'`"U"VA`@P;(2`YV*(5A
M?O""4)_ARC,X1!P6=P959_G7P`YVL,\0@`T(4]=MV``-LO]\AA"P8*#)DU<V
MY4`!`@2``T0``A:J\(5N<P$',&A"#D[0`@ULEL%G-L2YOEL'#<@@!CKH`@9N
M8`8V<(4/)$C#!:X@`AO$X`41H()0V`-A0C3!6`ZA06V;TJ0#C#!.-1#R@>60
M!`98_.)NT$,7?J")'3FW#U3`P\4M;@(``%854PCT`(X@`JMH+G@IF@X9&.`&
M)A0!!`;X@1E-$8PU-R`&0"B#R&6"<,ZM@>9@R<$$*/`,1*4BFSJ`U,AQ,.56
MC,,`:+#XT8_.``Q$@%H])NX<$/`!$XS<XC?0@*XW$(:SN_WM<(=[%U8@7E"T
MX0X$,,/9W1`"Z*JB>@N@P`!``(/_ME_06-#S"@-,P`0G'&$`?SYV(HPSAA<8
MH09N<!E7E&PA"QV]`U>PP`AF(`'?4&*=$6%`"^)#+0?,+[0>.#DH&&P!HD>/
MFFMPP@KHL`DP-5E-;Q@"ZO)R09./;!1JX:7E0>M8=L%P.@_!0Q*"0%P/!1\*
M-F"#\[7R%XGH@`<K@$I;6PD4$72^HZVR>I$/(%:;9$$#5D")APY!B38@(`>9
M[WP:#H"(/OR@`VW4>0(X@`38>1:``&''8?&C?9Y'`W*P<\AG/<FP`CL@`@\C
M&YQ#!AVP0:(P"4/``Z.">#4Q.]H2)VT4!D3``D-6%'6P+A'!!&H''TCU!E=@
M$S.0@*/P_P86D!4J@`6KPUR^$@D_<!,`<`I`@2AE@0`[H`7BH61XT15'YP9B
M4`,D<''\L7E70`4'9DM!,`$B$"C0L15<9P9E<`%5:'&OT1614BDHX&$%!8$?
M)P(V@0&TD`&55#<J4`,:$$<&YF"ZL68EL#D-(3T0('N"L``;H%;<MU,QQQ<,
M$`/)T8$$H'TUX06G`&@*(@`((`6F4W33$85ED`5B('(6UWD,T`5#0`>_1PB\
MT`!8<!,SQP!ZP`0P4(M=$`:0\AJ/DWDBL`$ST@<L@`<U@0,.$!_*TP=&8!.L
MA68[F!4,(`)!(`F&2"940(2GX!MP$`<%H``5<#K4Q`!\(`0[`/\!JE)0CC`$
M$;`#1'`#T\$`'Q`$5F!`G!8$+@!:?L$`.-`#!J`J**,[&S``/&`#>H!P:@@#
M/G5\'=@'<E@3=#@+=6"'6N,56:4CF%0(761H2'!!$=$06F``0`&'AR@`,N`%
M7M`#)GF2)ND%9Y`#%X@Z.G`&*!F3)AD"#A`XDDB)-&&)EP@)&A!;C?@0)F`#
M*#`6=1"/Q?4#$]`#-A`&U.0&.5`'""!YAI```!`&&)07`),!#E`'$C!A<"`'
M#G``*:`#(X0Z[:0JZ04'<W!0-=$$5A`?/-(&/F`33Q!2HJ"#6D%-.,`"\6(/
MZO8&%&"-/.<C$C`"LK0?>6$"R$(!,A;_#^(@+WNC(RP0`!'0#--(?Q[P`6Y0
M'FZ0!3'@`9T`%=0B4&^`,\B1`$JH!2_'.3<P`?%W8`HYA[/`8`40`9>5@2J0
M!1/@"_Y5"#OB`25@&9/24:PE?O07#]1B#,IY#+S``B@"0VL0`-.UG-0Y!4%P
MG;TY>9-H$SI9"D6V`?68(@WQ'R*``JOB",^`(\+@"7,``$]``.&0*2!9"%:`
M`4Y$$VR@!!PR![Q`"8YP'W40#Q+``NJ(`TI@;%W4"`L0`3M%!'5''-02!TE@
M$SP`;3G8C''B6"K``$4P!C4&)LD7%8)9"OI%`1Q023.Q!C7``3\01UTD"6?!
