Oncolytics Biotech Inc. (“Oncolytics”
or the “Corporation”) has entered into an equity distribution agreement dated October 24, 2018 (the “Equity
Distribution Agreement”) with Canaccord Genuity LLC (the “Agent”) relating to our common shares (“Common
Shares”). In accordance with the terms of the Equity Distribution Agreement, we may offer and sell Common Shares having
an aggregate offering price of up to US$30,000,000, subject to an aggregate maximum of US$14,800,000 that may be offered and sold
through the Agent, as our agent, under this Prospectus Supplement (the “Offering”). See “Plan of Distribution”
beginning on page S-18 of this Prospectus Supplement for more information regarding these arrangements.
Upon delivery of a placement notice by
us, if any, the Agent may sell the Common Shares in the United States only and such sales will only be made by transactions that
are deemed to be “at-the-market distributions” as defined in National Instrument 44-102 – Shelf Distributions
(“NI 44-102”), including, without limitation, sales made directly on NASDAQ, or on any other existing trading
market for the Common Shares in the United States. No Common Shares will be sold on the TSX or on other trading markets in Canada
as at-the-market distributions. The Agent will make all sales using commercially reasonable efforts consistent with their normal
sales and trading practices and on mutually agreed upon terms between the Agent and us. The Common Shares will be distributed at
the market prices prevailing at the time of the sale of such Common Shares. As a result, prices may vary as between purchasers
and during the period of distribution. There is no arrangement for funds to be received in escrow, trust or similar arrangement.
The compensation to the Agent for sales
of our Common Shares under this Prospectus Supplement will not exceed three percent (3%) of the gross proceeds from the sale of
such Common Shares. See “Plan of Distribution” in this Prospectus Supplement.
The net proceeds, if any, from sales under
this Prospectus Supplement will be used as described under the section titled “Use of Proceeds” in this Prospectus
Supplement. The proceeds we receive from sales will depend on the number of Common Shares actually sold and the offering price
of such Common Shares. We estimate the total expenses of this Offering, excluding the Agent’s fee, will be approximately
US$50,000.
In connection with the sale of the Common
Shares on our behalf, the Agent will be deemed to be an “underwriter” within the meaning of Section 2(a)(11) of the
U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”), and the compensation of the Agent
will be deemed to be an underwriting commission or discount. We have agreed to provide indemnification and contribution to the
Agent against certain liabilities, including liabilities under the U.S. Securities Act.
Messrs. Wayne Pisano, William G. Rice and
Leonard Kruimer and Dr. Bernd R. Seizinger are directors of the Corporation who reside outside of Canada. Messrs. Pisano, Rice
and Kruimer and Dr. Seizinger have appointed the Corporation, at its principal place of business, as agent for service of process.
Purchasers are advised that it may not be possible for investors to enforce judgments obtained in Canada against any person that
resides outside of Canada, even if the party has appointed an agent for service of process.
The financial information of the Corporation
incorporated by reference in the Prospectus is presented in Canadian dollars. Unless otherwise noted herein, all references to
“US$”, “United States dollars” or “US dollars” are to United States dollars and all references
to “C$” or “$”, are to Canadian dollars. See “Exchange Rate”.
Our head office and principal place of
business is located at 210, 1167 Kensington Crescent N.W., Calgary, Alberta, T2N 1X7. Our registered office is located at 4000,
421 - 7th Avenue S.W., Calgary, Alberta, T2P 4K9.
Base
Shelf Prospectus dated May 4, 2018
IMPORTANT NOTICE
ABOUT INFORMATION IN THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first
part is this Prospectus Supplement, which describes the specific terms of the Offering and Common Shares and the method of distribution
of the Common Shares and also supplements and updates information regarding Oncolytics Biotech Inc. contained and incorporated
by reference in the Prospectus. The second part is the accompanying Prospectus, which gives more general information, some of which
may not apply to the Common Shares. Both documents contain important information you should consider when making your investment
decision. If the description of the Common Shares varies between this Prospectus Supplement and the accompanying Prospectus, investors
should rely on the information in this Prospectus Supplement. This Prospectus Supplement is deemed to be incorporated by reference
into the Prospectus solely for the purpose of the Offering. If information in this Prospectus Supplement is inconsistent with the
Prospectus or the information incorporated by reference in the Prospectus, you should rely on this Prospectus Supplement. You should
read both this Prospectus Supplement and the accompanying Prospectus, together with the additional information about us to which
we refer you in the section of this Prospectus Supplement entitled “Where You Can Find Additional Information.”
You should rely only on the information
contained in this Prospectus Supplement, the Prospectus and the documents incorporated by reference in the Prospectus. The Corporation
and the Underwriter have not authorized anyone to provide you with different information. If anyone provides you with any different
or inconsistent information, you should not rely on it. The Corporation is offering the Common Shares only in jurisdictions where
such offers are permitted by law.
You should assume that the information
contained in this Prospectus Supplement, the Prospectus and the documents incorporated by reference in the Prospectus is accurate
only as of their respective dates, regardless of the time of delivery of this Prospectus Supplement and the accompanying Prospectus.
Our business, financial condition, results of operations and prospects may have changed since those dates.
