EX-99.1 2 ex991interimfinancialstate.htm 2017 THIRD QUARTER INTERIM FINANCIAL STATEMENTS

Exhibit

Interim Consolidated Financial Statements

(unaudited)

Oncolytics Biotech^® Inc.

September 30, 2017 and 2016

ONCOLYTICS BIOTECH INC.

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(unaudited)

	Notes	September 30, 2017 $		December 31, 2016 $
Assets
Current assets
Cash and cash equivalents	3	14,033,644		12,034,282
Short-term investments	3	—		2,088,800
Accounts receivable		33,129		54,406
Prepaid expenses		438,150		260,841
Total current assets		14,504,923		14,438,329
Non-current assets
Property and equipment		343,307		319,955
Total non-current assets		343,307		319,955
Total assets		14,848,230		14,758,284
Liabilities And Shareholders’ Equity
Current Liabilities
Accounts payable and accrued liabilities		2,781,932		4,068,664
Total current liabilities		2,781,932		4,068,664
Commitments	7
Shareholders’ equity
Share capital   Authorized: unlimited   Issued:
September 30, 2017 – 140,671,722
December 31, 2016 – 121,258,222	4	270,899,669		262,321,825
Warrants	4	3,617,900		—
Contributed surplus	5	26,887,579		26,643,044
Accumulated other comprehensive income		361,726		554,060
Accumulated deficit		(289,700,576	)	(278,829,309	)
Total shareholders’ equity		12,066,298		10,689,620
Total liabilities and equity		14,848,230		14,758,284

See accompanying notes

F - 2

ONCOLYTICS BIOTECH INC.

INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

(unaudited)

	Notes	Three Month Period Ending September 30, 2017 $		Three Month Period Ending September 30, 2016 $		Nine Month Period Ending September 30, 2017 $		Nine Month Period Ending September 30, 2016 $
Expenses
Research and development	5, 11, 12	1,726,726		2,141,737		6,913,470		6,358,822
Operating	5, 11, 12	1,309,607		1,222,447		4,054,450		3,708,317
Operating loss		(3,036,333	)	(3,364,184	)	(10,967,920	)	(10,067,139	)
Interest		31,759		31,691		96,637		136,849
Loss before income taxes		(3,004,574	)	(3,332,493	)	(10,871,283	)	(9,930,290	)
Income tax expense		168		19		16		333
Net loss		(3,004,406	)	(3,332,474	)	(10,871,267	)	(9,929,957	)
Other comprehensive income items that may be   reclassified to net loss
Translation adjustment		(126,846	)	32,545		(192,334	)	(268,341	)
Net comprehensive loss		(3,131,252	)	(3,299,929	)	(11,063,601	)	(10,198,298	)
Basic and diluted loss per common share	6	(0.02	)	(0.03	)	(0.08	)	(0.08	)
Weighted average number of shares (basic and diluted)	6	139,515,885		120,552,638		129,441,461		119,455,440

See accompanying notes

F - 3

ONCOLYTICS BIOTECH INC.

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(unaudited)

	Notes	Share Capital $		Warrants $		Contributed Surplus $		Accumulated Other Comprehensive Income $		Accumulated Deficit $		Total $
As at December 31, 2015		261,324,692		—		26,277,966		760,978		(263,689,330	)	24,674,306
Net loss and other comprehensive loss		—		—		—		(268,341	)	(9,929,957	)	(10,198,298	)
Issued pursuant to "At the Market" Agreement	4	1,339,378		—		—		—		—		1,339,378
Issued pursuant to incentive share award plan	5	41,000		—		(41,000	)	—		—		—
Share issue costs	4	(486,842	)	—		—		—		—		(486,842	)
Share based compensation	5	—		—		299,635		—		—		299,635
As at September 30, 2016		262,218,228		—		26,536,601		492,637		(273,619,287	)	15,628,179
	Notes	Share Capital $		Warrants $		Contributed Surplus $		Accumulated Other Comprehensive Income $		Accumulated Deficit $		Total $
As at December 31, 2016		262,321,825		—		26,643,044		554,060		(278,829,309	)	10,689,620
Net loss and other comprehensive loss		—		—		—		(192,334	)	(10,871,267	)	(11,063,601	)
Issued pursuant to "At the Market" Agreement	4	1,479,065		—		—		—		—		1,479,065
Issued pursuant to public offering	4	7,893,600		3,617,900		—		—		—		11,511,500
Issued pursuant to stock option plan	5	536,949		—		(193,509	)	—		—		343,440
Share issue costs	4	(1,331,770	)	—		—		—		—		(1,331,770	)
Share based compensation	5	—		—		438,044		—		—		438,044
As at September 30, 2017		270,899,669		3,617,900		26,887,579		361,726		(289,700,576	)	12,066,298