M#![":?-%+0H2_X$2<`1@^!!K``0&4`?\Z0@(!!7WXRQ-)P`0@#4<I05/<(3S
M^66QR9"SR85/4`/]@0$&,%I_L%V3,`<>0`0,@9BY.0$LH6F$P&#4I2G^>1)^
MM`+V"!%K``9KNJ9T$*0WR9T1^`G4!@+%$AT;\P4C$'OY0B9I40^A$0QG40_!
MD%2'@`*;"4!DX`1KHSO!<`F<X",6)0Q!\`-6T![BT`AP``8VL00+UQ1`D0!+
M8!,T\`:K>`AXF4HPH$,;J0,_("\@90@C2@H(M`-OZA!5T`"E&A"\%P<R@`:2
M4AED<`4K<%<3MP%14((J@`$*<!\5V7]12A,-:1)0T#@PE!<5<"F/L/\2U))L
M/K"9C[,&JW69I<!I;>"F-@$&K6I>VUF)$<@+">`%#)@B:W`!8V"AMJ`$7+$Y
M;G`"`B!CS7!?J0"JHNH74I!NH\%[?2`%-I$"_AH*KYIZ`9`#,Y=*>T!1,XJK
M-E&$IN!9#T<3%Q!%P=I_R0``VT-"'0``0:`R-%8N"!`&SX<3/G`<%:MNUQH1
MV4H+QD$`->`XGZ@%$],'FU4/"/`_T"$39)`%!,!>K<"N[EH3\%H<\YJ3HZ"6
MR``%=T1T#L$%X2>5L^`#^[&1;ID'S3(.JJ"P-G$$\4H:4,$#.R5<<<N*&!H1
M)X``/F!8:]`%AR(/(%L3(EL*".!4%Z),H33_#<$@!?XB*1;@)$1!?MK8!BG@
MM#!D!AZ@1'$HF[90)1$PM+BI!4^S3QM@-L^G`E<``>="MJ9`M;WJ!U?[*ED;
M$=TY>S&+`%A"&:9"`#FFKK!@`)-Q(6Z@`Y>R(SM+"FY;*F<@6</16F^``G7+
MJ*!PL1%Q!@(P!"(02!LJ,9/`I8Z0J[-W$B]`5^6!!0(`,BE+?\:Q!7`"$6[`
M)#M"70>V+!0@!L,'IR<P?^.[D-AZ"YN0&A.``4<"$16@`:GQ`S9`5)_8!4=K
MI@DK%%5+$[/["GU0NQ!QNQRV$OT$G3K@"9Z`D+6P`#1``ARC`B10!#WP`&,@
M!Z!Z$L`'+6%R/<L;_R<4N[X?%$?26Q,E0+V)8+T0`0+00`5<X#)Q@@.Q!YD4
M22I^4+B@\)5R$`0X<"N2$@/))<*S.04KP(ZTPY>M4`!%("A1L""=*Z74T`<#
M<`.:)RE%L`$(4`)&8BQK@`$FE[*P^ZYW>V`8[`<:C`B\\`9<H!EN0`-8?`OB
M@`(MRS1LH`5=4`([\`0-,`8!&E[%=`=)5<,1<00.*QH,%@<A@$%^D`-V:;%Y
M&\30$`<#X).EHCH*`Q2\\)PTX<0<E@E4(`8%S`90L`DH!,!]$`$(11,UL!&N
M8`-,_`4/6,AGVK./50T,%@%E<%5>(00<D"W0P147D#?V`@MW;+5Y3%Q[W/_'
M])=L)>@''1`!V.!'5/D!8N!$>$@>Y($=7-`$*URKR#$.'X+)#M&P.'P4\0("
M-M$#P%L(0.P'2]`,P-``_4(I1D`%YY(OGF"SA#L*T-`&#<"(85"$)]'-;1N]
M-Y$%4=D*?9"1-H$'OO&@UNJ_/EL-G)8``Y#0,;4&@8(3T_$%#C!.=BS!L5O!
MUO7-HS`.4`#*?J"'R%P+1[@`5C`$*6#"1[(9#.0&98`#)T``$-9@:@(4"TL3
M.?"DI0$ZJ5H3(>"7I##0)7!C?<`>$&#+&YDA7>"+T-`D5AK1HC!.!J`M#7$!
