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<SEC-DOCUMENT>0000912282-06-000145.txt : 20060303
<SEC-HEADER>0000912282-06-000145.hdr.sgml : 20060303
<ACCEPTANCE-DATETIME>20060303134216
ACCESSION NUMBER:		0000912282-06-000145
CONFORMED SUBMISSION TYPE:	40-F
PUBLIC DOCUMENT COUNT:		12
CONFORMED PERIOD OF REPORT:	20051231
FILED AS OF DATE:		20060303
DATE AS OF CHANGE:		20060303

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:		40-F
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-31062
		FILM NUMBER:		06662927

	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>40-F
<SEQUENCE>1
<FILENAME>oncolytics_40f-12312005.htm
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY>




<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>U.S. SECURITIES AND
EXCHANGE COMMISSION<BR>
WASHINGTON, D.C. 20549 </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<A NAME=A003></A>
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FORM 40-F </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>[&nbsp;]  </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
REGISTRATION STATEMENT PURSUANT TO SECTION 12 OF THE  SECURITIES EXCHANGE ACT
OF 1934 </FONT></TD>
</TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<A NAME=A006></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OR </FONT></P>

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<A NAME=A007></A>
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>[X]  </FONT></TD>
<TD WIDTH=95%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
ANNUAL REPORT PURSUANT TO SECTION 13(a) OR 15(d) OF THE  SECURITIES EXCHANGE ACT
OF 1934</FONT></P></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 align=center>
<TR VALIGN=TOP>
<TD WIDTH=50% align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>For
the fiscal year ended:</B>&nbsp;&nbsp; <B>December 31, 2005</B> </FONT> </TD>
<TD WIDTH=50% align=center>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Commission File Number:&nbsp;&nbsp;000-31062</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<A NAME=A009></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="5"><B><U>ONCOLYTICS BIOTECH INC.</U></B> </FONT> <FONT FACE="Times New Roman, Times, Serif" SIZE="5"><BR> </FONT>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">(Exact name of
Registrant as specified in its charter) </FONT> <FONT FACE="Times New Roman, Times, Serif" SIZE="5"></FONT></P>


<TABLE CELLPADDING=0 align=center CELLSPACING=0 BORDER=0 WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2></TH>
     <TH COLSPAN=2></TH>
     <TH COLSPAN=2></TH></TR>
<TR VALIGN=Top>
     <TD WIDTH=30% ALIGN=CENTER><FONT SIZE="2"><B><U>Not Applicable</U></B> </FONT> </TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT SIZE="2">&nbsp; </FONT></TD>
     <TD WIDTH=30% ALIGN=Center><FONT SIZE="2"><B><U>Province of Alberta, Canada</U></B> </FONT> </TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT SIZE="2">&nbsp; </FONT></TD>
     <TD WIDTH=30% ALIGN=Center><FONT SIZE="2"><B><U>Not Applicable</U></B> </FONT> </TD>
     <TD WIDTH=1% ALIGN=LEFT><FONT SIZE="2">&nbsp; </FONT></TD></TR>
<TR VALIGN=Top>
     <TD ALIGN=Center><FONT SIZE="2">(Translation of Registrant&#146;s<BR>name into English (if<BR>applicable) </FONT></TD>
     <TD ALIGN=LEFT><FONT SIZE="2">&nbsp; </FONT></TD>
     <TD ALIGN=Center><FONT SIZE="2">(Province of other jurisdiction of<BR>incorporation or organization) </FONT></TD>
     <TD ALIGN=LEFT><FONT SIZE="2">&nbsp; </FONT></TD>
     <TD ALIGN=Center><FONT SIZE="2">(I.R.S. Employer Identification<BR>Number (if applicable)) </FONT></TD>
     <TD ALIGN=LEFT><FONT SIZE="2">&nbsp; </FONT></TD></TR>
</TABLE>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>2834</U></B> </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR>
(Primary Standard Industrial Classification Code Number (if applicable)) </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<A NAME=A019></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Suite #210, 1167 Kensington Crescent N.W., Calgary, Alberta, Canada, T2N 1X7<BR>
<U>(403) 670-7377</U></B> </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR>
(Address and telephone number of Registrant&#146;s principal executive offices) </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<A NAME=A023></A>
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>DL Services, Inc., 1420 Fifth Avenue, Suite 3400, Seattle, Washington 98101<BR>
<U>(206) 903-8800</U></B> </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><BR>
(Name, address (including zip code) and telephone number (including area code) of agent for service in
the United States) </FONT> </P>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Securities registered or to be
registered pursuant to Section 12(b) of the Act. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Level 5" FSL="Default" -->
<TABLE WIDTH=600 CELLPADDING=0 CELLSPACING=0 align=center>
<TR VALIGN=TOP>
<TD WIDTH=50% align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Title of each class</U><BR>
<B>Common Shares</B> </FONT> </TD>
<TD WIDTH=50% align=center>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Name of each exchange on which registered</U><BR>
<B>NASDAQ SmallCap</B> </FONT>
</TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Securities registered or to be
registered pursuant to Section 12(g) of the Act.</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>None</U></B><BR>
(Title of Class) </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Securities for which there is a
reporting obligation pursuant to Section 15(d) of the Act.</FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U>None</U></B><BR>
(Title of Class) </FONT> </P>




<!-- *************************************************************************** -->
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<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For annual reports, indicated by
check mark the information filed with this Form: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush Level 5" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0 align=center>
<TR VALIGN=TOP>
<TD WIDTH=50% align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
[X]&nbsp;&nbsp;&nbsp;Annual information form</FONT></TD>
<TD WIDTH=50% align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
[X]&nbsp;&nbsp;&nbsp;Audited annual financial statements </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Indicate the number of outstanding
shares of each of the issuer&#146;s classes of capital or common stock as of the close of
the period covered by the annual report:<BR><BR>
<B>As at December 31, 2005, 36,236,748 Common Shares without par value were issued and outstanding.</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the
Registrant by filing the information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act
of 1934 (the &#147;Exchange Act&#148;). If &#147;Yes&#148; is marked, indicate the filing
number assigned to the Registrant in connection with such Rule. </FONT></P>


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<TABLE WIDTH=500 CELLPADDING=0 CELLSPACING=0 align=center>
<TR VALIGN=TOP>
<TD WIDTH=50% align=center>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">|_| Yes: 82-<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> </FONT></TD>
<TD WIDTH=50% align=center>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">|<U>X</U>| No</FONT> </TD>
</TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. </FONT></P>

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<TABLE WIDTH=500 CELLPADDING=0 CELLSPACING=0 align=center>
<TR VALIGN=TOP>
<TD WIDTH=50% align=center>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">|<U>X</U>| Yes</FONT> </TD>
<TD WIDTH=50% align=center>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">|_| No</FONT> </TD>
</TR>
</TABLE>
<BR>







<!-- *************************************************************************** -->
<!-- MARKER PAGE="sheet: 2; page: 2" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>







<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Explanatory  Note:  Oncolytics
 Biotech Inc. is a Canadian issuer eligible to file our annual report pursuant to Section
13  of the  Securities  Exchange Act of 1934 (the &#147;1934 Act&#148;) on  Form 40-F.  We are a
&#147;foreign  private issuer&#148; as  defined in  Rule 3b-4  under the 1934 Act and in  Rule 405
 under the  Securities  Act of 1933.  Our equity  securities  are  accordingly  exempt
from  Sections 14(a),  14(b),  14(c),  14(f) and 16 of the 1934 Act pursuant to Rule
3a12-3. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NOTE REGARDING FORWARD LOOKING
STATEMENTS</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certain  statements in this document
and the documents  attached as exhibits hereto constitute  &#147;forward-looking statements&#148;
 within the meaning of the Private  Securities  Litigation Reform Act of 1995. Such
 forward-looking statements  involve  known and  unknown  risks,  uncertainties  and
 other  factors  which may cause the  actual results,  performance  or  achievements  of
 Oncolytics  Biotech  Inc.,  or industry  results,  to be materially different from any
future  results,  performance or  achievements  expressed or implied by such
 forward-looking statements.  Forward-looking  statements are statements that are not
historical  facts,  and include but are not limited  to,  estimates  and  their
 underlying   assumptions;   statements  regarding  plans,   objectives  and expectations
 with  respect to the  efficacy of our  technologies;  the timing and  results of
clinical  studies related to our technologies;  future operations,  products and
services; the impact of regulatory initiatives on our operations;  the size of and
 opportunities  related to the markets for our  technologies;  general industry and
 macroeconomic  growth  rates;  expectations  related  to  possible  joint  and/or
 strategic  ventures  and statements regarding future performance.  Forward-looking
 statements generally,  but not always, are identified by the words &#147;expects,&#148;
&#147;anticipates,&#148; &#147;believes,&#148; &#147;intends,&#148; &#147;estimates,&#148;
&#147;projects&#148;,  &#147;potential&#148;,  &#147;possible&#148; and similar expressions, or that events or conditions
&#147;will,&#148; &#147;may,&#148; &#147;could&#148; or &#147;should&#148; occur. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The  forward-looking  statements in
this Annual Report are subject to various risks and  uncertainties,  most of which are
difficult to predict and generally beyond our control, including without limitation: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>uncertainty
as to our ability to achieve the goals and satisfy assumptions of management; </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
 uncertainties  related to the outcome of clinical  studies  and the long  process
 related to such          studies; </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
need for regulatory approvals to market REOLYSIN(R)and other products; </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our
need for additional financing which may not be available on acceptable terms or at all; </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>uncertainty
 as to  whether  we will be  able  to  complete  any  licensing,  partnering  or
 marketing          arrangements for our technologies; </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>uncertainty
 as to the  market  acceptance  of our  products  and our  ability to  generate
 sufficient          revenues to make our products and technologies commercially viable; </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
intense  competition in the  biotechnology  industry and risks related to changing
 technology that          may render our technology obsolete; and </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>other
factors  identified under the heading &#147;Risk Factors&#148; in our Renewal Annual  Information
Form, and          those that are discussed or identified in our other public filings
with the SEC. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our actual results,  performance or
achievement could differ  significantly  from those expressed in, or implied by, our
 forward-looking  statements.  Accordingly,  we cannot assure that any of the events
 anticipated by our forward-looking  statements  will occur,  or if they do, what impact
they will have on our results of operations and financial condition. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Forward-looking  statements are
based on our beliefs,  opinions and  expectations at the time they are made, and we do
not  assume any  obligation  to update our  forward-looking  statements  if those
 beliefs,  opinions,  or expectations, or other circumstances, should change. </FONT></P>
<BR><BR>


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<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For all of the reasons set forth
above, investors should not place undue reliance on forward-looking statements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CURRENCY</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unless otherwise indicated, all
dollar amounts in this report are Canadian dollars. The exchange rate of Canadian dollars
into United States dollars, on December 30, 2005, based upon the noon buying rate in New
York City for cable transfers payable in Canadian dollars as certified for customs
purposes by the Federal Reserve Bank of New York, was U.S.$1.00 = CDN $1.1656. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>AUDITED ANNUAL
FINANCIAL STATEMENTS AND <BR>
MANAGEMENT&#146;S DISCUSSION AND ANALYSIS</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Audited Annual Financial
Statements</I> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The audited financial statements,
including the report of the auditors with respect thereto are included herein by
reference. For a reconciliation of important differences between Canadian and United
States generally accepted accounting principles, see Note 20 &#151; Reconciliation of
Canadian GAAP to US GAAP of the Notes to Audited Financial Statements included herein by
reference. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Management&#146;s
Discussion and Analysis</I> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our management discussion and
analysis of financial conditions and results of operations (&#147;MD&amp;A&#148;) is
included herein by reference. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>DISCLOSURE CONTROLS AND
PROCEDURES</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of the end of the period covered
by this report, we carried out an evaluation, under the supervision of our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures pursuant to Rule 13a-15 of the United States Securities Exchange Act of 1934
(&#147;Exchange Act&#148;). Based upon that evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in reports that we
file or submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules and forms. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CHANGES IN INTERNAL
CONTROLS OVER FINANCIAL REPORTING</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the period covered by this
Annual Report on Form 40-F, no changes occurred in our internal control over financial
reporting that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our management, including the Chief
Executive Officer and Chief Financial Officer, does not expect that our disclosure
controls and procedures or internal controls and procedures will prevent all error and all
fraud. A control system can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within Oncolytics Biotech Inc. have been detected.
These inherent limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the control. The design of any system of
controls </FONT></P>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving our stated goals under all potential future conditions.
Because of the inherent limitations in a cost-effective control system, misstatements due
to error or fraud may occur and not be detected. </FONT></P>

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<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>CODE OF ETHICS FOR CHIEF EXECUTIVE
OFFICER, CHIEF FINANCIAL OFFICER AND CONTROLLER</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have adopted a Code of Ethics for
Chief Executive Officer, Chief Financial Officer and Controller. This code applies to our
President and Chief Executive Officer, Chief Financial Officer and Controller. A copy of
the Code of Ethics for Chief Executive Officer, Chief Financial Officer and Controller is
attached to this annual report as Exhibit F, and is available in print to any shareholder
who requests it by writing to Oncolytics Biotech Inc. at Suite #210, 1167 Kensington
Crescent N.W., Calgary, Alberta, Canada, T2N 1X7, Attention: Doug Ball. All amendments to
the code, and all waivers of the code with respect to any of the officers covered by it,
will be disclosed in our annual report on Form 40-F or in current reports on Form 6-K and
provided in print to any shareholder upon written request. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have a separate Code of Ethics
applicable to all of our employees, officers and directors, a copy of which is available
in print to any shareholder who requests it by writing to Oncolytics Biotech Inc. at Suite
#210, 1167 Kensington Crescent N.W., Calgary, Alberta, Canada, T2N 1X7, Attention: Doug
Ball. All amendments to the Code of Ethics applicable to our employees, officers and
directors, and all waivers of the code with respect to any of the officers covered by it,
will be disclosed in our annual report on Form 40-F or in current reports on Form 6-K and
provided in print to any shareholder upon written request. </FONT></P>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>AUDIT COMMITTEE</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our Board of Directors has a
separately-designated standing Audit Committee for the purpose of overseeing our
accounting and financial reporting processes and audits of our annual financial
statements. We have adopted a formal, written
Audit Committee Charter and our Audit Committee reviews and reassesses the adequacy of
the Charter on an annual basis.  As at the review of the 2005 Annual Report, and as at the date of this Report,
the following individuals comprise the entire membership of our Audit Committee, which
have been established in accordance with Section 3(a)(58)(A) of the Exchange Act: </FONT></P>





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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Fred Stewart<BR>
Robert Schultz<BR>
Jim Dinning </FONT></TD>
</TR>
</TABLE>
<BR>


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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Independence</I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have adopted the criteria for
director independence and unrelatedness prescribed by the Sarbanes-Oxley Act of 2002,
Section&nbsp;10A(m)(3) of the Exchange Act and Rule&nbsp;10A-3(b)(1) promulgated
thereunder, for members of public company audit committees. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Audit Committee Financial
Expert</I> </FONT> </P>

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     <P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mr.&nbsp;
          Robert Schultz has been determined by us to meet the audit committee financial
          expert criteria prescribed by the Securities and Exchange Commission and has
          been designated as an audit committee financial expert for the Audit Committee.
          Each of the previously mentioned directors have also been determined by us to be
          independent within the criteria referred to above under the subheading
          &#147;Independence&#148;. </FONT></P>
<BR><BR>



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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PRINCIPAL ACCOUNTING
FEES AND SERVICES &#150; INDEPENDENT AUDITORS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The table setting forth our fees paid
to our independent auditor, Ernst &amp; Young LLP for the years ended December 31, 2005
and December 31, 2004 are set forth under the heading <I>&#147;Additional Information
&#150; External Auditor Service Fees&#148;</I> of our 2005 Annual Information Form
included herein by reference. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>PRE-APPROVAL OF AUDIT
AND NON-AUDIT SERVICES PROVIDED BY <BR>INDEPENDENT AUDITORS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Audit Committee pre-approves all
audit services to be provided to us by our independent auditors. The Audit
Committee&#146;s policy regarding the pre-approval of non-audit services to be provided to
us by our independent auditors is that all such services shall be pre-approved by the
Audit Committee or by the Chairman of the Audit Committee, who must report all such
pre-approvals to the Audit Committee at their next meeting following the granting thereof.
Non-audit services that are prohibited to be provided to us by our independent auditors
may not be pre-approved. In addition, prior to the granting of any pre-approval, the Audit
Committee or the Chairman, as the case may be, must be satisfied that the performance of
the services in question will not compromise the independence of the independent auditors. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OFF-BALANCE SHEET
ARRANGEMENTS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As disclosed in our MD&amp;A included
herein by reference, under the heading <I>&#147;Liquidity and Capital Resources &#150;
Off-Balance Sheet Arrangements&#148;</I>, we have not entered into any off-balance sheet
arrangements. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TABLE OF CONTRACTUAL
COMMITMENTS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As disclosed in our MD&amp;A included
herein by reference, under the heading <I>&#147;Liquidity and Capital Resources &#150;
Capital Expenditures and Commitments&#148;,</I> we have set forth our contractual
commitments. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NASDAQ CORPORATE
GOVERNANCE </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our common shares are quoted for
trading on the Nasdaq SmallCap Market (&#147;Nasdaq&#148;). Section 4350 of the Nasdaq
Marketplace Rules permits Nasdaq to grant exemptions to a foreign private issuer when
provisions of Section 4350 related to qualitative listing requirements are contrary to a
law, rule or regulation of any public authority exercising jurisdiction over such issuer
or contrary to generally accepted business practices in the issuer&#146;s country of
domicile. We are organized under the laws of Province of Alberta and our common shares are
listed for trading on The Toronto Stock Exchange. We comply with the laws of Province of
Alberta and rules and regulations of The Toronto Stock Exchange, including rules related
to corporate governance practices. A description of the significant ways in which our
governance practices differ from those followed by domestic companies pursuant to Section
4350 of the Nasdaq Marketplace Rules is as follows: </FONT></P>

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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
<I>Shareholder
Meeting Quorum Requirement</I>: The Nasdaq minimum quorum requirement for a shareholder
meeting under Section 4350(f) of the Nasdaq Marketplace Rules is one-third of the
outstanding shares of common stock. In addition, a company listed on Nasdaq is required to
state our quorum requirement in our bylaws. Our quorum requirement is set forth in our
corporate bylaws. A quorum for our shareholder meeting is two persons present and being,
or representing by proxy, members holding not less than 5% of the issued shares entitled
to be voted at such meeting. </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The foregoing is consistent with the
laws, customs and practices in Canada and the rules of The Toronto Stock Exchange. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>UNDERTAKING AND
CONSENT TO SERVICE OF PROCESS </FONT></H1>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Undertaking</I> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We undertake to make available, in
person or by telephone, representatives to respond to inquiries made by the Commission
staff, and to furnish promptly, when requested to do so by the Commission staff,
information relating to: the securities registered pursuant to Form 40-F; the securities
in relation to which the obligation to file an annual report on Form 40-F arises; or
transactions in said securities. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Consent to Service of
Process</I> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We previously filed an Amended
Appointment of Agent for Service of Process and Undertaking on Form F-X signed by
Oncolytics Biotech Inc. and our agent for service of process on November 10, 2003 with
respect to the class of securities in relation to which the obligation to file the Form
40-F arises, which Form F-X is incorporated herein by reference. </FONT></P>
<BR><BR>




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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>SIGNATURES </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the requirements of the
Exchange Act, the Registrant certifies that it meets all of the requirements for filing
on Form 40-F and has duly caused this annual report to be signed on our behalf by the
undersigned, thereto duly authorized.  </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Registrant </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>




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<P>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">By &nbsp;&nbsp;<U>/s/Doug Ball&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Financial Officer </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date: &nbsp;&nbsp;March 3, 2006 </FONT></P>
<BR><BR>



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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DOCUMENTS FILED AS
PART OF THIS REPORT </FONT></H1>


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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Renewal
Annual Information Form of the Registrant for the year ended December 31, 2005 </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
following audited financial statements of the Registrant, are exhibits to and form a part
of                  this Annual Report: </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Auditors&#146;Report
on Financial Statements  </FONT></TD>
</TR>
</TABLE>



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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Balance
Sheets as of December 31, 2005 and 2004;  </FONT></TD>
</TR>
</TABLE>



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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Statements
of Loss and Deficit for the years ended December 31, 2005, 2004, 2003 and
                         cumulative from inception on April 2, 1998 to December 31, 2005;  </FONT></TD>
</TR>
</TABLE>



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<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Statements
of Cash Flows for the years ended  December 31,  2005,  2004, 2003 and cumulative
                         from inception on April 2, 1998 to December 31, 2005;  </FONT></TD>
</TR>
</TABLE>



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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Notes
to Financial Statements (which include reconciliation with United States generally
                         accepted accounting principles).  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Management
Discussion and Analysis of Financial Conditions and Results of Operations </FONT></TD>
</TR>
</TABLE>
<BR>

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<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>EXHIBITS</B> </FONT> </P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certifications
by our Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act, as
                 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>B.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certifications
by our Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act, as
                 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>C.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certificate
of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
                 Section 906 of the Sarbanes-Oxley Act of 2002 </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>D.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certificate
of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
                 Section 906 of the Sarbanes-Oxley Act of 2002 </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>E.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consent
of Ernst &amp; Young LLP, Independent Accountants </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>F.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Code
of Ethics for Chief Executive Officer, Chief Financial Officer and Controller </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>





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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>EXHIBIT 1</B> </FONT> </P>
<BR><BR>




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<P align=center><FONT FACE="Times New Roman, Times, Serif" SIZE=2><IMG SRC="logo.jpg"> </FONT></P>
<BR>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>RENEWAL ANNUAL
INFORMATION FORM </FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>for the Year Ended
December 31, 2005 </FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>March 2, 2006 </FONT></H1>
<BR><BR>



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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TABLE OF CONTENTS </FONT></H1>