See accompanying notes

F - 4

ONCOLYTICS BIOTECH INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Notes	Three Month Period Ending September 30, 2017 $		Three Month Period Ending September 30, 2016 $		Nine Month Period Ending September 30, 2017 $		Nine Month Period Ending September 30, 2016 $
Operating Activities
Net loss for the period		(3,004,406	)	(3,332,474	)	(10,871,267	)	(9,929,957	)
Amortization - property and equipment		20,591		44,014		70,315		134,631
Share based compensation	5, 11	148,447		98,369		438,044		299,635
Unrealized foreign exchange gain		(6,414	)	(49,400	)	(119,058	)	(152,019	)
Net change in non-cash working capital	10	(331,590	)	216,611		(1,186,142	)	978,847
Cash used in operating activities		(3,173,372	)	(3,022,880	)	(11,668,108	)	(8,668,863	)
Investing Activities
Acquisition of property and equipment		(9,451	)	(4,851	)	(95,337	)	(10,553	)
Redemption (purchase) of short-term investments		—		—		2,088,800		(27,823	)
Cash (used in) provided by investing activities		(9,451	)	(4,851	)	1,993,463		(38,376	)
Financing Activities
Proceeds from "At the Market" equity distribution agreement	4	733,171		242,706		1,292,698		852,536
Proceeds from public offering	4	—		—		10,366,098		—
Proceeds from exercise of options	5	48,090		—		343,440		—
Cash provided by financing activities		781,261		242,706		12,002,236		852,536
(Decrease) increase in cash		(2,401,562	)	(2,785,025	)	2,327,591		(7,854,703	)
Cash and cash equivalents, beginning of period		16,676,298		18,320,981		12,034,282		24,016,275
Impact of foreign exchange on cash and cash equivalents		(241,092	)	76,773		(328,229	)	(548,843	)
Cash and cash equivalents, end of period		14,033,644		15,612,729		14,033,644		15,612,729

See accompanying notes

F - 5

ONCOLYTICS BIOTECH INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

September 30, 2017

Note 1: Incorporation and Nature of Operations

Oncolytics Biotech Inc. was incorporated on April 2, 1998 under the Business Corporations Act (Alberta) as 779738 Alberta Ltd. On April 8, 1998, we changed our name to Oncolytics Biotech Inc.

Our interim consolidated financial statements for the period ended September 30, 2017, were authorized for issue in accordance with a resolution of the Board of Directors (the "Board") on November 7, 2017. We are a limited company incorporated and domiciled in Canada. Our shares are publicly traded and our registered office is located at 210, 1167 Kensington Crescent NW, Calgary, Alberta, Canada.

We are a development stage biopharmaceutical company that focuses on the discovery and development of pharmaceutical products for the treatment of cancers that have not been successfully treated with conventional therapeutics. Our lead product, REOLYSIN^®, is a potential immuno-oncology viral-agent that may be a novel treatment for certain types of cancer and may be an alternative to existing cytotoxic or cytostatic therapies. Our clinical development program for REOLYSIN emphasizes three pillars: chemotherapy combinations to trigger selective tumor lysis; immuno-therapy combinations to produce adaptive immune responses and immune modulator (IMiD) combinations to facilitate innate immune responses.