MQK;)KU``/,#$6J"EK0!EI,(`V:359(+2RTP-NK'_'A!0`9VWU$V#P(^`U^N*
MTWB,M3AINZ2`'TQ\!0JPSXG@#.WA(53``U5`5]MG1`YA`EJ0`U$["8?1!@.P
M4T)`U<(Q+1]@$SW42@/MH*VB(!!P`=)!$SA`!1`+!Q`=RZ/`(W%@`#=AUY7@
MV820`"_0T8)6:BX`U`R@7^+C"(8M4=FP)D4\@CBQ!B)P*28="]M,P1I]I_0J
M"B86`+"Q!2WL#;09`5*@`Q6@!6+POHX#RAU@`PT0H8Y``+\,$4:``/&!*&]@
M`S;Q`*-<O:7L!T2P("<A#@;`E!P%!*"I)@0,UZ%P7`L``8Q8`RI(3-/0!E#`
MQ#?@`'1@=9>K(B;P#`G9_]T_R\P)T`"WF=8<^AD_40OI'1$Z#=(\[=YO$`$E
M*#T:0-O?O0SE$L5A*05*@-\78&\!N]1NL`7P20=^]`/"2!/`)!]"P5<U`0%@
M?:$VX0.`=X1!$`%A<"%XX0,4$$U`$+(YV"0>`$Y:@\OG<MZU$`<L4++)-`&U
MU0<?P,1,H#PS[KG7\`8@(P,NN!5IP"''X..4S<V6C:>B(!0.T.4TP3[030HF
M]@<"D')H4;`*,@<_<`!'``-F`,H!BP51B1P2\.A^<`,$8(SA$,BEPD7,:!--
MX`OR*0XR`@&O%T-K@`=*(&0,[N&AL`!W4`![H(MY`0)H4>8F49H=[A<N$&O6
M8_\*`A8'0,`T(N!(9?R_V("T5J``+Z0U5=#6B$X+/PX105YJ0QX**9,`5:`9
M>A`"7R+9L^E'?Y`'-65+B')<F>(`,<`'1(N5>C0(.2XI,O#II]$&`/#6$=%3
M/NS'$2X"4#%'&;T`&A""-&$"29``$\KLHP`%3H07$5$%")`:C$LM@3B"%Q#G
MT4`*(M9:_4*T:\`!:.&ZA:WHUW`2#K#N7@[TKQ#OLKO>SE7OLU</5F4A#K$'
M$D!=OC%8*Q$!7%P3JS<('U!T,2#Q(7$2(_#H*G`!.*/1`ZT&,S((0>$(&M")
M(Z]EI"++HH``,*"1$:$'20`/C'MC`_#P7.$&&=!QK63_8NTA`^Q\&23``O%G
M[3Q+X]I`]$8?$5R`]+A0Z>I]Z>WM7,,0!&QT*S/'`:FQ*A_1/PM0`+=M$UTO
M""$0/1%A`YC?&/60`RJ"!9FBVQ'>!=ETS\34RPG-.7PP\\AM"@D``4SI%R;@
M`@C`]*<@I`G``9P>/5P@<*%."O:K!8;%`#EK+N6>TM_=!D5O$Y<_#4H_[ZMP
MP9>=P1+-GU80`6]"&6O`!R$@`:D/$@I2`%W-]80`"!-N?H1^9%L_?VU_C(V.
MCY"1DI.4E9:7B@5`*H5^*BYQ"YB,;Q:=A%P"<W2-?7U_<'13"Q-:9(4J9`R<
MG0"CC4$O9IVW;A8*?6VN?Z[+_\S-C,IOKW'4BY$);04;)60JO(8?'@ESSVU3
MKZ_,Z,I]!0A2:YZ$N1@_R=65KB*G?AC-``,*I/;K43(')/IQN5;P%YPV;59T
MZ`<&3L-)?0BPZ><%TX)L"TZPN>7IFYL2+!),<S1P73IESR(U>S-E2ILX4U@&
M7-0GCC)T?1+T88&A'X,(CJB@.=5A0H(%ZBY*G4HUTAP*-4Z189$LJJ52_3#8
M3!#))YP$&CI\Z]>KH!P["7BD(>.-GHHP.S:\0;#`IJMV"]Z\29"MP`\J0=[,
M"=)&%*4V/X`PP*6"`0P`">2T>2,GU$T[</IPEA-T#!$&:[[E\G,A@I51^TZI
M$'MSH/_M.(J@7CR8\-3"JI8>1IQXJB+P5AHY%G37`XT\7KF^G!AGY>.T.-BQ
M+Y`S=L$/#XE70A*LK0X')"AF4*C3YFD?OW9JQQ&<+8$`"%52$_)&QDD01V_8
