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<SEC-DOCUMENT>0001130319-07-000330.txt : 20070430
<SEC-HEADER>0001130319-07-000330.hdr.sgml : 20070430
<ACCEPTANCE-DATETIME>20070430170142
ACCESSION NUMBER:		0001130319-07-000330
CONFORMED SUBMISSION TYPE:	6-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20070430
FILED AS OF DATE:		20070430
DATE AS OF CHANGE:		20070430

FILER:

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

	FILING VALUES:
		FORM TYPE:		6-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-31062
		FILM NUMBER:		07801478

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

	MAIL ADDRESS:	
		STREET 1:		210 - 1167 KENSINGTON CRES NW
		CITY:			CALGARY
		STATE:			A0
		ZIP:			T2N 1X7
</SEC-HEADER>
<DOCUMENT>
<TYPE>6-K
<SEQUENCE>1
<FILENAME>o36020e6vk.htm
<DESCRIPTION>FORM 6-K
<TEXT>
<HTML>
<HEAD>
<TITLE>e6vk</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

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

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

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


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

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

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

<P align="center" style="font-size: 10pt">For the month of
April 2007

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

</DIV>

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<P><HR noshade><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">First Quarter Report</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="000"></A></DIV>
<P align="center" style="font-size: 10pt"><B>SIGNATURES</B>

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

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

<TD colspan="3" align="left" valign="top"><B>Oncolytics
Biotech Inc.</B><BR>
(Registrant)</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD valign="top">Date: April 30, 2007</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Doug Ball
<HR size="1" noshade width="60%">
Doug Ball<BR>
Chief Financial Officer</TD>
</TR>
</TABLE>
</CENTER>

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

</DIV>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="o36020o3602000.gif" alt="(ONCOLYTICS BIOTECH INC. LOGO)">
</DIV>

<!-- link1 "First Quarter Report" -->
<DIV align="left"><A NAME="001"></A></DIV>
<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>First Quarter Report</B>

</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 0pt">
March&nbsp;31, 2007
</DIV>


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


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

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




<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>First Quarter Report</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>For the quarter ended March&nbsp;31, 2007</I>
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The first quarter of 2007 was very active for Oncolytics as we announced approvals for a number of
new trials, presented preclinical results that support our Phase II program, appointed a Vice
President, Intellectual Property and closed a financing that provided gross proceeds of $13.8
million to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In early January, we announced that we had received approval for two U.K. clinical trials: one
investigating REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in combination with gemcitabine and the other investigating
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in combination with docetaxel, both of which are commonly prescribed
chemotherapeutics. The trials have two components; the first is an open-label, dose-escalating
study of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> delivered intravenously with docetaxel or gemcitabine every three
weeks. A standard dose of docetaxel or gemcitabine will be delivered with escalating dosages of
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> intravenously. A maximum of three cohorts will be enrolled in the dose
escalation portion. The second component will immediately follow and will include the enrolment of
a further 12 patients at the maximum dosage of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in combination with a standard
dosage of either docetaxel or gemcitabine. The primary objective of these trials is to determine
the maximum tolerated dose, dose limiting toxicity, recommended dose and dosing schedule and safety
profile of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> when administered in combination with these chemotherapies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Both trials, along with the previously announced combination REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and carboplatin
and paclitaxel trial, are expected to yield data that will help us to design the late-stage
development program for REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On April&nbsp;11, 2007 we announced that we are initiating a Phase II sarcoma trial in the U.S. for
patients with sarcomas that have metastasized to the lung. This multi-centre, Phase II trial is
testing multiple intravenous doses of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in up to 52 sarcoma patients. The
primary objective of this study is measuring tumour responses and duration of response and
describing any other evidence of antitumour activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our clinical trial program now includes seven ongoing or recently approved trials, including two
Phase II trials, one each in the U.S. and the U.K.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our research collaborators have presented results of a number of preclinical studies in the first
quarter that support the Company&#146;s ongoing and planned Phase II program. In January, Dr.&nbsp;Sheila
Fraser of St. James&#146;s University Hospital in Leeds delivered an oral presentation at the Society of
Academic &#038; Research Surgery Conference in Cambridge, U.K. entitled &#147;Reovirus as a Potentially
Immunogenic as well as Cytotoxic Therapy for Metastatic Colorectal Cancer.&#148; The results reinforce
the results of previous studies that have investigated the relationship between the reovirus and
the immune system, showing that not only does the reovirus kill cancer cells directly, but also
primes the immune system to fight cancer cells exposed to reovirus.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March, several posters and oral presentations focusing on the reovirus were delivered at the
4<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> International Conference on Oncolytic Viruses as Cancer Therapeutics in Carefree,
Arizona.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At the Arizona conference, Dr.&nbsp;Alan Melcher of St. James&#146;s University Hospital presented a poster
entitled &#147;Inflammatory Tumour Cell Killing by Oncolytic Reovirus for the Treatment of Melanoma&#148;
which indicated that the reovirus effectively replicated in and killed a range of human melanomas
<I>in vitro</I>, and that the melanoma cell death caused by reovirus also triggered an immune response
which led to additional anti-tumour activity. Professor Hardev Panda also presented a poster at the
conference entitled &#147;Synergistic Antitumour Activity of Oncolytic Reovirus and Cisplatin in
Malignant Melanoma.&#148; The results of this study showed that the combination of reovirus and
cisplatin was significantly more effective than cisplatin or reovirus alone at killing melanoma
cancer cells in an animal model.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dr.&nbsp;Richard Vile of the Mayo College of Medicine in Rochester, Minnesota delivered an oral
presentation at the conference which covered a study of systemic administration of reovirus in
combination with cyclophosphamide, an immune modulator. His work demonstrated that systemic
administration of reovirus in combination with cyclophosphamide enhanced tumour regression in a
melanoma animal model without increasing toxicity. In addition, the investigators were able to
demonstrate that the addition of cyclophosphamide significantly increased the amount of reovirus
replicating with the tumour.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April, Dr.&nbsp;Maureen Lane of Cornell University, New York, presented a poster at the American
Association for Cancer Research annual meeting in Los Angeles entitled &#147;<I>In Vivo </I>Synergy Between
Oncolytic Reovirus and Gemcitabine in Ras-Mutated Human HCT116 Xenografts.&#148; While treatment with
each of these agents alone resulted in tumour regression, there was no residual tumour in four of
the five animals treated with the combination, and the fifth animal had only a small amount of
tumour left, 40% of which was necrotic. In addition, the anti-tumour effect was long-lasting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Oncolytics will continue to support preclinical studies which help us to answer important questions
regarding our clinical trial program.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February, we announced that we had closed a financing resulting in gross proceeds to the Company
of $12&nbsp;million. An over-allotment option was also fully exercised in March, resulting in a further
$1.8&nbsp;million of gross proceeds to the Company. The net proceeds of this financing, along with our
existing cash reserves, provide funding for the Company well into 2009, and are expected to cover
costs of the Company&#146;s planned Phase II program.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the quarter, we secured an additional two U.S. patents, while a third was issued just
subsequent to the quarter end. The Company now has 20 U.S. patents, 3 European patents and 5
Canadian patents covering REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> and related technologies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The management team at Oncolytics was broadened in the quarter with the addition of Mary Ann
Dillahunty as Vice President, Intellectual Property. Ms.&nbsp;Dillahunty has been involved with the
development of Oncolytics&#146; intellectual property portfolio since 1999 in her previous role as
partner at a leading U.S. patent law firm.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The first quarter of 2007 has proven to be one of the Company&#146;s most productive as we continue to
expand the clinical program for REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in the U.S. and the U.K. In the second quarter
of 2007 and beyond, we expect to continue to further the development of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in our
later stage clinical trials.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Thank you for your continued encouragement and support.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><IMG src="o36020o3602001.gif" alt="-s- Brad Thompson">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Brad Thompson, PhD<BR>
President and CEO <BR>
April
26, 2007