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     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Page</U> </FONT></TH></TR>
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     <TD WIDTH=93% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><BR>CORPORATE STRUCTURE</B> </FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1</B> </FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>GENERAL DEVELOPMENT OF THE BUSINESS</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;General</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Clinical Trials</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Animal Studies</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Manufacturing</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Financings and Other Distributions</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Shareholdings in Other Issuers</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Publications and Presentations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Patents</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Recent Developments</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Future Developments</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>NARRATIVE DESCRIPTION OF THE BUSINESS</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>6</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Our Business</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Scientific Background</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;The Potential Cancer Product</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Repayable Grants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Business Strategy</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Regulatory Requirements</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Market and Competition</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Product Marketing Strategy</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Third Party Advisor, Collaborators and Scientific Advisory Board</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Intellectual Property Policy</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Patent and Patent Application Summary</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Acquisition of all of the Shares of Oncolytics Biotech Inc. by SYNSORB</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Employees</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Research and Development Expenditures</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Dividend Policy</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>MARKET FOR SECURITIES</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>15</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Market for Common Shares</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Description of Common Shares</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>DIRECTORS AND OFFICERS</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>16</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>AUDIT COMMITTEE MATTERS</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>18</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Mandate of the Audit Committee</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Composition of the Audit Committee</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>RISK FACTORS</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>25</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ADDITIONAL INFORMATION</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>33</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Legal Proceedings</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Interest of Management and Others in Material Transactions</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Page</U> </FONT></TH></TR>
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     <TD WIDTH=93% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"></FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Transfer Agent and Registrar</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Material Contracts</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Interests of Experts</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;External Auditor Service Fees</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit Fees</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Audit-Related Fees</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Tax Fees</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All Other Fees</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Other Additional Information</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TH></TR>
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     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>GLOSSARY</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>35</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>This Annual Information Form
contains forward-looking statements, including statements that may contain words such as
&#147;anticipate,&#148; &#147;estimate,&#148; expect,&#148; &#147;project,&#148;
&#147;intend,&#148; &#147;plan,&#148; &#147;believe&#148; and similar expressions and
statements relating to matters that are not historical facts. Forward-looking statements,
including our belief as to the potential of REOLYSIN&reg; 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&reg; as a cancer treatment, the success and timely
completion of clinical studies and trials, our ability to successfully commercialize
REOLYSIN&reg;, 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.</I></B> </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CORPORATE STRUCTURE </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. was
incorporated pursuant to the provisions of the ABCA on April 2, 1998 as 779738 Alberta
Ltd. On April 8, 1998, we amended our articles and changed our name to Oncolytics Biotech
Inc. On July 29, 1999, we further amended our articles by removing the private company
restrictions and subdividing our issued and outstanding 2,222,222 common shares to create
6,750,000 common shares. Our head office and principal place of business is located at
210, 1167 Kensington Crescent N.W., Calgary, Alberta T2N 1X7. Our registered office is
located at 4500 Bankers Hall East, 855 &#150; 2<SUP>nd</SUP> Street S.W., Calgary, Alberta
T2P 4K7. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>GENERAL DEVELOPMENT OF
THE BUSINESS </FONT></H1>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>General </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We focus on the discovery and
development of oncolytic viruses for the treatment of cancers that have not been
successfully treated with conventional therapeutics. Recent scientific advances in
oncology, virology, and molecular biology have created opportunities for new approaches to
the treatment of cancer. The product we are presently developing may represent a novel
treatment for Ras mediated cancers which can be used as an alternative to existing
cytotoxic or cytostatic therapies or as an adjuvant therapy to conventional chemotherapy,
radiation therapy, or surgical resections. It could also potentially be used to treat
certain cellular proliferative disorders for which no current therapy exists. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our technologies are based primarily
on discoveries in the Department of Microbiology and Infectious Diseases at the University
of Calgary in the 1990&#145;s. Oncolytics Biotech Inc. was formed in 1998 to explore the
natural oncolytic capability of the reovirus, a virus that preferentially replicates in
cells with an activated Ras pathway. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The lead product being developed by
us may represent a novel treatment for certain tumour types and some cellular
proliferative disorders. Our lead product is a virus that is able to replicate
specifically in, and hence kill, certain tumour cells both in tissue culture as well as in
a number of animal models without damaging normal cells. See <I>&#147;Narrative Description of the Business &#150; Our
Business; Scientific Background&#148;</I>. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are also assessing the potential
opportunities for product candidates resulting from issued patents received for Ras
targeted adenovirus and herpes virus. </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Clinical Trials </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 14, 2005, we reported
results in conjunction with a poster presentation at the AACR-NCI-EORTC conference in the
U.S. by our principal investigator for our Phase I systemic delivery clinical trial in the
U.K. We reported on 22 patients who made up seven of nine potential cohorts with each
cohort receiving escalating dose levels of REOLSYIN&reg;. Our principal investigator
presented data on 22 patients and reported that REOLYSIN&reg; is well tolerated when
administered intravenously with minimal toxicity observed and that reovirus replication in
tumours has been identified with evidence of tumor necrosis. The principal investigator
also reported that there have been encouraging hints of activity in prostate and
colorectal cancer. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2">On October 19, 2005, we announced
that we had ended patient treatment in our Canadian Phase I clinical trial investigating
the use of REOLYSIN&reg; to treat patients with recurrent malignant glioma. A total of
twelve patients were treated in the study at dosages of 10<SUP>7</SUP>, 10<SUP>8</SUP>, and
10<SUP>9 </SUP>TCID50. A
maximum tolerated dose was not reached over this dosage range and REOLYSIN&reg; appears to
have been well tolerated by the patients. Determination of the safety of REOLYSIN&reg; was
the primary purpose of this Canadian Phase I study. The study examined the use of a
single, intratumoural injection of REOLYSIN&reg;, delivered using imaging-guided surgery,
in patients with malignant gliomas that had recurred despite other treatments, including
surgery and radiation therapy. After treatment with REOLYSIN&reg;, the Phase I patients
are monitored and evaluated for safety for a period of six months. </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On April 7, 2005, we announced that
we received clearance from the US Food and Drug Administration (FDA) to begin a Phase I
clinical trial to investigate the systemic delivery of REOLYSIN&reg; as a treatment for
patients with advanced or metastatic solid tumours. This clinical trial is an open-label,
dose-escalation Phase I study in which a single dose of REOLYSIN&reg; will be administered
intravenously to patients diagnosed with selected advanced or metastatic solid tumours
that are refractory (have not responded) to standard therapy or for which no curative
standard therapy exists. The primary objective of the study is to determine the maximum
tolerated dose (&#147;MTD&#148;), dose limiting toxicity (&#147;DLT&#148;) and safety
profile of REOLYSIN&reg;. Secondary objectives include the evaluation of viral
replication, immune response to the virus and any evidence of anti-tumour activity. The
enrolment in this study, which commenced on September 28, 2005, is expected to be up to 36
evaluable patients and will depend in part upon the number of cohorts tested. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On February 28, 2005, we announced
that we had received clearance from the US Food and Drug Administration (FDA) to begin a
Phase I/II clinical trial to investigate the use of REOLYSIN&reg; to treat patients with
recurrent malignant gliomas. This clinical trial is an open-label dose escalation Phase
I/II study in which a single dose of REOLYSIN&reg; will be 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&reg; 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&reg;. Secondary objectives include the evaluation
of viral replication, immune response to the virus and any evidence of antitumour
activity. The enrolment in this study is expected to be up to 30 evaluable patients in the
dose escalation phase with up to an additional 14 patients added at the MTD. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On February 18, 2005, we announced
that we received a letter of approval from the U.K. regulatory authorities (Medicines and
Healthcare products Regulatory Agency or MHRA) for our Clinical Trial Application (CTA) to
begin a Phase I clinical trial to evaluate the feasibility, safety and anti-tumour effects
of intratumoural administration of REOLYSIN&reg; in combination with radiation in patients
with advanced cancers. The trial is a Phase I open-label, dose-escalation study of
REOLYSIN&reg; combined with two different radiation dosages/schedules. The enrolment in
this study is expected to be approximately thirty evaluable patients and will depend upon
the number of dose levels tested. Up to an </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>additional fifteen patients will also
be treated at the MTD. The primary objective of the study is to determine the MTD, DLT,
and safety profile of REOLYSIN&reg; when administered intratumourally to patients
receiving radiation treatment. A secondary objective is to examine any evidence of
anti-tumour activity. Patients 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 will be eligible. Patient enrolment commenced on July 26,
2005. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On February 27, 2004, we announced
that we received approval to commence a Phase I clinical trial to investigate the systemic
delivery of REOLYSIN&reg; as a treatment for patients with advanced or metastatic solid
tumours from the Medicines and Healthcare products Regulatory Authority in the United
Kingdom. The principal investigator for the study is Dr. J. de Bono of the Royal Marsden
Hospital in London, England. This clinical trial is the first to examine the systemic
delivery of REOLYSIN&reg;, which is expected to result in delivery of the virus throughout
the body to both the primary tumour and metastatic disease sites. The trial is an
open-label, dose escalation Phase I study in which REOLYSIN&reg; is administered
intravenously to patients diagnosed with advanced or metastatic solid tumours that are
refractory (have not responded) to standard therapy or for which no curative standard
therapy exists. The primary objective of the study is to determine the maximum tolerated
dose, dose limiting toxicity and safety profile of REOLYSIN&reg;. Secondary objectives
include the evaluation of viral replication, immune response to the virus and any evidence
of antitumour activity. The enrolment in this study is expected to be up to 40 evaluable
patients and will depend upon the number of dose levels tested. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On February 27, 2004, we announced
the final update on our technical clinical study for T2 prostate cancer. On March 23,
2003, we previously reported results from an interim assessment of this clinical trial.
These results were presented by Dr. Don Morris, from the Alberta Cancer Board, the
principal investigator for the trial. Dr. Morris reported that there was evidence of viral
activity in five of six patients and there were no safety concerns, from either a clinical
or histopathological perspective, in all six patients reported upon. The data in four of
the six patients, showed clear histopathological evidence of apoptotic tumour cell death
(one measure of viral activity). In a fifth patient, the PSA level dropped by 53% and the
prostate gland shrunk by 67% from the period of time prior to treatment to the time of
surgical removal. There was no evidence of viral activity in the sixth patient. In all six
patients, there was no histopathological evidence of any viral effect on healthy prostate
tissue. This trial, which was approved by Health Canada on October 11, 2001, was primarily
a technical study designed to allow us to measure overall tumour response and examine
changes or effects inside the tumour and in surrounding normal tissue, as part of a human
clinical trial. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On October 29, 2003, we announced the
approval by the Drug Development Group of the Division of Cancer Treatment and Diagnosis,
U.S. National Cancer Institute (&#147;NCI&#148;) for multiple clinical trials to evaluate
the efficacy of REOLYSIN&reg; in a range of cancers. The NCI approved REOLYSIN&reg; for
collaborative development after an analysis of preclinical, GLP toxicology and available
clinical data. Oncolytics and NCI plan to collaborate to select cancer indications and
suitable development programs for a number of clinical trials. The NCI is an agency of the
National Institutes of Health, one of eight agencies that comprise the Public Health
Service in the U.S. Department of Health and Human Services. The NCI, established under
the National Cancer Act of 1937, is the U.S. Federal Government&#146;s principal agency
for cancer research and training. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Animal Studies </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On February 14, 2003, we announced
successful completion of a primate toxicology study testing the safety of intravenous
infusion of REOLYSIN&reg; over 28 days. At the maximum daily dose used in the study, each
primate received daily from 10 to 100 times the expected maximum single human dose per
unit of body weight. The product was well tolerated and no product-related serious adverse
events were observed. </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We engage a toll manufacturer, Cobra
Biomanufacturing Plc for the production of reovirus for human clinical trials and animal
toxicology studies. The product will be produced in compliance with current regulatory
requirements and the manufacturer will confirm biosafety testing. See <I>&#147;Risk
Factors &#150; Manufacturing&#148;</I>. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On February 6, 2003, we announced the
successful completion of our program for the development of a commercial process for the
manufacturing of REOLYSIN&reg;, and indicated that we had filed selective patent
applications with respect to the process. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financings and Other
Distributions </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Since the initial public offering, we
have completed 11 offerings for net cash proceeds of $68,930,889. In 2005, on December 29,
2005, we issued 3,200,000 units at $5.15 per unit (each unit consisting of one common
share and one-half of one common share purchase warrant with each full share purchase
warrant exercisable into one common share at an exercise price of $6.15 per share until
December 29, 2008). </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Shareholdings in Other
Issuers </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During 2005, we sold 120,000 (2004
&#150; 697,945; 2003 &#150; 1,496,500) common shares of BCY for net cash proceeds of
$7,965 (2004 &#150; $133,609; 2003 &#150; $450,151) and reported a gain on sale of these
shares of $765 (2004 &#150; $34,185, 2003 &#150; $264,453). As at December 31, 2005, our
remaining ownership in BCY was 80,000 common shares which were still under escrow. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On June 6, 2003, we sold 6,890,000
common shares in the capital of Transition Therapeutics Inc., for net proceeds of
$2,552,695. We acquired these shares on June 18, 2002 in exchange for the issuance of
1,913,889 of our common shares valued at $4,709,380. We recorded a loss on sale with
respect to the sale of these shares of $2,156,685. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Publications and
Presentations </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On November 15, 2005, a poster
entitled &#147;Reovirus enhances radiation cytotoxicity <I>in vitro</I> and <I>in
vivo</I>&#148; was presented by Dr. Kevin J. Harrington of the Targeted Therapy
Laboratory, The Institute of Cancer Research, Cancer Research UK Centre for Cell and
Molecular Biology, UK. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On April 20, 2005, a poster by
Errington et al. entitled &#147;Potential role for reovirus in the treatment of melanoma:
Targeted killing and immune stimulation&#148; was presented at the 96th Annual Meeting of
the American Association for Cancer Research in Anaheim, CA. USA. This
research supports the use of reovirus as a targeted therapy for melanomas. The research
also showed that activation of certain classes of immune cells by the reovirus may enable
additional anti-tumour activity beyond that of tumour cell death caused directly by the
reovirus. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On December 15, 2004, &#147;Efficacy
and Safety Evaluation of Human Reovirus Type 3 in Immunocompetent Animals&#148; was
published in Clinical Cancer Research Vol. 10. This publication concluded that the data
showed the efficacy and safety of reovirus when it is used in the treatment of gliomas in
immunocompetent hosts. As well, inoculation of reovirus into the brain of nonhuman
primates did not produce significant toxicities. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On September 30, 2004, a poster was
presented at the 16th EORTC-NCI-AACR 2004 Symposium on &#145;Molecular Targets and Cancer
Therapeutics&#146; in Geneva, Switzerland entitled &#147;The oncolytic reovirus, Reolysin,
augments the anticancer effects of cytotoxic agents in vitro against the ras-mutated human </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>colon cancer cell line HCT 116.&#148;
The researchers were able to show that REOLYSIN&reg; enhances the cytotoxicity of
chemotherapeutic agents including 5-FU, gemcitabine, doxorubicin and cisplatin. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On September 23, 2003, we announced
that Dr. Ramon Alemany, one of our collaborators since July 30, 2003, and his colleagues
at the Institut Catala d&#146;Oncologia in Barcelona, Spain, had published a research
paper in the September 1, 2003 issue of <I>Cancer Research</I>, entitled
&#147;Ras-dependent Oncolysis with an adenovirus VAI Mutant.&#148; The researchers were
able to show that VAI mutant adenoviruses selectively replicated in and killed pancreatic
cancer cells with a Ras-activated pathway. We currently hold issued U.S. patent number
6,596,268 with claims covering the treatment of Ras-mediated tumours using adenoviruses
modified in the VAI domain. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On March 19, 2003, we announced that
Dr. Don Morris and his research group with the Alberta Cancer Board and the University of
Calgary had published the results of their work with the reovirus for the removal of
contaminating cancer cells from autologous (harvested from the patient themselves) blood
stem cells in model systems. The results showed that reovirus can successfully<SUP>
</SUP>purge cancer cells within autografts and were published in the March 13, 2003 issue
of <I>Blood</I>. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Patents </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2005, four Canadian patents and
one additional European patent were issued. The new patents in 2005 continued to expand on
previously issued patents in the area of using recombinant reovirus for the treatment of
neoplasia (cancers), non-cancer cellular proliferative diseases, and various methods of
production and processing of the reovirus. In addition, we have a number of other patents
under application, both in the United States, and through filings under the Patent
Cooperation Treaty. See &#147;<I>Narrative Description of the Business &#150; Patent and
Patent Application Summary</I>&#148;. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Recent Developments </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On January 18, 2006, the U.S. NCI
issued a solicitation for Letters of Intent with respect to the conduct of two human
clinical trials using REOLSYIN&reg;. The first is a Phase II study administering
REOLYSIN&reg; systemically in patients with melanoma. The dosage and dosing regimen to be
used in the study will be determined based on data derived from our ongoing U.K. and U.S.
Phase I systemic administration studies. The second solicitation is for proposals for a
Phase I/II study of REOLYSIN&reg; co-administered both systemically and intraperitoneally
(&#147;IP&#148;) in patients with ovarian cancer. The purpose of the Phase I portion of
the trial is to determine the Maximum Tolerated Dose of REOLYSIN&reg; given by IP
administration in combination with a constant systemic dose and dosing regimen. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On January 24, 2006, we announced
that an oral presentation of the preliminary results of our Phase I combination
REOLYSIN&reg;/radiation clinical trial is scheduled to be made at the American Association
of Cancer Researchers annual meeting held April 1 &#150; 5 in Washington D.C. by our
principal investigator Dr. Kevin Harrington. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Future Developments </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We anticipate that many important
activities related to our clinical trial program, our product manufacturing and our
intellectual property development and protection will occur in 2006 and beyond. We
presently intend to continue to focus our clinical trial program on the evaluation of the
effectiveness of REOLYSIN&reg; as a potential treatment for various cancer indications.
This will include continuing our clinical trial program presently underway, expanding into
other areas including utilizing our association with the NCI to broaden our clinical trial
program. We also intend to expand human clinical trials to determine the safety and
effectiveness of systemic delivery of REOLYSIN&reg; as a cancer therapeutic. </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Various forms of cancer are being
assessed and we intend to evaluate and select one or more forms of cancer that appear to
provide the best opportunity for timely approval. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We plan to continue our focus on
establishing strategic relationships with potential partners who can provide expertise in
marketing and distribution, as well as assistance with research and development. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Except for historical information,
this review contains statements which by their nature are forward-looking and which
involve known and unknown risks, delays, uncertainties and other factors not under our
control. Any of these factors may cause our actual results, performance or achievement to
be materially different from the results, performance or expectations implied by these
forward-looking statements. These factors include, but are not limited to, results of
current or pending clinical trials, actions by regulatory authorities such as the Food and
Drug Administration in the United States, the Health Protection Branch in Canada, or MHRA
in the UK as well as those factors detailed in our regulatory filings.</B> </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>NARRATIVE DESCRIPTION
OF THE BUSINESS </FONT></H1>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our Business </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our potential product for human use,
REOLYSIN&reg;, is developed from the reovirus. This virus has been demonstrated to
replicate specifically in tumour cells bearing an activated Ras pathway. Activating
mutations of Ras occur in approximately thirty per cent of all human tumours directly, but
considering its central role in signal transduction, activation of the Ras pathway has
been shown to play a role in approximately two-thirds of all tumours. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The functionality of the product is
based upon the finding that tumours bearing an activated Ras pathway are deficient in
their ability to activate the anti-viral response mediated by the host cellular protein,
PKR. Since PKR is responsible for preventing reovirus replication, tumour cells lacking
the activity of PKR are susceptible to reovirus infections. As normal cells do not possess
Ras activations, these cells are able to thwart reovirus infections by the activity of
PKR. In a tumour cell with an activated Ras pathway, reovirus is able to freely replicate
and hence kill the host tumour cell. The result of this replication is progeny viruses
that are then free to infect surrounding cancer cells. This cycle of infection,
replication and cell death is believed to be repeated until there are no longer any tumour
cells carrying an activated Ras pathway available. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following schematic illustrates
the molecular basis of how the reovirus kills cancer cells. </FONT></P>
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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Scientific Background </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Ras protein is a key regulator of
cell growth and differentiation. It transmits signals from the cell&#146;s surface, via
growth factor receptors, to downstream elements, which are in turn relayed to the nucleus.
This transmission of signals from the cell surface to the cell&#146;s nucleus is
collectively referred to as &#147;signal transduction&#148;. The transmission of these
signals results in cell growth, division, and in some instances cellular differentiation.
In normal cells, cell growth occurs only in the presence of factors stimulating the cells
to grow. Mutations in Ras itself, or any of the elements along the Ras pathway, often lead
to activation of the pathway in the absence of the appropriate growth stimuli, leading to
the uncontrolled growth of these cells and ultimately to the development of a cancerous
state. In fact, approximately 30% of all cancers are known to be due to mutations in Ras
itself. The frequency of these Ras mutations, as well as their etiology in a given tumour
is however, tissue specific. Activating mutations in Ras are found in many types of human
malignancies but are highly represented in pancreatic (90%), sporadic colorectal (50%),
lung carcinomas (40%), and myeloid leukemia (30%). Because Ras is a regulator of key
mitogenic signals, aberrant function of upstream elements such as receptor tyrosine
kinases (RTKs) can also result in Ras activation in the absence of mutations in Ras
itself. Indeed, over-expression of these RTKs such as HER2/neu/ErbB2 or the epidermal
growth factor receptor is common in breast cancer (25-30%), and over-expression of the
platelet-derived growth factor receptor (PDGFR) is common in glioblastomas and gliomas,
all of which are tumour types in which Ras mutations are relatively rare. Although
activating mutations of Ras itself is thought to occur in only about 30% of all tumours it
is expected that approximately two-thirds of all tumours have activated Ras signaling
pathways as a result of mutations in genes that lie upstream of Ras. With this in mind,
Ras becomes a significant therapeutic target in oncology. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All available scientific evidence
developed or reviewed by us to date supports the premise that the reovirus only actively
infects and replicates in cells with an activated Ras pathway. This naturally occurring
virus is believed to cause only mild infections of the respiratory and gastrointestinal
tract and in general, reovirus infections in humans are asymptomatic and usually
sub-clinical. Research has indicated this virus replicates in, and therefore kills, only
cancer cells (i.e. cancer cells with an activated Ras pathway), but does not replicate in
normal cells. It has been demonstrated that reovirus replication is restricted in
&#147;normal&#148; cells due to the activation of the double stranded RNA-activated
protein kinase (PKR). PKR is a crucial element in protecting cells from reovirus infection
and is capable of blocking viral protein translation. Activated Ras (or an activated
element of the Ras pathway) prevents PKR </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>activation, and thus allows viral
replication to ensue only in this subset of cancer cells. To prove that reovirus could be
used as a potential cancer therapeutic, a number of animal models were developed.
Experiments using this virus to treat mouse tumours, expanded animal models as well as
human brain, breast, and prostate tumours implanted in immuno-compromised mice have
yielded promising results. In animals where tumour regression was noted, a single
injection of reovirus is often enough to cause complete tumour regression. More
importantly, it was demonstrated that this treatment is effective in causing tumour
regression in immune competent animals. We believe that the nature of this virus, combined
with its selective replication makes it an attractive candidate as a cancer therapy. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We also believe that this research
may have broad utility in the treatment of tumours with an activated Ras pathway as well
as a potential use as an adjuvant therapy following surgical tumour resection or as an
adjuvant therapy to conventional chemotherapeutic or radiation therapies. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Potential Cancer
Product </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cancer is a group of related diseases
characterized by the aberrant or uncontrolled growth of cells and the spread of these
cells to other sites in the body. These cancer cells eventually accumulate and form
tumours that can disrupt and impinge on normal tissue and organ function. In many
instances, cells from these tumours can break away from the original tumour and travel
through the body to form new tumours through a process referred to as metastasis. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our cancer product is a potential
therapeutic for tumours possessing an activated Ras pathway. In tumour cells with this
type of activation, the virus is cytotoxic but may have no effect on the surrounding
normal tissue. Activating mutations of Ras are believed to account for approximately 30%
of all human tumours directly. It is also possible to activate Ras through mutation of
proteins that control its activity rather than through direct mutations of Ras itself.
This suggests that approximately two thirds of tumours may respond to this treatment. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Repayable Grants </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant to the Technology
Commercialization Agreement with the Alberta Heritage Foundation, we received $150,000 to
offset the REOLYSIN&reg; development costs. Under the Technology Commercialization
Agreement, we agreed to repay the amount of the grant from our gross sales. We agreed to
repay the Alberta Heritage Foundation in annual installments in an amount equal to the
lesser of: (a) 5% of gross sales; or (b) $15,000 per annum until the entire grant has been
paid in full. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In accordance with the Clinical Trial
Agreement with the ACB, we received funding and overhead support from the ACB to offset
the REOLYSIN&reg; clinical trial expenditures. Under the Clinical Trial Agreement, we
agreed to repay the amount of the grant together with a royalty, to a combined maximum
amount of $400,000 plus an overhead repayment of $100,000, upon sales of product. We
agreed to repay the ACB in annual installments from the date of commencement of sales in
an amount equal to the lesser of: (a) 5% of gross sales of REOLYSIN&reg;; or (b) $100,000
per annum. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Business Strategy </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our business strategy is to develop
and market REOLYSIN&reg; in an effective and timely manner, and access additional
technologies at a time and in a manner that we believe is best for our development. We
intend to achieve our business strategy by focusing on these key areas: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Develop
REOLYSIN&reg; by initiating toxicology and manufacturing programs and progress the
product through a clinical setting to assess its safety and efficacy in human subjects.  </FONT></TD>
</TR>
</TABLE>
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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-9- </FONT></P>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Establish
collaborations with experts to assist us with scientific and clinical developments of
this new potential pharmaceutical product.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Implement
strategic alliances with selected pharmaceutical and biotechnology companies and selected
laboratories, at a time and in a manner where such alliances may complement and expand
our research and development efforts on the product and provide sales and marketing
capabilities.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Utilize
our broadening patent base and collaborator network as a mechanism to meet our strategic
objectives.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Develop
relationships with companies that could be instrumental in assisting us to access other
innovative therapeutics.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our business strategy is based on
attaining a number of commercial objectives, which, in turn, are supported by a number of
product development goals. Our new product development presently being conducted is
primarily of a research and development nature. In the context of this Annual Information
Form, statements of our &#147;belief&#148; are based primarily upon our results derived to
date from our research and development program with animals, and early stage human trials,
and upon which we believe that we have a reasonable scientific basis to expect the
particular results to occur. It is not possible to predict, based upon studies in animals,
or early stage human trials, whether a new therapeutic will ultimately prove to be safe
and effective in humans. There are no assurances that the particular result expected by us
will occur. See <I>&#147;Risk Factors&#148;</I>. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At this time we do not intend to
become a fully integrated pharmaceutical company with substantial in-house research and
development, marketing and distribution or manufacturing capabilities. We are pursuing a
strategy of establishing relationships with larger companies as strategic partners. We
intend to partner or joint venture with larger pharmaceutical companies that have existing
and relevant marketing capability for our products. It is anticipated that future clinical
development into large international or pivotal trials would generally occur in
conjunction with a strategic partner or partners, who would contribute expertise and
financial assistance. In exchange for certain product rights and commitments to market our
products, the strategic partners would be expected to share in gross proceeds from the
sale of our product or products. The proceeds generated from partnering or joint venturing
projects are expected to be distributed on the basis of relative risk taken and resources
contributed by each party to the partnership or joint venture. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Regulatory Requirements </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The development of new
pharmaceuticals is strongly influenced by a country&#146;s regulatory environment. The
drug approval process in Canada is regulated by Health Canada. The primary regulatory body
in the United States is the FDA and in the UK is the MHRA. Similar processes are conducted
in other countries by equivalent regulatory bodies. Regulations in each jurisdiction
require the licensing of manufacturing facilities and mandate strict research and product
testing standards. Companies must establish the safety and efficacy of their products,
comply with Good Manufacturing Practices and submit marketing materials before being
allowed to market pharmaceutical products. While we plan to pursue or support the pursuit
of the approval of our product, success in acquiring regulatory approval for any product
is not assured. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In order to market our pharmaceutical
product in Canada, the United States, Europe and other jurisdictions, we must successfully
meet the requirements of those jurisdictions. The requirements of the Appropriate
Regulatory Authority will generally include the following stages as part of the regulatory
process: </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Pre-Pharmacological Studies</I>
</B>&#151; Pre-Pharmacological studies involve extensive testing on laboratory animals to
determine if a potential therapeutic product has utility in an <I>in vivo</I> disease
model and has any adverse toxicology in a disease model. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Investigational New Drug
Application</I></B><I></I> &#151; An Investigational New Drug (&#147;IND&#148;)
Submission, or the equivalent, must be submitted to the appropriate regulatory authority
prior to conducting Pharmacological Studies. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Pharmacological Studies</I>
</B>(or Phase I Clinical Trials) &#151; Pharmacological studies are designed to assess the
potential harmful or other side effects that an individual receiving the therapeutic
compound may experience. These studies, usually short in duration, are often conducted
with healthy volunteers or actual patients and use up to the maximum expected therapeutic
dose. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>Therapeutic Studies</I> </B>(or
Phase II and III Clinical Trials) &#151; Therapeutic studies are designed primarily to
determine the appropriate manner for administering a drug to produce a preventive action
or a significant beneficial effect against a disease process. These studies are conducted
using actual patients with the condition that the therapeutic is designed to remedy. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Prior to initiating these studies,
the organization sponsoring the program is required to satisfy a number of requirements
via the submission of documentation to support the approval for a clinical trial. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>New Drug
Submission</I></B><I></I> &#151; After all three phases of a clinical trial have been
completed, the results are submitted with the original IND Submission to the appropriate
regulatory authority for marketing approval. Once marketing approval is granted, the
product is approved for commercial sales. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Market and Competition </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>According to estimates for 2005 from
the American Cancer Society, 1.37 million Americans are expected to be diagnosed with
cancer in the year, and 57,000 Americans are forecast to die of cancer. In the United
States cancer accounts for 22.8% of all deaths, second only to cardiovascular disease. In
the United States, the relative lifetime risk of a male developing cancer is 1 in 2, while
for women, this risk is 1 in 3. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The costs of this disease state are
also significant. In the United States, the National Institute of Health estimates that
the overall annual costs for cancer treatment are $189.9 billion. Of this figure, $69.4
billion can be attributed to direct patient costs. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>It has been estimated that
approximately 30% of all tumours are a result of activating mutations of Ras itself. Since
Ras can be activated by mechanisms other than direct mutations it is believed that the
number of tumours with activated Ras (either through direct activating mutation or
mutation or over-expression of elements upstream of Ras) is approximately two thirds. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are aware of large pharmaceutical
companies developing small molecule programs for the development of therapeutics to treat
Ras mediated tumours. In addition, there are numerous companies, both big and small, that
are working in the field of cancer therapeutics including some companies developing other
oncolytic viruses. See <I>&#147;Risk Factors&#148;.</I> </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Product Marketing
Strategy </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The markets for the cancer product
being developed by us may be large and could require substantial sales and marketing
capability. Before or upon successful completion of the development of a cancer product,
we intend to enter into one or more strategic partnerships or other collaborative
arrangements with a pharmaceutical company or other company with marketing and
distribution expertise to address this need. If necessary, we will establish arrangements
with various partners for different geographical </FONT></P>
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<BR>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>areas or specific applications.  Our
management and consultants have relevant experience with the partnering process. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Third Party Advisor,
Collaborators and Scientific Advisory Board </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We use various third party advisors,
scientific collaborators and our scientific advisory board to assist us with the
advancement of REOLYSIN&reg;. We typically report on the activity of these groups once
their work is completed. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Scientific Advisory Board </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We formed a Scientific Advisory Board
in 2003 to provide us with additional scientific and clinical guidance on the development
of REOLYSIN&reg;. The advisory board is comprised of Ramon Alemany, Ph.D., Richard
Gorlick, M.D., Alan Tuchman, M.D., and Frank Tufaro, Ph.D. </FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Ramon
Alemany, Ph.D., is a recognized expert on the development of antitumoural agents based on
the adenovirus. During an eight year period in the United States he held progressively
more senior positions in gene therapy laboratories at the MD Anderson Cancer Center,
Baxter Healthcare Corporation and the University of Alabama at Birmingham. In 2001, he
was appointed Director of the Gene and Viral Therapy Group at the Institut Catala d&#146;Oncologia
in Barcelona. Dr. Alemany is currently collaborating with us to develop modified
adenoviruses that are selective for Ras mediated cancers.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Richard
Gorlick, M.D., is the Section Chief of Hematology/Oncology in the department of
pediatrics at the Children&#146;s Hospital at Montefiore in New York. He is actively
involved in the national pediatric cooperative group, the Children&#146;s Oncology Group,
for which he serves as the Chairman of the subcommittee on Bone Tumour Biology. Dr.
Gorlick is known for his research work on molecular pharmacology of antifolate resistance
and developing new therapeutic approaches for osteosarcoma.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Alan
Tuchman, M.D., works in private practice and is Clinical Professor of Neurology at New
York Medical College. He is also the Principal of NeuroPhysics Corporation, a healthcare
and neuroscience consulting firm. From 1997 to 2001 Dr. Tuchman was the Senior Vice
President of Equity Research for Oscar Gruss &amp; Son, where he conducted investment
research and helped develop marketing strategies for healthcare companies. He also held
senior neurology positions at New York Medical College and Lincoln Medical and Mental
Health Center.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Frank
Tufaro, Ph.D., has extensive experience with biotech firms and was one of the founders of
NeuroVir Inc., a Vancouver-based biotech company, which is now merged with MediGene AG to
develop Herpes Simplex virus-based oncolytic vectors for cancer therapy. Under Dr. Tufaro&#146;s
direction, NeuroVir and then MediGene Inc. were able to initiate and complete the first
Phase I/II U.S. clinical trials of two herpes-based oncolytic viruses for the treatment
of malignant brain tumours, and the treatment of colorectal cancer metastatic to the
liver. He currently serves on scientific advisory boards for several biotech companies.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Intellectual Property
Policy </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>At the end of 2005, we have 13
patents issued in the United States (11 of the 13 related to the reovirus technology),
four issued in Canadian and two issued in Europewith additional applications in process.
All potentially valuable intellectual property is identified by the inventory, and
classified by us in terms of its sensitivity. All sensitive documentation related to the
intellectual property is protected and kept in secure areas. All employees execute
agreements containing confidentiality clauses, which assign any new </FONT></P>
<BR><BR>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-12- </FONT></P>
<BR>





<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>intellectual property to us.  We
believe that we apply our intellectual property protection policy consistently. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Where appropriate, and consistent
with management&#146;s objective, patents are pursued as soon as the concepts have been
validated through appropriate laboratory work. To that end, patents will continue to be
sought on components or concepts that we perceive to be essential. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We believe that one of the best
intellectual property control policies is a strong human resources policy to ensure that
technical leaders with access to proprietary intellectual property do not consider leaving
us for other employment. We intend that all staff be compensated through competitive
salaries and participation in our stock option program. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Patent and Patent
Application Summary </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Where a patent is filed in the United
States there is an option to file a Patent Cooperation Treaty (&#147;PCT&#148;)
application. The PCT application process is a means for technology patented in one of the
PCT signatory countries to receive protection in other PCT countries. The PCT includes
over 100 countries. Within one year of filing a patent in the United States, the applicant
files for PCT coverage in all PCT countries. Approximately 18 months after the PCT filing,
the applicant must pay individual filing fees in designated PCT countries and at that time
the applicant may wish to restrict coverage to a subset of countries which have potential
for the technology. At the time of filing the PCT application the applicant designates
which of the member countries are to be covered by the application. The PCT application
allows the applicant to defer national filings in the various designated countries for a
period of up to 30 months from the original PCT application filing date. After the PCT
application deferral period, the applicant must file for separate national or regional
patents in one or more designated countries, depending on which specific markets the
applicant intends to target. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table sets forth our
patent issuances: </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Title</U> </FONT></TH>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Ownership</U> </FONT></TH>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Inventors</U> </FONT></TH>
     <TH COLSPAN=4>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Status of Patent</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TH></TR>

<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=35% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Patent Number U.S. 6,110,461</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=16% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=19% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Patrick W.K. Lee</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Aug. 13, 1997</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Reovirus for the Treatment of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. James E. Strong</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Aug. 29, 2000</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Neoplasia</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Patent Number U.S. 6,136,307</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Patrick W.K. Lee</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Feb. 24, 1999</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Reovirus for the Treatment of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. James E. Strong</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oct. 24, 2000</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>cellular proliferative disorders</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Patent Number U.S. 6,261,555</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Patrick W .K. Lee</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Aug. 12, 1998</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Reovirus for the treatment of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. James Strong</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>July 17, 2001</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Neoplasia</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Patent Number U.S. 6,344,195</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Patrick W. K. Lee</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>May 12, 2000</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Reovirus for the treatment of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. James Strong</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Feb. 5, 2002</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Neoplasia</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>European Patent Number </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Patrick W. K. Lee</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Aug 12, 1998</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1003534</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. James Strong</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 6, 2002</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Reovirus for the treatment of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Neoplasia</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
</TABLE>
<BR><BR>





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<!-- MARKER PAGE="sheet: 73; page: 73" -->
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<BR><BR>


<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-13- </FONT></P>
<BR>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Title</U> </FONT></TH>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Ownership</U> </FONT></TH>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Inventors</U> </FONT></TH>
     <TH COLSPAN=4>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Status of Patent</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=35% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=16% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=19% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Patent Number U.S. 6,455,038</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Patrick L. Lee</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>June 15, 2000</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Reovirus for the treatment of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. James E. Strong</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Sept. 24, 2002</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cellular Proliferative Disorders</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=35% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=16% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=19% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Patent Number U.S. 6,528,305</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Bradley G. Thompson</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Aug. 2, 2001</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=top>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Method of Producing Infectious <BR>
Reovirus</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued :</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 4, 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Patent Number U.S. 6,565,831</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Aug. 10, 2000</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Methods of Preventing Reovirus</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Bradley G. Thompson</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>May 20, 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Recognition for the Treatment for</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cellular Proliferative Disorders</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Patent Number U.S. 6,576,234</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Patrick L. Lee</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>May 10, 2001</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Reovirus for the Treatment of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. James E. Strong</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>June 6, 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Neoplasia</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Patent Number U.S. 6,596,268</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Nov. 9, 2000</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Viruses for the Treatment of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Bradley G. Thompson</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>July 22, 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cellular Proliferative Disorders(1)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Patent Number U.S. 6,649,157</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Sept. 28, 2001</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Viruses for the Treatment of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Bradley G. Thompson</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Nov 18, 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cellular Proliferative Disorders(2)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Patent Number U.S. 6,703,232</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>January 8, 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Methods of Producing Infectious</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Bradley G. Thompson</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 9, 2004</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Reovirus</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Patent Number U.S. 6,808,916</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 14, 2002</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Method of Extracting Virus from</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Bradley G. Thompson</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oct. 26, 2004</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cell Culture</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Patent Number U.S. 6,811,775</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Patrick L. Lee</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>August 15, 2002</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Reovirus for the Treatment of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. James E. Strong</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Nov. 2, 2004</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cellular Proliferative Disorders</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Matthew E. Coffee</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>European Patent Number </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>July 20, 2001</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,309,672</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Bradley G. Thompson</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>July 18, 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Method of Producing Infectious<BR>
Reovirus</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Canadian Patent Number </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 2, 2002</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,374,388</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>July 12, 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>The use of Ribozymes in the<BR>
Detection of Adventitious<BR>
Agents</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
</TABLE>
<BR><BR>





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<BR>

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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-14- </FONT></P>
<BR>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Title</U> </FONT></TH>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Ownership</U> </FONT></TH>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Inventors</U> </FONT></TH>
     <TH COLSPAN=4>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1"><U>Status of Patent</U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </FONT></TH></TR>

<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=35% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=16% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=19% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Canadian Patent Number </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oct 26, 2001</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,428,206</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Sept. 27, 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Methods for the Treatment of<BR>
Cellular Proliferative Disorders</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Canadian Patent Number </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Patrick L. Lee</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Aug. 12, 1998</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,283,280</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. James E. Strong</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oct. 18, 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=top>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Reovirus for the Treatment of<BR>
Neoplasia</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Canadian Patent Number </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Oncolytics Biotech Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Matthew C. Coffey</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Filing date:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Mar 11, 2002</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,437,962</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Dr. Bradley G. Thompson</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Nov. 15, 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Method of Extracting Virus<BR>
From Cell Culture</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=10><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
&nbsp;</FONT></TH></TR>
</TABLE>
<BR>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Notes:</B> </FONT> </P>

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<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1)  </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Claims
cover the treatment of Ras mediated tumours using modified adenoviruses. </FONT></P></TD>
</TR>
</TABLE>


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<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2)  </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Claims
cover the treatment of Ras mediated tumours using modified herpes viruses. </FONT></P></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other patent applications have been
filed by us, but have yet to be published or approved. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Acquisition of all of
the Shares of Oncolytics Biotech Inc. by SYNSORB </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In April 1999, Oncolytics Biotech
Inc., the Vendors and SYNSORB entered into the Share Purchase Agreement whereby SYNSORB
acquired all of our then outstanding common shares for a share and cash exchange valued at
$2,500,000 paid primarily in common shares of SYNSORB, four milestone payments payable to
the Vendors valued, in the aggregate, at up to $4,000,000 and a royalty commitment.
Pursuant to an assignment dated July 29, 1999, the obligation to make the milestone and
certain royalty payments was assigned from SYNSORB to us. We thereby agreed to indemnify
and save harmless SYNSORB from all actions, suits, demands, claims, costs, losses,
expenses, charges and damages brought against SYNSORB in relation to the payment or
non-payment of such obligations; however such assignment did not affect or release SYNSORB
from its liabilities and responsibilities under the terms of the Share Purchase Agreement.
As at the date hereof, we have made three milestone payments totaling $3,000,000. The
final milestone payment is $1.0 million payable within 90 days of the first receipt, in
any country, from the Appropriate Regulatory Authority, for marketing approval to sell
REOLYSIN&reg; to the public or the approval of a new drug application for REOLYSIN&reg;.
In addition to the milestone payments, royalty payments payable to the Vendors will become
due and payable in accordance with the Share Purchase Agreement upon realization of sales
of REOLYSIN&reg;. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2004, we reached an agreement that
cancelled a portion of our future contingent obligation for consideration of $400,000
consisting of $250,000 cash and 21,459 common shares valued at $150,000. As a result, our
future contingent obligations were reduced to 11.75% (formerly 14.25%) of royalty payments
or other payments received as a result of entering into partnerships or other arrangements
for the development of the reovirus technology. Alternatively, if we develop the reovirus
treatment to the point where it may be marketed at a commercial level, the payments
referred to in the foregoing sentence will be amended to equal a royalty payment of 2.35%
(formerly 2.85%) of net sales received by us for such products. </FONT></P>
<BR><BR>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-15- </FONT></P>
<BR>




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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employees </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2005, we had 10
employees. The majority of our activities are conducted under contract with third party
service providers. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research and Development
Expenditures </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the period ended December 31,
2005, we incurred research and development expenditures of $9,308,977 representing
approximately 68.6% of our total expenses for the year. See <I>&#147;Management&#146;s
Discussion and Analysis &#150; Results of Operations &#150; Research and Development
Expenses&#148;</I>. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividend Policy </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To date, we have not paid any
dividends on our outstanding common shares. The future payment of dividends will be
dependent upon our financial requirements to fund future growth, our financial condition
and other factors which our Board of Directors may consider appropriate in the
circumstances. It is unlikely that dividends will be paid in the foreseeable future. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>MARKET FOR SECURITIES </FONT></H1>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Market for Common Shares </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our outstanding common shares are
listed and posted for trading on the Toronto Stock Exchange under the trading symbol
&#147;ONC&#148; and on the Nasdaq Capital Market under the trading symbol
&#147;ONCY&#148;. The following table sets forth the market price ranges and the aggregate
volume of trading of the common shares on the Toronto Stock Exchange and Nasdaq Small Cap
Market for the periods indicated: </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Toronto Stock Exchange</FONT></TH>
     <TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Nasdaq Capital Market</FONT></TH></TR>