M@@L#*=1!CE?'):B@)`ED8,(I:<P!%8*4@'7*/VW8(=,;RK0!``EKL>6'+[\H
M4X`<$]2P1ETE,4""!0&LD$V'?5BW0!T&I`!#&C=D4(<`@KVA3P((?/!@22JL
M08(/!U"00`%M(%"`A/1]U(`2-S#@#2]K<,$"8[#UP4\G*F2AP`9HIJGFFFE2
M8$40%%["FT(,+>B(<!)19%&"&6UT2D>_U&C%!#?4Q<DW+@K_`<4/"VP&$)0)
M4`"!"UB8H<4#`C2*31M!).`#:F28($8%)9Q@@`,?D;9`-7TLML`8.Q3Q($F$
MK'&%`G4N8$.(GG01&&EV!BLL'#[02L@5<\P!$R86=H*!4'M"$EHU"Q#`A3PB
MDACF'9LID$.A\Y"TA@DU5`&$#Q^4D"X11N!P@1G\J=`!$C\P]A\ELR0@`0_Y
MY;(6&7Q<`(,0.2QQ!@\AQ(#$!T!@@$8N=/&'!A+C:!;FF)VX4486''?L\<<=
M5W#@;FT@1*>P=T*49W'1`M>G<K_,X<X"`-A@1I+]F'!!!4804<+/)?A@Q!47
MD)":-R3$0$%.D#1:P!):DKG&&AW4_X`!#%$H`?0'2D1101ANK$A727@H@5F=
M;X3@AK%B:.88RG!+%=HT!11U"A&!Y<.L!>`0HL4&R<ADD7`)-%"%L;@`$"=&
M<-@4QT,3V)"&/"2Q*.(\GI#$!PJ,%?!5'W+(H0$1A1XJFQ]N\&$"MN!PX@T:
M(F0@`'>>P]8&QF3V?3DN_X@7J&`K]-8)%ZS$G8P<*]/CAW$)OI'<GW^4@TDR
M"<0AAQ4H1'%#WZUKQ3U_8AP0YQMTS+"][KKOCK,AJ%=`PP:-"=E(R6+H'D%?
M<>??4'S)/+^?&P%(!CJF]P8B]$,+0RA`RR(!AP;"80980)PA,'.OJ93,!5L@
M`1E2`QTRT?^#@QW(@AI.,(`-5$-^<N*,`J1P@0>E[W+?6$,8B#``H2RN$J$S
MPNYVV(DU@(`[N['/$(1G"!54X&THFT\;%$`<3TPM@'Q"2Q.=Z`4!X*8A?WD#
M`#C`!7C9A8?RNH`10D``.,FD/3,801&8P`<)EN2-O,H<`VY@A`-8X89O*(+N
M1"8`_?D1$W103`%28#D5<&$,K+JA0>80@@M<P&-10(!0*N'`ASA`!%EX9,C&
M0):JJ"0.!5C!`U*`@RS<H`-Z`(<)S%`#+>`@!@]0`'L6T"BHR`$VU8`(`C00
M`C5HH0QFT`-;&-"!&UP`"T>(P!""4!/=-$0."\B!%D!&S6IV[`K_`%B`!!9X
MB2DH"P%.^-@%/M!'XR7`#A1P5R8Y!@,-*#)0'MJ")CG&A0EL9C=PH-)V%/"`
M)7"!"6+H@!MX008WF*$,&-!!"J#``DD&!86/$$H;,B6`#<P@`R"`P07"8(;)
MJ.:CW]"#&)BP!Q<88!P""(HDVB"'$!RI$&R8@3/_2--(T*$]&T@#]Y`P#=&\
MLQ6$00`"U(0`ED*4@0Z\@WTV,-0T=6I*56'I'`0@E&D@@`H:,$`+MMJ"!LS`
M`P5X0THY]!Z(0&-ZR;A.'T)CA1_,8`!<C6L$-."`.LQA,')(5D\O$CH!((`"
M;`JL8#<`V#\LH``_A40<JG>C-2&@4_F#_R:'"B`!!%3VL=E(D/7D4(>FHDF2
M-Y%*2D%GGS=L1PX4&$-6Y:J!>HE5#@*@:F,Z@XV[)@!.H*O1`JXZ@PA`(0`H
M"*YP`_`$`RB``GU(Z1PD\(8"7%&Q"V!!%GKHAR3(#"@US2XCGE*`#$2-;$^@
M0RS6.KU&_:0FC5'&<R51R<W,`1TU88<<CGH15IFU)W\AC0/5T8S.X+<GT^`F
M1FHS#;,JHY((;B`SVI&,<X3F(H+!SCGB2^$*6YC"C?))8@V2W@E/X0WSV3!5