</DIV>

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

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center" style="font-size: 12pt; margin-top: 18pt">April
26, 2007</DIV>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->
<DIV align="left"><A NAME="002"></A></DIV>
<DIV align="center" style="font-size: 12pt; margin-top: 6pt"><B>MANAGEMENT&#146;S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND<BR>RESULTS OF OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This discussion and analysis should be read in conjunction with the unaudited financial
statements of Oncolytics Biotech Inc. as at and for the three months ended March&nbsp;31, 2007 and 2006,
and should also be read in conjunction with the audited financial statements and Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations (&#147;MD&#038;A&#148;) contained in our
annual report for the year ended December&nbsp;31, 2006. The financial statements have been prepared in
accordance with Canadian generally accepted accounting principles (&#147;GAAP&#148;).
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following discussion contains forward-looking statements, within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements, including our
belief as to the potential of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> as a cancer therapeutic and our expectations as
to the success of our research and development and manufacturing programs in 2007 and beyond,
future financial position, business strategy and plans for future operations, and statements that
are not historical facts, involve known and unknown risks and uncertainties, which could cause our
actual results to differ materially from those in the forward-looking statements. Such risks and
uncertainties include, among others, the need for and availability of funds and resources to pursue
research and development projects, the efficacy of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> as a cancer treatment, the
success and timely completion of clinical studies and trials, our ability to successfully
commercialize REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, uncertainties related to the research, development and
manufacturing of pharmaceuticals, uncertainties related to competition, changes in technology, the
regulatory process and general changes to the economic environment. Investors should consult our
quarterly and annual filings with the Canadian and U.S. securities commissions for additional
information on risks and uncertainties relating to the forward-looking statements. Forward-looking
statements are based on assumptions, projections, estimates and expectations of management at the
time such forward-looking statements are made, and such assumptions, projections, estimates and/or
expectations could change or prove to be incorrect or inaccurate. Investors are cautioned against
placing undue reliance on forward-looking statements. We do not undertake to update these
forward-looking statements.
</DIV>

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


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Since our inception in April of 1998, Oncolytics Biotech Inc. has been a development stage company
and we have focused our research and development efforts on the development of
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>, our potential cancer therapeutic. We have not been profitable since our
inception and expect to continue to incur substantial losses as we continue research and
development efforts. We do not expect to generate significant revenues until, if and when, our
cancer product becomes commercially viable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>GENERAL RISK FACTORS</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Prospects for biotechnology companies in the research and development stage should generally be
regarded as speculative. It is not possible to predict, based upon studies in animals, or early
studies in humans, whether a new therapeutic will ultimately prove to be safe and effective in
humans, or whether necessary and sufficient data can be developed through the clinical trial
process to support a successful product application and approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If a product is approved for sale, product manufacturing at a commercial scale and significant
sales to end users at a commercially reasonable price may not be successful. There can be no
assurance that we will generate adequate funds to continue development, or will ever achieve
significant revenues or profitable operations. Many factors (e.g. competition, patent protection,
appropriate regulatory approvals) can influence the revenue and product profitability potential.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition to developmental and operational considerations, market prices for securities of
biotechnology companies generally are volatile, and may or may not move in a manner consistent with
the progress being made by Oncolytics.
</DIV>