<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=8><hr size=1 width=92%></TH>
     <TH COLSPAN=8><hr size=1 width=92%></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>

Period</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
High<BR>
($)</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Low<BR>
($)</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Close<BR>
($)</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Volume</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
High<BR>
($)</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Low<BR>
($)</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Close<BR>
($)</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Volume</FONT></TH>
</TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><hr size=1 width=75%></TH>
     <TH COLSPAN=2><hr size=1 width=75%></TH>
     <TH COLSPAN=2><hr size=1 width=75%></TH>
     <TH COLSPAN=2><hr size=1 width=75%></TH>
     <TH COLSPAN=2><hr size=1 width=75%></TH>
     <TH COLSPAN=2><hr size=1 width=75%></TH>
     <TH COLSPAN=2><hr size=1 width=75%></TH>
     <TH COLSPAN=2><hr size=1 width=75%></TH></TR>

<TR VALIGN=Bottom>
     <TD WIDTH=12% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><U><BR>2005<BR>
</U></B><BR>
January </FONT> </TD>
     <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.75</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.90</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.12</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,023,426</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.65</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.93</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.12</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,239,735</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>February</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.25</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.55</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.88</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,512,067</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.15</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.59</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.83</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,654,620</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>March</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.25</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.81</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.85</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>780,920</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.04</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.97</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.02</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,373,790</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>April</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.39</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.21</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.30</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>834,058</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.50</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.35</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.46</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,390,284</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>May</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.00</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.10</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.37</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>530,216</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.14</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.26</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.45</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,223,691</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>June</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.46</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.08</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.13</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>483,765</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.57</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.25</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.42</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>740,388</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>July</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.30</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.59</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.93</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>591,889</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.48</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.93</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.16</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,008,100</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>August</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.92</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.89</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.98</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>606,392</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.26</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.43</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.51</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,066,692</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>September</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.24</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.90</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.48</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,261,627</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.49</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.46</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.85</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,700,390</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>October</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.89</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.89</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.93</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,266,094</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.02</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.32</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.23</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,617,700</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>November</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.85</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.32</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.85</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,011,836</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.76</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.77</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.17</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,570,072</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.89</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.75</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.24</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,581,981</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.07</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.06</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.66</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,750,380</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Description of Common Shares</B> </FONT> </P>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The holders of our common shares are
entitled to one vote per share at meetings of shareholders, to receive such dividends as
declared by us and to receive our remaining property and assets upon dissolution or wind
up. Our common shares are not subject to any future call or assessment and there are no
pre-emptive, conversion or redemption rights attached to such shares. As at December 31,
2005, we </FONT></P>
<BR><BR>



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<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>






<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-16- </FONT></P>
<BR>




<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>have outstanding stock options and
common share purchase warrants as set forth in Note 11 and 12 of our audited financial
statements. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>DIRECTORS AND OFFICERS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our directors are elected by the
shareholders at each Annual General Meeting and typically hold office until the next
Annual General Meeting at which time they may be re-elected or replaced. Casual vacancies
on the board are filled by the remaining directors and the persons filling those vacancies
hold office until the next Annual General Meeting at which time they may be re-elected or
replaced. The officers are appointed by the Board of Directors and hold office
indefinitely at the pleasure of the Board of Directors. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table sets forth the
names and municipalities of residence of all our directors and officers as at the date
hereof, as well as the positions and offices held by such persons and their principal
occupations. </FONT></P>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Name and Municipality<BR>
&nbsp;&nbsp;&nbsp;&nbsp; of Residence</B> </FONT>
</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Position with the<BR>
&nbsp;&nbsp; Corporation</B> </FONT>
</TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Principal Occupation</B> </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Director of the<BR>
Corporation Since</B> </FONT>
</TD>
</TR>
<TR>
<TD colspan=4><HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE></TD></TR>
</TABLE>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1">Bradley G. Thompson<BR>
Ph.D(2) <BR>
<I>Calgary, Alberta</I> </FONT> </TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
President, Chief Executive <BR>
Officer and Executive    <BR>
Chairman of the
Board
</FONT></TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Executive Chairman of the Board, President and Chief
Executive Officer since April 1999.
</FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
April 21, 1999
</FONT></TD>
</TR>
</TABLE>
<BR>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1">Douglas A. Ball C.A.<BR>
<I>Calgary, Alberta</I> </FONT>
</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Chief Financial  Officer <BR>
and     Director        </FONT></TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Chief  Financial  Officer since May 2000.  Mr. Ball was <BR>
Vice President,  Finance and Chief Financial Officer of <BR>
SYNSORB from June 1997 to May 2000.  Prior to this,  he <BR>
was the Vice President,  Finance and Administration and <BR>
Chief  Financial  Officer  of ECL  Group  of  Companies <BR>
Ltd. Mr. Ball held this  position  from  December  1995 <BR>
until May 1997.  Prior to ECL,  he was  Controller  and <BR>
then  Vice   President   and   Controller  of  Canadian <BR>
Airlines   International  Ltd.  from  June  1993  until <BR>
August 1995.                                            </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
April 21, 1999
</FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1">William A. Cochrane,<BR>
OC, M.D. (3) <BR>
<I>Calgary, Alberta</I> </FONT> </TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Director</FONT></TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
President of W.A. Cochrane &amp; Associates, Inc. (a      <BR>
consulting company) since 1989 and Chairman of        <BR>
Resverlogix Corp. (a public biopharmaceutical company)<BR>
and University Technologies International Inc. (UTI)  <BR>
at the University of Calgary  since 2000 and is a     <BR>
director of Pheromone Corp and Medicure Inc.  Dr.     <BR>
Cochrane is an Officer of the Order of Canada and a   <BR>
2002 recipient of the Queens Golden Jubilee Medal.    <BR>
Dr. Cochrane also served as the Deputy Minister of    <BR>
Health Services for the Province of Alberta from 1973 <BR>
to 1974 and President of the University of Calgary    <BR>
from 1974 to 1978.                                    </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
October 31, 2002 </FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1">Matthew C. Coffey Ph.D. <BR>
<I>Calgary, Alberta</I> </FONT>
</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Chief Scientific Officer</FONT></TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Chief  Scientific  Officer  of  the  Corporation  since <BR>
December 2004,  Vice-President  of Product  Development <BR>
from July  1999 to  December  2004 and Chief  Financial <BR>
Officer from September 1999 to May 2000.                </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
N/A</FONT></TD>
</TR>
</TABLE>
<BR>
<BR>





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<HR SIZE=5 COLOR=GRAY NOSHADE>

<BR><BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Name and Municipality<BR>
&nbsp;&nbsp;&nbsp;&nbsp; of Residence</B> </FONT>
</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Position with the<BR>
&nbsp;&nbsp; Corporation</B> </FONT>
</TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Principal Occupation</B> </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Director of the<BR>
Corporation Since</B> </FONT>
</TD>
</TR>
<TR>
<TD colspan=4><HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE></TD></TR>
</TABLE>




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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1">George M. Gill, M.D. <BR>
<I>Washington, D.C.</I> </FONT> </TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Senior Vice President,<BR>
Clinical and Regulatory Affairs</FONT></TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Dr. Gill has been a  consultant  in  clinical  research <BR>
and  regulatory   affairs  to  the  pharmaceutical  and <BR>
biotechnology  industries  since he retired from Ligand <BR>
Pharmaceuticals  in  1999.  During  his 38 years in the <BR>
industry,  he also served in senior executive positions <BR>
with    ICI    Pharmaceuticals    (now    AstraZeneca), <BR>
Bristol-Myers  Squibb,  and Hoffmann-La Roche. Dr. Gill <BR>
holds a B.Sc. in chemistry  from  Dickinson  College in <BR>
Pennsylvania  and an M.D.  from the School of  Medicine <BR>
of the University of Pennsylvania in Philadelphia.      </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
N/A</FONT></TD>
</TR>
</TABLE>
<BR>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1">Antoine A. Noujaim <BR>
Ph.D. (2) <BR>
<I>Edmonton, Alberta</I> </FONT> </TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Director</FONT></TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Currently Honorary Chairman of ViRexx Medical Corp.<BR>
Chairman and Chief Executive  Officer of ViRexx Medical<BR>
Corp  from February 1, 2005 to November 2005.  Formerly  <BR>
Chairman,  CEO &amp;  President   of  ViRexx   Research   Inc.  (a  <BR>
public biopharmaceutical  company  which  changed  its name <BR>
to ViRexx  Medical  Corp.)  since  July,  2002.   Formerly<BR>
Chairman  of the  Board  of  AltaRex  Corp.  (a  public<BR>
biopharmaceutical  company) from February 1998 to July,<BR>
2002.    President  and  Chief  Executive   Officer  of<BR>
AltaRex Corp.,  from November 1995 to February 1998 and<BR>
from  May  2004 to the  present.   Prior  thereto,  Dr.<BR>
Noujaim was the President of Biomira  Research  Inc., a<BR>
division of Biomira  Inc.  (a public  biopharmaceutical<BR>
company)  from 1994 to 1995 and  Senior  Vice-President<BR>
of the  Immunoconjugate  Division of Biomira Inc.  from<BR>
1989 to November  1995.  Dr.  Noujaim  also served as a<BR>
Director of Biomira Inc. from 1985 to 1995.            </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
August 27, 1999  </FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1">Robert B. Schultz, <BR>
F.C.A. (1) <BR>
<I>Toronto, Ontario</I> </FONT> </TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Lead Director</FONT></TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Chairman and Director of Rockwater Capital  Corporation <BR>
formerly  McCarvill  Corporation (a financial  services <BR>
company)   since   June   2001.   Chairman   and  Chief <BR>
Executive  Officer of Merrill  Lynch Canada from August <BR>
1998  until his  retirement  on May 1,  2000.  Prior to <BR>
this  appointment,  Mr.  Schultz  was  Chief  Executive <BR>
Officer at Midland  Walwyn  since 1990.  Since  joining <BR>
the  investment  industry in 1971, Mr. Schultz has held <BR>
a variety of senior positions,  and has participated on <BR>
various    industry-related   boards   and   committees <BR>
including  Director  and  Chairman  of  the  Investment <BR>
Dealers Association of Canada.                          </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
June 30, 2000 </FONT></TD></TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1">Fred A. Stewart, <BR>
Q.C.(1)(2) <BR>
<I>Bragg Creek, Alberta</I> </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Director</FONT></TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
President  of  Fred   Stewart  &amp;  Associates   Inc.  (a<BR>
government and corporate relations  consulting company)<BR>
since March  1996.  Prior to that,  Mr.  Stewart was an<BR>
associate   with   Milner   Fenerty,   Barristers   and<BR>
Solicitors  from June 1993 to March 1996.  Mr.  Stewart<BR>
served  as Member of the  Legislative  Assembly  of the<BR>
Province of Alberta from 1986 to 1993.                 </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>August 27, 1999 </FONT></TD>
</TR>
</TABLE>
<BR>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1">Jim Dinning(1) <BR>
<I>Calgary, Alberta</I> </FONT>
</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Director</FONT></TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Chairman of Western  Financial  Group  since  September <BR>
2004.  Prior  thereto,  Mr.  Dinning was the  Executive <BR>
Vice   President   of  TransAlta   Corporation   (power <BR>
generation and wholesale  marketing  company) from 1997 <BR>
to  2004  and  served  as  Member  of  the  Legislative <BR>
Assembly  of the  Province  of  Alberta  from  1986  to <BR>
1997.   Mr.   Dinning   is  a   director   of   Finning <BR>
International Inc. and Shaw Communications Inc.         </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>March 24, 2004</FONT></TD>
</TR>
</TABLE>
<BR>
<BR>





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<HR SIZE=5 COLOR=GRAY NOSHADE>

<BR><BR>

<!-- MARKER FORMAT-SHEET="Para Flush Level 5" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Name and Municipality<BR>
&nbsp;&nbsp;&nbsp;&nbsp; of Residence</B> </FONT>
</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Position with the<BR>
&nbsp;&nbsp; Corporation</B> </FONT>
</TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Principal Occupation</B> </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Director of the<BR>
Corporation Since</B> </FONT>
</TD>
</TR>
<TR>
<TD colspan=4><HR ALIGN=LEFT WIDTH=100% SIZE=1 NOSHADE></TD></TR>
</TABLE>




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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1">J. Mark Lievonen C.A.(3)<BR>
<I>Markham, Ontario</I> </FONT>
</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Director</FONT></TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
President of Sanofi Pasteur Limited, a vaccine        <BR>
development, manufacturing and marketing company,     <BR>
since October 1998 and holding various positions with <BR>
Sanofi Pasteur Limited and its predecessors since     <BR>
1983.  Mr. Lievonen serves on a number of industry and<BR>
community boards and councils including BIOTECanada,  <BR>
the Ontario Genomics Institute, and the Ontario       <BR>
Institute for Cancer Research.                        </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>April 5, 2004</FONT></TD>
</TR>
</TABLE>
<BR>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1">Karl Mettinger, M.D.,<BR>
Ph.D <BR>
<I>Berkeley, CA</I> </FONT>
</TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Chief Medical Officer</FONT></TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Dr. Mettinger has been involved in clinical and        <BR>
regulatory affairs with various pharmaceutical         <BR>
companies since 1985. Prior to joining Oncolytics, he  <BR>
was Senior Vice President and Chief Medical Officer    <BR>
with SuperGen Inc. Prior to that, he was Executive     <BR>
Director, Clinical Research at IVAX/Baker Norton,      <BR>
which is the new drug subsidiary of IVAX Corporation.  <BR>
He began his career in the industry with KABI in       <BR>
Sweden. Dr. Mettinger holds an MD from the University  <BR>
of Lund in Sweden and a PhD (hematology/stroke) from   <BR>
the Karolinska Institute in Stockholm, Sweden.         </FONT></TD>
<TD WIDTH=20%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>N/A</FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B><U>Notes</U>:</B> </FONT> </P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1)  </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>These
persons are members of the Audit Committee.  Mr. Stewart is the Chair of the Audit
Committee. </FONT></P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2)  </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>These
persons are members of the Compensation Committee.  Dr. Cochrane is the Chair of the
Compensation Committee. </FONT></P></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD ALIGN=LEFT WIDTH=3%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(3)  </FONT></TD>
<TD WIDTH=97%><P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>These
persons are members of the Corporate  Governance and Nominating  Committee.  Mr.
 Lievonen is the Chair of the Corporate          Governance and Nominating Committee. </FONT></P></TD>
</TR>
</TABLE>
<BR>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As at the date hereof, the directors
and senior officers as a group beneficially owned, directly or indirectly, 379,500 of our
common shares, representing 1.0% of the issued and outstanding common shares. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certain of our directors are
associated with other companies, which may give rise to conflicts of interest. In
accordance with the ABCA, directors who have a material interest in any person who is a
party to a material contract or a proposed material contract with us are required, subject
to certain exceptions, to disclose that interest and abstain from voting on any resolution
to approve that contract. In addition, the directors are required to act honestly and in
good faith with a view to the best interests of Oncolytics Biotech Inc. </FONT></P>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AUDIT COMMITTEE MATTERS </FONT></H1>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Mandate of the Audit
Committee</I></B> </FONT> </P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. &nbsp;&nbsp;&nbsp;Policy Statement </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>It is the policy of Oncolytics
Biotech Inc. (the &#147;Corporation&#148;) to establish and maintain an Audit Committee,
composed entirely of independent directors, to assist the Board of Directors (the
&#147;Board&#148;) in carrying out their oversight responsibility for the
Corporation&#146;s internal controls, financial reporting and risk management processes.
The Audit Committee will be provided with resources commensurate with the duties and
responsibilities assigned to it by the Board including administrative support. If
determined necessary by the Audit Committee, it will have the discretion to institute
investigations of improprieties, or suspected improprieties within the scope of its
responsibilities, including the standing authority to retain special counsel or experts. </FONT></P>
<BR><BR>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-19- </FONT></P>
<BR>



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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. &nbsp;&nbsp;&nbsp;Composition of the
Committee </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Audit Committee shall consist of a minimum of three (3) directors, at least
               half of whom shall be resident Canadians. The Board shall appoint the
members of                the Audit Committee and may seek the advice and assistance of
the Corporate                Governance and Nominating Committee in identifying qualified
candidates. The                Board shall appoint one member of the Audit Committee to
be the Chair of the                Audit Committee, or delegate such authority to appoint
the Chair of the Audit                Committee to the Audit Committee.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Chair of the Committee shall be responsible for leadership of the Committee,
               including preparing or approving the agenda, presiding over the meetings,
and                making committee assignments.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each
director appointed to the Audit Committee by the Board shall be an outside
               director who is unrelated. An outside, unrelated director is a director
who                meets the requirements of NASDAQ Rule 4200 and Multilaterial
Instrument 52-110.                A director appointed to the audit committee shall also
meet the requirements of                NASDAQ Rule 4350 (d)(2)(A)(ii) and Exchange Act
Rule 10A-3(b)(1). Such director                shall be independent of management and
free from any interest, any business or                other relationship which could, or
could reasonably be perceived, to materially                interfere with the director&#146;s
ability to act with a view to the best                interests of the Corporation, other
than interests and relationships arising                from shareholding. In determining
whether a director is independent of                management, the Board shall make
reference to the abovementioned rules and any                applicable revisions
thereto, and any additional relevant then current                legislation, rules,
policies and instruments of applicable regulatory                authorities.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Each
member of the Audit Committee shall be financially literate. In order to be
               financially literate, a director must be, at a minimum, able to read and
               understand basic financial statements that present a breadth and level of
               complexity of accounting issues that are generally comparable to the
breadth and                complexity of the issues that can reasonably be expected to be
raised by the                Corporation&#146;s financial statements. At least one member
shall have                accounting or related financial management expertise, meaning
the ability to                analyze and interpret a full set of financial statements,
including the notes                attached thereto, in accordance with generally
accepted accounting principles.                In determining whether a member of the
Audit Committee is financially literate                or has accounting or related
financial expertise, reference shall be made to the                then current
legislation, rules, policies and instruments of applicable                regulatory
authorities, which for further clarification, shall include but not                be
limited to the definition of &#147;financial expert&#148; as defined by the
               U.S. Securities and Exchange Commission rule.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(e)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A
director appointed by the Board to the Audit Committee shall be a member of
               the Audit Committee until replaced by the Board or until his or her
resignation.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. &nbsp;&nbsp;&nbsp;Meetings of the
Committee </FONT></H1>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Audit Committee shall convene a minimum of four times each year at such
               times and places as may be designated by the Chair of the Audit Committee
and                whenever a meeting is requested by the Board, a member of the Audit
Committee,                the auditors, or senior management of the Corporation.
Scheduled meetings of the                Audit Committee shall correspond with the review
of the year-end and quarterly                financial statements and management
discussion and analysis.  </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-20- </FONT></P>
<BR><BR>




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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notice
of each meeting of the Audit Committee shall be given to each member of
               the Audit Committee and to the auditors, who shall be entitled to attend
each                meeting of the Audit Committee and shall attend whenever requested to
do so by a                member of the Audit Committee.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Notice
of a meeting of the Audit Committee shall:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>be
in writing, including by electronic communication facilities;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>state
the nature of the business to be transacted at the meeting in reasonable
               detail;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>to
the extent practicable, be accompanied by copies of documentation to be
               considered at the meeting; and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iv)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>be
given at least two business days prior to the time stipulated for the meeting
               or such shorter period as the members of the Audit Committee may permit.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A
quorum for the transaction of business at a meeting of the Audit Committee
               shall consist of a majority of the members of the Audit Committee.
However, it                shall be the practice of the Audit Committee to require
review, and, if                necessary, approval of certain important matters by all
members of the Audit                Committee.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(e)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A
member or members of the Audit Committee may participate in a meeting of the
               Audit Committee by means of such telephonic, electronic or other
communication                facilities, as permits all persons participating in the
meeting to communicate                adequately with each other. A member participating
in such a meeting by any such                means is deemed to be present at the
meeting.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(f)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In
the absence of the Chair of the Audit Committee, the members of the Audit
               Committee shall choose one of the members present to be Chair of the
meeting. In                addition, the members of the Audit Committee shall choose one
of the persons                present to be the Secretary of the meeting.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(g)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A
member of the Board, senior management of the Corporation and other parties
               may attend meetings of the Audit Committee; however the Audit Committee
(i)                shall, at each meeting, meet with the external auditors independent of
other                individuals other than the Audit Committee and (ii) may meet
separately with                management.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(h)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minutes
shall be kept of all meetings of the Audit Committee and shall be signed
               by the Chair and the Secretary of the meeting.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. &nbsp;&nbsp;&nbsp;Duties and
Responsibilities of the Committee </FONT></H1>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Audit Committee&#146;s primary duties and responsibilities are to:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>identify
and monitor the management of the principal risks that could impact the
          financial reporting of the Corporation ;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>monitor
the integrity of the Corporation&#146;s financial reporting process and
               system of internal controls regarding financial reporting and accounting
               compliance;  </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>




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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-21- </FONT></P>
<BR><BR>





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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>monitor
the independence and performance of the Corporation&#146;s external
               auditors. This will include receipt, review and evaluation, at least
annually,                of a formal written statement from the independent auditors
confirming their                independence, and qualifications, including their
compliance with the                requirements of the relevant oversight boards ;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iv)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>deal
directly with the external auditors to pre-approve external audit plans,
               other services (if any) and fees;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(v)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>directly
oversee the external audit process and results (in addition to items
               described in Section 4(d) below);  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(vi)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>provide
an avenue of communication among the external auditors, management and                the
Board; and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(vii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>carry
out a review designed to ensure that an effective &#147;whistle                blowing&#148; procedure
exists to permit stakeholders to express any concerns                regarding
accounting, internal controls, auditing matters or financial matters                to an
appropriately independent individual.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(viii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pre-approve
any related party transactions to be entered into by the Company,                and
ensure appropriate disclosure thereof.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ix)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ensure
financial disclosure incorporates inclusion of any material correcting
               adjustments required by the external auditors.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(x)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Require
and ensure that the external auditors are directly responsible to the
               Audit Committee, to whom they report  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Audit Committee shall have the authority to:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>inspect
any and all of the books and records of the Corporation and its
               affiliates;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>discuss
with the management of the Corporation and its affiliates, any affected
               party and the external auditors, such accounts, records and other matters
as any                member of the Audit Committee considers necessary and appropriate;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>engage
independent counsel and other advisors as it determines necessary to                carry
out its duties; and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iv)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>to
set and pay the compensation for any advisors employed by the Audit
               Committee.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Audit Committee shall, at the earliest opportunity after each meeting,
               report to the Board the results of its activities and any reviews
undertaken and                make recommendations to the Board as deemed appropriate.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Audit Committee shall:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>review
the audit plan with the Corporation&#146;s external auditors and with
          management;  </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>




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<BR>





<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-22- </FONT></P>
<BR><BR>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Review
with the independent auditors the matters required to be discussed
               relating to the conduct of the audit, including (a) the proposed scope of
their                examination, with emphasis on accounting and financial areas where
the                Committee, the independent auditors or management believes special
attention                should be directed; (b) the results of their audit, including
their audit                findings report and resulting letter, if any, of
recommendations for management;                (c) their evaluation of the adequacy and
effectiveness of the Company&#146;s                internal controls over financial
reporting; (d) significant areas of                disagreement, if any, with management;
(e) co-operation received from management                in the conduct of the audit; (f)
significant accounting, reporting, regulatory                or industry developments
affecting the Company; and (g) review any proposed                changes in major
accounting policies or principles proposed or contemplated by                the
independent auditors or management, the presentation and impact of material
               risks and uncertainties and key estimates and judgements of management
that may                be material to financial reporting;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>review
with management and with the external auditors material financial
               reporting issues arising during the most recent fiscal period and the
resolution                or proposed resolution of such issues;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iv)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>review
any problems experienced or concerns expressed by the external auditors                in
performing an audit, including any restrictions imposed by management or
               material accounting issues on which there was a disagreement with
management;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(v)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>review
with senior management the process of identifying, monitoring and
               reporting the principal risks affecting financial reporting;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(vi)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>review
audited annual financial statements (including management discussion and
               analysis) and related documents in conjunction with the report of the
external                auditors and obtain an explanation from management of all
material variances                between comparative reporting periods. Without
restricting the generality of the                foregoing, the committee will discuss
with management and the independent                auditors to the extent required, any
issues and disclosure requirements                regarding (a) the use of &#147;pro forma&#148; or
&#147;adjusted&#148; non-GAAP                information, as well as financial
information and earnings guidance provided to                analysts and rating
agencies, (b) any off balance sheet arrangements, and (c)                any going
concern qualification.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(vii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>consider
and review with management, the internal control memorandum or                management
letter containing the recommendations of the external auditors and
               management&#146;s response, if any, including an evaluation of the
adequacy and                effectiveness of the internal financial controls of the
Corporation and                subsequent follow-up to any identified weaknesses;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(viii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>review
with financial management and the external auditors the quarterly
               unaudited financial statements and management discussion and analysis
before                release to the public;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ix)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>before
release, review and if appropriate, recommend for approval by the Board,
               all public disclosure documents containing audited or unaudited financial
               information, including any prospectuses, annual reports, annual
information                forms, management discussion and analysis and press releases;
and  </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>




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<BR>







<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-23- </FONT></P>
<BR><BR>





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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(x)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>oversee,
any of the financial affairs of the Corporation or its affiliates, and,                if
deemed appropriate, make recommendations to the Board, external auditors or
               management.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(e) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Audit Committee shall:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>evaluate
the independence and performance of the external auditors and annually
               recommend to the Board the appointment of the external auditor or the
discharge                of the external auditor when circumstances are warranted and
monitor the audit                partners&#146; rotation as required by law.;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>consider
the recommendations of management in respect of the appointment of the
               external auditors;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>pre-approve
all non-audit services to be provided to the Corporation or its                subsidiary
entities by its external auditors&#146;, or the external auditors of
               affiliates of the Corporation subject to the over-riding principle that
the                external auditors not being permitted to be retained by the
Corporation to                perform specifically listed categories of non-audit
services as set forth by the                Securities and Exchange Commission as well as
internal audit outsourcing                services, financial information systems work
and expert services.                Notwithstanding, the foregoing the pre-approval of
non-audit services may be                delegated to a member of the Audit Committee,
with any decisions of the member                with the delegated authority reporting to
the Audit Committee at the next                scheduled meeting;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(iv)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>approve
the engagement letter for non-audit services to be provided by the
               external auditors or affiliates, together with estimated fees, and
considering                the potential impact of such services on the independence of
the external                auditors;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(v)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>when
there is to be a change of external auditors, review all issues and provide
               documentation related to the change, including the information to be
included in                the Notice of Change of Auditors and documentation required
pursuant to the then                current legislation, rules, policies and instruments
of applicable regulatory                authorities and the planned steps for an orderly
transition period; and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(vi)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>review
all reportable events, including disagreements, unresolved issues and
               consultations, as defined by applicable securities policies, on a routine
basis,                whether or not there is to be a change of external auditors.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(f)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Audit Committee shall enquire into and determine the appropriate resolution
               of any conflict of interest in respect of audit or financial matters,
which are                directed to the Audit Committee by any member of the Board, a
shareholder of the                Corporation, the external auditors, or senior
management.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(g) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Audit Committee shall periodically review with management the need for an
          internal audit function.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(h) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Audit Committee shall review the Corporation&#146;s accounting and reporting           of
costs, liabilities and contingencies.  </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-24- </FONT></P>
<BR><BR>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i) </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Audit Committee shall establish and maintain procedures for:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
receipt, retention and treatment of complaints received by the Corporation
               regarding accounting controls, or auditing matters; and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(ii)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=85%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
confidential, anonymous submission by employees of the Corporation or
               concerns regarding questionable accounting or auditing matters.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(j)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Audit Committee shall review and approve the Corporation&#146;s hiring
               policies regarding employees and former employees of the present and
former                external auditors.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(k)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Audit Committee shall review with the Corporation&#146;s legal counsel, on
               no less than an annual basis, any legal matter that could have a material
impact                on the Corporation&#146;s financial statements, and any enquiries
received from                regulators, or government agencies.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(l)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
Audit Committee shall assess, on an annual basis, the adequacy of this
               Mandate and the performance of the Audit Committee.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. &nbsp;&nbsp;&nbsp;Date of Mandate </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This Mandate was initially approved
by the Board on September 3, 1999. Subsequent to that date, the Board has amended and
restated this Mandate on each of December 13, 2002 April 23, 2003, March 5, 2004 and
December 8, 2004. This Mandate is effective from and after December 13, 2005. </FONT></P>
<BR><BR>




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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-25- </FONT></P>
<BR><BR>



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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Composition of the Audit
Committee</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table sets forth the
name of each of the current members of the Audit Committee, whether such member is
independent, whether such member is financially literate and the relevant education and
experience of such member. </FONT></P>








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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Name</B> </FONT>

</TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Independent</B> </FONT></TD>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Financially<BR>
Literate</B> </FONT></TD>
<TD WIDTH=65%><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>
Relevant Education and Experience</B> </FONT></TD>
</TR>
<TR>
<TD colspan=4><HR size=1></Td></TR>
</TABLE>
<BR>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1">
Fred A. Stewart, Q.C.<BR>
(Chairman)
</FONT>
</TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Yes</FONT></TD>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Yes</FONT></TD>
<TD WIDTH=65%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Mr. Stewart graduated with Bachelor of Commerce           <BR>
(Saskatchewan) and Bachelor of Law (Toronto) and is a     <BR>
Barrister and Solicitor (Queens Counsel).  Mr. Stewart    <BR>
served as a Member of Cabinet in the Legislative Assembly <BR>
of the Province of Alberta.  Mr. Stewart has acquired     <BR>
significant financial experience and exposure to          <BR>
accounting and financial issues as a founding partner of  <BR>
his law firm,  as a Member of the Treasury Board of the   <BR>
Government of Alberta and while serving as a director and <BR>
audit committee member of both private and public         <BR>
companies.</FONT></TD>                                                </TR>
</TABLE>
<BR>




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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1">
Robert B. Schultz F.C.A.
</FONT>
</TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Yes</FONT></TD>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Yes</FONT></TD>
<TD WIDTH=65%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Mr. Schultz is a Fellow of the Chartered Accountants and   <BR>
is currently Chairman and Director of Rockwater Capital    <BR>
Corporation (a financial services company).  Mr. Schultz   <BR>
has served as Chairman and Chief Executive Officer of      <BR>
Merrill Lynch Canada (a public financial services company) <BR>
and as Chief Executive Officer of Midland Walwyn. Through  <BR>
his various roles as Chairman and Chief Executive Officer, <BR>
Mr. Schultz has supervised the individual engaged in       <BR>
preparing, analyzing or evaluating financial statements.   <BR>
Mr. Schultz has also served as a director with several     <BR>
other public companies.                                    </FONT></TD>
</TR>
</TABLE>
<BR>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=15%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="1">
Jim Dinning
</FONT>
</TD>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Yes</FONT></TD>
<TD WIDTH=15%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Yes</FONT></TD>
<TD WIDTH=65%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
 Mr. Dinning is currently Chairman of the Board of Western   <BR>
 Financial Group.  He graduated with a bachelor of commerce  <BR>
 honours degree and a master's degree in public              <BR>
 administration from Queen's University.  Mr. Dinning        <BR>
 served as a Member of the Legislative Assembly of the       <BR>
 Province of Alberta from 1986 to 1997.  Mr. Dinning has     <BR>
 acquired significant financial experience and exposure to   <BR>
 accounting and financial issues while serving as a          <BR>
 director and audit committee member for other publicly      <BR>
 traded companies and as Minister of Finance for the         <BR>
 Alberta Provincial Government.                              </FONT></TD>
</TR>
</TABLE>
<BR>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RISK FACTORS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>All of our potential products,
including REOLYSIN&reg;, are in the research and development stage and will require
further development and testing before they can be marketed commercially.</B> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Prospects for companies in the
biotechnology industry generally may be regarded as uncertain given the nature of the
industry and, accordingly, investments in biotechnology companies should be regarded as
speculative. We are currently in the research and development stage on one product,
REOLYSIN&reg;, for human application, the riskiest stage for a company in the
biotechnology industry. It is not possible to predict, based upon studies in animals and
early stage human clinical trials whether REOLYSIN&reg; will prove to be safe and
effective in humans. REOLYSIN&reg; will require additional research and </FONT></P>
<BR><BR>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-26- </FONT></P>
<BR><BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>development, including extensive
additional clinical testing, before we will be able to obtain the approvals of the
relevant regulatory authorities in applicable countries to market REOLYSIN&reg;
commercially. There can be no assurance that the research and development programs
conducted by us will result in REOLYSIN&reg; or any other products becoming commercially
viable products, and in the event that any product or products result from the research
and development program, it is unlikely they will be commercially available for a number
of years. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To achieve profitable operations
Oncolytics Biotech Inc., alone or with others, must successfully develop, introduce and
market our products. To obtain regulatory approvals for products being developed for human
use, and to achieve commercial success, human clinical trials must demonstrate that the
product is safe for human use and that the product shows efficacy. Unsatisfactory results
obtained from a particular study relating to a program may cause us to abandon our
commitment to that program or the product being tested. No assurances can be provided that
any current or future animal or human test, if undertaken, will yield favourable results.
If we are unable to establish that REOLYSIN&reg; is a safe, effective treatment for
cancer, we may be required to abandon further development of the product and develop a new
business strategy. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There are inherent risks
in pharmaceutical research and development </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pharmaceutical research and
development is highly speculative and involves a high and significant degree of risk. The
marketability of any product developed by us will be affected by numerous factors beyond
our control, including: </FONT></P>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
discovery of unexpected toxicities or lack of sufficient efficacy of products which make
them unattractive or unsuitable for human use;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>preliminary
results as seen in animal and/or limited human testing may not be substantiated in larger
controlled clinical trials;  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>manufacturing
 costs  or  other  production  factors  may  make  manufacturing  of  products
  ineffective,   impractical  and                   non-competitive; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>proprietary
rights of third parties or competing products or technologies may preclude
commercialization; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>requisite
regulatory approvals for the commercial distribution of products may not be obtained; and </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>other
factors may become apparent during the course of research, up-scaling or manufacturing
which may result in the discontinuation of research and other critical projects.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our product under development has
never been manufactured on a commercial scale, and there can be no assurance that such
products can be manufactured at a cost or in a quantity to render such products
commercially viable. Production and utilization of our products may require the
development of new manufacturing technologies and expertise. The impact on our business in
the event that new manufacturing technologies and expertise are required to be developed
is uncertain. There can be no assurance that we will successfully meet any of these
technological challenges, or others that may arise in the course of development. </FONT></P>
<BR><BR>