Note 2: Basis of Financial Statement Presentation

Our interim consolidated financial statements include our financial statements and the financial statements of our subsidiaries as at September 30, 2017 and are presented in Canadian dollars, our functional currency.

Our accounts are prepared in accordance with International Financial Reporting Standards (“IFRS”) and interpretations issued by the International Accounting Standards Board (“IASB”). The accounts are prepared on the historical cost basis, except for certain assets and liabilities which are measured at fair value as explained in the notes to these financial statements.

These interim consolidated financial statements have been prepared in compliance with International Accounting Standard 34 Interim Financial Reporting. The notes presented in these interim consolidated financial statements include only significant events and transactions occurring since our last fiscal year end and are not fully inclusive of all matters required to be disclosed in our annual audited consolidated financial statements. Accordingly, these interim consolidated financial statements should be read in conjunction with our most recent annual audited consolidated financial statements, for the year ended December 31, 2016. We have consistently applied the same accounting policies for all periods presented in these interim consolidated financial statements as those used in our audited consolidated financial statements for the year ended December 31, 2016.

Note 3: Cash Equivalents and Short Term Investments

Cash Equivalents

Cash equivalents consist of interest bearing deposits with our bank totaling $12,313,008 (December 31, 2016 – $10,679,992).  The current annual interest rate earned on these deposits is 1.01% (December 31, 2016 – 0.96%).

Short-Term Investments

Short-term investments consisted of guaranteed investment certificates which 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 were to invest our excess cash resources in investment vehicles that provided a better rate of return compared to our interest bearing bank account with limited risk to the principal invested.  We intended to match the maturities of these short-term investments with the cash requirements of the Company’s activities and treated these as held-to-maturity short-term investments.

F - 6

ONCOLYTICS BIOTECH INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

September 30, 2017

	Face Value $		Original Cost $		Accrued Interest $		Carrying Value $		Fair Value $		Effective Interest Rate %
September 30, 2017
Short-term investments	—		—		—		—		—		—%
December 31, 2016
Short-term investments	2,088,800		2,088,800		—		2,088,800		2,088,800		1.41%

Fair value is determined by using published market prices provided by our investment advisor.

Note 4: Share Capital

Authorized:

Unlimited number of no par value common shares

Issued:	Shares				Warrants
	Number		Amount $		Number		Amount $
Balance, December 31, 2015	118,151,622		261,324,692		—		—
Issued pursuant to incentive share award plan	100,000		41,000		—		—
Issued pursuant to "At the Market" equity distribution agreement(a)	3,006,600		1,456,296		—		—
Share issue costs	—		(500,163	)	—		—
Balance, December 31, 2016	121,258,222		262,321,825		—		—
Issued pursuant to stock option plan	801,000		536,949		—		—
Issued pursuant to "At the Market" equity distribution agreement(a)	2,167,500		1,479,065		—		—
Issued pursuant to public offering(b)	16,445,000		7,893,600		16,445,000		3,617,900
Share issue costs	—		(1,331,770	)	—		—
Balance, September 30, 2017	140,671,722		270,899,669		16,445,000		3,617,900

(a) On February 25, 2016, we entered into an "at-the-market" equity distribution agreement with Canaccord Genuity Inc. acting as our sole agent with an aggregate offering value of $4.6 million and allows us to sell our common shares through the facilities of the Toronto Stock Exchange or other "marketplace” (as defined in National Instrument 21-101 Marketplace Operation) in Canada (our "Canadian ATM"). Subject to the terms of our Canadian ATM, we are able to determine, at our sole discretion, the timing and number of shares to be sold under this ATM facility. During the period ending September 30, 2017, we sold 2,167,500 (2016 - 2,621,600) common shares for gross proceeds of $1,479,065 (2016 - $1,339,378 ). We incurred share issue costs of $186,367 (2016 - $486,842).