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

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

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

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B><I>REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Development Update for the First Quarter of 2007</I></B>
</DIV>


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

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We currently have six clinical trials ongoing of which three are actively enrolling patients
and three have been recently approved.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Clinical Trials &#151; Actively Enrolling</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2007, we continued to enroll patients in our phase II and Phase Ib
combination REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><B><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP></B></SUP>/radiation clinical trials in the U.K. and in our Phase I/II
recurrent malignant glioma clinical trial in the U.S.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Clinical Trials &#151; Recently Approved to Commence</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Along with our U.K. REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in combination with paclitaxel and carboplatin clinical
trial, we received approval to commence two additional co-therapy clinical trials in the U.K.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>U.K. REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in Combination with Docetaxel</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the first quarter of 2007, we announced we had received a letter of approval from the U.K.
Medicines and Healthcare products Regulatory Agency (&#147;MHRA&#148;) for our Clinical Trial Application
(&#147;CTA&#148;) to begin a clinical trial using intravenous administration of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in
combination with docetaxel (Taxotere<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>) in patients with advanced cancers including
bladder, prostate, lung and upper gastro-intestinal. The principal investigator is Professor Hardev
Pandha of The Royal Surrey Hospital, U.K. Docetaxel is used in patients with lung, breast and
prostate cancers, and is also used widely in the treatment of many other types of cancers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The trial has two components. The first is an open-label, dose-escalating, non-randomized study of
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> given intravenously with docetaxel every three weeks. A standard dosage of
docetaxel will be delivered with escalating dosages of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> intravenously. A
maximum of three cohorts will be enrolled in the REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> dose escalation portion. The
second component of the trial will immediately follow and will include the enrolment of a further
12 patients at the maximum dosage of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in combination with a standard dosage of
docetaxel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Eligible patients include those who have been diagnosed with advanced or metastatic solid tumours
such as bladder, lung, prostate or upper gastro-intestinal cancers that are refractory to standard
therapy or for which no curative standard therapy exists. The primary objective of the trial is to
determine the maximum tolerated dose (&#147;MTD&#148;), dose limiting toxicity (&#147;DLT&#148;), recommended dose and
dosing schedule and safety profile of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> when administered in combination with
docetaxel. Secondary objectives include the evaluation of immune response to the drug combination,
the body&#146;s response to the drug combination compared to chemotherapy alone and any evidence of
anti-tumour activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>U.K. REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in Combination with Gemcitabine</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2007, we announced we had received a letter of approval from the MHRA
to begin a clinical trial using intravenous administration of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in combination
with gemcitabine (Gemzar<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>) in patients with advanced cancers including pancreatic, lung
and ovarian. The principal investigators are Dr.&nbsp;Johann de Bono of The Royal Marsden NHS
Foundation Trust and The Institute of Cancer Research, London and Professor Jeff Evans of the
University of Glasgow and the Beatson Oncology Centre in Glasgow, Scotland. Gemcitabine is used in
patients with lung, pancreatic and ovarian cancers and is also used widely in the treatment of many
other types of cancers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This trial has two components. The first is an open-label, dose-escalating, non-randomized study of
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> given intravenously with gemcitabine every three weeks. A standard dosage of
gemcitabine will be delivered with escalating dosages of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> intravenously. A
maximum of three cohorts will be enrolled in the REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> dose escalation portion. The
second component of the trial will immediately follow and will include the enrolment of a further
12 patients at the maximum dosage of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in combination with a standard dosage of
gemcitabine.
</DIV>