MID":`S>00W.X)9\X-`6<H/<F%KN(S'ZRX&JP:C[L<-3Q-M-BTR[K$6X33(-]
MVF)7H`/!S-#,7__0L=A0+,X.@12"Z0A!`J[\P;3:S6Y["G`!V32!`ED.LYC'
M3.8RF_G,:+[$9A(`A5T8B@$GH*4STFRG4,A@,CU\P4SIS.<^^_G/@`YT3>-7
M!QRHAAY?4,`4[$!>04^E#P@H@K%4D(85R,S1F,ZTIC?-:3XG0UDH$-L\UB`%
MPC"MT_@"L!QH,,5PM.'2J(ZUK&=-ZUJ/H@YAB&,8&C!)6SO"K`OPP!5T9P8`
MD$_`ODZVLI?-;#*W(0#Z*<0:A+`89,L:(D+AP"!PX0<AM,%`IVZVN,=-[G(K
M:`YAZ`<>(,#H9=-G#+TAB0K,H`&5B-C<^,ZWOIG='I=JY0*=DD.O:_W_E"`4
M038JD$)*;V+M?3O\X1!'=6`H(&G*,(`(C+FKK[7!`3SD#@,SN'?$1T[RDINY
M#W600P"68CH&F.`!4))>K:<0`1"120\A$$"=3,[SGOM<S/:9`P*0X`?4K,@0
M62``87Q-A0@B3@02Z.3/IT[UJJ.,0YH9`A-"=`L5P&`%*IZSIG-9@#&!@PP=
M:$"-@+,`41[@`!.`^P-F,(8ZN`)858%#`Q[P@`;X;CG;:4^R^C"&#'"``RXX
M00;N(9HV6.3'OWB#`1[P=K[+?0*4?T`$""#S7SQN`0+0P-L/0/FW9X#O$^@\
M7VDR0`T$(`5'.`(/!O"#<`<J'V/@^PJB\HK`_PS@`$AIN)A9RO<!J'@W^?C!
M$R80@3ZR"@X?@<`!H+#GBSANHFU@@0Q<$(,4O"`"]X"\\>1@`#SHC@%&>$-H
M'LSIP03A`]LNR1H8$((@*`LX`K`!:MS`@/[[?XY"``'E]&@"L`7]%P5I=1'Q
M$0<4L``#X`1BT']N$`99P@`3:`3U-E^/<Q$$4`/_UW_S!X+S!P0($$1S``#7
M,C4?.#5H,`9541,4,`)88`)ZP`!L<$K]AP=7`&98!$T)H`1KX`9(<'Q]8`5Q
M@``FX'(*L%YG5B,_T%$DT`"!L1L^>!K]=P$*4%KD,`8PP`!Z``'')Q6TA``\
MT`4=T'\FD`9GZ(4B0/\%(O=HA`$"\;<?#%`"3X%WFZ8O1\`'1F$!$J`JPJ</
M<L`W9&`$$V``$3``4'`&.+!!-0`!51$47/`-1@`13#@]01`$8V`#;+`&%Y`"
M`S`#5/`#+/``.0`B)O`!8W!+EW@)"Z`!#=``!F``21`=#S"+!M``8'<1^=0&
M,_`%E1$#`Q"+#3``Q@@!.]<0;_``%:`';M`%)P`!"N`!*Z`!,K`#`#"`OS`+
MIB5E#)`#I]8J5B`'`\4`8_"&^M,'=#`$?"`O4MB*EL"-ND(7NU`&`8``;\`M
M"H`%E8&,55$`#X`%>H`'1>`%TO@#J@4%(;`"U0<WR;4-C5@(WA"$/3`RG+;_
M``'0`8@S&RP@#7_7@TT0#K04"@(@`2,P-1V`%%2Q6%S@#4``8O!8"::U`$DP
M4&$P`(UB']4C&C+`!BZ'!&1!7W(R49KQ!E[P#5LP&""A"KOQ!P7PBY4!!6O5
M0!.5&.CH"!T8A$H`'C`F,YPQ44'D>$+@!VN0!+SG?N6(*Y[6!AZ@%FD7.F%)
M+)7A!"`B!B!P1P*@`#A`EFI7%1-P`?V'!"M0`"IQ5XN55XWF1ZX0!`I0`Z;#
M">/"`XPA#5=)4W\Q!P'`A\2P!F(0`*3A"K`V%0FP*W[@/C1P`CV`!"+`!PR0
M!32@7A]V$>U1!9P`!'T`&A=Q6+B6"Q90!P'6!W<`_Q5P$`0PL"(7L`!3]8;8
M`6*;<91^<`6@Z5ZVAPGM``#`.&U><`+:J9T0,'!2H4-D@`$@!E^K,I6!TQ!G