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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-27- </FONT></P>
<BR><BR>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pharmaceutical products
are subject to intense regulatory approval processes </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The regulatory process for
pharmaceuticals, which includes preclinical studies and clinical trials of each compound
to establish its safety and efficacy, takes many years and requires the expenditure of
substantial resources. Moreover, if regulatory approval of a drug is granted, such
approval may entail limitations on the indicated uses for which it may be marketed.
Failure to comply with applicable regulatory requirements can, among other things, result
in suspension of regulatory approvals, product recalls, seizure of products, operating
restrictions and criminal prosecution. Further, government policy may change, and
additional government regulations may be established that could prevent or delay
regulatory approvals for our products. In addition, a marketed drug and its manufacturer
are subject to continual review. Later discovery of previously unknown problems with the
product or manufacturer may result in restrictions on such product or manufacturer,
including withdrawal of the product from the market. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The FDA in the United States and
similar regulatory authorities in other countries may deny approval of a NDA or NDS if
required regulatory criteria are not satisfied, or may require additional testing. Product
approvals may be withdrawn if compliance with regulatory standards is not maintained or if
problems occur after the product reaches the market. The FDA and similar regulatory
authorities in other countries may require further testing and surveillance programs to
monitor the pharmaceutical product that has been commercialized. Non-compliance with
applicable requirements can result in fines and other judicially imposed sanctions,
including product withdrawals, product seizures, injunction actions and criminal
prosecutions. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition to our own
pharmaceuticals, we may supply active pharmaceutical ingredients and advanced
pharmaceutical intermediates for use in our customers&#146; drug products. The final drug
products in which the pharmaceutical ingredients and advanced pharmaceutical intermediates
are used, however, are subject to regulation for safety and efficacy by the FDA and other
jurisdictions, as the case may be. Such products must be approved by such agencies before
they can be commercially marketed. The process of obtaining regulatory clearance for
marketing is uncertain, costly and time consuming. We cannot predict how long the
necessary regulatory approvals will take or whether our customers will ever obtain such
approval for their products. To the extent that our customers do not obtain the necessary
regulatory approvals for marketing new products, our product sales could be adversely
affected. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The FDA and other governmental
regulators have increased requirements for drug purity and have increased environmental
burdens upon the pharmaceutical industry. Because pharmaceutical drug manufacturing is a
highly regulated industry, requiring significant documentation and validation of
manufacturing processes and quality control assurance prior to approval of the facility to
manufacture a specific drug, there can be considerable transition time between the
initiation of a contract to manufacture a product and the actual initiation of manufacture
of that product. Any lag time in the initiation of a contract to manufacture product and
the actual initiation of manufacture could cause us to lose profits or incur liabilities. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The pharmaceutical regulatory regime
in Europe and other countries is, by and large, generally similar to that of the United
States. We could face similar risks in these other jurisdictions, as the risks described
above. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our operations and products may be
subject to other government manufacturing and testing regulations</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Securing regulatory approval for the
marketing of therapeutics by the FDA in the United States and similar regulatory agencies
in other countries is a long and expensive process, which can delay or prevent </FONT></P>
<BR><BR>




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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-28- </FONT></P>
<BR><BR>


<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>product development and marketing.
 Approval to market products may be for limited applications or may not be received at
all. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The products we anticipate
manufacturing will have to comply with the FDA&#146;s current Good Manufacturing Practices
(&#147;cGMP&#148;) and other FDA, and local government guidelines and regulations,
including other international regulatory requirements and guidelines. Additionally,
certain of our customers may require the manufacturing facilities contracted by us to
adhere to additional manufacturing standards, even if not required by the FDA. Compliance
with cGMP regulations requires manufacturers to expend time, money and effort in
production, and to maintain precise records and quality control to ensure that the product
meets applicable specifications and other requirements. The FDA and other regulatory
bodies periodically inspect drug-manufacturing facilities to ensure compliance with
applicable cGMP requirements. If the manufacturing facilities contracted by us fail to
comply with the cGMP requirements, the facilities may become subject to possible FDA or
other regulatory action and manufacturing at the facility could consequently be suspended.
We may not be able to contract suitable alternative or back-up manufacturing facilities on
terms acceptable to us or at all. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The FDA or other regulatory agencies
may also require the submission of any lot of a particular product for inspection. If the
lot product fails to meet the FDA requirements, then the FDA could take any of the
following actions: (i) restrict the release of the product; (ii) suspend manufacturing of
the specific lot of the product; (iii) order a recall of the lot of the product; or (iv)
order a seizure of the lot of the product. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are subject to regulation by
governments in many jurisdictions and, if we do not comply with healthcare, drug,
manufacturing and environmental regulations, among others, our existing and future
operations may be curtailed, and we could be subject to liability. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition to the regulatory
approval process, we may be subject to regulations under local, provincial, state, federal
and foreign law, including requirements regarding occupational health, safety, laboratory
practices, environmental protection and hazardous substance control, and may be subject to
other present and future local, provincial, state, federal and foreign regulations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>The biotechnology industry is
extremely competitive and we must successfully compete with larger companies with
substantially greater resources</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Technological competition in the
pharmaceutical industry is intense and we expect competition to increase. Other companies
are conducting research on therapeutics involving the Ras pathway as well as other novel
treatments or therapeutics for the treatment of cancer which may compete with our product.
Many of these competitors are more established, benefit from greater name recognition and
have substantially greater financial, technical and marketing resources than us. In
addition, many of these competitors have significantly greater experience in undertaking
research, preclinical studies and human clinical trials of new pharmaceutical products,
obtaining regulatory approvals and manufacturing and marketing such products. In addition,
there are several other companies and products with which we may compete from time to
time, and which may have significantly better and larger resources than us. Accordingly,
our competitors may succeed in manufacturing and/or commercializing products more rapidly
or effectively, which could have a material adverse effect on our business, financial
condition or results of operations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We anticipate that we will face
increased competition in the future as new products enter the market and advanced
technologies become available. There can be no assurance that existing products or new
products developed by our competitors will not be more effective, or be more effectively
manufactured, marketed and sold, than any that may be developed or sold by us. Competitive
products may render our products obsolete and uncompetitive prior to recovering research,
development or commercialization expenses incurred with respect to any such products. </FONT></P>
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<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We rely on patents and
proprietary rights to protect our technology </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our success will depend, in part, on
our ability to obtain patents, maintain trade secret protection and operate without
infringing the rights of third parties. We have patents in the United States, Canada and
Europe and have filed applications for patents in the United States and under the PCT,
allowing us to file in other jurisdictions. See &#147;<I>Narrative Description &#150;
Patent and Patent Application Summary</I>.&#148; Our success will depend, in part, on our
ability to obtain, enforce and maintain patent protection for our technology in Canada,
the United States and other countries. We cannot be assured that patents will issue from
any pending applications or that claims now or in the future, if any, allowed under issued
patents will be sufficiently broad to protect our technology. In addition, no assurance
can be given that any patents issued to or licensed by us will not be challenged,
invalidated, infringed or circumvented, or that the rights granted thereunder will provide
continuing competitive advantages to us. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The patent positions of
pharmaceutical and biotechnology firms, including us, are generally uncertain and involve
complex legal and factual questions. In addition, it is not known whether any of our
current research endeavours will result in the issuance of patents in Canada, the United
States, or elsewhere, or if any patents already issued will provide significant
proprietary protection or will be circumvented or invalidated. Since patent applications
in the United States and Canada are maintained in secrecy until at least 18 months after
filing of the original priority application, and since publication of discoveries in the
scientific or patent literature tends to lag behind actual discoveries by several months,
we cannot be certain that we or any licensor were the first to create inventions claimed
by pending patent applications or that it was the first to file patent applications for
such inventions. Loss of patent protection could lead to generic competition for these
products, and others in the future, which would materially and adversely affect our
financial prospects for these products. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Similarly, since patent applications
filed before October 2000 in the United States are maintained in secrecy until the patents
issue or foreign counterparts, if any, publish, we cannot be certain that we or any
licensor were the first creator of inventions covered by pending patent applications or
that we or such licensor were the first to file patent applications for such inventions.
There is no assurance that our patents, if issued, would be held valid or enforceable by a
court or that a competitor&#146;s technology or product would be found to infringe such
patents. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accordingly, we may not be able to
obtain and enforce effective patents to protect our proprietary rights from use by
competitors, and the patents of other parties could require us to stop using or pay to use
certain intellectual property, and as such, our competitive position and profitability
could suffer as a result. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition, we may be required to
obtain licenses under patents or other proprietary rights of third parties. No assurance
can be given that any licenses required under such patents or proprietary rights will be
available on terms acceptable to us. If we do not obtain such licenses, we could encounter
delays in introducing one or more of our products to the market while we attempt to design
around such patents, or could find that the development, manufacture or sale of products
requiring such licenses could be foreclosed. In addition, we could incur substantial costs
in defending ourselves in suits brought against us on such patents or in suits in which
our attempts to enforce our own patents against other parties. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Our products may fail or cause
harm, subjecting us to product liability claims, which are uninsured</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The sale and use of our products
entail risk of product liability. We currently do not have any product liability
insurance. There can be no assurance that we will be able to obtain appropriate levels of
product liability insurance prior to any sale of our pharmaceutical products. An inability
to obtain insurance on economically feasible terms or to otherwise protect against
potential product liability claims could inhibit or prevent the commercialization of
products developed by us. The obligation to pay any product liability </FONT></P>
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<BR><BR>





<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>claim or a recall of a product could
have a material adverse effect on our business, financial condition and future prospects. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We have limited manufacturing
experience and intend to rely on third parties to commercially manufacture our products,
if and when developed.</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To date, we have relied upon a sole
contract manufacturer to manufacture small quantities of REOLYSIN&reg;. The manufacturer
may encounter difficulties in scaling up production, including production yields, quality
control and quality assurance. Only a limited number of manufacturers can supply
therapeutic viruses and failure by the manufacturer to deliver the required quantities of
REOLYSIN&reg; on a timely basis at a commercially reasonable price may have a material
adverse affect on us. We have completed a program for the development of a commercial
process for manufacturing REOLYSIN&reg; and have filed a number of patent applications
related to the process. There can be no assurance that we will successfully obtain
sufficient patent protection related to our manufacturing process. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>New products may not be
accepted by the medical community or consumers. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our primary activity to date has been
research and development and we have no experience in marketing or commercializing
products. We will likely rely on third parties to market our products, assuming that they
receive regulatory approvals. If we rely on third parties to market our products, the
commercial success of such product may be outside of our control. Moreover, there can be
no assurance that physicians, patients or the medical community will accept our product
even if it proves to be safe and effective and is approved for marketing by Health Canada,
the FDA and other regulatory authorities. A failure to successfully market our product
would have a material adverse affect on our revenue. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our technologies may
become obsolete </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The pharmaceutical industry is
characterized by rapidly changing markets, technology, emerging industry standards and
frequent introduction of new products. The introduction of new products embodying new
technologies, including new manufacturing processes, and the emergence of new industry
standards may render our products obsolete, less competitive or less marketable. The
process of developing our products is extremely complex and requires significant
continuing development efforts and third party commitments. Our failure to develop new
technologies and products and the obsolescence of existing technologies could adversely
affect our business. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We may be unable to anticipate
changes in our potential customer requirements that could make our existing technology
obsolete. Our success will depend, in part, on our ability to continue to enhance our
existing technologies, develop new technology that addresses the increasing sophistication
and varied needs of the market, and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis. The development of
our proprietary technology entails significant technical and business risks. We may not be
successful in using our new technologies or exploiting our niche markets effectively or
adapting our businesses to evolving customer or medical requirements or preferences or
emerging industry standards. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We are highly dependent on third
party relationships for research and clinical trials</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We rely upon third party
relationships for assistance in the conduct of research efforts, pre-clinical development
and clinical trials, and manufacturing. In addition, we expect to rely on third parties to
seek regulatory approvals for and to market our product. Although we believe that our
collaborative partners will have an economic motivation to commercialize our product
included in any collaborative agreement, </FONT></P>
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<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the amount and timing of resources
diverted to these activities generally is expected to be controlled by the third party.
Furthermore, if we cannot maintain these relationships, our business may suffer. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have no operating
revenues and a history of losses. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To date, we have not generated
sufficient revenues to offset our research and development costs and accordingly have not
generated positive cash flow or made an operating profit. As of December 31, 2005, we had
an accumulated deficit of $51.0 million. We have incurred net losses of $13.0 million,
$13.0 million, and $8.5 million for the years ended December 31, 2005, 2004, and 2003,
respectively. We anticipate that we will continue to incur significant losses during 2006
and in the foreseeable future. We will not reach profitability until after successful
commercialization of one or more of our products. Even if one or more of our products are
profitably commercialized, the initial losses incurred by us may never be recovered. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We may need additional financing
in the future to fund the research and development of our products and to meet our ongoing
capital requirements.</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2005, we had cash
and cash equivalents (including short-term investments) of $40.4 million and working
capital of approximately $39.3 million. We anticipate that we may need additional
financing in the future to fund research and development and to meet our ongoing capital
requirements. The amount of future capital requirements will depend on many factors,
including continued scientific progress in our drug discovery and development programs,
progress in our pre-clinical and clinical evaluation of drug candidates, time and expense
associated with filing, prosecuting and enforcing our patent claims and costs associated
with obtaining regulatory approvals. In order to meet such capital requirements, we will
consider contract fees, collaborative research and development arrangements, and
additional public or private financings (including the incurrence of debt and the issuance
of additional equity securities) to fund all or a part of particular programs as well as
potential partnering or licensing opportunities. There can be no assurance that additional
funding will be available or, if available, that it will be available on acceptable terms.
If adequate funds are not available on terms favorable to us, we may have to reduce
substantially or eliminate expenditures for research and development, testing, production
and marketing of our proposed product, or obtain funds through arrangements with corporate
partners that require us to relinquish rights to certain of our technologies or product.
There can be no assurance that we will be able to raise additional capital if our current
capital resources are exhausted. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>The cost of director and officer
liability insurance may increase substantially and may affect our ability to retain
quality directors and officers</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We carry liability insurance on
behalf of our directors and officers. Given a number of large director and officer
liability insurance claims in the U.S. equity markets, director and officer liability
insurance has become increasingly more expense with increased restrictions. Consequently,
there is no assurance that we will continue to be offered this insurance or be able to
obtain adequate coverage. The inability to acquire the appropriate insurance coverage will
limit our ability to attract and maintain directors and officers as required to conduct
our business. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are dependent on our
key employees and collaborators </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our ability to develop the product
will depend, to a great extent, on our ability to attract and retain highly qualified
scientific personnel and to develop and maintain relationships with leading research
institutions. Competition for such personnel and relationships is intense. We are highly
dependent on the principal members of our management staff, Dr. Thompson, Dr. Coffey, Mr.
Ball, Dr. Gill and Dr. Mettinger, as well as our advisors and collaborators, the loss of
whose services might impede the achievement of development objectives. The persons working
with us are affected by a number of influences outside of </FONT></P>
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<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>our control.  The loss of key
employees and/or key collaborators may affect the speed and success of product
development. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We presently carry key man insurance
in the amounts of $1,500,000,  $1,000,000 and $500,000 for Dr. Thompson,  Dr. Coffey and
Mr. Ball, respectively. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our share price may be
highly volatile </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Market prices for securities of
biotechnology companies generally are volatile. This increases the risk of securities
litigation. Factors such as announcements (publicly made or at scientific conferences) of
technological innovations, new commercial products, patents, the development of
proprietary rights, results of clinical trials, regulatory actions, publications,
quarterly financial results, our financial position, public concern over the safety of
biotechnology, future sales of shares by us or our current shareholders and other factors
could have a significant effect on the market price and volatility of the common shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We incur some of our expenses in
foreign currencies and therefore we are exposed to foreign currency exchange rate
fluctuations</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We incur some of our manufacturing,
clinical and consulting expenses in foreign currencies (to date mainly in the U.S. and the
UK). Over the past year the Canadian dollar has appreciated relative to these currencies
thereby decreasing the Canadian dollar equivalent. However, if this trend reverses, our
Canadian dollar equivalent costs will increase. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Also, as we expand to other foreign
jurisdictions there may be an increase in our foreign exchange exposure. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We earn interest income on our
excess cash reserves and is exposed to changes in interest rates</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We invest our excess cash reserves in
investment vehicles that provide a rate of return with little risk to principal. As
interest rates change the amount of interest income we earn will be directly impacted. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>We believe we are a passive
foreign investment company, which may have a material affect on U.S. holders.</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We believe we are a &#147;passive
foreign investment company&#148; (&#147;PFIC&#148;), which may have a material affect on
U.S. holders. United States income tax legislation contains rules governing PFICs, which
can have significant tax effects on U.S. holders of foreign corporations. A U.S. holders
who holds stock in a foreign corporation during any year in which such corporation
qualifies as a PFIC is subject to United States federal income taxation under one of two
alternative tax regimes at the election of each such U.S. holders. The U.S. federal income
tax consequences to a U.S. holder of the acquisition, ownership, and disposition of Common
Shares will depend on whether such U.S. holder makes an election to treat the Company as a
&#147;qualified electing fund&#148; or &#147;QEF&#148; under Section&nbsp;1295 of the Code
(a &#147;QEF Election&#148;) or a mark-to-market election under Section&nbsp;1296 of the
Code (a &#147;Mark-to-Market Election&#148;). You should consult your tax advisor as to
the consequences of acquiring, owning or disposing of our Common Shares. </FONT></P>
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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ADDITIONAL INFORMATION </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Legal Proceedings </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are not aware of any material
legal proceedings nor are we aware of any such proceedings being contemplated. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<A NAME=A086></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest of Management
and Others in Material Transactions </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other than as discussed herein, there
are no material interests, direct or indirect, of directors, executive officers, senior
officers, or any direct or indirect shareholder of ours who beneficially owns, or who
exercises control over, more than 10% of our outstanding common shares or any known
associate or affiliate of such persons, in any transaction within the three most recently
completed financial years or during the current financial year that has materially
affected or will materially affect us. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<A NAME=A087></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Transfer Agent and
Registrar </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The transfer agent and registrar for
our common shares is Computershare Trust Company of Canada at its principal offices in
Calgary, Alberta and Toronto, Ontario. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<A NAME=A088></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Material Contracts </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other than as discussed herein, there
are no material contracts, other than contracts entered into in the ordinary course of
business, that are material to us that were entered into within the most recently
completed financial year, or before the most recently completed financial year but are
still in effect. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<A NAME=A089></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interests of Experts </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Ernst &amp; Young LLP, Chartered
Accountants, have audited our financial statements for the year ended December 31, 2005,
as set forth in our Annual Report. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As at the date hereof, the partners
and associates of Ernst &amp; Young LLP, Chartered Accountants, our independent auditors,
as a group did not beneficially own any of our outstanding common shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<A NAME=A090></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>External Auditor Service
Fees </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During the financial years ended
December 31, 2005, 2004 and 2003, Ernst &amp; Young LLP received the following fees: </FONT></P>


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<TR VALIGN=Bottom>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
December 31,</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Item</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2003<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Audit fees</FONT></TD>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>63,500</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>60,460</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>44,600</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Audit-related fees (1),(3),(4)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20,250</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33,354</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34,062</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax fees (2)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,048</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,150</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,946</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All other fees</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
</TABLE>
<BR><BR>




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<BR>




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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-34- </FONT></P>
<BR><BR>





<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><U>Notes</U>: </FONT> </H1>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Includes
review of interim financial statements, accounting consultations and subscription to
on-line accounting.  </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Comprised
of tax return preparation, scientific research and development return and other tax
consultation fees.  </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Includes
fees associated with matters relating to the prospectus offerings in 2004 and 2003.  </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Includes
fees associated with preliminary internal control work for Sarbanes Oxley Section 404.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Audit Fees</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Audit fees were for professional
services rendered by Ernst &amp; Young, LLP for the audit of our annual financial
statements and services provided in connection with statutory and regulatory filings or
engagements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Audit-Related Fees</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Audit-related fees were for assurance
and related services reasonably related to the performance of the audit or review of the
annual statements and are not reported under the heading Audit Fees above. These services
consisted of accounting consultations, assistance with prospectus filings and assistance
with preparations for compliance with section 404 of the <I>Sarbanes-Oxley Act of
2002</I>. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Tax Fees</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax fees were for tax compliance and
professional tax consultations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>All Other Fees</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There were no fees paid to Ernst
&amp; Young, LLP that would be considered All Other Fees in 2004 or 2003. Fees to be
disclosed under this category would be for products and services other than those
described under the headings Audit Fees, Audit-Related Fees and Tax Fees above. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other Additional
Information </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Additional information, including
information as to our directors&#146; and officers&#146; remuneration and indebtedness,
principal holders of our securities, options to purchase securities and interests of
insiders in material transactions is contained in our Information Circular for our most
recent annual meeting of shareholders that involved the election of directors, which is
incorporated herein by reference and forms an integral part of this Annual Information
Form. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Additional financial information is
contained in our financial statements for the year ended December 31, 2005 and under the
heading &#147;Management&#146;s Discussion and Analysis of Financial Conditions and
Results of Operations&#148; in our 2005 Annual Report, which are incorporated herein by
reference and form an integral part of this Annual Information Form. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The documents referred to above as
well as additional information relating to us is available through the Internet on the
Canadian System for Electronic Document Analysis and Retrieval (&#147;SEDAR&#148;) at
www.sedar.com. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Alternatively, a request for any
documents referred to above may be made to the Chief Financial Officer, Oncolytics Biotech
Inc., Suite 210, 1167 Kensington Crescent N.W., Calgary, Alberta, Canada, T2N 1X7 or by
telecopier at (403) 283-0858.</B> </FONT></P>
<BR><BR>



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<BR>




<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-35- </FONT></P>
<BR><BR>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>GLOSSARY </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><I>In this Annual Information Form,
unless the context otherwise requires, the following words and phrases shall have the
meaning set forth below:</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>ABCA </B>&#151; <I>Business
Corporations Act</I> (Alberta), as amended. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<A NAME=A100></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ACB </B>&#151; Alberta Cancer
Board. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Activating mutations </B>&#151; a
type of genetic mutation that results in a particular protein being active in the absence
of an appropriate stimuli. This type of mutation typically leads to the development of a
cancerous transformation of a cell. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Adjuvant therapy </B>&#151; a form
of therapy that is to be used in conjunction with one or more addition therapies. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Alberta Heritage Foundation
</B>&#150; the Alberta Heritage Foundation for Medical Research. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Animal model </B>&#151; a human
disease given to an animal which exhibits similar or identical characteristics to this
disease in humans. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Appropriate Regulatory Authority
</B> &#151; means (a) Health Canada, (b) the Food and Drug Administration in the United
States, or (c) the comparable authorities in the following countries or areas: United
Kingdom, France, Germany, Japan, Benelux. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Asymptomatic </B>&#151; without
any signs or symptoms. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Cancer </B>&#151; a heterogeneous
group of diseases that is characterized by the uncontrolled or aberrant growth of cells.
In addition to the uncontrolled growth of these tumour cells, these cells are able to
invade and colonize other sites in the body; by definition these tumours are malignant. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Carcinomas </B>&#151; a type of
cancer that arises from epithelial tissue. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Cellular proliferative disorder </B>&#151;
a heterogeneous group of disease characterized by the uncontrolled or aberrant growth of
cells; is distinct from cancer in that it does not necessarily imply a malignant state. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Clinical Trial Agreement
</B>&#151; the agreement among Oncolytics Biotech Inc., Dr. Don Morris and the ACB dated
May 1, 1999, providing for, among other things, a repayable grant of $200,000 to us to
offset the future REOLYSIN&reg; clinical trial expenditures. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Cytostatic </B>&#151; any drug or
agent that is capable of preventing a cell&#146;s growth and division. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Cytotoxic </B>&#151; any drug or
agent that is capable of causing cell death. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Differentiation </B>&#151; a form
of growth; a process whereby a cell develops different or more advanced processes than
were possessed by the cell before. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Epidermal growth factor </B>&#151;
a compound that promotes the growth of cells. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Epidermal growth factor receptor
</B>&#151; the cellular receptor that interacts with the epidermal growth factor; a
particular family of receptor tyrosine kinase. </FONT></P>
<BR><BR>


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<BR>



<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-36- </FONT></P>
<BR><BR>



<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Epithelial </B>&#151; the tissue
that forms the outer layer of the body surface or the tissue that lines the gut or other
hollow structure. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Etiology </B>&#151; the reason or
causation of an illness, disease or disorder. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<A NAME=A102></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>FDA </B>&#151; the Food and
Drug Administration </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Gastrointestinal tract </B>&#151;
within the digestive system including the stomach, intestine, and all accessory organs. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Glioblastoma </B>&#151; a specific
form of cancer derived from brain tissue. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Gliomas </B>&#151; a specific form of
cancer derived from brain tissue. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Good Manufacturing Practices
</B>&#151; the current regulatory requirements and standards regarding quality assurance
procedures to be adhered to in the manufacturing of therapeutic products established and
monitored by various governments including Canada and the United States. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Growth factor receptor </B>&#151;
a form of receptor that interacts with growth factors. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>HER2/neu/ErbB2 </B>&#151; a form
of receptor tyrosine kinase that is frequently overexpressed in breast cancers. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Immune competent </B>&#151; an
animal with a fully functional immune system; an animal that can mount a response to a
foreign or infectious agent. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Immuno-compromised </B>&#151; an
animal that is lacking an immune system. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Investigational New Drug
Submission (or IND) </B>&#151; documentation filed with government agencies responsible
for evaluating and licensing pharmaceutical drugs. This documentation is necessary for the
initiation of clinical trials. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B><I>In Vivo</I> </B>&#151; in the
living body. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Lesion </B>&#151; a morbid change
in the functioning or texture of an organ or tissue. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Metastasis </B>&#151; the process whereby
a tumour cell is able to leave the original tumour mass and spread to secondary sites in
the body forming additional tumour sites. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Mitogenic </B>&#151; a drug or
agent that promotes cellular division or growth. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Neoplasia</B> &#151; a group of
diseases characterized by uncontrolled cell growth, including, but not limited to, cancer. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Nucleus </B>&#151; an organelle in
the cell that contains genetic material. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Oncology </B>&#151; the study and
treatment of cancer and tumours. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Patent Cooperation Treaty or PCT
</B>&#151; an international patent treaty, of which Canada is a signatory, whereby a
single international patent application can be filed in the applicant&#146;s or
inventor&#146;s home country for possible protection of intellectual property in over 100
PCT member countries. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>PKR (or double stranded RNA
dependent protein kinase)</B> &#151; a host protein that plays a key role in mediating the
cell&#146;s antiviral activity. </FONT></P>
<BR><BR>



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<BR>



<!-- MARKER FORMAT-SHEET="Head Minor Center" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>-37- </FONT></P>
<BR><BR>



<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Platelet-derived growth factor
receptor (PDGFR) </B>&#151; the cellular receptor that interacts with the platelet-derived
growth factor; a particular family of receptor tyrosine kinase. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Ras </B>&#151; a cellular protein
that is a key relay in the transmission of growth signals from the outside of the cell to
the cell&#146;s nucleus. In a noncancerous cell, Ras is activated in the presence of an
appropriate growth signal. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Receptor </B>&#151; a cellular
structure, usually found on the cell surface, that can interact with a certain compound to
elicit a specific type of cellular response. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Receptor tyrosine kinase (RTK)
</B>&#151; a type of host receptor that uses a particular residue for cellular signaling
to the nucleus. Mutation or overexpression of this type of receptor is frequently seen in
the development of a variety of cancers. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>REOLYSIN&reg; </B>&#151; is our
trademark for the human reovirus for the treatment of a specific disease. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Reovirus </B>&#151; a double
stranded RNA virus first identified in 1959. The name is an acronym for Respiratory
Enteric Orphan virus. The virus is given the designate of orphan virus since it is not
associated with a known disease state. For the purpose of this document, all reference to
reovirus is to reovirus type III Dearing. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Research Contract </B>&#151; an
agreement between Oncolytics Biotech Inc. and the Governors of the University of Calgary,
providing for the aggregate sum of $102,000 to be paid by us for a research project under
the direction and supervision of Dr. Patrick Lee. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Share Purchase Agreement
</B>&#151; the share purchase agreement among the Vendors, SYNSORB and Oncolytics Biotech
Inc. dated April 21, 1999 providing for the purchase by SYNSORB of all of our issued and
outstanding shares. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Signal Transduction </B>&#151; The
transmission of signals from the cell surface to the cell&#146;s nucleus. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>SYNSORB </B> &#151; SYNSORB Biotech Inc.
(now Iteration Energy Ltd. by name change formerly Hawker Resources Inc.), a
public Company incorporated under the ABCA. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Technology Commercialization
Agreement </B>&#151; the agreement between Oncolytics Biotech Inc. and the Alberta
Heritage Foundation dated February 9, 1999 providing for a repayable grant of $150,000 to
us to offset reovirus clinical trial expenditures. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>TCID50 &#151;</B>a measure of
viral particle concentration. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Toxicology </B>&#151; the
scientific determination of the quantity of a substance that is required to act adversely
in the body. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Tumour </B>&#151; an abnormal
growth of tissue whether benign or malignant. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><B>Vendors</B> &#151; Dr. Patrick
Lee, Dr. James Strong, Dr. Matthew Coffey, Dr. Bradley Thompson and University
Technologies International Inc. </FONT></P>
<BR><BR>




<!-- *************************************************************************** -->
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MB@`K`/@GPP7D?^PK$-(Y=R(@-S'J3CO6_10`V.-(HDCC4*B`*JCH`.@IU%%`
M&-=>$_#]Y>27<^C637,IS),(@KR?[Q'+?C6I:VMO96T=M:01P6\2[4BB0*JC
MT`'`J6B@`JM:Z=9V,ES):6L4+W,IFG:-0#(Y&"S>IX'-6:*`*MEIUEIPG%E:
MPVXN)FN)O*0+YDC?><XZDX'-6J**`"BBB@`JM9Z=9:=]H^QVL-O]IF:XF\M`
MOF2-]YSCJ3@9-6:*`"JL^G65U?6M[/:PR75IO^SS.@+1;AAMI[9'!JU10!1;
M1M,?5TU=M/MCJ4:%%NO*'FA>F-W7')_.KU%%`#719$9'4,C`AE89!'H:Q8?!
MOAJVD5X-"T^+:P=52!0BL#D$+C`.><XK<HH`*BN;:"\M9;6YB2:"9#')&XRK
KJ1@@CN"*EHH`K:?IUGI-C%8Z?:Q6MK$"(X8E"JN22<`>Y)_&BK-%`'__V3\_
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end
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2
<SEQUENCE>5
<FILENAME>ex_2.htm
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY>

<!-- MARKER FORMAT-SHEET="Para Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>EXHIBIT 2</B> </FONT> </P>
<BR>



<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial Statements </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="3"><B>Oncolytics Biotech Inc. <BR></B> </FONT>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">December 31, 2005 and 2004 </FONT> </P>
<BR><BR>