(b) On June 1, 2017, pursuant to an underwritten public offering, 16,445,000 units were sold at a purchase price of $0.70 per unit for gross proceeds of $11,511,500. Each unit included one common share (ascribed value of $0.48) and one common share purchase warrant (ascribed value of $0.22). The ascribed value was determined using the relative fair value method. The ascribed value of the common share purchase warrants was determined using the Black Scholes option pricing model. Each common share purchase warrant entitles the holder to purchase one common share in the capital of the Company until June 1, 2022, at an exercise price of $0.95. The common share purchase warrants will be subject to acceleration if the volume weighted average price of the Company's common shares equals or exceeds $2.50 for 15 consecutive trading dates. We incurred share issue costs of $1,145,402.

F - 7

ONCOLYTICS BIOTECH INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

September 30, 2017

Warrants

The following table summarizes the assumptions used in the Black Scholes Option Pricing Model with respect to the valuation of warrants issued:

	2017
Risk-free interest rate	0.70%
Expected hold period to exercise	2.0 years
Volatility in the price of the Company's shares	89.30%
Dividend yield	Nil

We use historical data to estimate the expected dividend yield and expected volatility of our stock in determining the fair value of the warrants. The risk-free interest rate is based on the Government of Canada benchmark bond yield rates in effect at the time of grant and the expected life of the warrants represents the estimated length of time the warrants are expected to remain outstanding.

The following table summarizes our outstanding warrants at September 30, 2017:

Exercise Price $		Outstanding, Beginning of the Period		Granted During the Period		Outstanding, End of the Period		Weighted Average Remaining Contractual Life (years)
0.95		—		16,445,000		16,445,000		4.67

Note 5: Share Based Payments

Stock Option Plan

We have issued stock options to acquire common stock through our stock option plan of which the following are outstanding at September 30:

	2017			2016
	Stock Options		Weighted Average Exercise Price $	Stock Options		Weighted Average Exercise Price $
Outstanding, beginning of the period	8,674,227		1.83	8,561,394		2.17
Granted during the period	295,000		0.45	35,000		0.39
Forfeited during the period	(702,000	)	3.26	(806,667	)	3.39
Expired during the period	(17,900	)	2.25	—		—
Exercised during the period	(801,000	)	0.43	—		—
Outstanding, end of the period	7,448,327		1.79	7,789,727		2.03
Options exercisable, end of the period	6,049,911		2.12	5,681,393		2.63

F - 8

ONCOLYTICS BIOTECH INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

September 30, 2017

The following table summarizes information about the stock options outstanding and exercisable at September 30, 2017:

Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Contractual Life (years)	Weighted Average Exercise Price $	Number Exercisable		Weighted Average Exercise Price $
$0.26 - $0.42	3,437,000		8.7	0.35	2,166,084		0.35
$0.51 - $0.80	428,000		8.1	0.66	300,500		0.72
$1.45 - $2.00	1,387,667		4.4	1.77	1,387,667		1.77
$2.13 - $3.89	1,089,660		2.1	3.23	1,089,660		3.23
$4.01 - $6.72	1,106,000		2.5	5.34	1,106,000		5.34
	7,448,327		6.0	1.79	6,049,911		2.12

Non-exercisable options vest annually over periods ranging from one to three years or upon satisfaction of certain performance conditions.

The estimated fair value of stock options issued during the period was determined using the Black Scholes Option Pricing Model using the following weighted average assumptions and fair value of options:

	2017	2016
Risk-free interest rate	1.06%	0.56%
Expected hold period to exercise	3.0 years	3.0 years
Volatility in the price of the Company's shares	92.43%	89.49%
Rate of forfeiture	3.67%	3.67%
Dividend yield	Nil	Nil
Weighted average fair value of options	$0.27	$0.22

We use historical data to estimate the expected dividend yield and expected volatility of our stock in determining the fair value of the stock options. The risk-free interest rate is based on the Government of Canada benchmark bond yield rates in effect at the time of grant and the expected life of the options represents the estimated length of time the options are expected to remain outstanding.