M01I2%IY``S1)(`3RP``.T&=!,01NV0!Z4Q#IV0=2YD,#H)$,T`2HH@!;P)?`
M(6EE4E1PD@^]URAO^!X!@8>7<`!IL`NGX`92($E0(G9\UAY!<`(L=PIZP`-(
M=!Q@L4&YLP9E8`0R$`1]44'+,05<0`A`L(&[L0!4`"(JL`0S54E38`,K(@;G
M4)F-``=><"P<RHO)0!25@2T?M`0),)T%H06>T`1O8'\?.15P0!-Q,)9^@`=B
M$*9A2@)H8',,H`!^U@?VZ?\':9>?#L&E8TD&2/`'!%`&=%$#+/`#.K0&#0`<
M:8`*<2`AWAF)G:(20?(+"3`!9$D,E1$%T!>E@1842V!^]$`7E>$"03!?1/H(
M8*$"2M`J;4`'J!4!%:`+,"`!B%6BTR.C-&JCZ/D&$G`!WG`%9L0(E60%.O`-
M60`Z*95W1_J<28J>2ZH%*N`&*.`(<W!;#5D0!^<'7-`']I>,6@JG(@D1[1&E
M$C`(9YJF:]JFZ+BE+3:6:_`!*#<&%N`-'7``IL"GP`$#WG`!"*!S=Y0@+!44
M3Z$2TCH)?C4"+Z4\:U`$$*`I@#8&0F!^4^8'J5A4[J$@%E("V`=@"9`#24("
M&D#_5KO!JGY0HX$H"<T0`FIA`B/P-I7T`,-@`B7`C<!AI$BZJ;"PI%^`.@=`
M!\U@5-A1%1%0*&[0!#.@J0D"KEU*ECD02((!%4`R&=M*G]V*G]]*K2K0!*\V
M!T-P!&;`F=/%KE7Q!$R@"SZ@`=7!LHS@"L@)``'P`@_`@YA@'P70<>FS!EI@
M`!)P#5Y+%675*H-!`$#`.KB@!S8`/R$6MZW2!-[@!%"0`4\`!4\P`B`0!@4%
M!`82K)8@&C.:L?,AE(_+#`40`S=`-4CP!`/``BRP=RF0M29@`QU)8I'8!K]Z
M!9N1K[!A6M:I"SD`!;([N[([`Q"A>J,0!`%P`6%3!5)0_UP0((LR``(A(`$D
MTQCBF@,,)A2$N0L,L'N>%FSW*7[3`Q$+(&49VPQQ4`<\$('>P`!]^H\!@`%A
MPP5+4%P$``$1(`-(\`+(A45Q(```8(`V.`"!\AYS<`1X($'S-@((T!FJFETU
MPABPM;NG@SI"8`6.%RRM(@0?B!K^AP9%T`,E2!7M@07]9P%=415QP`)*4`;\
M-X$U@`?]9P86$`%!$).`MP/\!P.!P;H$5`<L<"T/_']-$`1WA(X+$`0Q"`1\
M$(0N1\(NL@5HBD7)L``E8(%+4">:@0`=,"[GZ&E!\`,DP`!IX$[H^!<+\`$'
M&!5QH(E<H`=K@`<#L*E*N0-.@/\&_L<&24A,7="76%0X'=5_+7"_M#0',="O
M^U&L3H`9M3-\'R$!5"`$PN0]#)`$]H=8#%P`0P`!!C``$``!PZ@`#B`C+AK`
MGI>7D/P#1.(R.RP`C7P`/,`#&=``5$"8F:C"MX<`P0L`9A551ZP`Q2B+N&B,
MQIA`C;&QD)!<"?`C<_`#<8<"!Z`!&V`@80A/<$`%D3P$43%?G9)56.QIV0"+
M&I!A4I$,<.`!N>@!1"@'02`!!#``!+`=56%:@R$`4VP`4(`"4``!#?@D#SI;
M#I`!+S``?WP)6%8C"3`">$8,GD`"`5`'SA8*!U`#8],/;G`$DL07,'S-&A9;
M:24`A$G_&(LEI=L()_:A<RPK&A*`SH7*79U"47&K".^5&5!1/(\&"\AYI5"1
M'5/90,DU!ZHL"9RU*BA&/1YJ!9DB%=4`!]5@:JWP$?9Q6*&99D&A6]73T)/0
MT_.5G(T0&%15E+%)%7E%&,[U!Z2A&8LAT;5:(A/M-(EQO[E$!W8P`%O'/27Q
M!4^``(W7'MH[TD<VLZ$0`%V(.<1``B_`&""&R9$H)"]AJ\RP`,*AU/J@"$`!