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

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Eligible patients include those who have been diagnosed with advanced or metastatic solid tumours
including pancreatic, lung and ovarian cancers that are refractory to standard therapy or for which
no curative standard therapy exists. The primary objective of the trial is to determine the MTD,
DLT, recommended dose and dosing schedule and safety profile of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> when
administered in combination with gemcitabine. Secondary objectives include the evaluation of immune
response to the drug combination, the body&#146;s response to the drug combination compared to
chemotherapy alone and any evidence of anti-tumour activity.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the first quarter of 2007, an oral presentation entitled &#147;Reovirus as a Potentially
Immunogenic as well as Cytotoxic Therapy for Metastatic Colorectal Cancer&#148; was given by one of our
collaborators, Dr.&nbsp;Sheila Fraser of St. James&#146;s University Hospital in Leeds, U.K. The
investigators tested reovirus <I>in vitro </I>against recently resected colorectal cancer liver
metastases. The results showed that a significant proportion of tumour cell cultures showed
susceptibility to death following reovirus infection, and also demonstrated effective replication
of reovirus within these cells. In addition, dendritic cells that prime the immune system to fight
cancer cells were activated by exposure to the reovirus. The investigators concluded that the data
supports the development of reovirus as a novel therapy for colorectal cancer, with the potential
to direct the immune system to target cancer cells.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2007, an abstract entitled &#147;<I>In Vivo </I>Synergy between Oncolytic Reovirus
and Gemcitabine in Ras-Mutated Human HCT116 Xenografts&#148; was made available on the American
Association for Cancer Research (AACR)&nbsp;website at www.aacr.org. The abstract covered preclinical
work using reovirus in combination with gemcitabine and showed the combination of reovirus and
gemcitabine was more effective than gemcitabine or reovirus alone at killing human colon cancer
cells in a mouse model.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2007, Professor Hardev Pandha of The Royal Surrey Hospital, U.K. presented a poster
entitled &#147;Synergistic Antitumour Activity of Oncolytic Reovirus and Cisplatin in Malignant
Melanoma&#148; at the 4th International Conference on Oncolytic Viruses as Cancer Therapeutics in
Carefree, Arizona. The results of the preclinical study showed that the combination of reovirus
and cisplatin was significantly more effective than cisplatin or reovirus alone at killing melanoma
cancer cells in a mouse model. The investigators concluded that the addition of chemotherapeutic
agents can enhance the efficacy of reovirus therapy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Finally in March&nbsp;2007, Dr.&nbsp;Richard Vile of the Mayo College of Medicine, Rochester, Minnesota
delivered an oral presentation at the 4th International Conference on Oncolytic Viruses as Cancer
Therapeutics in Carefree, Arizona that covered a study of systemic administration of reovirus in
combination with cyclophosphamide, an immune modulator. The work demonstrated that systemic
administration of reovirus in combination with cyclophosphamide enhanced tumour regression in a
melanoma animal model without increasing toxicity. In addition, the investigators were able to
demonstrate that the addition of cyclophosphamide significantly increased the amount of reovirus
replicating within the tumour. The investigators concluded that the addition of cyclophosphamide
may lead to improved efficacy of REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> treatment.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We continued to have REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top"><SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> </SUP>manufactured in order to supply our current and
future clinical trial program. In the first quarter of 2007, we contracted for additional cGMP
(&#147;current good manufacturing practices&#148;) production runs. As well, we continued process
development activity focused on the potential scale up of our manufacturing process.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the first quarter of 2007, two U.S. patents were issued. At the end of the first quarter
of 2007, we had been issued a total of 19 U.S., five Canadian and three European patents. We also
have other patent applications filed in the U.S., Europe and Canada and other jurisdictions.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2007, we issued 4,600,000 units at a price of $3.00 per unit for
net proceeds of $12,068,172. Each unit consisted of one common share and one-half of one common
share purchase warrant. Each whole common share purchase warrant shall entitle the holder thereof
to acquire one common share upon payment of $3.50 expiring on February&nbsp;22, 2010. The net proceeds
from this offering will be used for our clinical trial program, manufacturing activities in support
of the clinical trial program and for general corporate purposes.
</DIV>

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

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

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We estimated at the beginning of 2007 that our monthly cash usage would be approximately
$1,400,000 for 2007. Our cash usage for the first quarter of 2007 was $3,747,709 from operating
activities and $252,925 for the purchases of intellectual property and capital assets which is in
line with our estimate. Our net loss for the first quarter of 2007 was $4,113,231.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We exited the first quarter of 2007 with cash resources totaling $35,681,286 (see <I>&#147;Liquidity
and Capital Resources&#148;)</I>.
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B><I>Expected REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> Development for the Remainder of 2007</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe that we will continue to expand our clinical trials to include studies
investigating REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> as a monotherapy. As well, we expect to commence enrollment in
our co-therapy chemotherapy clinical trials in 2007 and to continue to enroll patients in our other
trials. We believe we will complete enrollment in our U.K. Phase Ia/Ib and Phase II combination
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>/radiation clinical trials by the end of 2007 and complete enrollment in our
chemotherapy co-therapy studies in 2008. We expect to produce REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in 2007 to
supply our clinical trial program. We also plan to complete our scale up studies in an effort to
continue to improve our manufacturing process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Based on our expected activity in 2007, we continue to estimate our monthly cash usage to be
$1,400,000 per month (see <I>&#147;Liquidity and Capital Resources&#148;</I>).
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 12pt"><B>Recent 2007 Progress</B>
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On April&nbsp;11, 2007, we announced that subsequent to the regulatory review period for this
submission, we are proceeding with a Phase II trial to evaluate the intravenous administration of
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in patients with various sarcomas that have metastasized to the lung. The
Principal Investigators are Dr.&nbsp;Glenn S. Kroog of the Montefiore Medical Center/Albert Einstein
College of Medicine in the Bronx, New York, Dr.&nbsp;Laurence H. Baker of the University of Michigan
Comprehensive Cancer Center in Ann Arbor, and Dr.&nbsp;Monica Mita of the Cancer Therapy and Research
Center, Institute for Drug Development in San Antonio, Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This trial is a Phase II, open-label, single agent study whose primary objective is to measure
tumour responses and duration of response, and to describe any evidence of antitumour activity of
intravenous, multiple dose REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> in patients with bone and soft tissue sarcomas
metastatic to the lung. REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> will be given intravenously to patients at a dose of
3x10<SUP style="font-size: 85%; vertical-align: text-top">10</SUP> TCID<SUB style="font-size: 85%; vertical-align: text-bottom">50</SUB> for five consecutive days. Patients may receive additional
five-day cycles of therapy every four weeks for a maximum of eight cycles. Up to 52 patients will
be enrolled in the study.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Eligible patients must have a bone or soft tissue sarcoma metastatic to the lung deemed by their
physician to be unresponsive to, or untreatable by standard therapies. These include patients with
osteosarcoma, Ewing sarcoma family tumours, malignant fibrous histiocytoma, synovial sarcoma,
fibrosarcoma and leiomyosarcoma.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Net loss for the three month period ending March&nbsp;31, 2007 was $4,113,231 compared to
$2,994,536 for the three month period ending March&nbsp;31, 2006.
</DIV>