<!-- MARKER PAGE="sheet: 9; page: 9" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>STATEMENT OF
MANAGEMENT&#146;S RESPONSIBILITY </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Management is responsible for the
preparation and presentation of the financial statements, Management&#146;s Discussion and
Analysis (&#147;MD&amp;A&#148;) and all other information in the Annual Report. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In management&#146;s opinion, the
accompanying financial statements have been properly prepared with reasonable limits of
materiality and within the appropriately selected Canadian generally accepted accounting
principles and policies consistently applied and summarized in the financial statements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The MD&amp;A has been prepared in
accordance with the requirements of securities regulators as applicable to Oncolytics
Biotech Inc. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The financial statements and
information in the MD&amp;A generally include estimates that are necessary when
transactions affecting the current accounting period cannot be finalized with certainty
until future periods. Based on careful judgments by management, such estimates have been
properly reflected in the accompanying financial statements and MD&amp;A. The MD&amp;A
also includes information regarding the impact of current transactions and events, sources
of liquidity and capital resources and risks and uncertainty. Actual results in the future
may differ materially from our present assessment of this information because future
events and circumstances may not occur as expected. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Systems of internal controls,
including organizational and procedural controls and internal controls over financial
reporting, assessed as reasonable and appropriate in the circumstances, are designed and
maintained by management to provide reasonable assurance that assets are safeguarded from
loss or unauthorized use and to produce reliable records for financial purposes. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We, as the Chief Executive Officer
and Chief Financial Officer will certify to the our annual filings with the CSA and the
SEC as required in Canada by Multilateral Instrument 52-109 (certification of Disclosure
in Issuers&#146; Annual Interim Filings) and in the United States by the <I>Sarbanes-Oxley
Act.</I> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The external auditors conducted an
independent examination of corporate and accounting records in accordance with generally
accepted auditing standards to express their opinion on the financial statements. Their
examination included such tests and procedures as they considered necessary to provide
reasonable assurance that the financial statements are presented fairly. The external
auditors have full and free access to our Board of Directors and its Committees to discuss
audit, financial reporting and related matters. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Board of Directors is responsible
for ensuring that management fulfills its responsibilities for financial reporting and
internal control. The Board exercises this responsibility through the Audit Committee of
the Board. This Committee meets with management and the external auditors to satisfy
itself that management&#146;s responsibilities are properly discharged and to review the
financial statements and MD&amp;A before they are presented to the Board of Directors for
approval. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush Level 5" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>/s/ Brad Thompson<BR>
</I><BR>
Brad Thompson, PhD <BR>
Chairman, President and CEO </FONT>
</TD>
<TD WIDTH=50%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>/s/ Doug Ball<BR>
</I><BR>
Doug Ball, CA <BR>
Chief Financial Officer </FONT>
</TD>
</TR>
</TABLE>
<BR>
<BR>



<!-- MARKER PAGE="sheet: 10; page: 10" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>




<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>AUDITORS&#146; REPORT </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">To the Shareholders of<BR>
<B>Oncolytics Biotech Inc.</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have audited the balance sheets of
Oncolytics Biotech Inc. as at December 31, 2005 and 2004 and the statements of loss and
deficit and cash flows for each of the years in the three year period ended December 31,
2005 and for the cumulative period from inception on April 2, 1998. These financial
statements are the responsibility of the Company&#146;s management. Our responsibility is
to express an opinion on these financial statements based on our audits. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We conducted our audits in accordance
with Canadian generally accepted auditing standards and the standards of the Public
Company Accounting Oversight Board (United States).&nbsp;Those standards require that we
plan and perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. We were not engaged to perform an audit of the
Company&#146;s internal control over financial reporting. An audit includes consideration
of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company&#146;s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In our opinion, these financial
statements present fairly, in all material respects, the financial position of the Company
at December 31, 2005 and 2004 and the results of its operations and its cash flows for
each of the years in the three year period ended December 31, 2005 and the cumulative
period from inception on April 2, 1998 in accordance with Canadian generally accepted
accounting principles. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush Level 5" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Calgary, Canada<BR>
February 8, 2006</FONT></TD>
<TD WIDTH=50% align=right>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>/s/ Ernst &amp; Young LLP
</I></B><BR>
Chartered Accountants </FONT> </TD>
</TR>
</TABLE>
<BR>
<BR>



<!-- MARKER PAGE="sheet: 11; page: 11" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>BALANCE SHEETS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<A NAME=A012></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As at December 31 </FONT></P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2004<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=2>&nbsp;</TD>
     <TD COLSPAN=4><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=58% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>ASSETS</B> </FONT></TD>
     <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=14% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=14% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Current</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash and cash equivalents</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,511,357</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,408,516</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Short-term investments</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>36,894,810</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,510,707</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accounts receivable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>47,390</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>47,767</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Prepaid expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>540,368</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>250,365</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2>&nbsp;</TD>
     <TD COLSPAN=4><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>40,993,925</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>34,217,355</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Capital assets <I>[note 4]</I></B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>189,863</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>261,688</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Intellectual property <I>[note 5]</I></B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>5,110,538</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,997,598</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Investments <I>[notes 7 and 8]</I></B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2>&nbsp;</TD>
     <TD COLSPAN=4><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>46,294,326</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39,488,641</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2>&nbsp;</TD>
     <TD COLSPAN=4><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Current</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accounts payable and accrued liabilities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,692,481</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>949,258</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2>&nbsp;</TD>
     <TD COLSPAN=4><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Alberta Heritage Foundation loan <I>[note 6]</I></B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>150,000</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>150,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2>&nbsp;</TD>
     <TD COLSPAN=4><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Commitments and contingency <I>[notes 9 and 10]</I></B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Shareholders&#146; equity</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Share capital <I>[note 11]</I> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Authorized: unlimited</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Issued: 36,236,748 (2004 - 31,915,496)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>84,341,212</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>66,643,325</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Warrants <I>[note 11]</I> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>4,429,932</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,347,630</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Contributed surplus <I>[notes 2,7, 12 and 13]</I> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>6,413,243</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,349,139</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Deficit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(50,732,542</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(37,950,711</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=2>&nbsp;</TD>
     <TD COLSPAN=4><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>44,451,845</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>38,389,383</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2>&nbsp;</TD>
     <TD COLSPAN=4><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>46,294,326</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39,488,641</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=2>&nbsp;</TD>
     <TD COLSPAN=4><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR><BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>See accompanying notes</I> </FONT> </P>

</FONT></P>



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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=33%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
On behalf of the Board: </FONT></TD>

<TD WIDTH=33%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>/s/ Brad Thompson<BR>
</I><BR>

Director </FONT></TD>
<TD WIDTH=33%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>/s/ Doug Ball<BR>
</I><BR>

Director </FONT> </TD>
</TR>
</TABLE>
<BR>
<BR>


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<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>





<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>STATEMENTS OF LOSS AND
DEFICIT </FONT></H1>


<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the periods ended
December 31 </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2003<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Cumulative<BR>
from inception<BR>
on April&nbsp;2,<BR>
1998 to<BR>
December 31,<BR>
2005<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=46% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Revenue</B> </FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Rights revenue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>310,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Interest income</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>783,456</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>699,757</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>313,305</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,569,196</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>783,456</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>699,757</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>313,305</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,879,196</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Expenses</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Research and development <I>[note 10]</I> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>9,308,977</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>7,107,998</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,818,962</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>32,835,505</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Operating</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>3,084,897</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,803,669</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,449,478</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>13,090,691</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Stock based compensation <I>[note 12]</I> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>64,104</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,668,570</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>996,707</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,762,099</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Foreign exchange loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>253,608</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>358,068</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,881</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>613,578</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amortization - intellectual property</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>786,459</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>686,717</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>594,353</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,162,791</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amortization - capital assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>69,532</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>65,039</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>69,171</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>355,046</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>13,567,577</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>13,690,061</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>6,931,552</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>53,819,710</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Loss before the following:</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>12,784,121</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>12,990,304</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>6,618,247</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>49,940,514</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Gain on sale of BCY LifeSciences Inc. <I>[note 8]</I></B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(765</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(34,185</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(264,453</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(299,403</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Loss on sale of Transition Therapeutics Inc. <I>[note 8]</I></B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,156,685</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,156,685</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Loss before taxes</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>12,783,356</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>12,956,119</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>8,510,479</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>51,797,796</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Capital tax (recovery)</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(1,525</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>33,552</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>49,746</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Future income tax recovery <I>[note 15]</I></B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1,115,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Net loss for the year</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>12,781,831</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>12,956,119</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>8,544,031</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>50,732,542</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Deficit, beginning of year</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>37,950,711</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>24,994,592</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>16,450,561</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Deficit, end of year</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>50,732,542</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>37,950,711</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>24,994,592</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>50,732,542</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Basic and diluted loss per share <I>[note 14]</I></B> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(0.39)</B>  </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(0.45)</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(0.35)</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>



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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>See accompanying notes</I> </FONT> </P>
<BR><BR>



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<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR><BR>





<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>STATEMENTS OF CASH
FLOWS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the periods ended
December 31 </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=630>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2003<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Cumulative<BR>
from inception<BR>
on April&nbsp;2,<BR>
1998 to<BR>
December 31,<BR>
2005<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=41% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>OPERATING ACTIVITIES</B> </FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net loss for the year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(12,781,831</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(12,956,119</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(8,544,031</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(50,732,542</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Deduct non-cash items</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;Amortization - intellectual property</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>786,459</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>686,717</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>594,353</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,162,791</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;Amortization - capital assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>69,532</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>65,039</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>69,171</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>355,046</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1">&nbsp;&nbsp;&nbsp;Stock based compensation <I>[note 12]</I> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>64,104</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,668,570</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>996,707</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,762,099</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;Loss on sale of Transition Therapeutics Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,156,685</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,156,685</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1">&nbsp;&nbsp;&nbsp;Other non-cash items <I>[note 19]</I> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>224,508</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>379,895</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(261,572</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(773,148</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net changes in non-cash working</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1">&nbsp;&nbsp;&nbsp;capital <I>[note 19]</I> </FONT> </TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>584,766</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(69,065</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(489,051</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,092,999</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cash used in operating activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(11,052,462</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(9,224,963</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(5,477,738</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(40,976,070</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>INVESTING ACTIVITIES</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Intellectual property</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(1,033,035</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(958,809</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1,045,869</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(4,656,670</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Capital assets</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(61,309</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(15,230</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(50,729</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(587,511</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Purchase of short-term investments</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(22,195,253</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(6,777,179</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(18,111,608</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(47,084,040</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Redemption of short-term investments</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>6,656,746</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,114,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>9,770,746</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Investment in BCY LifeSciences Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>7,965</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>133,609</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>450,151</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>464,602</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Investment in Transition Therapeutics Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,552,695</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,532,343</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cash used in investing activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(16,624,886</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(4,503,609</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(16,205,360</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(39,560,530</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>FINANCING ACTIVITIES</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Alberta Heritage Foundation loan</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>150,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Proceeds from exercise of stock options and</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;warrants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>3,384,787</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>8,121,296</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>700,882</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>14,967,068</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Proceeds from private placements</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>15,395,402</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>6,223,763</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>9,844,700</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>38,137,385</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Proceeds from public offerings</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>9,150,902</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>5,459,399</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>30,793,504</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cash provided by financing activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>18,780,189</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>23,495,961</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>16,004,981</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>84,047,957</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Increase (decrease) in cash and cash equivalents</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;&nbsp;&nbsp;during the period</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(8,897,159</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>9,767,389</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(5,678,117</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,511,357</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Cash and cash equivalents, beginning of the</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;&nbsp;&nbsp;period</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>12,408,516</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,641,127</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>8,319,244</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Cash and cash equivalents, end of the period</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>3,511,357</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>12,408,516</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,641,127</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,511,357</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Cash interest received</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>993,097</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>459,757</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>187,843</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Cash taxes paid (net)</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,552</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>




<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>See accompanying notes</I> </FONT> </P>
<BR><BR>




<!-- MARKER PAGE="sheet: 14; page: 14" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>





<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. &nbsp;&nbsp;&nbsp;INCORPORATION AND
NATURE OF OPERATIONS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. (the
&#147;Company&#148; or &#147;Oncolytics&#148;) was incorporated on April 2, 1998 under the
Business Corporations Act (Alberta) as 779738 Alberta Ltd. On April 8, 1998, the Company
changed its name to Oncolytics Biotech Inc. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is a development stage
biopharmaceutical company that focuses on the discovery and development of pharmaceutical
products for the treatment of cancers that have not been successfully treated with
conventional therapeutics. The product being developed by the Company may represent a
novel treatment for Ras mediated cancers which can be used as an alternative to existing
cytotoxic or cytostatic therapies, as an adjuvant therapy to conventional chemotherapy,
radiation therapy, or surgical resections, or to treat certain cellular proliferative
disorders for which no current therapy exists. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2. &nbsp;&nbsp;&nbsp;BASIS OF FINANCIAL
STATEMENT PRESENTATION </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On April 21, 1999, SYNSORB Biotech
Inc. (&#147;SYNSORB&#148;) purchased all of the shares of the Company. In connection with
the acquisition, the basis of accounting for the assets and liabilities of Oncolytics was
changed to reflect SYNSORB&#146;s cost of acquiring its interest in such assets and
liabilities (i.e. reflecting SYNSORB&#146;s purchase cost in the financial statements of
the Company). The amount by which SYNSORB&#146;s purchase price exceeded the underlying
net book value of the Company&#146;s assets and liabilities at April 21, 1999 was
$2,500,000. Such amount has been credited to contributed surplus and charged to
intellectual property which will be amortized to income based on the established
amortization policies for such assets. Subsequent to April 21, 1999 SYNSORB&#146;s
ownership has been diluted through public offerings of the Company&#146;s common shares,
sales of the Company&#146;s shares by SYNSORB and a distribution of SYNSORB&#146;S
ownership interest in the Company to its shareholders <I>[note 7]</I>. As a result,
SYNSORB no longer has any ownership in the Company. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3. &nbsp;&nbsp;&nbsp;SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The financial statements of the
Company have been prepared in accordance with Canadian generally accepted accounting
principles. These policies are, in all material respects, in accordance with United States
generally accepted accounting principles except as disclosed in note 20. The financial
statements have, in management&#146;s opinion, been properly prepared within reasonable
limits of materiality and within the framework of the accounting policies summarized
below. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Use of estimates </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Because a precise determination of
many assets and liabilities is dependent upon future events, the preparation of financial
statements in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of expenses during the reporting periods.
Actual results could differ from those estimates and such differences could be
significant. Significant estimates made by management affecting the Company&#146;s
financial statements include the assessment of the net realizable value of long lived
assets and the amortization period of intellectual property. </FONT></P>
<BR><BR>




<!-- MARKER PAGE="sheet: 15; page: 15" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash and cash equivalents </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash and cash equivalents consists of
cash on hand and balances with the Company&#146;s bank including interest bearing deposits
earning an average interest rate of 2.9% (2004 &#150; 2.26%). </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Short-term investments </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Short-term investments consisting
primarily of bankers&#146; acceptances, treasury bills and bonds and are liquid
investments that are readily convertible to known amounts of cash and are subject to an
insignificant risk of changes in value and with original maturities less than two years at
the time of purchase, and are carried at the lower of amortized cost and market value.
Gains and losses on disposal of short-term investments are included in income in the
period of realization. Premiums or discounts are amortized over the remaining maturity of
the instrument and reported in interest income. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capital assets </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capital assets are recorded at cost.
Amortization is provided on bases and at rates designed to amortize the cost of the assets
over their estimated useful lives. Amortization is recorded using the declining balance
method at the following annual rates: </FONT></P>



<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->
<TABLE WIDTH=450 CELLPADDING=0 CELLSPACING=0 align=center>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=45%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Office equipment and furniture<BR>
Medical equipment             <BR>
Computer equipment            <BR>
Leasehold improvements
 </FONT></TD>
<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
20%                                      <BR>
20%                                      <BR>
30%                                      <BR>
Straight line over the term of the lease
 </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Intellectual property </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Costs relating to acquiring and
establishing intellectual property (mainly patents) are recorded at cost, net of
recoveries. Amortization of the intellectual property is on a straight-line basis over
seventeen years or estimated useful life (currently estimated to be ten years) and begins
on the earlier of a patent being granted or its utilization. The Company assesses
potential impairment of its intellectual property when any events that might give rise to
impairment are known to the Company by measuring the expected net recovery from products
based on the use of the intellectual property. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investments </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investments are accounted for at cost
and written down only when there is evidence that a decline in value that is other than
temporary has occurred. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Foreign exchange </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Transactions originating in foreign
currencies are translated into Canadian dollars at the exchange rate in effect at the date
of the transaction. Monetary assets and liabilities are translated at the year-end rate of
exchange and  non-monetary  items
are  translated at historic  exchange  rates.  Exchange gains and losses are included in
net loss for the year.</FONT></P>
<BR><BR>




<!-- MARKER PAGE="sheet: 16; page: 16" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR><BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>




<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research and development </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research costs are expensed as
incurred. Development costs that meet specific criteria related to technical, market and
financial feasibility will be capitalized. To date, all of the development costs have been
expensed. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss per common share </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic loss per share is determined
using the weighted average number of common shares outstanding during the period. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company uses the treasury stock
method to calculate diluted loss per share. Under this method, diluted loss per share is
computed in a manner consistent with basic loss per share except that the weighted average
shares outstanding are increased to include additional shares from the assumed exercise of
options and warrants, if dilutive. The number of additional shares is calculated by
assuming that any outstanding &#147;in the money&#148; options and warrants were exercised
at the later of the beginning of the period or the date of issue and that the proceeds
from such exercises were used to acquire shares of common stock at the average market
price during the reporting period. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock option plan </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has one stock option plan
(the &#147;Plan&#148;) available to officers, directors, employees, consultants and
suppliers with grants under the Plan approved from time to time by the Board of Directors.
Under the Plan, the exercise price of each option equals the market price of the
Company&#146;s stock on the date of grant in accordance with Toronto Stock Exchange
guidelines. Vesting is provided for at the discretion of the Board and the expiration of
options is to be no greater than ten years from the date of grant. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock based compensation </FONT></H1>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Officers, Directors and Employees </I></B><BR>
Effective January 1, 2003, the
Company prospectively adopted the fair value based method of accounting for employee
awards granted under its stock option plan (see note 12). The Company calculates the fair
value of each stock option grant using the Black Scholes Option Pricing Model and the fair
value is recorded over the option&#146;s vesting period on a straight line basis.
Previously, the intrinsic value method was used. The following tables provide pro forma
net loss and pro forma basic and diluted net loss per share had compensation expense, for
awards granted in 2002, been based on the fair value method of accounting for stock based
compensation: </FONT> </P>
<BR><BR>




<!-- MARKER PAGE="sheet: 17; page: 17" -->
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<BR><BR>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2003<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=54% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reported net loss</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,781,831</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,956,119</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,544,031</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Compensation expense</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>983</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,425</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>46,533</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pro forma net loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,782,814</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,960,544</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,590,564</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reported basic and diluted net loss per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.39</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.45</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.35</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pro forma basic and diluted net loss per share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.39</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.45</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.35</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As this policy has been applied
prospectively, comparative information has not been restated. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Non-employees</I></B><BR>
Stock based compensation to
non-employees is recorded at the fair market value based on the fair value of the
consideration received, or the fair value of the equity instruments granted, or
liabilities incurred, whichever is more reliably measurable, on the earlier of the date at
which a performance commitment is reached, performance is achieved, or the vesting date of
the options. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Future income taxes </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company follows the liability
method of accounting for income taxes. Under the liability method, future income taxes are
recognized for the difference between financial statement carrying values and the
respective income tax basis of assets and liabilities (temporary differences). Future
income tax assets and liabilities are measured using substantively enacted income tax
rates expected to apply in the years in which temporary differences are expected to be
recovered or settled. The effect on future income tax assets and liabilities of a change
in tax rates is included in income in the period of the change. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Newly Adopted Canadian
Accounting Standards </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>GAAP Hierarchy and
General Standards of Financial Statement Presentation </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2005, the Company adopted the new
CICA Handbook Sections 1100, &#147;Generally Accepted Accounting Principles,&#148; and
1400, &#147;General Standards of Financial Statement Presentation&#148;. Section 1100
describes what constitutes Canadian GAAP and its sources and provides guidance on sources
to consult when selecting accounting policies and determining appropriate disclosures when
a matter is not dealt with explicitly in the primary sources of generally accepted
accounting principles, thereby re-codifying the Canadian GAAP hierarchy. Section 1400
provides general guidance on financial statement presentation and further clarifies what
constitutes fair presentation in accordance with GAAP. The application of this standard
had no impact on the financial position or results of operations of the Company. </FONT></P>
<BR><BR>




<!-- MARKER PAGE="sheet: 18; page: 18" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>





<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Future Changes in
Accounting Policy </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-monetary Transactions </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2006, the Company will
prospectively adopt the new Canadian standard, Non-monetary Transactions, which requires
application of fair value measurement to non-monetary transactions determined by a number
of tests. The new standard is consistent with recently amended US standards. The Company
does not expect this standard to have a significant impact on its financial statements
upon adoption. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial Instruments </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On January 1, 2007, the Company will
prospectively adopt the new Canadian accounting standards for financial instruments and
comprehensive income. These new accounting standards will impact our accounting policy for
investment securities. The new rules will require the Company to classify these securities
as held-to-maturity or available-for-sale. Available-for-sale securities will be measured
at fair value with gains and losses recorded in a new section of shareholders&#146; equity
called other comprehensive income. There will be no change in accounting for
held-to-maturity securities. The Company does not expect these standards to have a
significant impact on its financial statements upon adoption as the Company&#146;s
short-term investments will be classified as held-to-maturity securities. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4. &nbsp;&nbsp;&nbsp;CAPITAL ASSETS </FONT></H1>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2005</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Cost</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Accumulated<BR>
Amortization</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Net Book<BR>
Value</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=41% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Medical equipment</FONT></TD>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>30,201</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>7,178</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>23,023</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Office equipment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>27,869</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>17,627</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>10,242</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Office furniture</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>91,080</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>49,840</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>41,240</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Computer equipment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>167,111</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>84,561</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>82,550</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Leasehold improvements</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>117,333</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>84,525</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>32,808</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>433,594</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>243,731</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>189,863</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR><BR>





<!-- MARKER PAGE="sheet: 19; page: 19" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2004</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Cost</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Accumulated<BR>
Amortization</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Net Book<BR>
Value</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=41% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Medical equipment</FONT></TD>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>191,502</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>82,498</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>109,004</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Office equipment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>29,576</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16,163</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13,413</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Office furniture</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>88,788</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43,046</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>45,742</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Computer equipment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>126,322</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>66,205</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>60,117</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Leasehold improvements</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>96,636</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>63,224</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33,412</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>532,824</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>271,136</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>261,688</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2005, the Company donated the
medical equipment used in its Canadian glioma clinical trial to the clinical trial site.
The amount of the donation was $66,069 and equates to the net book value of the medical
equipment donated. This amount has been recorded as a clinical trial cost within research
and development expenses. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5. &nbsp;&nbsp;&nbsp;INTELLECTUAL PROPERTY </FONT></H1>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2005</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Cost</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Accumulated<BR>
Amortization</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Net Book<BR>
Value</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=41% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Intellectual property</FONT></TD>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>8,273,328</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,162,790</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>5,110,538</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2004</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Cost</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Accumulated<BR>
Amortization</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Net Book<BR>
Value</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=41% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Intellectual property</FONT></TD>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,373,742</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,376,144</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,997,598</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6. &nbsp;&nbsp;&nbsp;ALBERTA HERITAGE
FOUNDATION LOAN </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has received a loan of
$150,000 from the Alberta Heritage Foundation for Medical Research. Pursuant to the terms
of the agreement, the Company is required to repay this amount in annual installments from
the date of commencement of sales in an amount equal to the lesser of: (a) 5% of the gross
sales generated by the Company; or (b) $15,000 per annum until the entire loan has been
paid in full. </FONT></P>
<BR><BR>





<!-- MARKER PAGE="sheet: 20; page: 20" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>




<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7. &nbsp;&nbsp;&nbsp;RELATED PARTY
TRANSACTIONS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On May 7, 2002, the shareholders of
SYNSORB and the Company approved an arrangement whereby the Company would release from
escrow 4,000,000 common shares held by SYNSORB. As consideration, SYNSORB provided the
Company with 1,500,000 common shares of BCY Life Sciences Inc. (&#147;BCY&#148;) along
with the rights to receive an additional 400,000 common shares of BCY upon the attainment
of certain milestones by BCY at no cash cost to the Company. The Company received 200,000
of these 400,000 common shares on November 27, 2002. These 1,700,000 common shares in BCY
were recorded as an investment at $170,000 based on the quoted market price of the BCY
common shares at that time with an offsetting credit recorded to contributed surplus. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8. &nbsp;&nbsp;&nbsp;INVESTMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On April 23, 2002, the Company
acquired 694,445 common shares of BCY, a public company, for $0.18 per share, and warrants
exercisable until April 23, 2004 to purchase up to 694,445 common shares in BCY at an
exercise price of $0.27 per share for total consideration of $127,123 (including costs of
$2,123). After this transaction and the transaction described in note 7, the Company held
a total of 2,394,445 BCY shares. During 2005, the Company sold 120,000 (2004 &#150;
697,945; 2003 &#150; 1,496,500) of its BCY shares for net cash proceeds of $7,965 (2004
&#150; $133,609; 2003 &#150; $450,151) recording a gain on sale of investment of $765
(2004 &#150; $34,185; 2003 &#150; $264,453). As at December 31, 2005, the Company&#146;s
remaining ownership in BCY was 80,000 common shares with a book value $4,800. These common
shares will be released from escrow in February 2006; consequently the remaining
investment in BCY has been reclassified as a short term investment. The warrants expired
out of the money. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On June 14, 2002, the Company
acquired 6,890,000 common shares of Transition Therapeutics Inc. (&#147;TTH&#148;), a
public company, through the issuance of 1,913,889 common shares of the Company from
treasury. The investment was recorded at $4,709,380 (including acquisition costs of
$20,352) based on the trading price of the Company&#146;s shares at the time of
acquisition. On June 6, 2003, the Company sold all of its 6,890,000 common shares of TTH
for net cash proceeds of $2,552,695 recording a loss on sale of investment of $2,156,685. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9. &nbsp;&nbsp;&nbsp;COMMITMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is committed to payments
totaling $1,138,000 during 2006 for activities related to its clinical trial program and
collaborations. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company is committed to monthly
rental payments (excluding the Company&#146;s portion of operating costs) of $7,453 under
the terms of a lease for office premises, which expires on May 31, 2011. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under a clinical trial agreement
entered into with the Alberta Cancer Board (&#147;ACB&#148;), the Company has agreed to
repay the amount funded under the agreement together with a royalty, to a combined maximum
amount of $400,000 plus an overhead repayment of $100,000, upon sales of a specified
product. The Company agreed to repay the ACB in annual installments in an amount equal to
the lesser of: (a) 5% of gross sales of a specified product; or (b) $100,000 per annum. </FONT></P>
<BR><BR>




<!-- MARKER PAGE="sheet: 21; page: 21" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>




<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>





<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10. &nbsp;&nbsp;&nbsp;CONTINGENCY </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During 1999, the Company entered into
an agreement that assumed certain obligations (the &#147;Assumption Agreement&#148;) in
connection with a Share Purchase Agreement (the &#147;Agreement&#148;) between SYNSORB and
the former shareholders of the Company to make milestone payments and royalty payments. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2005, a milestone
payment was still outstanding for $1.0 million, due within 90 days of the first receipt
from an Appropriate Regulatory Authority, for marketing approval to sell REOLYSIN&reg; to
the public or the approval of a new drug application for REOLYSIN&reg;. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This milestone payment, when payable,
will be accounted for as research and development expense and will not be deductible for
tax purposes. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition to the milestone payment,
payments may become due and payable in accordance with the Agreement upon realization of
sales of REOLYSIN&reg;. In 2003, the Company completed amendments and revisions to the
contingent obligations to its five founding shareholders with respect to these other
contingent payments. The amendments and revisions reduced the amount and clarified the
determination of potential obligations of the Company to these shareholders arising from
the Agreement and Assumption Agreement entered into in 1999. Also, on September 23, 2004,
the Company reached an agreement that further reduced its contingent payments to its
founding shareholders through the cancellation of a portion of these contingent payments
from one of its non-management founding shareholders. The consideration paid by the
Company consisted of $250,000 cash and 21,459 common shares valued at $150,000 and has
been recorded as research and development expense. The value of the common shares was
based on the closing market price on September 23, 2004. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As a result of the amendments and the
cancellation agreement, if the Company receives royalty payments or other payments as a
result of entering into partnerships or other arrangements for the development of the
reovirus technology, the Company is obligated to pay to the founding shareholders 11.75%
(formerly in 2003 &#150; 14.25% and 2002 &#150; 20%) of the royalty payments and other
payments received. Alternatively, if the Company develops the reovirus treatment to the
point where it may be marketed at a commercial level, the payments referred to in the
foregoing sentence will be amended to a royalty payment of 2.35% (formerly in 2003 &#150;
2.85% and 2002 &#150; 4%) of Net Sales received by the Company for such products. </FONT></P>
<BR><BR>




<!-- MARKER PAGE="sheet: 22; page: 22" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11. &nbsp;&nbsp;&nbsp;SHARE CAPITAL </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Authorized: </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unlimited number of common shares </FONT></P>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Issued:</FONT></TH>
     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Shares</FONT></TH>
     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Warrants</FONT></TH></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Number</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Amount<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Number</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Amount<BR>
$</FONT></TH>
</TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance, December 31, 1998</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,145,300</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued on exercise of stock options</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>76,922</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>77</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,222,222</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>81</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>July 29, 1999 share split (a)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>6,750,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>81</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued for cash pursuant to July 30, 1999 private</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;placement (net of share issue costs of $45,000) (b)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,500,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>855,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued for cash pursuant to August 24, 1999 private</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;placement</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,399,997</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,049,998</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued on initial public offering (net of share issue</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;costs of $317,897) (c)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4,000,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,082,103</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued for cash pursuant to exercise of share purchase</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;warrants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>20,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>15,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance, December 31, 1999</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>13,669,997</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>5,002,182</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued on exercise of stock options and warrants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>573,910</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>501,010</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued for cash pursuant to July 17, 2000 private</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;placement (d)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>244,898</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,998,645</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued on public offering (net of share issue costs of</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;$998,900) (e)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,000,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>13,101,100</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance, December 31, 2000</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>17,488,805</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>21,602,937</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued on exercise of stock options and warrants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,702,590</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,210,016</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance, December 31, 2001</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>19,191,395</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>23,812,953</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued on exercise of stock options</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>40,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>34,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued on acquisition of the interest in Transition</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1">&nbsp;&nbsp;&nbsp;Therapeutics Inc. <I>[note 8]</I> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,913,889</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4,689,028</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued for cash pursuant to December 11, 2002 private</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;placement (f)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,000,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,896,714</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>550,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>114,286</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Share issue costs</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(241,123</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
</TABLE>
<BR><BR>





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<BR>




<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Issued:</FONT></TH>
     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Shares</FONT></TH>
     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Warrants</FONT></TH></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Number</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Amount<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Number</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Amount<BR>
$</FONT></TH>
</TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance, December 31, 2002</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>22,145,284</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>30,191,572</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>550,000</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>114,286</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued for cash pursuant to February 10, 2003 private</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;placement (g)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>140,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>265,540</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>77,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>16,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued for cash pursuant to June 19, 2003 private</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;placement (h)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,120,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>5,912,113</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,272,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>543,287</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued for cash pursuant to August 21, 2003 private</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;placement (i)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,363,900</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,801,778</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>813,533</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>349,176</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued for cash pursuant to October 14, 2003 public</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;offering (j)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,200,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>5,528,972</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>720,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>617,428</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercise of options</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>64,700</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>149,615</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercise of warrants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>174,378</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>593,194</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(174,378</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(41,927</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Share issue costs</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1,730,195</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance, December 31, 2003</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>27,208,262</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>44,712,589</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,258,155</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,598,250</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued for cash pursuant to April 7, 2004 private</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;placement(k)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,077,100</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>5,924,050</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>646,260</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,028,631</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued for cash pursuant to pursuant to November 23, 2004</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;public offering(l)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,504,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>8,693,120</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>864,800</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,521,672</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued pursuant to cancellation of contingent</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>payment [note 10]</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>21,459</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>150,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercise of warrants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,907,175</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>8,178,546</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1,907,175</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(798,096</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Expired warrants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,827</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(6,700</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2,827</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercise of options</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>197,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>778,951</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Share issue costs</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1,796,758</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance, December 31, 2004</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>31,915,496</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>66,643,325</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,855,340</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,347,630</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Issued for cash pursuant to December 29, 2005 private</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;placement(m)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,200,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>14,176,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,920,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,908,800</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercise of warrants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>771,252</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,417,271</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(771,252</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(329,984</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Expired warrants</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,496,514</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1,219,288</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1,496,514</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercise of options</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>350,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>297,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Share issue costs</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1,689,398</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance, December 31, 2005</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>36,236,748</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>84,341,212</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,784,800</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4,429,932</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR><BR>