M8L?Q"L#2>(W0&>W`)SUAK3V1V`^Q#.P'"_M%%HZ+0W_@%[<DLXQ@$T*BRX\0
M&@`1J"P1/>HE)(0MP&:%&ZXPTPP$$)?&$/\U$RYS9?B%&Z$!_Q%G\=AQ+->M
M+2T.9`!:X*3]0`)-,`'5$5O9X`J4*V/605$-X`-/C-S^L@8UP`,",$!6]]W@
M'=XU54E!L`%-X''I\PUX0`03L`%0(62D;0G<XDU#,`&G&#%]\[TP0`#:X-WB
M_=\`'N!YYT":40<C(`9VK3R>8`(5$`+CD%PC'10(\`)[D$H0PSZ=@`<Y8""*
ML:P"_N$@'N*V6DE=P0)["1WI;08B$`'5<VIS4SV[#"R.IV#I,`!-4#\*7D2=
M\`6\MAT*)N)`'N1";KEY$`(88*&[HR1[H`3U7"]Q<`>#L1VG!4W)&CIO4`<-
M@`(@@`/.$4=V`3%:(`5#P!F3/>1F?O_F`0Y*!4``0O`PR)T[[$,&:;`%4;`$
M(1``+2#.!+#GX=P"`1`"2V`#19"Y\^#E9*+B&E``'Y%;:-[HCDYUR455M$0`
M%M!J'M1U_3`N9K#IF]Z)C*H\+T26;G`%&6`%3P)ZW3W2C[[JK(YJ$,K;<[`"
M1*"17Y3@/'3K(J('36#/4,%@/6'1K1[LPHYO;S`#4A"!A^(ON+Y#Z<T`?"`$
M!!!6!0#LPU[MUEYNR9H`/Q``-I`%`V7KRRX;6T*6-:`#(S`$M403JG[M[-[N
M?K8=`L`>"<`"+J`#7X`&;A3NF=,!6J`&(*`![?$1$,&S[E[P!F]KRR`SN=4'
M&W``.2`"P$1@J;?."7I@!C>``R4@`S_0(3?V$NM^\"`?\F+60#<E&AX``7&5
M\BJ_51"`&-@GVR(?\S*?:<T0&J`'34]^7[9Q/!PRDE,]\T`?])OF4R]N;Z"C
1?@G67DX&U$+?]$[_"X$``#L_
`
end
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>GRAPHIC
<SEQUENCE>3
<FILENAME>o32490o3249001.gif
<DESCRIPTION>GRAPHIC
<TEXT>
begin 644 o32490o3249001.gif
M1TE&.#EA6``T`.8```@&!^[M[//R\9"-C&UJ:9Z;FF5B8NGHZ(2!@5).3*RJ
MJ75S<L"^O7Y[>D5#0VEE9(Z+BDU)2:BFI"4A(;*PL%A55./BX3TZ.E934Z2B
MH1T:&F%=72TJ*=_=W;BVMN?EXZ&?GLK(R`T+"XB%A<S*R921D'!M;.7DXQ42
M$MS:V9F7EC8S,TE%1=K9V+"NK=#/SL;%Q,3#PGAV=3$N+;Z]O::DI#DV->+@
MW[JXM_?W]EU:6=;4TR`='<C&Q;2RLM73TD`]/2<E)=?5U,+`O_;V]?3T\Y>4
MD[:TLVMH9^SKZNGHYNCFYKRZN;NYMZJHIHN(A]K8U]G7U]+1T.WLZ[Z\NQ<4
M%;>UM+*PKZ*@H(!]?&-@7^#?WUM86*:CHE503L[,RSLX.'-P;\;$PI61CQ$.