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

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

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

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

<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Manufacturing and related process development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,838,193</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">843,141</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>721,617</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">546,767</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pre-clinical trial expenses and collaborations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>106,281</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155,086</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other R&#038;D expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>552,146</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">371,328</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,218,237</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,916,322</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the first quarter of 2007, R&#038;D increased to $3,218,237 compared to $1,916,322 for the first
quarter of 2006. The increase in R&#038;D was due to the following:
</DIV>

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

<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Product manufacturing expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,748,417</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">643,423</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Process development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>89,776</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199,718</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Manufacturing and related process development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,838,193</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">843,141</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our M&#038;P expenses for the first quarter of 2007 increased to $1,838,193 compared to $843,141 for the
first quarter of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the first quarter of 2007, our production and vial filling activity increased compared to the
first quarter of 2006. In the first quarter of 2007, we commenced additional production runs to
manufacture REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>. As well, we incurred costs associated with the vialling of our
production runs that were completed at the end of 2006. In the first quarter of 2006, we were
completing the production runs that had started at the end of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our process development expenses for the first quarter of 2007 were $89,776 compared to $199,718
for the first quarter of 2006. In the first quarter of 2007, our main process development focus
was on our scale up studies. In the first quarter of 2006, our process development activity
included scale up studies and the validation of the fill process used in our manufacturing process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We still expect that our overall manufacturing and related process development expenses for 2007
will decrease compared to 2006. We expect to complete our planned 2007 production runs in the
third quarter of 2007. As well, we expect to continue our process development activity that is
examining the potential scale up of our manufacturing process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are also examining ways to reduce our economic dependence resulting from having only a single
cGMP manufacturer. This might include building up a level of inventory, increasing the scale of
each production run, engaging another cGMP manufacturer or manufacturing REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>
ourselves. Depending on how we mitigate our risk of economic dependence our expectation of our
2007 M&#038;P expenses may change.
</DIV>

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

<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Direct clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>683,107</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">499,633</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38,510</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,134</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>721,617</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">546,767</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2007, our direct clinical trial expenses increased to $683,107 compared
to $499,633 for the first quarter of 2006. In the first quarter of 2007, we incurred direct
patient costs in our three ongoing clinical trials along with start up costs associated with our
three U.K. co-therapy clinical trials that were approved to commence at the end of 2006 and at the
beginning of 2007. In the first quarter of 2006, we incurred direct patient costs in our three
ongoing clinical trials.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We still expect our clinical trial expenses in 2007 will increase compared to 2006 as we expect to
commence enrollment in our U.K. co-therapy trials in 2007. As well, we expect to continue to
expand our clinical trial program to include additional Phase II trials.
</DIV>

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

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

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

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

<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research collaboration expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>106,281</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155,086</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pre-clinical trial expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pre-clinical trial expenses and research collaborations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>106,281</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">155,086</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2007, our research collaboration expenses were $106,281 compared to
$155,086 for the first quarter of 2006. Our research collaboration activity continues to focus on
the interaction of the immune system and the reovirus and the use of the reovirus as a co-therapy
with existing chemotherapeutics and radiation. As well, we will also examine the use of new RAS
active viruses as potential therapeutics and investigate new uses of the reovirus in therapy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the remainder of 2007, we still expect that pre-clinical trial expenses and research
collaborations will decline compared to 2006. We expect to continue with our various
collaborations in order to provide support for our expanding clinical trial program. As well, we
may expand our collaborative activities to include other viruses.
</DIV>

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

<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">R&#038;D consulting fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>91,776</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,955</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">R&#038;D salaries and benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>372,389</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321,125</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Quebec scientific research and experimental development refund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(52,344</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other R&#038;D expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>87,981</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,592</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>552,146</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">371,328</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2007, our R&#038;D consulting fees were $91,776 compared to $32,955 for the
first quarter of 2006. In the first quarter of 2007, we incurred consulting activity associated
with our ongoing clinical trials and assistance with our clinical trial applications. In the first
quarter of 2006, our consulting activity related to our ongoing clinical trials.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our R&#038;D salaries and benefits costs were $372,389 in the first quarter of 2007 compared to $321,125
in the first quarter of 2006. The increase is a result of increases in salary and staff levels
along with the hiring of our Vice President of Intellectual Property in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We now expect that our other research and development expenses for the remainder of 2007 will
increase compared to 2006. We expect that salaries and benefits will increase to reflect increased
compensation levels and the salary and benefit costs for our Vice President of Intellectual
Property. Our R&#038;D consulting fees are expected to remain consistent with 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&#038;D consulting expenses to increase.
</DIV>

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

<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Public company related expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>581,876</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">834,720</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Office expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>324,839</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">283,216</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>906,715</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,117,936</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2007, our public company related expenses were $581,876 compared to
$834,720 for the first quarter of 2006. In the first quarter of 2006, we incurred financial
advisory costs that were not incurred in the first quarter of 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2007, our office expenses were $324,839 compared to $283,216 for the
first quarter of 2006. Our office expense activity has remained consistent in the first quarter of
2007 compared to the first quarter of 2006 with increases mainly due to increased compensation
levels and a general increase in office costs.
</DIV>