<!-- MARKER PAGE="sheet: 24; page: 24" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>



<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant
to subsection 167(1)(f) of the Business Corporations Act (Alberta), the
          Articles of the Company were amended by subdividing the 2,222,222 issued and
          outstanding common shares of the Company into 6,750,000 common shares.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(b)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant
to a private placement, 1,500,000 common share purchase warrants were           issued
entitling the holders thereof to acquire one additional share at $0.75           per
share until November&nbsp;8, 2001. At December 31, 2001, all of the warrants
          had been exercised.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(c)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant
to the initial public offering, the agent was issued common share           purchase
warrants entitling it to acquire 400,000 common shares at $0.85 per           share until
May 8, 2001. At December 31, 2001, all of the warrants had been           exercised.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(d)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant
to the private placement, 244,898 common shares were issued at an issue           price
of $12.25 per share net of issue costs of $1,355.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(e)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant
to a special warrant offering, the Company sold 3,000,000 special           warrants for
$4.70 per warrant for net proceeds of $13,101,100. Each warrant           entitled the
holder to one common share upon exercise. At December 31, 2001, all           of the
warrants had been exercised.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(f)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant
to a private placement, 1,000,000 units were issued at an issue price           of $2.00
per unit net of issue costs of $241,123. Each unit included one common           share
(ascribed value of $1.897) and one-half of one common share purchase           warrant
(ascribed value of $0.103) for a total of 500,000 warrants. Each whole           common
share purchase warrant entitles the holder to acquire one common share in           the
capital of the Company upon payment of $3.00 per share until June 11, 2004.           In
addition, the Company issued 50,000 common share purchase warrants on the           same
terms to the brokerage firm assisting with the transaction. The ascribed           value
of these broker warrants was $11,000 ($0.22 per broker warrant) and has           been
included in the issue costs. The ascribed values of the warrants were based           on
the Black Scholes Option Pricing Model.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(g)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant
to a private placement, 140,000 units were issued at an issue price of           $2.00
per unit net of issue costs of $37,369. Each unit included one common           share
(ascribed value of $1.897) and one-half of one common share purchase           warrant
(ascribed value of $0.103) for a total of 70,000 warrants. Each whole           common
share purchase warrant entitles the holder to acquire one common share in           the
capital of the Company upon payment of $3.00 per share until August 10,           2004.
In addition, the Company issued 7,000 common share purchase warrants on           the
same terms to the brokerage firm assisting with the transaction. The           ascribed
value of these broker warrants was $1,540 ($0.22 per broker warrant)           and has
been included in the issue costs. The ascribed values of the warrants           were
based on the Black Scholes Option Pricing Model.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(h)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant
to a private placement, 2,120,000 units were issued at an issue price           of $3.00
per unit net of issue costs of $637,986. Each unit included one common           share
(ascribed value of $2.789) and one-half of one common share purchase           warrant
(ascribed value of $0.211) for a total of 1,060,000 warrants. Each whole           common
share purchase warrant entitles the holder to acquire one common share in           the
capital of the Company upon payment of $4.00 per share until December 19,           2004.
In addition, the Company issued 212,000 common share purchase warrants on           the
same terms to the brokerage firms assisting with the transaction. The           ascribed
value of these broker warrants was  </FONT></TD>
</TR>
</TABLE>
<BR>



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<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>




<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
$95,400
($0.45 per broker warrant) and has been included in the issue costs. The ascribed values
of the warrants were based on the Black Scholes Option Pricing Model.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(i)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant
to a private placement, 1,363,900 common shares and 681,943 common           share
purchase warrants were issued for gross proceeds of $4,091,738. Each           common
share and whole common share purchase warrant have ascribed values of           $2.787
and $0.425 respectively. Each common share purchase warrant entitles the           holder
to acquire one common share in the capital of the Company upon payment of           $4.00
per share until February 21, 2005. Share issue costs related to this           private
placement were $367,839. In addition, the Company issued 131,590 common           share
purchase warrants on the same terms to the advisors assisting with the
          transaction. The ascribed value of these additional warrants was $59,216 ($0.45
          per additional warrant) and has been included in the issue costs. The ascribed
          values of the warrants were based on the Black Scholes Option Pricing Model.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(j)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant
to a public offering, 1,200,000 units were issued at an issue price of           $5.00
per unit net of issue costs of $687,001. Each unit included one common           share
(ascribed value of $4.607) and one-half of one common share purchase           warrant
(ascribed value of $0.393) for a total of 600,000 warrants. Each whole           common
share purchase warrant entitles the holder to acquire one common share in           the
capital of the Company upon payment of $6.25 per share until April 14, 2005.           In
addition, the Company issued 120,000 common share purchase warrants with an
          exercise price of $5.00 that expires on April 14, 2005 to the brokerage firms
          assisting with the transaction. The ascribed value of these broker warrants was
          $146,400 ($1.19 per broker warrant) and has been included in the issue costs.
          The ascribed values of the warrants were based on the Black Scholes Option
          Pricing Model.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(k)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant
to a private placement, the Company sold 1,077,100 units at an average           price of
$6.25 per unit for gross cash proceeds of $6,731,875. The units were           comprised
of 1,077,100 common shares and 538,550 common share purchase warrants           and have
ascribed values of $5.50 and $1.50 respectively. Each common share           purchase
warrant entitles the holder to acquire one common share in the capital           of the
Company upon payment of $7.75 per share until October 7, 2005. Share           issue
costs related to the private placement were $728,918. In addition, the           Company
issued 107,710 common share purchase warrants to its advisor entitling           the
holder to acquire one common share of the capital of the Company upon           payment
of $7.00 per share until October 7, 2005. The ascribed value of these
          additional warrants was $220,806 ($2.05 per additional warrant) and has been
          included in the share issue costs above. The ascribed values of the warrants
          were based on the Black Scholes Option Pricing Model.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(l)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant
to a public offering, the Company sold 1,504,000 units at an issue           price of
$6.65 per unit for gross cash proceeds of $10,001,600. Each unit           included one
common share (ascribed value of $5.78) and one-half of one common           share
purchase warrant (ascribed value of $0.87) for a total of 752,000           warrants.
Each whole common share purchase warrant entitles the holder to           acquire one
common share in the capital of the Company upon payment of $8.00 per           share
until November 23, 2007. Share issue costs related to this public offering           were
$ 1,063,890. In addition, the Company issued 112,800 common share purchase
          warrants with an exercise price of $7.06 that expires on May 23, 2006 to the
          brokerage firm assisting with the transaction. The ascribed value of these
          broker warrants was $213,192 ($1.89 per broker warrant) and has been included
in           the share issue costs above. The ascribed values of the warrants were based
on           the Black Scholes Option Pricing Model.  </FONT></TD>
</TR>
</TABLE>
<BR>




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<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>





<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(m)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pursuant
to a private placement, 3,200,000 units were issued at an issue price           of $5.15
per unit net of issue costs of $1,689,398. Each unit included one           common share
(ascribed value of $4.43) and one-half of one common share purchase           warrant
(ascribed value of $0.72) for a total of 1,600,000 warrants. Each whole           common
share purchase warrant entitles the holder to acquire one common share in           the
capital of the Company upon payment of $6.15 per share until December 29,           2008.
In addition, the Company issued 320,000 common share purchase warrants           with an
exercise price of $5.65 expiring on December 29, 2008. The ascribed           value of
these broker warrants was $604,800 ($1.89 per broker warrant) and has           been
included in the issue costs. The ascribed values of the warrants were based           on
the Black Scholes Option Pricing Model.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table summarizes the
Company&#146;s outstanding warrants as at December 31, 2005: </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=650>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Exercise<BR>
Price</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Outstanding,<BR>
Beginning of<BR>
the Year</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Granted<BR>
During the<BR>
Year</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Exercised<BR>
During the<BR>
Year</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Expired<BR>
During the<BR>
Year</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Outstanding,<BR>
End of Year</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Weighted<BR>
Average<BR>
Remaining<BR>
Contractual<BR>
Life (years)</FONT></TH></TR>
<TR>
     <TD COLSPAN=14><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>.00</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>768,972</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>768,972</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>.00</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>45,558</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,280</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>43,278</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>.65</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>320,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>320,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3.00</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>.15</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,600,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,600,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3.00</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>.25</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>529,750</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>529,750</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>.00</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>107,710</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>107,710</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>.06</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>112,800</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>112,800</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>0.40</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>.75</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>538,550</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>538,550</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>.00</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>752,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>752,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1.90</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=14><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,855,340</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,920,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>771,252</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,219,288</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,784,800</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2.60</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD></TR>
<TR>
     <TD COLSPAN=14><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR><BR>





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<BR>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>



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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12. &nbsp;&nbsp;&nbsp;STOCK BASED
COMPENSATION </FONT></H1>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock Option Plan </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company has issued stock options
to acquire common stock through its stock option plan of which the following are
outstanding at December 31: </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2005</FONT></TH>
     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2004</FONT></TH></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Stock<BR>
Options</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Weighted<BR>
Average Share<BR>
Price<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Stock<BR>
Options</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Weighted<BR>
Average Share<BR>
Price<BR>
$</FONT></TH>
</TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=30% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Outstanding at beginning of year</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>3,805,550</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>4.39</B> </FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,800,800</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3.81</FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Granted during year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>200,000</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>3.18</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,202,250</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>5.63</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cancelled during year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(21,000</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Exercised during year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(350,000</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>0.85</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(197,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3.77</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=Black SIZE=1></TD>
     <TD COLSPAN=2>&nbsp;</TD>
     <TD COLSPAN=2><HR NOSHADE COLOR=Black SIZE=1></TD>
     <TD COLSPAN=2>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Outstanding at end of year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>3,634,550</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>4.66</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,805,550</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4.39</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=Black SIZE=2></TD>
     <TD COLSPAN=2>&nbsp;</TD>
     <TD COLSPAN=2><HR NOSHADE COLOR=Black SIZE=2></TD>
     <TD COLSPAN=2>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Options exercisable at end of year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>3,387,050</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>4.77</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,717,050</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4.41</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=Black SIZE=2></TD>
     <TD COLSPAN=2>&nbsp;</TD>
     <TD COLSPAN=2><HR NOSHADE COLOR=Black SIZE=2></TD>
     <TD COLSPAN=2>&nbsp;</TD></TR>
</TABLE>
<BR>




<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table summarizes
information about the stock options outstanding and exercisable at December 31, 2005: </FONT></P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=650>
<TR VALIGN=Bottom>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Range of<BR>
Exercise Price</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Number<BR>
Outstanding</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Weighted<BR>
Average<BR>
Remaining<BR>
Contractual<BR>
Life (years)</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Weighted<BR>
Average<BR>
Exercise<BR>
Price<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Number<BR>
Exercisable</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Weighted<BR>
Average<BR>
Exercise<BR>
Price<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=18% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$0.75 - $1.00</FONT></TD>
     <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>632,550</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3.8</FONT></TD>
        <TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>0.85</FONT></TD>
        <TD WIDTH=7% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>632,550</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>0.85</FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$1.65 - $2.37</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>281,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>6.9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1.85</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>246,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1.87</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$2.70 - $3.33</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>678,750</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>7.9</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3.10</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>478,750</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3.06</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$4.00 - $5.00</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,190,750</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>8.7</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4.89</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,178,250</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4.89</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$6.77 - $9.76</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>708,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>6.2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>8.66</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>708,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>8.66</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>$12.15 - $13.50</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>143,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4.8</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>12.63</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>143,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>12.63</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,634,550</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>6.4</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4.66</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,387,050</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4.77</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
</TABLE>
<BR>





<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As the Company is following the fair
value based method of accounting for stock option awards, compensation expense related to
options granted to employees and consultants was $43,886 (2004 &#150; $2,537,088; 2003
&#150; $812,711) and $20,218 (2004 &#150; $131,482; 2003 &#150; $102,466) respectively
with an offsetting credit to contributed surplus. </FONT></P>
<BR><BR>



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<BR>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>




<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The estimated fair value of stock
options issued during the year was determined using the Black-Scholes model using the
following weighted average assumptions and fair value of options: </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=49% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risk-free interest rate</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3.27%</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.83%</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.09%</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected hold period to exercise</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3.5 years</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 years</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 years</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Volatility in the price of the Company's shares</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>64%</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>71%</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>69%</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividend yield</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Zero</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Zero</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Zero</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average fair value of options</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>$&nbsp;&nbsp;1.51</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;2.26</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$&nbsp;&nbsp;1.47</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2002, the Company granted 48,000
share incentive rights to a non-employee which, when exercised by the holder, would
require payment in cash or shares, at the sole option of the Company for amounts in excess
of $2.31 based on the weighted average trading price for the ten trading days prior to the
exercise. The Company accounted for this transaction with a non-employee at fair value
determined using the Black-Scholes model. The related compensation expense recorded in
2003 was $81,530, with an offsetting credit to contributed surplus. During 2005, these
share incentive rights were surrendered. In accordance with generally accepted accounting
principles, no credit to expense was recorded as a result of the surrender. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13. &nbsp;&nbsp;&nbsp;CONTRIBUTED SURPLUS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following table summarizes the
change in contributed surplus for the period ending December 31: </FONT></P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004</FONT></TH></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=59% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance, beginning of year</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>6,349,139</B> </FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,699,425</FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock based compensation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>64,104</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,683,869</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exercise of stock options</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(34,155</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance end of year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>6,413,243</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,349,139</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>




<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14. &nbsp;&nbsp;&nbsp;LOSS PER COMMON SHARE </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss per common share is calculated
using the weighted average number of common shares outstanding for the year ended December
31, 2005 of 32,804,540 (2004 &#150; 29,028,391; 2003 &#150; 24,242,845). The effect of any
potential exercise of the Company&#146;s stock options and warrants outstanding during the
year has been excluded from the calculation of diluted earnings per share, as it would be
anti-dilutive. </FONT></P>
<BR><BR>




<!-- MARKER PAGE="sheet: 29; page: 29" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15. &nbsp;&nbsp;&nbsp;INCOME TAXES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The provision for income taxes
recorded in the financial statements differs from the amount which would be obtained by
applying the statutory income tax rate to the loss before tax as follows: </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=650>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2003<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=50% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss before taxes</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(12,783,356</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(12,956,119</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(8,510,479</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Statutory Canadian corporate tax rate</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>33.60</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>%</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33.87</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>36.75</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Anticipated tax recovery</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(4,295,208</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4,388,238</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(3,127,601</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-taxable portion of net capital loss (gain)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(129</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(16,717</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>347,698</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employee stock based compensation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>21,539</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>903,845</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>366,290</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cancellation of contingent payment obligation settled</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;in common shares</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>50,805</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Change in tax rate</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>102,309</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>242,119</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>272,506</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax return adjustment</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>78,995</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(43,509</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-deductible expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>8,113</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,976</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,739</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Change in valuation allowance (a)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>4,084,381</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,242,719</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,131,368</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Future income tax recovery</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(a)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As
of December 31, 2005, the Company has non-capital losses for income tax
          purposes of approximately $34,176,000, which are available for application
          against future taxable income and expire in 2006 ($663,000) 2007 ($1,033,000),
          2008 ($2,898,000), 2009 ($4,483,000), 2010 ($4,483,000), 2014 ($9,075,000) and
          2015 ($11,541,000) . In addition to the loss carry forward amounts above, the
          Company has scientific research and development claims and related investment
          tax credits of approximately $8,170,000 and $1,997,000 respectively as at
          December 31, 2005 which are available for application against future taxable
          income. The potential benefits resulting from these tax pools have been
          recognized in the financial statements only to the extent they are more likely
          than not of being realized.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The components of the Company&#146;s
future income tax asset are as follows: </FONT></P>
<BR><BR>



<!-- MARKER PAGE="sheet: 30; page: 30" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>




<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=650>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=69% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-capital loss carryforwards</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>11,483,387</B> </FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,010,356</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Scientific research and development</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2,745,133</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,113,447</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Investment tax credits</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,997,300</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,721,119</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net capital loss carryforwards</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>283,822</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>283,627</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Undepreciated capital costs in excess of book value of capital assets and</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;intellectual property</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>325,377</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,269</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Share issue costs</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>772,133</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>683,239</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Valuation allowance</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(17,607,152</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(12,834,057</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Future tax asset</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16. &nbsp;&nbsp;&nbsp;INDEMNIFICATION OF
OFFICERS AND DIRECTORS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company&#146;s corporate by-laws
require that, except to the extent expressly prohibited by law, the Company will indemnify
its officers and directors against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment reasonably incurred in respect of any
civil, criminal or administrative action or proceeding as it relates to their services to
the Company. The by-laws provide no limit to the amount of the indemnification. The
Company has purchased directors&#146; and officers&#146; insurance coverage to cover
claims made against the directors and officers during the applicable policy periods. The
amounts and types of coverage have varied from period to period as dictated by market
conditions. The Company believes that it has adequate insurance coverage; however there is
no guarantee that all indemnification payments will be covered under the Company&#146;s
existing insurance policies. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There is no pending litigation or
proceeding involving any officer or director of the Company as to which indemnification is
being sought, nor is the Company aware of any threatened litigation that may result in
claims for indemnification. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17. &nbsp;&nbsp;&nbsp;FINANCIAL INSTRUMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial instruments of the Company
consist of cash and cash equivalents, short term investments, accounts receivable,
investments, accounts payable, and the Alberta Heritage Foundation loan. As at December
31, 2005, there are no significant differences between the carrying values of these
amounts and their estimated market values. </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Credit risk </I></B><BR>
The Company is exposed to credit risk
on its short-term investments in the event of non-performance by counterparties, but does
not anticipate such non-performance. The Company mitigates its exposure to credit risk by
restricting its portfolio to investment grade securities with short term maturities and by
monitoring the credit risk and credit standing of counterparties. </FONT> </P>
<BR><BR>




<!-- MARKER PAGE="sheet: 31; page: 31" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>





<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Interest rate risk </I></B><BR>
The Company has exposure to interest
income risk through its short-term investments in fixed-income securities that are
sensitive to interest rate fluctuations. </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Foreign exchange risk </I></B><BR>
The Company purchases goods and
services denominated primarily in Canadian, U.S. and UK currencies. To manage its foreign
exchange risk, the Company, from time to time, acquires short-term investments denominated
in these securities. </FONT> </P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18. &nbsp;&nbsp;&nbsp;ECONOMIC DEPENDENCE </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company contracts the production
and currently receives its supplies of REOLYSIN&reg; from one toll manufacturer based in
the United Kingdom. There are a limited number of potential producers and suppliers of
REOLYSIN&reg;. As a result, any significant disruption of the services provided by this
toll manufacturer has the potential to delay the progress of the Company&#146;s clinical
trial program. Management is aware of and is taking actions to minimize this exposure. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19. &nbsp;&nbsp;&nbsp;ADDITIONAL CASH FLOW
DISCLOSURE </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net Change In Non-Cash
Working Capital </FONT></H1>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2003<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Cumulative from     <BR>
 inception on       <BR>
   April 2,         <BR>
   1998 to          <BR>
  December 31, 2005 </FONT></TH></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=35% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><I>Change in:</I> </FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accounts receivable</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>377</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>16,457</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(15,688</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(47,390</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Prepaid expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(290,003</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(93,528</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(79,679</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(540,368</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accounts payable and accrued liabilities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>743,223</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>64,330</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(378,192</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,692,481</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Change in non-cash working capital</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>453,597</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(12,741</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(473,559</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,104,723</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net change associated with investing activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>131,169</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(56,324</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(15,492</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(11,724</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net change associated with operating activities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>584,766</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(69,065</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(489,051</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,092,999</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
</TABLE>
<BR>
<BR>




<!-- MARKER PAGE="sheet: 32; page: 32" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>




<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>



<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Other Non-Cash Items</B> </FONT> </P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2003<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Cumulative from     <BR>
 inception on       <BR>
   April 2,         <BR>
   1998 to          <BR>
  December 31, 2005 </FONT></TH></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=35% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Foreign exchange loss</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>159,204</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>264,080</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,881</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>425,186</FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1">Donation of medical equipment <I>[note 4]</I> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>66,069</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>66,069</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Gain on sale of BCY LifeSciences Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(765</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(34,185</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(264,453</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(299,403</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Cancellation of contingent payment obligation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1">&nbsp;&nbsp;settled in common shares <I>[note 10]</I> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>150,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>150,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Future income tax recovery</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1,115,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>224,508</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>379,895</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(261,572</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(773,148</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20. &nbsp;&nbsp;&nbsp;RECONCILIATION OF
CANADIAN GAAP TO US GAAP </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The financial statements of the
Company are prepared in accordance with Canadian GAAP which, in most respects, conforms to
US GAAP. Significant differences between Canadian and US GAAP are as follows: </FONT></P>
<BR><BR>




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<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=650>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Year Ended December 31</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
    Cumulative from   <BR>
 inception on April 2,<BR>
 1998 to December <BR>
31,  2005</FONT></TH></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Notes<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2003<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=33% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net loss - Canadian GAAP</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=4% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>12,781,831</B> </FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>12,956,119</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>8,544,031</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>50,732,542</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Amortization of intellectual</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;property</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(361,500</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(361,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(361,500</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2,349,750</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Future income tax recovery</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1,115,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Net loss - US GAAP</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>12,420,331</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>12,594,619</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>8,182,531</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>49,497,792</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=12>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;Unrealized loss (gain) on</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;available-for-sale securities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(45,715</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2,423,699</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=12>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;Reclassification of unrealized</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;gain (loss) on available-for-sale</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;securities</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>45,715</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2,469,414</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2,423,699</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;Comprehensive loss - US GAAP</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>12,420,331</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>12,640,334</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>5,667,402</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>49,497,792</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;Basic and diluted loss per common</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;&nbsp;&nbsp;share - US GAAP</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>(0.38</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(0.43</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(0.34</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>There are no differences between
Canadian GAAP and US GAAP in amounts reported as cash flows from (used in) operating,
financing and investing activities. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance sheet items in accordance
with US GAAP are as follows: </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
December 31, 2005</FONT></TH>
     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
December 31, 2004</FONT></TH></TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Notes</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Canadian<BR>
GAAP</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
US<BR>
GAAP</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Canadian<BR>
GAAP</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
US<BR>
GAAP</FONT></TH>
</TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=27% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Intellectual property</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=5% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>5,110,538</B> </FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>3,845,288</B> </FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>4,997,598</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,370,848</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Investments</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>12,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>12,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Future income taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Contributed surplus</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>6,413,243</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>3,913,243</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>6,349,139</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>3,849,139</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Deficit</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>50,732,542</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>49,497,792</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>37,950,711</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>37,077,461</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Other comprehensive loss (income)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
</TABLE>
<BR>



<!-- MARKER PAGE="sheet: 34; page: 34" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>



<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#147;Push-Down&#148;Accounting
and In Process Research and Development</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Intellectual
property of $2,500,000 recorded as a consequence of SYNSORB&#146;s acquisition of the
Company&#146;s shares comprises intangible assets related to research and development
activities. Under US GAAP, this would not be capitalized on acquisition. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
As
a result of removing the $2,500,000 from intellectual property in 1999 for US GAAP
purposes, the amortization of the intellectual property, the future income tax recovery,
future income tax liability and contributed surplus amounts recorded for Canadian GAAP
purposes have been reversed. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Hang" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2.</B> </FONT> </TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&nbsp;</B> </FONT> </TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Unrealized
Gains and Losses on Investments</B> </FONT> </TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Under
U.S. GAAP, equity securities, having a readily determinable fair value and not classified
as trading securities, are classified as &#147;available-for-sale securities&#148; and
reported at fair value, with unrealized gains and losses included in comprehensive income
or loss and reported as a separate component of shareholders&#146; equity net of related
deferred income taxes. Declines in the fair value of individual available-for-sale
securities below their cost that are other than temporary result in write-downs of the
individual securities to their fair value. The related write-downs are included in
earnings as realized losses. Under Canadian GAAP, these securities are carried at cost and
written down only when there is evidence that a decline in value that is other than
temporary has occurred. </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock Based Employee
Compensation </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On January 1, 2003, the Company
prospectively adopted the fair value based method for its employee options (see note 3).
Consequently there were no differences between Canadian GAAP and U.S. GAAP with respect to
options granted subsequent to this date. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2002, the Company applied the
intrinsic value method for employee stock options and the fair value method for
non-employee options granted after January 1, 2002. Prior to January 1, 2002, for US GAAP,
the Company applied the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25, &#147;Accounting for Stock Issued to Employees&#148; and related
interpretations in accounting for its employee stock option plans. As well, the Company
provided pro forma disclosure as required by FAS 123 for those options granted prior to
January 1, 2002. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following additional pro-forma
disclosure would be provided under US GAAP with respect to the fair value of employee
options granted prior to January 1, 2002. The fair value for these options granted was
estimated at the date of grant using a Black-Scholes Option Pricing Model with the
following weighted-average assumptions: </FONT></P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Left WIDTH=400>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2001</FONT></TH></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=76% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risk free interest rate</FONT></TD>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.0%</FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividend yield</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0%</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Volatility factors of expected market price</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>87%</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average expected life of the options</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2 years</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
</TABLE>
<BR><BR><BR><BR><BR><BR><BR>




<!-- MARKER PAGE="sheet: 35; page: 35" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>


<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>



<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pro forma disclosures of loss and
loss per common share are presented below as if the Company had adopted the cost
recognition requirements under FAS 123 from inception. </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=100%>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=29% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=22% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pro forma - Canadian</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net Loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>GAAP</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>12,782,814</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,960,544</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,590,564</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As reported - US GAAP</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>12,420,331</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,594,619</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,182,531</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pro forma - US GAAP</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>12,421,314</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,599,044</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,236,440</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic and diluted net loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pro forma - Canadian</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>per common share</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>GAAP ($/share)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(0.39</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.45</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.35</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=10>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As reported - US GAAP</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(0.38</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.43</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.34</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pro forma - US GAAP</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>($/share)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(0.38</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.43</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.34</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR>
     <TD COLSPAN=10><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Additional Stock Based
Payment Disclosure </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As at December 31, 2005, the
aggregate intrinsic value of the stock options outstanding and the stock options
exercisable were $5,595,845 and $5,058,570, respectively. The total intrinsic value of the
options exercised in 2005 was $1,223,400 (2004 &#150; 1,253,014; and 2003 &#150; 195,715). </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A summary of the Company&#146;s
non-vested shares as of December 31, 2005 and changes during the year ended December 31,
2005 is as follows: </FONT></P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
2005</FONT></TH></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Stock <BR>
Options</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Weighted<BR>
Average Grant<BR>
Date Fair Value<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=#000000 SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=46% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-vested at beginning of year</FONT></TD>
     <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=16% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>88,500</B> </FONT></TD>
        <TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=16% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.06</FONT></TD>
        <TD WIDTH=8% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Granted during year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>200,000</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.51</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vested during year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(41,000</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.45</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Forfeited during year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=#000000 SIZE=1></TD>
     <TD COLSPAN=2>&nbsp;</TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-vested at end of year</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>247,500</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.36</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=#000000 SIZE=2></TD>
     <TD COLSPAN=2>&nbsp;</TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2005, there was
$335,750 of total unrecognized compensation costs related to non-vested stock options
granted under the Company&#146;s stock option plan. This cost is expected to be recognized
over a weighted average period of 2.12 years. The total fair value of shares vested during
the years ended December 31, 2005, 2004 and 2003 was $59,630, $8,250 and $nil,
respectively. </FONT></P>




<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company issues shares from
treasury to satisfy any exercises of stock options. </FONT></P>



<BR><BR>




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<BR>



<!-- MARKER FORMAT-SHEET="Head Major Center Bold 1" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Oncolytics Biotech Inc. </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Major Center Bold" FSL="Default" -->
<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>NOTES TO FINANCIAL
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>December 31, 2005 and 2004 </FONT></P>
<BR>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21. &nbsp;&nbsp;&nbsp;COMPARATIVE FIGURES </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certain comparative figures have been
reclassified to conform with the current year&#146;s presentation. </FONT></P>
<BR><BR>




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<!-- MARKER FORMAT-SHEET="Para Right" FSL="Default" -->
<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>EXHIBIT 3</B> </FONT> </P>
<BR>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>March 2, 2006 </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Sub 3 Left" FSL="Default" -->
<P ALIGN=center><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>
MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL<BR>
CONDITION AND RESULTS OF OPERATIONS</B> </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following information should be
read in conjunction with our 2005 audited financial statements and notes thereto, which
were prepared in accordance with Canadian generally accepted accounting principles
(&#147;GAAP&#148;). </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FORWARD-LOOKING
STATEMENTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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&reg; 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&reg; as a cancer treatment, the success and timely completion of
clinical studies and trials, our ability to successfully commercialize REOLYSIN&reg;,
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. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>OVERVIEW </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Oncolytics Biotech Inc.
is a Development Stage Company</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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&reg;, 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. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>General Risk Factors</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>If a product is approved for sale,
product manufacturing at a commercial scale and significant sales to end users at a
commercially reasonable price may not be successful. There can be no assurance that we
will generate adequate funds to continue development, or will ever achieve significant
revenues or profitable operations. Many factors (e.g. competition, patent protection,
appropriate regulatory approvals) can influence the revenue and product profitability
potential. </FONT></P>
<BR><BR>


<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 1 - </FONT></P>
<BR>


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<BR>



<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In developing a pharmaceutical
product, we rely upon our employees, contractors, consultants and collaborators and other
third party relationships, including the ability to obtain appropriate product liability
insurance. There can be no assurance that these reliances and relationships will continue
as required. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>REOLYSIN &reg;
Development Update For 2005</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have been developing our product
REOLYSIN&reg; as a possible cancer therapy since our inception in 1998. Our goal each year
is to advance REOLYSIN&reg; through the various steps and stages of development required
for potential pharmaceutical products. In order to achieve this goal, we believe that we
have to actively manage the development of our clinical trial program, our pre-clinical
and collaborative programs, our manufacturing process and supply, and our intellectual
property. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Clinical Trial Program </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the first part of 2005, we
reported that we received regulatory clearance to commence three additional clinical trial
studies. The first trial approved in 2005 was our first co-therapy study that is
investigating REOLYSIN&reg; in combination with radiation therapy in the United Kingdom
(&#147;U.K.&#148;). Our second and third trials that received regulatory clearance were
two United States (&#147;U.S.&#148;) clinical trial studies. The first of these trials was
a Phase I/II recurrent malignant glioma clinical trial. The second was a Phase I systemic
delivery clinical trial. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During 2005, we commenced patient
enrollment in the U.K. combination radiation therapy and the U.S. systemic delivery
clinical trials while continuing to enroll patients in our ongoing U.K. systemic delivery
and Canadian glioma clinical trials. In the fourth quarter of 2005, we ended patient
treatment in the Canadian glioma study and exited 2005 with three actively enrolling
clinical trials. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the fourth quarter of 2005, we
reported interim results from two of our clinical trials. The first report was in
conjunction with a poster presentation at the AACR-NCI-EORTC conference in Philadelphia by
our principal investigator for our Phase I systemic delivery clinical trial in the U.K.
Our principal investigator presented data on 22 patients and reported that REOLYSIN&reg;
is well tolerated when administered intravenously with minimal toxicity observed and that
reovirus replication in tumours has been identified with evidence of tumor necrosis. The
principal investigator also reported that there have been encouraging hints of activity in
prostate and colorectal cancer. This trial continues to enroll and we expect that patient
enrollment will be completed in 2006. We also reported on the Canadian glioma clinical
trial. In this trial a total of 12 patients were enrolled. A maximum tolerated dose was
not reached and REOLYSIN&reg; was well tolerated. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pre-Clinical Trial and
Collaborative Program </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We perform pre-clinical studies and
engage in collaborations to help support our clinical trial programs and expand our
intellectual property base. In 2005, we investigated the interaction of the reovirus with
the immune system and the use of reovirus as a co-therapy with existing chemotherapies and
radiation. In the fourth quarter of 2005, we reported in conjunction with one of our
collaborators at the AACR-NCI-EORTC conference in Philadelphia, that reovirus enhances
radiation cytotoxicity in vitro and in vivo. The results of this collaboration were also
used to support our radiation co-therapy clinical trial application in the U.K. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing and
Process Development </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During 2005, we contracted cGMP
(&#147;current good manufacturing practices&#148;) production runs that we believe produced
sufficient REOLYSIN&reg; to supply our existing
clinical trials in the U.S. and the U.K. We also entered into process development
activities that examined ways to improve the process yields. </FONT></P>
<BR><BR>