M#BLG)Q(/$/GX^/O[^_CX]_'P\/KZ^<'`P/W]_=+0S\K(Q_7U]):4E)&/CYN9
MF//S\H:!?!H7&.7CX5I75T(_/][<W._N[CHW-U)/3WQY>/___R'Y!```````
M+`````!8`#0```?_@'^"@X2%AH>(B8J+A#8LC)"1DI.21@`B:92:FX8O4)R"
M-@!\H*6:$4B@(3PH$::OD"H`3YMM>0`H(@BPO(D8`!Z:)&``&G7`O:]*7UN%
M';DADC<U#V:7%@]!-\F<%BH8,RA!.(1(`#-+#"-+B"D23Q5!`!<L`!A_*PG<
MFU0S500_+.31)PB-M05_G```P&$&`B-&*FA8"*!,!!DI_N@P\Z&(B`'[*`T0
M@4?`("0.!BD$P$"0DATE\G"8N>*!A!XWB!"RH^4/`P`P0DJ2`P#$F7($__``
M8*>()CPH6N(1L4<HHQP(>$0CE`.5(`4+YVBB8T:&H#(ZK"XZ,\"."T,,_\Q<
M$61@H11-(`"0^'-&Q!&UBN20D7"HP0I!+^0]HF30U1\<(I(`1@3!3(%#:3CL
M^F,.0`]-LK;]`9-RLJ$F9N0@"E,FHQIY8-!0$J#A@2`H>DT78F`'`B(2&DH(
ML@2`BJ815=C]&2%"-Z$6/#"L.73&1H*J?X#,T]1B`L(_<!S<<_[G!)#2AYC?
M_<-F(0A-6E`,VL$C(WF9`1!)`&!D4`,`)L@VR0%F]"=(!8>1E\4$,2!20Q"T
M"/(%&6;8-TD>8$@FR$?D#0``!8A\,4$J_@&0`5XB,#%(&$%$X5P49GQG2!1!
M:)&?(`%<,(%.DYRA04^"G#%!%L[=8,=BG01!0/\A,@"@@"8>?C`(!`#LH-L2
M?,PPG2$4B.!'(1*(0.(D+XC@!"%!Y.&<"2A\84@:89@!(B$!+$48)7@$(>`?
M1U2IVQ4:=&'($A%P0$,A:$0`0`(Y4/($"N0,P@<+;9AV``\K"%'(%V!<\((A
M8`$@UB06E+$!(3_M-5D.7LR@@7&""%"`&5K`88@;"YFA!R5<\+#>'T1$@)Y:
M:-2530>"6.!/4(;\,$,9`&PFB1``U$!(`2*X.=D<`(Q1EB`Z`&#`"8<DL<(,
M&0#PZ20\1'#4("P`81H)/&Q`@`/8>>``#R`9DD`9,6@Q+"08B&`!(2"(,">Q
M?:S0A0AL$"(``AQH<<#_($0PY\(S!D;2IW"-)*#&9&-444(57ASB!A\\O/%'
M&U3.9809(T>2P@I("I("`)&J=8((,AC``8^&G/$$&2Z`%0:P"?0Q"1X\7$S(
M#&!,EH:.#]^92!@BB&#;'S7P+(D)9CQ)R!O%;2M"`57(F$A>/`A(0(*0D$"&
M"H6<T3#10K5@Q@8LK'"P(C_PH($(8@@R@0F1J,$!!DX1,@0`0P!&!`$\C`!`
M@XITH,$*Z:I&A9.1:%&%U(1L,,.>0H7]``!:(\)`$$!,`=9;?8RY2)/K$E*"
M""T!M@('`.BP)2(^\.#`%'\L,`,<N)[)B`1V7&;(#$X#1H$&9?!0,R(X3)!'
M_T9N],99$'0P\D,0%1RB@`@^`+;&1"+$7L@:?@!`0"9JV''/#63``B/6L`(P
MD*L0:M``"TRBEM<!X&O4,4>$SL`!,D3C81I21`+(H*I"U,-EW'"!%0:!@X5$
M@&^$.,(,9J"I/P2@8)]"0],8X0,`C-`0-8Q0+\3@``$*0@T38(JV"G&`#?"`
M`,WX@Q18\"I!_.0OG:M"!5@GB!-,X`(H+,49&E`&'29D(?;[PP$&8`,@N$!`
M/FA(,`0A!SO<R">&4`/F1'.`WH5!5)*0`AMH(`&(=*$$67B($18`!!1D8$]3
M$$7["A&#"7@M$W](P@:*=P="^$%>?^@!$AA7""H)9[<+!:C`#?_P"UQ$(`$+
M\$(%$L!*5I8!!;"DR"46PH.9F`%3?I`2(;0`@`E4:A!GX`(`N'"C/:@`EM+;
M)1B.,`$>Q.$0=^2!"*J@@/0-(@U["$$#'#"#9CK@FPY`A0E<P(9RQ@`*'R!"
M$8KPRT2$K0J[&L0+8/F9/PA@`#PP0Q;>2`@J\$`+5L!.''L``PN1!Q]F.-%\
E4*`!+/A@`0X0`1\&@*R#)H,)1J&3`41PB3P8``3\M"@O`@$`.S\_
`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