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

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

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

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As at March&nbsp;31, 2007, we are committed to payments totaling $1,623,000 during the remainder of
2007 for activities related to clinical trial activity and collaborations. All of these committed
payments are considered to be part of our normal course of business.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following unaudited quarterly information is presented in thousands of dollars except for
per share amounts:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>March</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Dec.</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Sept.</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>March</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Dec.</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Sept.</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>June</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Revenue</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Interest income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>268</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>286</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>320</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>335</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>292</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>160</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>211</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>168</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net loss<SUP style="font-size: 85%; vertical-align: text-top">(3), </SUP></B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,156</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,890</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,425</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,988</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,995</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,941</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,510</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,955</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Basic and diluted loss per common
share<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.11</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.13</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.09</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.08</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.08</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.12</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.11</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>0.09</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total assets<SUP style="font-size: 85%; vertical-align: text-top">(1), (4)</SUP></B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>41,775</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>33,566</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>37,980</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>40,828</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43,660</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>46,294</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34,538</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38,081</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total cash<SUP style="font-size: 85%; vertical-align: text-top">(2), (4)</SUP></B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>35,681</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>27,614</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>31,495</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>34,501</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>37,687</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>40,406</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>28,206</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>31,975</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total long-term debt<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>150</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash dividends
declared<SUP style="font-size: 85%; vertical-align: text-top">(6)</SUP></B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right"><B>Nil</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



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

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Subsequent to the acquisition of Oncolytics Biotech Inc. by SYNSORB in April&nbsp;1999, we
applied push down accounting. See note 2 to the audited financial statements for 2006.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Included in total cash are cash and cash equivalents plus short-term investments.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Included in net loss and loss per common share between March&nbsp;2007 and April&nbsp;2004 are
quarterly stock based compensation expenses of $64,167, $109,670, $34,671, $222,376,
$36,833, $38,152, $4,173, and $8,404, respectively.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>We issued 4,600,000 common shares for net cash proceeds of $12,068 during 2007 (2006 &#151;
284,000 common shares for cash proceeds of $241,400; 2005 &#151; 4,321,252 common shares for
cash proceeds of $18,789,596).</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>The long-term debt recorded represents repayable loans from the Alberta Heritage
Foundation. On January&nbsp;1, 2007, in conjunction with the adoption of the CICA Handbook
section 3855 &#147;Financial Instruments&#148;, this loan was recorded at fair value (see note 1 of
the March&nbsp;31, 2007 interim financial statements).</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>We have not declared or paid any dividends since incorporation.</TD>
</TR>

</TABLE>



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


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As at March&nbsp;31, 2007, we had cash and cash equivalents (including short-term investments) and
working capital positions of $35,681,286 and $33,664,830, respectively compared to $27,613,748 and
$25,719,870, respectively for December&nbsp;31, 2006. The increase in 2007 reflects the cash inflow
from financing activities of $12,068,172 offset by cash usage from operating activities and
purchases of intellectual property of $3,747,709 and $218,177, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We desire to maintain adequate cash and short-term investment reserves to support our planned
activities which include our clinical trial program, product manufacturing, administrative costs,
and our intellectual property expansion and protection. For the remainder of 2007, we are
expecting to commence patient enrollment in our co-therapy trials and continue to enroll patients
in our existing trials throughout 2007. We also expect to continue to expand our clinical trial
program. As well we expect to continue with our collaborative studies pursuing support for our
future clinical trial program. We will therefore need to ensure that we have enough
REOLYSIN<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP> to supply our clinical trial and collaborative programs. We continue to
expect our cash usage in 2007 to be $1,400,000 per month and we believe our existing capital
resources are adequate to fund our current plans for research and development activities well into
2009. 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&#038;D activity, and the level of
pre-clinical activity undertaken.
</DIV>

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

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

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

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

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We spent $218,177 on intellectual property in the first quarter of 2007 compared to $230,948 in the
first quarter of 2006. The change in intellectual property expenditures reflects the timing of
filing costs associated with our expanded patent base. In the first quarter of 2007, two U.S.
patents were issued bringing our total patents issued to 19 in the U.S., five in Canada and three
in Europe.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under our Investment Policy, we are permitted to invest in short-term instruments with a rating no
less than R-1 (DBRS)&nbsp;with terms less than two years. We have $24,356,007 invested under this
policy and we are currently earning interest at an effective rate of 4.08% (2006 &#151; 3.56%).
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have 41,120,748 common shares outstanding at April&nbsp;26, 2007. If all of our warrants
(4,972,000) and options (3,537,950) were exercised we would have 49,630,698 common shares
outstanding.
</DIV>

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


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

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

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




<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>BALANCE SHEETS</B><BR>
<B><I>(unaudited)</I></B>
</DIV>


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

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">$</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,325,279</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,491,511</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term investments <I>&#091;note 7&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>24,356,007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,122,237</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>50,948</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>781,957</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">638,540</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>36,514,191</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,336,291</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Property and equipment</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>174,488</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,596</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Intellectual property</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,086,290</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,079,805</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>41,774,969</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,565,692</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND SHAREHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,849,361</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,616,421</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Alberta Heritage Foundation loan </B><B><I>&#091;notes 1 and 8&#093;</I></B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shareholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share capital <I>&#091;note 2&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Authorized: unlimited number of common shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issued: 41,120,748 (December&nbsp;31, 2006 &#151; 36,520,748)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>92,713,443</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,083,271</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Warrants <I>&#091;note 2&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6,654,740</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,216,740</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contributed surplus <I>&#091;note 4&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,550,722</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,529,326</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deficit <I>&#091;notes 1 and 5&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(68,993,297</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(65,030,066</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38,925,608</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,799,271</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>41,774,969</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,565,692</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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