<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 2 - </FONT></P>
<BR>



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<BR>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Intellectual Property </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>During 2005 four Canadian patents and
one European patent were issued. At the end of 2005, we exited with a total of thirteen
U.S., four Canadian and two European patents. We also have other patent applications filed
in the U.S., Europe and Canada and other jurisdictions. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial Impact </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We estimated at the beginning of 2005
that our cash usage would be approximately $12,000,000 for 2005. Our actual cash usage for
the year was $12,146,806 with $11,052,462 from operating activities and $1,094,344 from
the purchases of intellectual property and capital assets. Our net loss for the year was
$12,781,831. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash Resources </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have used the equity markets to
acquire the cash resources required to fund our operations. In 2005, we received cash
proceeds in two types of financing transactions. The first was the exercise of existing warrants in the first quarter of
2005 and options for total cash proceeds of $3,384,787. The second occurred in the fourth
quarter of 2005 when we issued units comprised of one common share and one half of one
common share purchase warrant for net cash proceeds of $15,395,402. We exited 2005 with
cash resources totaling $40,406,167 (see <I>&#147;Liquidity and Capital
Resources&#148;)</I>. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>REOLYSIN&reg; Development
For 2006</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We believe that patient enrollment in
our two U.K. clinical trials and our U.S. systemic trial will conclude in 2006 and we
believe that we will be able to report additional patient data pertaining to these trials.
The timing of when and what we are able to report will be determined in conjunction with
the principal investigator and the clinical trial site. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We believe that the results from our
existing clinical trials will provide us with support to expand our clinical trial program
in 2006. We plan to expand our program to focus on specific cancer indications and drug
combinations and move into Phase II clinical trials. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We expect to produce REOLYSIN&reg; in
2006 to supply our expanding clinical trial program. We also plan to continue process
yield improvement and scale up studies in 2006 in an effort to continue to improve our
manufacturing process. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We estimate, based on our expected
activity in 2006 that our monthly cash usage for the year will increase to $1,500,000 per
month (see <I>&#147;Liquidity and Capital Resources&#148;</I>). </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Recent 2006 Progress</I></B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On January 18, 2006, the U.S. NCI
issued a solicitation for Letters of Intent with respect to the conduct of two human
clinical trials using REOLYSIN&reg;. The first is a Phase II study administering
REOLYSIN&reg; systemically in patients with melanoma. The dosage and dosing regimen to be
used in the study will be determined based on data derived from our ongoing U.K. and U.S.
Phase I systemic administration studies. The second solicitation is for proposals for a
Phase I/II study of REOLYSIN&reg; co-administered both systemically and intraperitoneally
(&#147;IP&#148;) in patients with ovarian cancer. The purpose of the Phase I portion of
the trial is to determine the Maximum Tolerated Dose of REOLYSIN&reg; given by IP
administration in combination with a constant systemic dose and dosing regimen. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On January 24, 2006, we announced
that an oral presentation of the preliminary results of our Phase I combination
REOLYSIN&reg;/radiation clinical trial is scheduled to be made at the American Association
of Cancer Researchers annual meeting held April 1 &#150; 5 in Washington D.C. by our
principal investigator Dr. Kevin Harrington. </FONT></P>
<BR><BR>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 3 - </FONT></P>
<BR>



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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ACCOUNTING POLICIES </FONT></H1>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Critical Accounting
Policies and Estimates </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In preparing our financial
statements, we are required to make certain estimates, judgments and assumptions that we
believe are reasonable based upon the information available. These estimates and
assumptions affect the reported amounts of assets at the date of the financial statements
and the reported amounts of expenses during the periods presented. Significant estimates
are used for, but not limited to, the treatment of our research and development
expenditures, the assessment of realizable value of long-lived assets, the amortization
period of intellectual property and the calculation of stock based compensation. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The significant accounting policies
which we believe are the most critical to aid in fully understanding and evaluating our
reported financial results include the following: </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Research and Development</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our research and development costs
are expensed as they are incurred. Under Canadian generally accepted accounting
principles, development costs should be capitalized if certain criteria are met. Companies
with products in clinical trials do not necessarily meet these criteria. Our development
costs do not meet the following two criteria: (i) the technical feasibility of the product
or process has been established; and (ii) the future market for the product or process is
clearly defined. With regard to (i), we have completed three Phase I clinical trials and
are presently enrolling in three additional Phase I clinical trial studies for
REOLYSIN&reg;. We are also planning to add to our clinical trial program. Until the
appropriate clinical studies have been completed, the technical feasibility of this
product will not be known. With regard to (ii), the future market for the product will not
be clearly defined until the completion of the clinical studies. Clinical studies not only
determine the technical feasibility of the product, but also provide information regarding
the proper use of the product and, therefore, the future market. Once the feasibility is
determined a New Drug Application, or equivalent, is made to the appropriate regulatory
body. Regulatory approval is required before the product can be marketed. For these
reasons, our development costs are expensed and not capitalized. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Capitalization and
Amortization of Patent Costs</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We treat third party costs incurred
(primarily legal and registration costs) in the development of our Patent portfolio as
limited-life intangible assets, and we amortize the costs related to these assets over the
lesser of 17 years or their estimated useful life. We also review the valuation of our
Patent costs for impairment when any events that might give rise to impairment are known
to us. If there is an indication of impairment, we would assess the fair value of our
Patents and would record a reduction if the fair value were less than the book value. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In capitalizing these costs, we are
recognizing the inherent future benefit of our Patents, not only in protection of our own
potential products, but also as a possible asset that could give rise to revenues in the
future through licensing agreements. While Patent life is different in different
jurisdictions it is normally considered to be 20 years from date of application. With an
assumption of an average of three years from initial Patent application to Patent
issuance, we have set a maximum of 17 years to amortize the costs from the date of
issuance. We have then assessed the nature of the market and the continuing efforts to
develop and market new and better products, as well as the incurrence of costs associated
with Patents that have been issued and, as a result, we have chosen to amortize the costs
on a straight-line basis over ten years. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As the product to which the Patents
relate is in the development stage, with commercial recognition and revenue potential
highly uncertain, should we experience a significant failure in our clinical trial program
or other areas of risk, then the value of the Patents could be in serious question, giving
rise to a possible write-down or write-off of the asset. </FONT></P>
<BR><BR>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 4 - </FONT></P>
<BR>



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<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In the event that we are successful
in our product development and sales, or other parties enter into licensing agreements
with us, then it is also possible that the Patents may have a life and value beyond the
ten years assumed for the amortization policy. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In any event, the revision to any of
these policies or estimates outlined above would impact losses but not impact cash flows. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Changes in Accounting
Policy including Initial Adoption </FONT></H1>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>GAAP Hierarchy and
General Standards of Financial Statement Presentation</I> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2005, we adopted the new CICA
Handbook Sections 1100, &#147;Generally Accepted Accounting Principles,&#148; and 1400,
&#147;General Standards of Financial Statement Presentation&#148;. Section 1100 describes
what constitutes Canadian GAAP and its sources and provides guidance on sources to consult
when selecting accounting policies and determining appropriate disclosures when a matter
is not dealt with explicitly in the primary sources of generally accepted accounting
principles, thereby re-codifying the Canadian GAAP hierarchy. Section 1400 provides
general guidance on financial statement presentation and further clarifies what
constitutes fair presentation in accordance with GAAP. The application of this standard
had no impact on our financial position or results of operations. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Non-monetary Transactions</I> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2006, we will prospectively adopt
the new Canadian standard, Non-monetary Transactions, which requires application of fair
value measurement to non-monetary transactions determined by a number of tests. The new
standard is consistent with recently amended US standards. We do not expect this standard
to have a significant impact on our financial statements upon adoption. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Financial Instruments</I> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On January 1, 2007, we will
prospectively adopt the new Canadian accounting standards for financial instruments and
comprehensive income. These new accounting standards will impact our accounting policy for
investment securities. The new rules will require us to classify these securities as
held-to-maturity or available-for-sale. Available-for-sale securities will be measured at
fair value with gains and losses recorded in a new section of shareholders&#146; equity
called other comprehensive income. There will be no change in accounting for
held-to-maturity securities. We do not expect these standards to have a significant impact
on our financial statements upon adoption as our short-term investments will be classified
as held-to-maturity securities. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fair Presentation </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We prepare our financial statements
in accordance with GAAP. As a result of complying with GAAP, we believe that the following
should be mentioned in an effort to understand and fairly present our financial
information: </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Stock Based Compensation</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As required by the fair value based
method for measuring stock based compensation, we use the Black Scholes Option Pricing
Model (&#147;Black Scholes&#148; or the &#147;Model&#148;) to calculate the fair value of
our options. Though there are other models available to calculate the option values (for
example, the binomial model), Black Scholes is currently widely used and accepted by other
publicly traded companies. Therefore, we have concluded that Black Scholes is the
appropriate option pricing model to use for our stock options at this time. </FONT></P>
<BR><BR>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 5 - </FONT></P>
<BR>




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<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Black Scholes uses inputs in its
calculation of fair value that requires us to make certain estimates and assumptions. For
2005, we used the following weighted average assumptions: </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=500 align=center>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005</FONT></TH></TR>
<TR>
     <TD COLSPAN=4><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=77% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risk-free interest rate</FONT></TD>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=16% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.27%</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected hold period to exercise</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.5 years</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Volatility in the price of the our shares</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>64%</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividend yield</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>zero</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>A change in these estimates and
assumptions will impact the value calculated by the Model. For instance, the volatility in
the price of our shares is based on the quoted trading price. We assume that weekly
trading prices best reflects our trading price volatility. However, an entity can choose
between daily, weekly, monthly or quarterly trading prices in the volatility calculation.
For example, based upon periods chosen, if we were to use daily trading prices, volatility
would increase 34%, resulting in an option value increase of 27% from that calculated from
the stated volatility. If we were to use monthly trading prices over the same period,
volatility would increase 17%, resulting in an option value increase of 15%. Also,
volatility would change based on the period chosen and the frequency of price points
chosen. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Model also uses an expected hold
period to exercise in its calculation of fair value. When we are estimating the expected
hold period to exercise we take into consideration past history, the current trading price
and volatility of our common shares and have concluded that 3.5 years is an appropriate
estimate. However, our options have a 10 year life and given the fluctuations in our stock
price the expected hold period could be different. If the hold period was to increase 1
year, there would have been a 13% increase in our stock based compensation expense. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Consequently, in complying with GAAP
and selecting what we believe are the most appropriate assumptions under the
circumstances, we have increased our reported non-cash employee stock based compensation
expense for the year by $64,104. However, given the above discussion this expense could be
increased between 13% &#151; 27% and still be in accordance with GAAP. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Warrant Values</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2005, we continued to raise cash
through the issue of units and the exercise of warrants and options. Each issued unit
consisted of one common share and one half of one common share purchase warrant with each
whole warrant exercisable at a specified price for one additional common share for up to
36 months from the issue date. GAAP requires that when recording the issued units, a value
should be ascribed to each component of the units based on the component&#146;s fair
value. The fair value of our common shares is established based on trading on stock
exchanges in Canada and the U.S. However, as the warrants do not trade on an exchange, the
Black Scholes Option Pricing Model was used to determine the fair value of the warrants.
In the event that the total calculated value of each individual component is greater than
the price paid for the unit the value of each component is reduced on a relative basis
until the total is equal to the unit&#146;s issue price. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For reasons discussed above under
&#147;Stock Based Compensation&#148;, the Model can produce a wide range of calculated
values for our warrants. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Initial Value of Our
Intellectual Property</I></B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 1999, we were acquired by SYNSORB
Biotech Inc. (&#147;SYNSORB&#148;) through the purchase of all of our share capital for
$2,500,000. In connection with this acquisition, the basis of accounting for the assets
and liabilities was changed to reflect SYNSORB&#146;s cost of acquiring theses assets and
liabilities. This was achieved through the application of &#147;push down&#148;
accounting. At the time, our major asset was our intellectual property, therefore the
$2,500,000 was allocated to this asset with the corresponding credit to contributed
surplus. This accounting treatment, permitted under GAAP, increased the value of our
assets and shareholders&#146; equity. As of December 31, 2005, the net book value of our
original intellectual property </FONT></P>
<BR><BR>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 6 - </FONT></P>
<BR>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>was $833,333. Consequently, without
the application of push down accounting the value of our intellectual property and
shareholders&#146; equity would be $833,333 lower than presented in the 2005 audited
financial statements. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<A NAME=A028></A>
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SELECTED ANNUAL
INFORMATION </FONT></H1>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=46% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revenues(1)</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>783,456</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>699,757</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>313,305</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss(2),(4)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,781,831</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,956,119</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,544,031</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic and diluted loss per share (2),(4),(5)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.39</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.45</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.35</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total assets(3),(5)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>46,294,326</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39,488,641</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26,050,600</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total long term financial liabilities(6)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>150,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>150,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>150,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash dividends declared per share(7)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nil</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nil</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nil</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Notes: </FONT></P>


<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Revenue
is comprised of interest income and income from short term investments. </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Included
in net loss and net loss per share for 2005 is a net gain (net loss) from sale of
investments of $765 (2004 -          $34,185; 2003 - ($1,892,232)). </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(3)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Subsequent
to the acquisition of Oncolytics Biotech Inc. by SYNSORB in April 1999, we applied push
down accounting. See note          2 to the audited financial statements for 2005. </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(4)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Included
in net loss and net loss per share is stock based compensation expense of $64,104 (2004 -
$2,668,570; 2003 -          $996,707) </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(5)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>We
issued 4,321,252 common shares for cash proceeds of $18,780,189 in 2005 (2004 - 4,685,775
common shares for cash proceeds          of $23,495,961; 2003 - 5,062,978 common shares
for $16,004,981).  In addition, 21,459 common shares were issued in 2004 as
         partial consideration for the cancellation of a portion of our contingent
payments (see note 10 to the audited financial          statements for 2005 </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(6)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>The
long-term debt recorded in 2005, 2004 and 2003 represents repayable loans from the
Alberta Heritage Foundation. </FONT></TD>
</TR>
</TABLE>


<!-- MARKER FORMAT-SHEET="Para Hang Level 1" FSL="Default" -->
<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(7)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>We
have not declared or paid any dividends since incorporation. </FONT></TD>
</TR>
</TABLE>
<BR>
<BR>


<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 7 - </FONT></P>
<BR>


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<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>RESULTS OF OPERATIONS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss for the year ended December
31, 2005 was $12,781,831 compared to $12,956,119 and $8,544,031,for 2004 and 2003,
respectively. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Research and Development
Expenses (&#147;R&amp;D&#148;)</I></B> </FONT> </P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=650>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=53% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing and related process development expenses</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>4,714,320</B> </FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,868,883</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,328,480</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Clinical trial expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,871,942</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>799,990</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>130,034</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pre-clinical trial expenses and collaborations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>786,488</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>824,889</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>322,060</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cancellation of contingent payment obligation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>400,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Quebec scientific research and experimental development refund</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(21,436</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(255,905</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other R&amp;D expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,936,227</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,235,672</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,294,293</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research and development expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>9,308,977</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,107,998</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,818,962</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2005, R&amp;D was $9,308,977
compared to $7,107,998 and $2,818,962 in 2004 and 2003, respectively. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing &amp;
Related Process Development (&#147;M&amp;P&#148;) </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>M&amp;P expenses include product
manufacturing expenses and process development. Production manufacturing expenses include
third party direct manufacturing costs, quality control testing, and fill costs. Process
development expenses include costs associated with studies that examine components of our
manufacturing process looking for improvements and costs associated with the creation and
testing of our master and working viral and cell banks. </FONT></P>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=620>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=58% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Product manufacturing expenses</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>4,326,577</B> </FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,212,586</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>924,456</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Technology transfer expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>656,346</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Process development expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>387,743</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>999,951</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>404,024</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing and related process development expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>4,714,320</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,868,883</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,328,480</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our M&amp;P expenses in 2005
increased to $4,714,320 compared to $3,868,883 and $1,328,480 in 2004 and 2003,
respectively. In 2005, we continued to<I> </I>focus on the production of REOLYSIN&reg; in
order to supply our expanding clinical trial program along with other research activity.
In the first part of 2005, we entered into a multiple cGMP  production run supply contract with Cobra Biomanufacturing
Plc (&#147;Cobra&#148;). Later in 2005, we further expanded our cGMP production contracts
by adding additional manufacturing runs. As well, we contracted Cobra to supply non-cGMP
product to be used in non-human research and collaborative studies. As a result, we
believe that the REOLYSIN&reg; produced in 2004 and 2005 should be sufficient to complete
our existing clinical trials. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2004, we entered into an agreement
to commence the manufacturing of REOLYSIN&reg; and consequently incurred expenses
associated with the technology transfer of our manufacturing process. This transfer was
completed in 2004. In 2003, we were producing REOLYSIN&reg; with our former manufacturer. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We expect that our product
manufacturing expenses in 2006 will remain consistent compared to 2005. We are expecting
to enter into additional production run contracts to ensure a supply of REOLYSIN&reg; for
our existing and future clinical trial and collaborative programs and to supply the NCI
clinical studies. However, we may choose to increase our product manufacturing commitments
in 2006 if we believe we will need additional REOLYSIN&reg; as our clinical trial program
progresses. </FONT></P>
<BR><BR>



<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 8 - </FONT></P>
<BR>



<!-- MARKER PAGE="sheet: 8; page: 8" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our process development expenses in
2005 were $387,743 compared to $999,951 and $404,024 in 2004 and 2003, respectively. We
believe that improvements can be made to increase productivity. In 2005, our process
development activities focused on improving process yields. In 2003 and 2004, our process
development activity mainly related to establishing our own master and working viral and
cell banks. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our process development expenses in
2006 may increase compared to 2005. We will continue to work on improving process yields.
We are also expecting to incur additional process development expenses associated with the
scale up of our manufacturing process. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Clinical Trial Program </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Clinical trial expenses include those
costs associated with our clinical trial program in the U.S., UK and Canada as well as
those incurred in the preparation of commencing other clinical trials. Included in
clinical trial expenses are direct patient costs, contract research organization
(&#147;CRO&#148;) expenses, clinical trial site costs and other costs associated with our
clinical trial program. </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=45% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Direct clinical trial expenses</FONT></TD>
     <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,675,003</B> </FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>649,405</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>64,559</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other clinical trial expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>196,939</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>150,585</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>65,475</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Clinical trial expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,871,942</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>799,990</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>130,034</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2005, we incurred costs directly
associated with ongoing clinical trials of $1,675,003 compared to $649,405 and $64,559 in
2004 and 2003, respectively. In 2005, our clinical trial program expanded to include our
two U.S. studies and an additional study in the U.K. Consequently, we actively enrolled in
four clinical trials in 2005 compared to only having two ongoing studies in 2004 and 2003.
Also, we concluded our enrollment in the Canadian glioma study and incurred site closure
expenses towards the end of 2005. In 2004, we provided a final update with respect to our
T2 prostate cancer study and incurred site closure costs. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We expect our clinical trial expenses
will continue to increase in 2006 compared to 2005. The increase in these expenses is
expected to arise from enrollment in our existing clinical trial program and expansion
into further clinical trials. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pre-Clinical Trial
Expenses and Research Collaborations </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pre-clinical trial expenses include
toxicology studies and are incurred by us in support of expanding our clinical trial
program into other indications, drug combinations and jurisdictions. Research
collaborations are intended to expand our intellectual property related to reovirus and
other viruses and identify potential licensing opportunities arising from our technology
base. </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=650>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=61% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research collaboration expenses</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>652,393</B> </FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>262,910</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>120,026</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pre-clinical trial expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>134,095</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>561,979</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>202,034</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pre-clinical trial expenses and research collaborations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>786,488</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>824,889</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>322,060</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2005, our research collaboration
expenses were $652,393 compared to $262,910 and $120,026 in 2004 and 2003, respectively. In
2005, we expanded our collaborative activities to include studies investigating the
interaction of the reovirus with the immune system and the use of the reovirus as a
co-therapy with existing chemotherapies and radiation. In the fourth quarter of 2005, we
reported the results of our collaboration with The Institute of Cancer Research that
examined the combination of REOLYSIN&reg; and radiation therapy which showed that the
combination of REOLYSIN&reg; and radiation therapy results in enhanced cytotoxicity in a
range of tumour cell lines in vitro and in vivo. </FONT></P>
<BR><BR>


<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 9 - </FONT></P>
<BR>



<!-- MARKER PAGE="sheet: 9; page: 9" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>





<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2004, our collaborative activities
included studies that used reovirus as a co-therapy in combination with existing
chemotherapies and radiation. Data from our collaboration examining the use of
REOLYSIN&reg; with approved chemotherapeutics in animal models was presented in 2004. In
2003, we entered into a collaboration to develop modified adenoviruses that are selective
for Ras mediated cancers. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2005, we incurred pre-clinical
trial expenses of $134,095 compared to $561,979 and $202,034 in 2004 and 2003
respectively. The decrease in pre-clinical trial expenses in 2005 compared to 2004 related
to toxicology and equivalency studies that were performed in 2004 but not in 2005. As we
move through our clinical trial program the number of pre-clinical studies required will
change from year to year. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2006, we expect that pre-clinical
trial expenses and research collaborations will remain consistent compared to 2005 and
2004. 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 and 2004. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other Research and
Development Expenses </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other R&amp;D expenses include
compensation expenses for employees (excluding stock based compensation), consultant fees,
travel and other miscellaneous R&amp;D expenses. </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=49% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>R&amp;D consulting fees</FONT></TD>
     <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>675,530</B> </FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>290,135</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>187,513</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>R&amp;D salaries and benefits</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,018,144</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>722,136</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>815,869</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other R&amp;D expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>242,553</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>223,401</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>290,911</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other research and development expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,936,227</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,235,672</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,294,293</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2005, our R&amp;D consulting fees
were $675,530 compared to $290,135 and $187,513 in 2004 and 2003, respectively. For the
past three years, we have mainly incurred consulting activity associated with our clinical
trial applications, assistance with our existing and future clinical trial program and our
scientific advisory board. In 2005, we also incurred consulting expenses for executive
search activities associated with the hiring of our Chief Medical Officer which was not
incurred in 2004 or 2003. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our R&amp;D salaries and benefits
were $1,018,144 in 2005 compared to $722,136 and $815,869 in 2004 and 2003, respectively.
In 2005, along with increases in salary levels, we hired our Chief Medical Officer in the
third quarter of 2005. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2006, we expect that our Other
R&amp;D expenses 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. Our R&amp;D consulting fees should decline as we do not expect to
incur executive search costs in 2006. 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&amp;D consulting expenses to increase. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cancellation of
Contingent Payment Obligation </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On September 23, 2004, we reached an
agreement that cancelled a portion of our future contingent obligation to one of our
non-management founding shareholders for consideration of $400,000. The consideration paid
included cash of $250,000 and non-cash consideration of 21,459 common shares valued at
$150,000 and was recorded as additional research and development expense. The value of the
common shares was based on the September 23, 2004 closing price of $6.99. As a result, our
future contingent payment obligations were reduced to 11.75% (formerly in 2003 &#150;
14.25% and 2002 &#150; 20%) of payments received associated with a partnership or other
arrangement for development. Similarly, if we develop the reovirus treatment to the point
where it may be marketed at a commercial level, the payment referred to in </FONT></P>
<BR><BR>


<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 10 - </FONT></P>
<BR>



<!-- MARKER PAGE="sheet: 10; page: 10" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the foregoing sentence has been
amended to a royalty payment of 2.35% (formerly in 2003 &#150; 2.85% and 2002 &#150; 4%)
of Net Sales received by us for such products. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Operating Expenses</I></B> </FONT> </P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=45% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Public company related expenses</FONT></TD>
     <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2,156,614</B> </FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,910,611</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,633,849</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Office expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>928,283</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>893,058</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>815,629</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,084,897</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,803,669</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,449,478</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2005, we incurred operating
expenses of $3,084,897 compare to $2,803,669 and $2,449,478 in 2004 and 2003 respectively.
The reason for the change is as follows: </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Public company related expenses
include costs associated with investor relations activities, legal and accounting fees,
corporate insurance, and transfer agent and other fees relating to our U.S. and Canadian
stock listings. We incurred public company related expenses of $2,156,614 in 2005 compared
to $1,910,611 and $1,633,849 in 2004 and 2003, respectively. In 2005, after receiving
approval to commence our two U.S. clinical trials we initiated an expanded public
relations and investor relations program in the U.S. The increase in 2004 related to the
rising cost of directors&#146; and officers&#146; liability insurance which increased due
to general market conditions for companies with a U.S. stock listing. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Office expenses include compensation
costs (excluding stock based compensation), office rent, and other office related costs.
In 2005, we incurred office expenses of $928,283 compared to $893,058 and $815,629 in 2004
and 2003, respectively. Our office expense activity has remained consistent over the last
three years with increases mainly due to increased compensation and staff levels. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Stock Based Compensation</I></B> </FONT> </P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=35% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock based compensation</FONT></TD>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>64,104</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,668,570</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>996,707</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-cash stock based compensation
recorded for 2005 was $64,104 compared to $2,668,570 and $996,707 in 2004 and 2003,
respectively. This expense is associated with the granting of stock options to our
employees, directors, and certain consultants and in 2005 there was a reduction in the
number of stock options granted compared to 2004 and 2003. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Foreign Exchange Loss
(Gain)</I></B> </FONT> </P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=47% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Foreign exchange loss (gain)</FONT></TD>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>253,608</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>358,068</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,881</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We acquire investments in foreign
currency to pay for anticipated expenses that are to be incurred in the U.S. and the U.K.
As a result of continued strengthening in the Canadian dollar relative to the U.S. dollar
and British pound, we recorded a foreign exchange loss of $253,608 in 2005 compared to
$358,068 and $2,881 in 2004 and 2003, respectively. </FONT></P>
<BR><BR>

<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 11 - </FONT></P>
<BR>




<!-- MARKER PAGE="sheet: 11; page: 11" -->
<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>



<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Sale of Investments</I></B> </FONT> </P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=650>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2005<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2004<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2003<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=62% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gain on partial sale of investment in BCY LifeSciences Inc.</FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(765</B> </FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(34,185</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(264,453</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss on sale of investment in Transition Therapeutics Inc.</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,156,685</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net (gain) loss from sale of investments</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>(765</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>)</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(34,185</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,892,232</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=8><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>



<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>BCY LifeSciences Inc. (&#147;BCY&#148;)</I> </FONT> </P>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2005, we sold 120,000 (2004 &#150;
697,945; 2003 &#150; 1,496,500) common shares of BCY for net cash proceeds of $7,965 (2004
&#150; $133,609; 2003 &#150; $450,151). This resulted in an accounting gain of $765 (2004
&#150; $34,185; 2003 &#150; $264,453). Our total cash invested with respect to our BCY
investment was $127,123. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><I>Transition Therapeutics
Inc. (&#147;TTH&#148;)</I> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2003, we sold 6,890,000 common
shares of TTH for net cash proceeds of $2,552,695 which had been acquired through the
issuance of 1,913,889 of our common shares. As a result of the sale, an accounting loss of
$2,156,685 was recorded. Our cash expenses with respect to our investment in TTH were
limited to acquisition legal costs of $20,352. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Commitments </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As at December 31, 2005, we are
committed to payments totaling $1,138,000 during 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. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Subsequent to 2005, we entered into
research and development agreements and under these contracts we have committed to
payments totaling $1,451,000. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SUMMARY OF QUARTERLY
RESULTS </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The following unaudited quarterly
information is presented in thousands of dollars except for per share amounts: </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=650>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2005</FONT></TH>
     <TH COLSPAN=8><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
2004</FONT></TH></TR>
<TR>
     <TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Dec.</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Sept.</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
June</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
March</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Dec.</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
Sept.</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
June</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>
March</FONT></TH>
</TR>
<TR>
     <TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=26% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Revenue(1)</B> </FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>160</B> </FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>211</B> </FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>168</B> </FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>245</B> </FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>205</B> </FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>194</B> </FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>183</B> </FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>117</B> </FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Net loss(2),(5)</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>3,941</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>3,510</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>2,955</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>2,377</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>3,992</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>3,096</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>3,192</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>2,676</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Basic and diluted loss per</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>common share(2),(5)</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>$&nbsp;&nbsp;&nbsp;&nbsp;0.12</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>$&nbsp;&nbsp;&nbsp;&nbsp;0.11</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>$&nbsp;&nbsp;&nbsp;&nbsp;0.09</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>$&nbsp;&nbsp;&nbsp;&nbsp;0.07</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>$&nbsp;&nbsp;&nbsp;&nbsp;0.14</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>$&nbsp;&nbsp;&nbsp;&nbsp;0.11</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>$&nbsp;&nbsp;&nbsp;&nbsp;0.11</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>$&nbsp;&nbsp;&nbsp;&nbsp;0.10</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD></TR>
<TR>
     <TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Total assets(3),(6)</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>46,294</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>34,538</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>38,081</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>40,519</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>39,489</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>29,471</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>31,221</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>25,435</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Total cash(4),(6)</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>40,406</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>28,206</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>31,975</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>34,713</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>33,919</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>23,806</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>25,522</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>20,298</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Total long-term debt(7)</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>150</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>150</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>150</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>150</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>150</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>150</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>150</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>150</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Cash dividends declared(8)</B> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Nil</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Nil</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Nil</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Nil</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Nil</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Nil</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Nil</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>&nbsp;</B> </FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="1"><B>Nil</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=18><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Revenue
is comprised of interest income and income from short term investments. </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Included
in net loss and net loss per share between December 2005 and January 2004 is a quarterly
gain (loss) on sale of          investment of $nil, $nil, $nil, $765, $nil, ($12,817),
($646), and $47,648 , respectively. </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(3)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Subsequent
to the acquisition of Oncolytics Biotech Inc. by SYNSORB in April 1999, we applied push
down accounting. See note          2 to the audited financial statements for 2005. </FONT></TD>
</TR>
</TABLE>
<BR>


<BR>


<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 12 - </FONT></P>
<BR>


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<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>




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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(4)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Included
in total cash are cash and cash equivalents plus short-term                investments.  </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(5)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Included
in net loss and loss per common share between December 2005 and January
               2004 are quarterly stock based compensation expenses of $38,152, $4,173,
$8,404,                $13,375, $1,870,596, $48,878, $734,670, and $5,426, respectively.  </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(6)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>We
issued 4,321,252 common shares for cash proceeds of $18,789,596 during 2005
               (2004 &#150; 4,685,775 common shares for $23,495,961). In addition, 21,459
               common shares were issued in September 2004 as partial consideration for
the                cancellation of a portion of our contingent payments (see note 10 to
the audited                financial statements for 2005).  </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(7)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>The
long-term debt recorded represents repayable loans from the Alberta Heritage
               Foundation.  </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(8)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>We
have not declared or paid any dividends since incorporation.  </FONT></TD>
</TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>FOURTH QUARTER </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Statement of loss for the three month
period ended December 31, 2005 and 2004 </FONT></P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=55% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest income</FONT></TD>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>159,841</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>204,941</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research and development expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2,809,943</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,425,286</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>973,470</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>690,628</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock based compensation</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>38,152</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,879,596</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Foreign exchange loss (gain)</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>55,127</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,104</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Amortization</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>223,708</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>197,280</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>4,100,400</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,196,894</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss before the following:</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,940,559</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,991,953</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gain on sale of investment in BCY</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss before taxes</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,940,559</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,991,953</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capital tax</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net loss</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>3,940,559</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,991,953</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Review of Operations </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>For the three month period ended
December 31, 2005, our net loss was $3,940,559 compared to $3,991,953 for the three month
period ended December 31, 2004. The reasons for the increase are as follows: </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Research and Development
Expenses (&#147;R&amp;D&#148;)</I></B> </FONT> </P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=71% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing and related process development expenses (&#147;M&amp;P&#147;)</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,129,891</B> </FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>507,869</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Clinical trial expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>717,265</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>366,852</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pre-clinical trial expenses and research collaborations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>262,015</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>89,425</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other R&amp;D expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>700,772</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>461,140</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research and development expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>2,809,943</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,425,286</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our R&amp;D expenses increased to
$2,809,943 in the fourth quarter of 2005 compared to $1,425,286 in the fourth quarter of
2004. </FONT></P>
<BR><BR>


<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 13 - </FONT></P>
<BR>


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<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>



<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing &amp;
Related Process Development (&#147;M&amp;P&#148;) </FONT></H1>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=67% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Product manufacturing expenses</FONT></TD>
     <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>951,667</B> </FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>324,671</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Technology transfer expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>&#151;</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>120,546</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Process development expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>178,224</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>62,652</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Manufacturing and related process development expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>1,129,891</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>507,869</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our M&amp;P expenses increased to
$1,129,891 in the fourth quarter of 2005 compared to $507,869 in the fourth quarter of
2004. In the fourth quarter of 2005, we continued to focus on the production of
REOLYSIN&reg; by commencing additional production runs with Cobra. In the fourth quarter
of 2004, we had finished the technology transfer to Cobra and had begun producing
REOLYSIN&reg;. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our process development costs were
$178,224 in the fourth quarter of 2005 compared to $62,652 in the fourth quarter of 2004.
In the fourth quarter of 2005, our process development activities related to the
improvement of process yields. In the fourth quarter of 2004, process development
activities related to the technology transfer to Cobra. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Clinical Trial Program </FONT></H1>