Incentive Share Award Plan

Restricted Share Units

We have issued restricted share units ("RSU") to non-employee directors through our incentive share award plan. Grants of RSU to non-employee directors vest either on the third anniversary date from the grant date or when the director ceases to be a member of the board. We have also issued RSU to certain officers and employees of the Company. Grants of RSU to certain officers and employees of the Company vest over a three year period. The following RSU are outstanding at September 30:

	2017		2016
Outstanding, beginning of the period	1,322,829		368,831
Granted during the period(1)	205,210		67,551
Vested, during the period	—		(100,000	)
Outstanding, end of the period	1,528,039		336,382

(1) The weighted average fair value of the RSU granted was $0.57 in 2017 (2016 - $0.38).

F - 9

ONCOLYTICS BIOTECH INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

September 30, 2017

Performance Share Units

We have also issued performance share units ("PSU") to certain officers and employees of the Company. Grants of PSU require completion of certain performance criteria and cliff vest after three years or vest over a three year period, depending on the grant. PSU grants to certain officers will vest immediately upon a change of control of the Company. If certain officers cease employment with the Company, vesting occurs on a pro rata basis prior to the third anniversary of the grant but after the first anniversary. The following PSU are outstanding at September 30:

	2017		2016
Outstanding, beginning of the period	840,000		—
Granted during the period(1)	60,000		1,200,000
Vested, during the period	—		—
Outstanding, end of the period	900,000		1,200,000

(1) The weighted average fair value of the RSU granted was $0.35 in 2017 (2016 - $0.38).

We have reserved 14,067,172 common shares for issuance relating to outstanding stock options. Compensation expense related to stock options granted to employees, directors and consultants and restricted share units granted to independent directors and certain officers was $148,447 and $438,044 for the three and nine month periods ending September 30, 2017, respectively (2016 - $98,369 and $299,635, respectively).

Note 6: Loss Per Common Share

Loss per common share is calculated using the net loss for the three and nine month periods and the weighted average number of common shares outstanding for the three and nine month periods ending September 30, 2017 of 139,515,885 and 129,441,461, respectively (September 30, 2016 of 120,552,638 and 119,455,440, respectively). The effect of any potential exercise of our stock options and warrants outstanding during the period has been excluded from the calculation of diluted loss per common share, as it would be anti-dilutive.

Note 7: Commitments

We are committed to payments totaling $1,866,232 for activities related to our clinical trial, manufacturing and collaboration programs which are expected to occur over the next twelve months.

We are committed to rental payments (excluding our portion of operating costs and rental taxes) under the terms of our office leases. Annual payments under the terms of these leases are as follows: 

	Amount $
Remainder of 2017	71,542
2018	287,230
2019	251,996
2020	159,609
2021	43,130
	813,507

Under a clinical trial agreement entered into with the Alberta Cancer Board (“ACB”), we have agreed to repay the amount funded under the agreement together with a royalty, to a combined maximum amount of $400,000 plus an overhead repayment of $100,000, upon sales of a specified product.  We agreed to repay the ACB in annual installments in an amount equal to the lesser of: (a) 5% of gross sales of a specified product; or (b) $100,000 per annum once sales of a specified product commence. 

F - 10

ONCOLYTICS BIOTECH INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

September 30, 2017

Note 8: Capital Disclosures

Our objective when managing capital is to maintain a strong statement of financial position. We achieve our objective by obtaining adequate cash resources to support planned activities which include the clinical trial program, product manufacturing, administrative costs and intellectual property expansion and protection. We include shareholders’ equity, cash and cash equivalents and short-term investments in the definition of capital.

	September 30, 2017 $		December 31, 2016 $
Cash and cash equivalents	14,033,644		12,034,282
Short-term investments	—		2,088,800
Shareholders’ equity	12,066,298		10,689,620

We do not have any debt other than trade accounts payable and we have potential contingent obligations relating to the completion of our research and development of REOLYSIN.