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

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

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




<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>STATEMENTS OF LOSS AND COMPREHENSIVE LOSS</B><BR>
<B><I>(unaudited)</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">For the three month periods ended March&nbsp;31,
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Cumulative</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>from inception</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>on April 2, 1998</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>to March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">$</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;
&nbsp; &nbsp; &nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Revenue</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rights revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">310,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">310,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,218,237</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,916,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,439,431</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>906,715</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,117,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,677,296</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock based compensation <I>&#091;note 3&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>21,396</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,187,045</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign exchange loss (gain)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(5,233</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,051</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">643,615</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization &#151; intellectual property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>230,992</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,267,826</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization &#151; property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,856</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">417,539</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,381,963</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,286,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,632,752</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,281,963</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,286,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,322,752</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Interest income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(268,732</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(292,222</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,071,737</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Gain on sale of BCY LifeSciences Inc.</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(299,403</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Loss on sale of Transition Therapeutics Inc.</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,156,685</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Loss before taxes</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,113,231</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,994,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,108,297</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Future income tax recovery</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,115,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net loss and comprehensive loss for the period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,113,231</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,994,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,993,297</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Basic and diluted loss per share</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(0.11</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.08</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Weighted average number of shares (basic and diluted)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>38,231,859</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,236,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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



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

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

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




<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>STATEMENTS OF CASH FLOWS</B><BR>
<B><I>(unaudited)</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">For the three month periods ended March&nbsp;31,
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Cumulative</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>from inception</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>on April 2, 1998</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>to March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">$</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>OPERATING ACTIVITIES</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss for the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4,113,231</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,994,536</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(68,993,297</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct non-cash items
Amortization &#151; intellectual property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>230,992</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,267,826</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization &#151; property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>9,856</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">417,539</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>21,396</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,187,045</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other non-cash items <I>&#091;note 6&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,383,537</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net changes in non-cash working capital <I>&#091;note 6&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>103,278</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,008,199</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(3,747,709</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,461,213</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56,729,151</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>INVESTING ACTIVITIES</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of intellectual property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(218,177</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(230,948</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,717,457</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(34,748</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,381</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(658,096</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase of short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(233,770</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(249,443</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48,353,237</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Redemption of short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,900,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,578,746</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investment in BCY LifeSciences Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">464,602</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investment in Transition Therapeutics Inc<I>.</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,532,343</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(486,695</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,392,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(28,153,099</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>FINANCING ACTIVITIES</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from exercise of warrants and stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,208,468</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from private placements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,137,385</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from public offerings <I>&#091;note 2&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,068,172</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,861,676</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,068,172</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96,207,529</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Increase in cash and cash equivalents during the
period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,833,768</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,931,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,325,279</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents, beginning of the period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,491,511</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,511,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents, end of the period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>11,325,279</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,442,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,325,279</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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


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

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

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




<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NOTES TO FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">March&nbsp;31, 2007 <I>(unaudited)</I>
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These unaudited interim financial statements do not include all of the disclosures included in the Company&#146;s annual financial statements. Accordingly, these
unaudited interim financial statements should be read in conjunction with the Company&#146;s most recent
annual financial statements. The information as at and for the year ended December&nbsp;31, 2006 has
been derived from the Company&#146;s audited financial statements.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Adoption of New Accounting Policy</B>
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;1, 2007, the Company prospectively adopted, without restatement, CICA Handbook section
3855 <I>&#147;Financial Instruments &#151; Recognition and Measurement&#148; </I>and section 1530 <I>&#147;Other Comprehensive
Income&#148;</I>. Pursuant to the transitional provisions of Section&nbsp;3855, the Company classified its
short-term investments as held-to-maturity fixed income securities and recorded its Alberta
Heritage Foundation interest free loan at fair value. As a result, at the beginning of the year,
there were no adjustments made to short-term investments or other comprehensive income and there
was a decrease in the Alberta Heritage Foundation loan of $150,000 with a corresponding decrease of
$150,000 in the Company&#146;s deficit.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Financial assets comprise of cash and cash equivalents, accounts receivable (mainly goods and
service tax receivable), and short-term investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Cash and cash equivalents</I><BR>
Cash and cash equivalents consist of cash on hand and balances with the Company&#146;s bank including
interest bearing deposits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Short-term investments</I><BR>
The Company determines the appropriate classification of its short-term investments at the time of
purchase and reevaluates such designation as of each balance sheet date. Short-term investments
can be classified as held-for-trading, available-for-sale or held-to-maturity. Currently, the
Company has classified all its short-term investments as held-to-maturity as it has the positive
intent and ability to hold the securities to maturity. Held-to-maturity securities are stated at
original cost, adjusted for amortization of premiums and accretion of discounts to maturity
computed under the effective interest method. Such amortization and interest on securities
classified as held-to-maturity are included in interest income.
</DIV>

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

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

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

<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NOTES TO FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">March&nbsp;31, 2007 <I>(unaudited)</I>
</DIV>