<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=54% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Direct clinical trial expenses</FONT></TD>
     <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=14% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>657,405</B> </FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=14% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>227,221</FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other clinical trial expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>59,860</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>139,631</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Clinical trial expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>717,265</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>366,852</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our clinical trial expenses for the
fourth quarter of 2005 were $717,265 compared to $366,852 for the fourth quarter of 2004.
In the fourth quarter of 2005, we were actively enrolling patients in three clinical
trials in the U.S. and the U.K. and incurred clinical trial site closure costs associated
with the Canadian malignant glioma trial. In the fourth quarter of 2004, we were actively
enrolling in the U.K. systemic and the Canadian malignant glioma clinical trials. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pre-Clinical Trial
Expenses and Research Collaborations </FONT></H1>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=70% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research collaboration expenses</FONT></TD>
     <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>224,673</B> </FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>89,425</FONT></TD>
        <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pre-clinical trial expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>37,342</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pre-clinical trial expenses and research collaborations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>262,015</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>89,425</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our pre-clinical trial expenses and
research collaborations were $262,015 in the fourth quarter of 2005 compared to $89,425 in
the fourth quarter of 2004. In the fourth quarter of 2005, our research collaborations
continued to expand to include the interaction of the immune system and reovirus and the
use of reovirus as a co-therapy with existing chemotherapies. In the fourth quarter of
2004, our research collaboration activity mainly related to the use of reovirus as a
co-therapy with existing chemotherapies and the development of modified adenoviruses that
are selective for Ras mediated cancers. </FONT></P>
<BR><BR>


<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 14 - </FONT></P>
<BR>


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<HR SIZE=5 COLOR=GRAY NOSHADE>
<BR>




<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other Research and
Development Expenses </FONT></H1>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=63% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>R&amp;D consulting fees</FONT></TD>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>124,936</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>108,697</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>R&amp;D salaries and benefits</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>455,771</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>274,640</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other R&amp;D expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>120,065</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>77,803</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other research and development expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>700,772</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>461,140</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our other research and development
expenses were $700,772 for the fourth quarter of 2005 compared to $461,140 for the fourth
quarter of 2004. The increase mainly related to the hiring of our Chief Medical Officer at
the end of the third quarter of 2005. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Operating Expenses</I></B> </FONT> </P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=59% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Public company related expenses</FONT></TD>
     <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>672,010</B> </FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=13% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>438,349</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Office expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>301,460</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>252,279</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating expenses</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>973,470</B> </FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>690,628</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our operating expenses for the fourth
quarter of 2005 were $973,470 compared to $690,628 for the fourth quarter of 2004. This
increase corresponds to an increase in investor relations activity in the fourth quarter
of 2005 compared to the fourth quarter of 2004. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Left" FSL="Default" -->
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>Stock Based Compensation</I></B> </FONT> </P>


<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=600>
<TR VALIGN=Bottom>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2005<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH>
     <TH COLSPAN=2>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">2004<BR>
$<BR>
<I>(unaudited)</I> </FONT></TH></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=46% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock based compensation</FONT></TD>
     <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=18% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>38,152</B> </FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=18% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,879,596</FONT></TD>
        <TD WIDTH=6% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=6><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>
<BR>


<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our non-cash stock based compensation
recorded for the fourth quarter of 2005 was $38,152 compared to $1,879,596 for the fourth
quarter of 2004. The stock based compensation expense in the fourth quarter of 2005
related to the vesting of previously granted options. In the fourth quarter of 2004, stock
based compensation expense related to the granting of options to officers, directors and
employees. </FONT></P>

<!-- MARKER FORMAT-SHEET="Head Major Left Bold" FSL="Default" -->
<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financing Activities </FONT></H1>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>On December 29, 2005, we issued
3,200,000 units for gross cash proceeds of $16,480,000. Each unit consisted of one common
share and one half of one common share purchase warrant. Each whole common share purchase
warrant entitles the holder to acquire on common share in our capital upon payment of
$6.15 per share until December 29, 2008. In addition, we issued 320,000 common share
purchase warrants with an exercise price of $5.65 to the agent of this transaction. The
broker warrants expire on December 29, 2008. </FONT></P>
<BR><BR>



<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 15 - </FONT></P>
<BR>


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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>LIQUIDITY AND CAPITAL
RESOURCES </FONT></H1>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Liquidity </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As at December 31, 2005, we had cash
and cash equivalents (including short-term investments) and working capital positions of
$40,406,167 and $39,301,444, respectively, compared to $33,919,223 and $33,268,097,
respectively, for 2004. The increase in 2005 reflects the cash inflow of $18,780,189 from
one private placement and proceeds from the exercise of warrants and options. Cash usage
from operating activities and the purchase of intellectual property and capital assets in
2005 was $12,146,806 which was in line with our estimate of $12,000,000 for 2005. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. In 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&reg; to supply our potentially expanding clinical trial and collaborative
programs. We presently estimate the cash usage for 2006 to increase to $1,500,000 per
month 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 monthly burn rate include, but are not limited to, the number of manufacturing
runs 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 NCI&#146;s R&amp;D activity, and
the level of pre-clinical activity undertaken. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>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. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capital Expenditures </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We spent $1,033,035 on intellectual
property in 2005 compared to $958,809 in 2004. 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 2005, four Canadian and one European patents were
issued bringing our total patents issued to thirteen in the U.S., four in Canada and two
in Europe. </FONT></P>

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<H1 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Contractual Obligations </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have the following contractual
obligations as at December 31, 2005: </FONT></P>



<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 ALIGN=Center WIDTH=650>
<TR VALIGN=Bottom>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Contractual Obligations</FONT></TH>
     <TH COLSPAN=10 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Payments Due by Period</FONT></TH></TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TH COLSPAN=2 align=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
&nbsp;</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Total<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Less than 1 year<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
1-3 years<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
4-5 years<BR>
$</FONT></TH>
     <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
After 5 years<BR>
$</FONT></TH></TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD WIDTH=33% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Long term debt<SUP>(1)</SUP> </FONT></TD>
     <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>150,000</FONT></TD>
        <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD WIDTH=5% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=10% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=11% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>150,000</FONT></TD>
        <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capital lease obligations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nil</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2">Operating leases<SUP>(2)</SUP> </FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>484,445</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>89,436</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>178,872</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>178,872</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>37,265</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase obligations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,138,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,138,000</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other long term obligations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Nil</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=Black SIZE=1></TD></TR>
<TR VALIGN=Bottom>
     <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total contractual obligations</FONT></TD><TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,772,445</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,227,436</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>178,872</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>178,872</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
     <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>187,265</FONT></TD>
        <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD></TR>
<TR>
     <TD COLSPAN=12><HR NOSHADE COLOR=Black SIZE=2></TD></TR>
</TABLE>



<BR><BR>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 16 - </FONT></P>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Note: </FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(1)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Our
long term debt is a $150,000 loan from the Alberta Heritage Foundation.  Repayments are
required upon the realization of        sales (see note 9 of the Company's audited 2005
financial statements). </FONT></TD>
</TR>
</TABLE>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>(2)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Our
operating leases are comprised of our office lease and exclude our portion of operating
costs. </FONT></TD>
</TR>
</TABLE>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We will fund our capital expenditure
requirements and commitments with existing working capital. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Investing Activities</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Under our Investment Policy, we are
permitted to invest in short-term instruments with a rating no less than R-1 (DBRS) with
terms less than two years. We have $36,894,810 invested under this policy and we are
currently earning interest at an effective rate of 2.9%. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>OFF-BALANCE SHEET
ARRANGEMENTS</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As at December 31, 2005, we have not
entered into any off-balance sheet arrangements. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>TRANSACTIONS WITH RELATED
PARTIES</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In 2005 and 2004, we did not enter
into any related party transactions. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>FINANCIAL INSTRUMENTS AND
OTHER INSTRUMENTS</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We do not use financial derivatives
or &#147;other financial instruments&#148;. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>RISK FACTORS AFFECTING
FUTURE PERFORMANCE</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>All of our potential products,
including REOLYSIN(R), are in the research and development stage and will require further
development and testing before they can be marketed commercially.</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Prospects for companies in the
biotechnology industry generally may be regarded as uncertain given the nature of the
industry and, accordingly, investments in biotechnology companies should be regarded as
speculative. We are currently in the research and development stage on one product,
REOLYSIN(R), for human application, the riskiest stage for a company in the biotechnology
industry. It is not possible to predict, based upon studies in animals, or early studies
in humans, whether REOLYSIN(R)will prove to be safe and effective in humans.
REOLYSIN(R)will require additional research and development, including extensive clinical
testing, before we will be able to obtain the approval of the United States Food and Drug
Administration (the &#147;FDA&#148;) or from similar regulatory authorities in other
countries to market REOLYSIN(R)commercially. There can be no assurance that the research
and development programs conducted by us will result in REOLYSIN(R)or any other products
becoming commercially viable products, and in the event that any product or products
result from the research and development program, it is unlikely they will be commercially
available for a number of years. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To achieve profitable operations
Oncolytics Biotech Inc., alone or with others, must successfully develop, introduce and
market our products. To obtain regulatory approvals for products being developed for human
use, and to achieve commercial success, human clinical trials must demonstrate that the
product is safe for human use and that the product shows efficacy. Unsatisfactory results
obtained from a particular study relating to a program may cause us to abandon our
commitment to that program or the product being tested. No assurances can be provided that
any current or future animal or human test, if undertaken, will yield favorable results.
If we are unable to establish that REOLYSIN(R)is a safe, effective treatment for cancer,
we may be required to abandon further development of the product and develop a new
business strategy. </FONT></P>




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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 17 - </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>There are inherent risks in
pharmaceutical research and development.</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Pharmaceutical research and development
is highly speculative and involves a high and significant degree of risk. The
marketability of any product developed by us will be affected by numerous factors beyond
our control, including: </FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
discovery of unexpected toxicities or lack of sufficient efficacy of products which make
them unattractive or unsuitable for human use;  </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>preliminary
 results as seen in animal and/or limited human testing may not be  substantiated  in
larger  controlled  clinical          trials; </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>manufacturing
costs or other factors may make manufacturing of products impractical and non-competitive; </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>proprietary
rights of third parties or competing products or technologies may preclude
commercialization; </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>requisite
regulatory approvals for the commercial distribution of products may not be obtained; and </FONT></TD>
</TR>
</TABLE>


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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>other
factors may become apparent during the course of research, up-scaling or manufacturing
which may result in the discontinuation of research and other critical projects.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our product under development has
never been manufactured on a commercial scale, and there can be no assurance that such
products can be manufactured at a cost or in a quantity to render such products
commercially viable. Production and utilization of our products may require the
development of new manufacturing technologies and expertise. The impact on our business in
the event that new manufacturing technologies and expertise are required to be developed
is uncertain. There can be no assurance that we will successfully meet any of these
technological challenges, or others that may arise in the course of development. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Pharmaceutical products are subject
to intense regulatory approval processes.</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The regulatory process for
pharmaceuticals, which includes preclinical studies and clinical trials of each compound
to establish its safety and efficacy, takes many years and requires the expenditure of
substantial resources. Moreover, if regulatory approval of a drug is granted, such
approval may entail limitations on the indicated uses for which it may be marketed.
Failure to comply with applicable regulatory requirements can, among other things, result
in suspension of regulatory approvals, product recalls, seizure of products, operating
restrictions and criminal prosecution. Further, government policy may change, and
additional government regulations may be established that could prevent or delay
regulatory approvals for our products. In addition, a marketed drug and its manufacturer
are subject to continual review. Later discovery of previously unknown problems with the
product or manufacturer may result in restrictions on such product or manufacturer,
including withdrawal of the product from the market. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The FDA in the United States and
other relevant regulatory authorities may deny approval of a new drug application
(&#147;NDA&#148;) or its equivalent in the relevant jurisdiction if required regulatory
criteria are not satisfied, or may require additional testing. Product approvals may be
withdrawn if compliance with regulatory standards is not maintained or if problems occur
after the product reaches the market. The FDA may require further testing and surveillance
programs to monitor the pharmaceutical product that has been commercialized.
Non-compliance with applicable requirements can result in fines and other judicially
imposed sanctions, including product withdrawals, product seizures, injunction actions and
criminal prosecutions. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition to our own
pharmaceuticals, we may supply active pharmaceutical ingredients and advanced
pharmaceutical intermediates for use in our customers&#146; drug products. The final drug
products in which the pharmaceutical ingredients and advanced pharmaceutical intermediates
are used, however, are subject to regulation for safety and efficacy by the FDA and other
jurisdictions, as the case may be. Such products must be approved by such agencies before
they can be commercially marketed. The process of obtaining regulatory clearance for
marketing is uncertain, costly and time consuming. We cannot predict how long </FONT></P>



<BR><BR>



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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 18 - </FONT></P>
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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the necessary regulatory approvals
will take or whether our customers will ever obtain such approval for their products. To
the extent that our customers do not obtain the necessary regulatory approvals for
marketing new products, our product sales could be adversely affected. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The FDA and other governmental
regulators have increased requirements for drug purity and have increased environmental
burdens upon the pharmaceutical industry. Because pharmaceutical drug manufacturing is a
highly regulated industry, requiring significant documentation and validation of
manufacturing processes and quality control assurance prior to approval of the facility to
manufacture a specific drug, there can be considerable transition time between the
initiation of a contract to manufacture a product and the actual initiation of manufacture
of that product. Any lag time in the initiation of a contract to manufacture product and
the actual initiation of manufacture could cause us to lose profits or incur liabilities. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The pharmaceutical regulatory regime
in Europe and other countries is, by and large, generally similar to that of Canada and
the United States. We could face similar risks in these other jurisdictions, as the risks
described above. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Our
operations and products may be subject to other government manufacturing and testing
regulations.</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Securing regulatory approval for the
marketing of therapeutics by the FDA in the United States and similar regulatory agencies
in other countries is a long and expensive process, which can delay or prevent product
development and marketing. Approval to market products may be for limited applications or
may not be received at all. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The products anticipated to be
manufactured by us will have to comply with the FDA&#146;s current Good Manufacturing
Practices (&#147;cGMP&#148;) and other FDA and local government guidelines and
regulations, including other international regulatory requirements and guidelines.
Additionally, certain of our customers may require the manufacturing facilities contracted
by us to adhere to additional manufacturing standards, even if not required by the FDA.
Compliance with cGMP regulations requires manufacturers to expend time, money and effort
in production, and to maintain precise records and quality control to ensure that the
product meets applicable specifications and other requirements. The FDA and other
regulatory bodies periodically inspect drug-manufacturing facilities to ensure compliance
with applicable cGMP requirements. If the manufacturing facilities contracted by us fail
to comply with the cGMP requirements, the facilities may become subject to possible FDA or
other regulatory action and manufacturing at the facility could consequently be suspended.
We may not be able to contract suitable alternative or back-up manufacturing facilities on
terms acceptable to us or at all. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The FDA or other regulatory agencies
may also require the submission of any lot of a particular product for inspection. If the
lot product fails to meet the FDA requirements, then the FDA could take any of the
following actions: (i) restrict the release of the product; (ii) suspend manufacturing of
the specific lot of the product; (iii) order a recall of the lot of the product; or (iv)
order a seizure of the lot of the product. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We are subject to regulation by
governments in many jurisdictions and, if we do not comply with healthcare, drug,
manufacturing and environmental regulations, among others, our existing and future
operations may be curtailed, and we could be subject to liability. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In addition to the regulatory
approval process, we may be subject to regulations under local, provincial, state, federal
and foreign law, including requirements regarding occupational health, safety, laboratory
practices, environmental protection and hazardous substance control, and may be subject to
other present and future local, provincial, state, federal and foreign regulations. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Our
products may fail or cause harm, subjecting us to product liability claims, which are
uninsured.</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The sale and use of our products
entail risk of product liability. We currently do not have any product liability
insurance. There can be no assurance that we will be able to obtain appropriate levels of
product </FONT></P>


<BR><BR>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 19 - </FONT></P>
<BR>





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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>liability insurance prior to any sale
of our pharmaceutical products. An inability to obtain insurance on economically feasible
terms or to otherwise protect against potential product liability claims could inhibit or
prevent the commercialization of products developed by us. The obligation to pay any
product liability claim or a recall of a product could have a material adverse effect on
our business, financial condition and future prospects. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Our technologies may become obsolete.</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The pharmaceutical industry is
characterized by rapidly changing markets, technology, emerging industry standards and
frequent introduction of new products. The introduction of new products embodying new
technologies, including new manufacturing processes, and the emergence of new industry
standards may render our products obsolete, less competitive or less marketable. The
process of developing our products is extremely complex and requires significant
continuing development efforts and third party commitments. Our failure to develop new
technologies and products and the obsolescence of existing technologies could adversely
affect our business. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We may be unable to anticipate
changes in our potential customer requirements that could make our existing technology
obsolete. Our success will depend, in part, on our ability to continue to enhance our
existing technologies, develop new technology that addresses the increasing sophistication
and varied needs of the market, and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis. The development of
our proprietary technology entails significant technical and business risks. We may not be
successful in using our new technologies or exploiting the respective niche markets
effectively or adapting our businesses to evolving customer or medical requirements or
preferences or emerging industry standards. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>We have no operating revenues and a
history of losses.</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>To date, we have not generated
sufficient revenues to offset our research and development costs and accordingly have not
generated positive cash flow or made an operating profit. As of December 31, 2005, we had
an accumulated deficit of $50.7 million and we incurred net losses of $12.8 million, $13.0
million, and $8.5 million for the years ended December 31, 2005, 2004, and 2003,
respectively. We anticipate that we will continue to incur significant losses during 2006
and in the foreseeable future. We will not reach profitability until after successful and
profitable commercialization of one or more of our products. Even if one or more of our
products are profitably commercialized, the initial losses incurred by us may never be
recovered. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>We may need additional financing in
the future to fund the research and development of our products and to meet our ongoing
capital requirements.</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of December 31, 2005, we had cash
and cash equivalents (including short-term investments) of $40.4 million and working
capital of approximately $39.3 million. We anticipate that we may need additional
financing in the future to fund research and development and to meet our ongoing capital
requirements. The amount of future capital requirements will depend on many factors,
including continued scientific progress in our drug discovery and development programs,
progress in our pre-clinical and clinical evaluation of drug candidates, time and expense
associated with filing, prosecuting and enforcing our patent claims and costs associated
with obtaining regulatory approvals. In order to meet such capital requirements, we will
consider contract fees, collaborative research and development arrangements, and
additional public or private financings (including the incurrence of debt and the issuance
of additional equity securities) to fund all or a part of particular programs as well as
potential partnering or licensing opportunities. There can be no assurance that additional
funding will be available or, if available, that it will be available on acceptable terms.
If adequate funds are not available on terms favorable to us, we may have to reduce
substantially or eliminate expenditures for research and development, testing, production
and marketing of our proposed product, or obtain funds through arrangements with corporate
partners that require us to relinquish rights to certain of our technologies or product.
There can be no assurance that we will be able to raise additional capital if our current
capital resources are exhausted. </FONT></P>
<BR><BR>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 20 - </FONT></P>
<BR>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>The cost of director and officer
liability insurance may continue to increase substantially or may not be available to us
and may affect our ability to retain quality directors and officers.</B> </FONT> </P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We carry liability insurance on
behalf of our directors and officers. Given a number of large director and officer
liability insurance claims in the U.S. equity markets, director and officer liability
insurance is becoming increasingly more expensive with increased restrictions.
Consequently, there is no assurance that we will continue to be offered this insurance or
be able to obtain adequate coverage. The inability to acquire the appropriate insurance
coverage may limit our ability to attract and maintain directors and officers as required
to conduct our business. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>We incur some of our expenses in
foreign currencies and therefore are exposed to foreign currency exchange rate
fluctuations.</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We incur some of our manufacturing,
clinical, collaborative and consulting expenses in foreign currencies, primarily the U.S.
dollar and the Great British pound (&#147;GBP&#148;). Over the past year the Canadian
dollar has appreciated relative to the U.S. dollar and the GBP thereby decreasing the
Canadian dollar equivalent. However, if this trend reverses, our Canadian dollar
equivalent costs will increase. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Also, as we expand to other foreign
jurisdictions there may be an increase in our foreign exchange exposure. </FONT></P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>We earn interest income on our excess
cash reserves and are exposed to changes in interest rates.</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We invest our excess cash reserves in investment
vehicles that provide a rate of return with little risk to principle. As interest rates
change the amount of interest income we earn will be directly impacted. </FONT></P>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>OTHER MD&amp;A
REQUIREMENTS</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Flush" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We have 36,236,748 common shares
outstanding at March 2, 2006. If all of our warrants and options were exercised we would
have 42,656,098 common shares outstanding. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Our 2005 Annual Information Form is
available on www.sedar.com. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>Disclosure Controls and Procedures</B> </FONT> </P>

<!-- MARKER FORMAT-SHEET="Para Default" FSL="Default" -->
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>As of the year ending December&nbsp;31,
2005, we carried out an evaluation, under the supervision of our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures.  Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures are effective as of
the end of the period covered by the annual filings based on this evaluation. </FONT></P>


<BR><BR>


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<P ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>- 21 - </FONT></P>
<BR>






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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>EXHIBIT 99-A</B> </FONT> </P>
<BR>




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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CERTIFICATIONS
PURSUANT TO SECTION 302 OF<BR>
THE SARBANES-OXLEY ACT OF 2002 </FONT></H1>
<BR>


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<A NAME=A002></A>
<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Brad Thompson, certify
that: </FONT></P>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I
have reviewed this annual report on Form&nbsp;40-F of Oncolytics           Biotech Inc.;
&nbsp; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based
on my knowledge, this annual report does not contain any untrue           statement of a
material fact or omit to state a material fact necessary to make           the statements
made, in light of the circumstances under which such statements           were made, not
misleading with respect to the period covered by this annual           report;  </FONT></TD>
</TR>
</TABLE>
<BR>


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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based
on my knowledge, the financial statements, and other financial           information
included in this annual report, fairly present in all material           respects the
financial condition, results of operations and cash flows of the           issuer as of,
and for, the periods presented in this annual report;  </FONT></TD>
</TR>
</TABLE>
<BR>


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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
issuer&#146;s other certifying officer(s) and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) for the issuer and have:  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the issuer, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is
being prepared;  </FONT></TD>
</TR>
</TABLE>
<BR>


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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Evaluated
the effectiveness of the issuer&#146;s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation;
and  </FONT></TD>
</TR>
</TABLE>
<BR>


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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>c)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Disclosed
in this report any change in the issuer&#146;s internal control over financial reporting
that occurred during the period covered by the annual report that has materially
affected, or is reasonably likely to materially affect, the issuer&#146;s internal
control over financial reporting; and  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
issuer&#146;s other certifying officer(s) and I have disclosed, based           on our
most recent evaluation of internal control over financial reporting, to           the
issuer&#146;s auditors and the audit committee of the issuer&#146;s board of
          directors (or persons performing the equivalent functions):  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All
significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
issuer&#146;s ability to record, process, summarize and report financial information; and  </FONT></TD>
</TR>
</TABLE>
<BR>


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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Any
fraud, whether or not material, that involves management or other employees who have a
significant role in the issuer&#146;s internal control over financial reporting.  </FONT></TD>
</TR>
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<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:&nbsp;&nbsp; March 3, 2006</FONT></TD>
<TD WIDTH=50%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">By:&nbsp;&nbsp;<U>/s/ Brad Thompson&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brad Thompson<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Executive Officer </FONT>
</TD>
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>EXHIBIT 99-B</B> </FONT> </P>
<BR>



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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>CERTIFICATIONS
PURSUANT TO SECTION 302 OF<BR>
THE SARBANES-OXLEY ACT OF 2002 </FONT></H1>

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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I, Doug Ball, certify
that: </FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1. </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>I
have reviewed this annual report on Form&nbsp;40-F of Oncolytics           Biotech Inc.;
&nbsp; </FONT></TD>
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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based
on my knowledge, this annual report does           not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this annual report;  </FONT></TD>
</TR>
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<BR>


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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Based
on my knowledge, the financial statements, and other financial           information
included in this annual report, fairly present in all material           respects the
financial condition, results of operations and cash flows of the           issuer as of,
and for, the periods presented in this annual report;  </FONT></TD>
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<BR>


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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
issuer&#146;s other certifying officer(s) and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) for the issuer and have:  </FONT></TD>
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<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Designed
such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information
relating to the issuer, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is
being prepared;  </FONT></TD>
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<BR>


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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Evaluated
the effectiveness of the issuer&#146;s disclosure controls and procedures and presented
in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation;
and  </FONT></TD>
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<BR>


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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>c)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Disclosed
in this report any change in the issuer&#146;s internal control over financial reporting
that occurred during the period covered by the annual report that has materially
affected, or is reasonably likely to materially affect, the issuer&#146;s internal
control over financial reporting; and  </FONT></TD>
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<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=95%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The
issuer&#146;s other certifying officer(s) and I have disclosed, based           on our
most recent evaluation of internal control over financial reporting, to           the
issuer&#146;s auditors and the audit committee of the issuer&#146;s board of
          directors (or persons performing the equivalent functions):  </FONT></TD>
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<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>a)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>All
significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
issuer&#146;s ability to record, process, summarize and report financial information; and  </FONT></TD>
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<BR>


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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>b)  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Any
fraud, whether or not material, that involves management or other employees who have a
significant role in the issuer&#146;s internal control over financial reporting.  </FONT></TD>
</TR>
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<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:&nbsp;&nbsp; March 3, 2006</FONT></TD>
<TD WIDTH=50%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">By:&nbsp;&nbsp;<U>/s/ Doug Ball&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doug Ball<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Financial Officer </FONT>
</TD>
</TR>
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>EXHIBIT 99-C</B> </FONT> </P>
<BR>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
CERTIFICATIONS PURSUANT TO SECTION 906 OF<BR>
THE SARBANES-OXLEY ACT OF 2002 </FONT></H1>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In connection with this annual report
on Form&nbsp;40-F of Oncolytics Biotech Inc. for the period ended December&nbsp;31, 2005,
I, Brad Thompson, Chief Executive Officer of the issuer, certify that: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
annual report fully complies with the requirements of Section&nbsp;13(a) or 15(d) of the
Securities Exchange Act of 1934; and </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information contained in the annual report fairly presents, in all material respects, the
financial condition and results of operations of the issuer. </FONT></P>


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<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:&nbsp;&nbsp; March 3, 2006</FONT></TD>
<TD WIDTH=50%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">By:&nbsp;&nbsp;<U>/s/ Brad Thompson&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Brad Thompson<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Executive Officer </FONT>
</TD>
</TR>
</TABLE>
<BR>
<BR>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This certification accompanies the
annual report pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002 and shall
not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by
the issuer for purposes of Section&nbsp;18 of the Securities Exchange Act of 1934. </FONT></P>
<BR><BR>




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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>EXHIBIT 99-D</B> </FONT> </P>
<BR>


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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
CERTIFICATIONS PURSUANT TO SECTION 906 OF<BR>
THE SARBANES-OXLEY ACT OF 2002 </FONT></H1>
<BR>


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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>In connection with this annual report
on Form&nbsp;40-F of Oncolytics Biotech Inc. for the period ended December&nbsp;31, 2005,
I, Doug Ball, Chief Financial Officer of the issuer, certify that: </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
annual report fully complies with the requirements of Section&nbsp;13(a) or 15(d) of the
Securities Exchange Act of 1934; and </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
information contained in the annual report fairly presents, in all material respects, the
financial condition and results of operations of the issuer. </FONT></P>



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<TD WIDTH=50%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Date:&nbsp;&nbsp; March 3, 2006</FONT></TD>
<TD WIDTH=50%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2">By:&nbsp;&nbsp;<U>/s/ Doug Ball&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U><BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Doug Ball<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Financial Officer </FONT>
</TD>
</TR>
</TABLE>
<BR>
<BR>




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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>This certification accompanies the
annual report pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002 and shall
not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by
the issuer for purposes of Section&nbsp;18 of the Securities Exchange Act of 1934. </FONT></P>
<BR><BR>





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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>EXHIBIT 99-E</B> </FONT> </P>
<BR><BR>





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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=3>CONSENT OF INDEPENDENT
CHARTERED ACCOUNTANTS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>We consent to the incorporation by
reference in this Annual Report (Form 40-F) of Oncolytics Biotech Inc. of our report dated
February 8, 2006, included in the 2005 annual report to shareholders of Oncolytics Biotech
Inc. </FONT></P>


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Calgary, Canada<BR>
March 3, 2006</FONT></TD>
<TD WIDTH=50%>
<FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B><I>&#147;Ernst &amp; Young LLP&#148;<BR>
</I></B>Chartered Accountants </FONT>
</TD>
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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE="2"><B>EXHIBIT 99-F</B> </FONT> </P>
<BR>



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<H1 ALIGN=CENTER><FONT FACE="Times New Roman, Times, Serif" SIZE=2>ONCOLYTICS BIOTECH
INC. (&#147;the Company&#148;) </FONT><BR>
<FONT FACE="Times New Roman, Times, Serif" SIZE=3>CODE OF ETHICS </FONT></H1>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2><U>This Code of Ethics is applicable
to the Chief Executive Officer, the Chief Financial Officer, the Controller and all
accounting officers performing similar functions.</U> </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>The Company requires ethical conduct
in the practice of financial management and any and all activities that impact on the
financial results of the Company from all its officers and employees (collectively, the
&#147;Financial Officers&#148;). </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Financial Officers hold important roles in corporate governance and financial reporting.
They are uniquely positioned and empowered to ensure that the Company&#146;s and its
stockholders, interests are appropriately balanced, protected and preserved. This code
provides principles that these officers must adhere to and advocate. This code is designed
to designed to deter wrongdoing and to promote: </FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>honest
and ethical conduct,  including the ethical  handling of actual or apparent  conflicts of
interest between personal and                   professional relationships; </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>full,
fair, accurate, timely, and understandable disclosure in reports and documents that a
company files with, or submits to, the SEC and in other public communications made by the
company;  </FONT></TD>
</TR>
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<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>compliance
with applicable governmental laws, rules and regulations; </FONT></TD>
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<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the
prompt internal reporting of code violations to an appropriate person or persons
identified in the code; and </FONT></TD>
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<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>accountability
for adherence to the code. </FONT></TD>
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<BR>

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<A NAME=A003></A>
<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
 Financial Officers will:  </FONT></P>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Act
at all times with honesty, integrity and independence, avoiding actual or apparent
conflicts of interest in personal and professional relationships  </FONT></TD>
</TR>
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<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Discuss
with the appropriate level (senior management or board), in advance, any transaction that
reasonably could be expected to give rise to a conflict of interest.  </FONT></TD>
</TR>
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<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Provide
full, fair, accurate, complete, objective, and timely financial disclosures in documents
filed or submitted to the Securities and Exchange Commission, any other government agency
or self-regulatory organization, or used in public communications.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Comply
with the Company&#146;s policies and procedures, which includes compliance with all
applicable rules and regulations of applicable  </FONT></TD>
</TR>
</TABLE>
<BR>
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<TR VALIGN=TOP>
<TD WIDTH=10%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
governments,
commissions and exchanges in jurisdictions within which the Company conducts its
activities.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Act
in good faith with due care, diligence and without knowingly misrepresenting material
facts or allowing my better judgment to be subordinated.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Protect
and respect the confidentiality of information acquired in the course of my work except
when authorized or otherwise legally obligated to disclose. Confidential information
acquired in the course of my work will not be used for personal advantage.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Be
recognized as a responsible partner among my colleagues.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149;  </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Responsibly
use and control assets and other resources employed or entrusted to my supervision.  </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149; </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Proactively promote and be an example of ethical behavior as a responsible partner among
peers, in the work environment and the community. </FONT></TD>
</TR>
</TABLE>
<BR>

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<TABLE WIDTH=100% CELLPADDING=0 CELLSPACING=0>
<TR VALIGN=TOP>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=5%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#149; </FONT></TD>
<TD><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp; </FONT></TD>
<TD WIDTH=90%><FONT FACE="Times New Roman, Times, Serif" SIZE=2>
Promptly report to the Chairman of the Audit Committee any conduct that the individual
believes to be a violation of law or business ethics or any provision of the
Company&#146;s Codes of Conduct, including any transaction or relationship that reasonably
could be expected to give rise to such conflict. </FONT></TD>
</TR>
</TABLE>
<BR>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Violations of this Code of Ethics,
including failures to report potential violations by others, will be viewed as a severe
disciplinary matter that may result in personnel action, including termination of
employment. If you believe that a violation of the Code of Ethics has occurred, please
contact the Chairman of the Audit Committee. </FONT></P>

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<P><FONT FACE="Times New Roman, Times, Serif" SIZE=2>It is against the Company&#146;s
policy to retaliate against any employee for good faith reporting of violations of this
code. </FONT></P>
<BR><BR>


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<P ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</FONT></P>
<BR><BR>





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<P ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Approved by Resolution
April 23, 2003 </FONT></P>
<BR><BR>



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