In managing our capital, we estimate our future cash requirements by preparing a budget and a multi-year plan annually for review and approval by our Board .  The budget establishes the approved activities for the upcoming year and estimates the costs associated with these activities.  The multi-year plan estimates future activity along with the potential cash requirements and is based on our assessment of our current clinical trial progress along with the expected results from the coming year’s activity.  Budget to actual variances are prepared and reviewed by management and are presented quarterly to the Board.

Historically, funding for our plan is primarily managed through the issuance of additional common shares and common share purchase warrants that upon exercise are converted to common shares.  Management regularly monitors the capital markets attempting to balance access to capital in different jurisdictions, the timing of issuing additional equity with our progress through our clinical trial program, general market conditions, and the availability of capital.  There are no assurances that funds will be made available to us when required.

On February 16, 2016, we renewed our short form base shelf prospectus (the “Base Shelf”) that qualifies for distribution of up to $150,000,000 of common shares, subscription receipts, warrants, or units (the “Securities”) in Canada. Under our Base Shelf, we may sell Securities to or through underwriters, dealers, placement agents or other intermediaries and also may sell Securities directly to purchasers or through agents, subject to obtaining any applicable exemption from registration requirements. The distribution of Securities may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, at market prices prevailing at the time of sale, or at prices related to such prevailing market prices to be negotiated with purchasers and as set forth in an accompanying Prospectus Supplement.

Renewing our Base Shelf provides us with additional flexibility when managing our cash resources as, under certain circumstances, it shortens the time period required to close a financing and is expected to increase the number of potential investors that may be prepared to invest in our company. Funds received from a Prospectus Supplement will be used in line with our Board approved budget and multi-year plan. Our renewed Base Shelf expires on March 16, 2018 and allowed us to enter into our Canadian ATM equity distribution agreement (see Note 4). We use this equity arrangement to assist us in achieving our capital objective.

We are not subject to externally imposed capital requirements and there have been no changes in how we define or manage our capital in 2017.

Note 9: Financial Instruments

Our financial instruments consist of cash and cash equivalents, short-term investments,  accounts receivable, and accounts payable.  As at September 30, 2017, there are no significant differences between the carrying values of these amounts and their estimated market values.

Credit risk

Credit risk is the risk of financial loss if a counterparty to a financial instrument fails to meet its contractual obligations.  We are exposed to credit risk on our cash and cash equivalents and short-term investments in the event of non-performance by counterparties, but we do not anticipate such non-performance.  Our maximum exposure to credit risk at the end of the period is the carrying value of our cash and cash equivalents and short-term investments.

We mitigate our exposure to credit risk by maintaining our primary operating and investment bank accounts with Schedule I banks in Canada.  For our foreign domiciled bank accounts, we use referrals or recommendations from our Canadian banks to open foreign bank accounts and these accounts are used solely for the purpose of settling accounts payable or payroll.

We also mitigate our exposure to credit risk by restricting our portfolio to investment grade securities with short-term maturities and by monitoring the credit risk and credit standing of counterparties.  As at December 31, 2016, 100% of our short-term investments were in guaranteed investment certificates.

Interest rate risk

Interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates.  We are exposed to interest rate risk through our cash and cash equivalents and our portfolio of short-term investments.  We mitigate this risk through our investment policy that only allows investment of excess cash resources in investment grade vehicles while matching maturities with our operational requirements.

Fluctuations in market rates of interest do not have a significant impact on our results of operations due to the short term to maturity of the investments held.

Currency risk

Currency risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. In the normal course of our operations, we are exposed to currency risk from the purchase of goods and services primarily in the U.S., the U.K. and the European Union. In addition, we are exposed to currency risk to the extent cash is held in foreign currencies from either the purchase of foreign currencies or when we receive foreign currency proceeds from financing activities.