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


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Unlimited number of common shares
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><FONT style="font-size:10pt"><B>Issued</B>:</FONT></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Warrants</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,236,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,841,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,784,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,429,932</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">284,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expired warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(112,800</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(213,192</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,520,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,083,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,672,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,216,740</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issued for cash pursuant
to February&nbsp;22, 2007
public offering
<SUP style="font-size: 85%; vertical-align: text-top">(a)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,362,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,438,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share issue costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,731,828</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, March&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,120,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,713,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,972,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,654,740</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Pursuant to a public offering, 4,600,000 units were issued at an issue price of $3.00 per
unit for gross proceeds of $13,800,000. Each unit included one common share (ascribed value
of $2.47) and one-half of one common share purchase warrant (ascribed value of $0.53) for a
total of 2,300,000 warrants. Each whole common share purchase warrant entitles the holder to
acquire one common share in the capital of the Company upon payment of $3.50 per share until
February&nbsp;22, 2010. Share issue costs for this offering were $1,731,828.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the weighted average assumptions used in the Black Scholes Model
with respect to the valuation of warrants issued in the three month period ending March&nbsp;31, 2007:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="60%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>4.08</B></TD>
    <TD nowrap><B>%</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected hold period to exercise</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center"><B>3 years</B></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Volatility in the price of the Company&#146;s shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>62.8</B></TD>
    <TD nowrap><B>%</B></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There were no warrants issued during the three month period ending March&nbsp;31, 2006.
</DIV>

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

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

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

<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NOTES TO FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">March&nbsp;31, 2007 <I>(unaudited)</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the Company&#146;s outstanding warrants as at March&nbsp;31, 2007:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Weighted</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Outstanding,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Granted</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Exercised</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Expired</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Remaining</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Beginning of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>During the</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>During the</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>During the</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Outstanding,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Contractual</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exercise Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>the Period</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>End of Period</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Life (years)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$3.50</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.90</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$5.65</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">320,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$6.15</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,600,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">$8.00</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">752,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">752,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,672,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,972,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3.</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>STOCK BASED COMPENSATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As the Company is following the fair value based method of accounting for stock options, the
Company recorded compensation expense of $21,396 (March&nbsp;31, 2006 &#151; $36,833) for the period with
respect to the vesting of options issued in prior periods with an offsetting credit to contributed
surplus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;1, 2007, the Company granted 100,000 options with an exercise price of $3.28 (the
market price at the date of grant) to its recently appointed Vice President of Intellectual
Property. These options are conditional upon an increase in the Company&#146;s option pool which the
Company presently expects to occur at the Annual General Meeting on May&nbsp;2, 2007. As a result, no
compensation expense has been recorded with respect to these options during the three month period
ending March&nbsp;31, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4.</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>CONTRIBUTED SURPLUS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,912,584</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expired warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213,192</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">403,550</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,529,326</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,396</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, March&nbsp;31, 2007</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,550,722</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

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

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


<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NOTES TO FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">March&nbsp;31, 2007 <I>(unaudited)</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>5.</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>DEFICIT</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>$</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,732,542</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss for the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,297,524</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance, December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,030,066</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustment &#151; Alberta Heritage Foundation loan <I>&#091;note 1&#093;</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(150,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss and comprehensive loss, March&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,113,231</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance, March&nbsp;31, 2007</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>68,993,297</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6.</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>ADDITIONAL CASH FLOW DISCLOSURE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Net Change In Non-Cash Working Capital</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the three month period ending March&nbsp;31,
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Cumulative</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>from inception</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>on April 2, 1998</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>to March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">$</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Change in:</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>33,055</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(69,921</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(50,948</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(143,417</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(781,957</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>232,940</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">323,454</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,849,361</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in non-cash working capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>122,578</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">266,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,016,456</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net change associated with investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(19,300</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,257</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net change associated with operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>103,278</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,008,199</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Cumulative</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>from inception</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>on April 2, 1998</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>to March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">$</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">$</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign exchange loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">425,186</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Donation of medical equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,069</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on sale of Transition Therapeutics Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,156,685</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on sale of BCY LifeSciences Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(299,403</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cancellation of contingent payment obligation
settled in common shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Future income tax recovery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,115,000</TD>
    <TD nowrap>)</TD>
</TR>


<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,383,537</TD>
    <TD>&nbsp;</TD>
</TR>


<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

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

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


<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>Oncolytics Biotech Inc.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NOTES TO FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">March&nbsp;31, 2007 <I>(unaudited)</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>7.</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>SHORT-TERM INVESTMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Short-term investments, mainly consisting of government of Canada treasury bills, are liquid
investments that are readily convertible to known amounts of cash and are subject to an
insignificant risk of changes in value. The objectives for holding short-term investments are to
invest the Company&#146;s excess cash resources in investment vehicles that provide a better rate of
return compared to the Company&#146;s interest bearing bank account with limited risk to the principal
invested. The Company also intends to match the maturities of these short-term investments with
the cash requirements of the Company&#146;s activities.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Effective</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Original</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accrued</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Fair</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Interest</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Cost</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Interest</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Value</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Value</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Rate</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March&nbsp;31, 2007<BR>
Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,136,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219,905</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,356,007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,354,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.08</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,672,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">449,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,122,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,124,810</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">3.95</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Fair value is determined by using published market prices provided by the Company&#146;s investment
advisor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>8.</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>ALBERTA HERITAGE LOAN</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company received an interest free 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)&nbsp;5% of the gross sales generated by the Company; or (b) $15,000 per annum until the
entire loan has been paid in full.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>9.</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>COMPARATIVE FIGURES</B>
</DIV>


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


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

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

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

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

</DIV>

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

</DIV>

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

</DIV>

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

</DIV>

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

</DIV>

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

</DIV>

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

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

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

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



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


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