The impact of a $0.01 increase in the value of the U.S. dollar against the Canadian dollar would have increased our net loss for the nine month period ending September 30, 2017 by approximately $36,946. The impact of a $0.10 increase in the value of the British pound against the Canadian dollar would have increased our net loss for the nine month period ending September 30, 2017 by approximately $13,089. The impact of a $0.10 increase in the value of the Euro against the Canadian dollar would have increased our net loss for the nine month period ending September 30, 2017 by approximately $4,570 .

We mitigate our foreign exchange risk by maintaining sufficient foreign currencies, through the purchase of foreign currencies or receiving foreign currencies from financing activities, to settle our foreign accounts payable.

Balances in foreign currencies at September 30, 2017 are as follows:

	U.S. dollars $		British pounds £		Euro €
Cash and cash equivalents	1,038,574		33,560		22,783
Accounts payable	(201,110	)	(17,367	)	—
	837,464		16,193		22,783

Liquidity risk

Liquidity risk is the risk that we will encounter difficulty in meeting obligations associated with financial liabilities.  We manage liquidity risk through the management of our capital structure as outlined in Note 8.  Accounts payable are all due within the current operating period. 

F - 11

ONCOLYTICS BIOTECH INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

September 30, 2017

Note 10: Additional Cash Flow Disclosures

Net Change In Non-Cash Working Capital

	Three Month Period Ending September 30, 2017 $		Three Month Period Ending September 30, 2016 $		Nine Month Period Ending September 30, 2017 $		Nine Month Period Ending September 30, 2016 $
Change in:
Accounts receivable	28,980		9,642		21,277		295,068
Prepaid expenses	46,925		173,729		(177,309	)	149,928
Accounts payable and accrued liabilities	(529,016	)	28,303		(1,286,732	)	99,516
Non-cash impact of foreign exchange	121,521		4,937		256,622		434,335
Change in non-cash working capital related to operating activities	(331,590	)	216,611		(1,186,142	)	978,847

Other Cash Flow Disclosures

	Three Month Period Ending September 30, 2017 $		Three Month Period Ending September 30, 2016 $		Nine Month Period Ending September 30, 2017 $		Nine Month Period Ending September 30, 2016 $
Cash interest received	31,759		31,691		96,637		136,849
Cash taxes paid	—		(19	)	—		(333	)

Note 11: Other Expenses and Adjustments

We present our expenses based on the function of each expense and therefore include realized foreign exchange gains and losses, unrealized non-cash foreign exchange gains and losses, and non-cash stock based compensation associated with research and development activity as a component of research and development expenses and amortization of property and equipment and stock based compensation associated with operating activities as a component of operating expenses.

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ONCOLYTICS BIOTECH INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

September 30, 2017

	Three Month Period Ending September 30, 2017 $		Three Month Period Ending September 30, 2016 $		Nine Month Period Ending September 30, 2017 $		Nine Month Period Ending September 30, 2016 $
Included in research and development expenses:
Realized foreign exchange (gain) loss	(40,097	)	38,276		(40,141	)	115,735
Unrealized non-cash foreign exchange (gain) loss	(88,738	)	218,941		(135,894	)	116,322
Non-cash share based payments	56,757		70,092		182,860		190,412
Included in operating expenses
Amortization of property and equipment	20,591		44,014		70,315		134,631
Non-cash share based payments	91,690		28,277		255,184		109,223
Office minimum lease payments	65,186		22,691		163,324		108,660

Note 12: Related Party Transactions

Compensation of Key Management Personnel

Key management personnel are those persons having authority and responsibility for planning, directing and controlling our activities as a whole. We have determined that key management personnel consists of the members of the Board of Directors along with certain officers of the Company.

	Three Month Period Ending September 30, 2017 $		Three Month Period Ending September 30, 2016 $		Nine Month Period Ending September 30, 2017 $		Nine Month Period Ending September 30, 2016 $
Short-term employee compensation and benefits	477,800		649,184		1,588,602		2,007,630
Termination benefits	—		—		779,666		—
Share-based payments	128,161		95,495		339,824		296,761
	605,961		744,679		2,708,092		2,304,391

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