Market data and certain industry forecasts
used in this Prospectus Supplement, the Prospectus and the documents incorporated by reference in the Prospectus were obtained
from market research, publicly available information and industry publications. We believe that these sources are generally reliable,
but the accuracy and completeness of this information is not guaranteed. We have not independently verified such information, and
we do not make any representation as to the accuracy of such information.
In this Prospectus Supplement, “Oncolytics,”
the “Corporation,” “we,” “us,” and “our” refer to Oncolytics
Biotech Inc. and its subsidiaries.
FORWARD-LOOKING STATEMENTS
This Prospectus Supplement, the Prospectus
and the documents incorporated by reference in the Prospectus contain certain statements relating to future events or the Corporation’s
future performance which constitute forward-looking statements. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation, or industry
results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking
statements. Forward-looking statements are statements that are not historical facts, and include, but are not limited to, estimates
and their underlying assumptions; statements regarding plans, objectives and expectations with respect to the efficacy of our technologies;
the timing and results of clinical studies related to our technologies; future operations, products and services; the impact of
regulatory initiatives on our operations; the size of and opportunities related to the markets for our technologies; general industry
and macroeconomic growth rates; expectations related to possible joint and/or strategic ventures and statements regarding future
performance. Forward-looking statements generally, but not always, are identified by the words “expects,” “anticipates,”
“believes,” “intends,” “estimates,” “projects”, “potential”, “possible”
and similar expressions, or that events or conditions “will,” “may,” “could” or “should”
occur.
The forward-looking statements in this
Prospectus Supplement, the Prospectus and the documents incorporated by reference in the Prospectus are subject to various risks
and uncertainties, most of which are difficult to predict and generally beyond the Corporation’s control, including without
limitation:
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risks related to all of our products, including REOLYSIN® (pelareorep), being in the research
and development stage and requiring further development and testing before they can be marketed commercially;
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risks inherent in pharmaceutical research and development;
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risks related to timing and possible delays in our clinical trials;
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risks related to some of our clinical trials being conducted in, and subject to the laws of, foreign
countries;
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risks related to our pharmaceutical products being subject to intense regulatory approval processes
in the United States and other foreign jurisdictions;
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risks related to being subject to government manufacturing and testing regulations;
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risks related to the extremely competitive biotechnology industry and our competition with larger
companies with greater resources;
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risks related to our reliance on patents and proprietary rights to protect our technology;
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risks related to potential product liability claims;
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risks related to our limited manufacturing experience and reliance on third parties to commercially
manufacture our products, if and when developed;
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risks related to our new products not being accepted by the medical community or consumers;
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risks related to our technologies becoming obsolete;
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risks related to our dependence on third party relationships for research and clinical trials;
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risks related to our license, development, supply and distribution agreement with Adlai Nortye
Biopharma Co. Ltd.;
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risks related to our lack of operating revenues and history of losses;
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uncertainty regarding our ability to obtain third-party reimbursement for the costs of our product;
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risks related to other third-party arrangements;
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risks related to our ability to obtain additional financing to fund future research and development
of our products and to meet ongoing capital requirements;
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risks related to potential increases in the cost of director and officer liability insurance;
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risks related to our dependence on key employees and collaborators;
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risks related to Barbados law, including those relating to the enforcement of judgments obtained
in Canada or the United States;
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risks related to the effect of changes in the law on our corporate structure;
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risks related to expenses in foreign currencies and our exposure to foreign currency exchange rate
fluctuations;
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risks related to fluctuations in interest rates;
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risks related to information technology systems; and
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risks related to our Common Shares.
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This list is not exhaustive of the factors
that may affect any of the Corporation’s forward-looking statements. Some of the important risks and uncertainties that could
affect forward-looking statements are described further under the heading “Risk Factors” in this Prospectus
Supplement, in the Prospectus and in the Corporation’s Annual Report (as defined below). If one or more of these risks or
uncertainties materializes, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected,
estimated or projected. Forward-looking statements in this document are not a prediction of future events or circumstances, and
those future events or circumstances may not occur. Given these uncertainties, users of the information included herein, including
investors and prospective investors, are cautioned not to place undue reliance on such forward-looking statements. Investors should
consult our quarterly and annual filings with the securities commissions or similar regulatory authorities in Canada and the SEC
for additional information on risks and uncertainties relating to forward-looking statements.
The Corporation cautions that the foregoing
list of factors that may affect future results is not exhaustive. The forward-looking information contained in this Prospectus
Supplement, the Prospectus and the documents incorporated by reference in the Prospectus is made as of the date of such documents.
The forward-looking information contained in this Prospectus Supplement, the Prospectus and in the documents incorporated by reference
in the Prospectus is expressly qualified by this cautionary statement. The Corporation does not undertake any obligation to publicly
update or revise any forward-looking information except as required pursuant to applicable securities laws.
DOCUMENTS INCORPORATED
BY REFERENCE
This Prospectus Supplement is deemed
to be incorporated by reference into the Prospectus solely for the purposes of the Offering.
Information has been incorporated by
reference in the Prospectus from documents filed with securities commissions or similar authorities in Canada. Copies of the
documents incorporated herein by reference may be obtained on request without charge from our Corporate Secretary at 210, 1167
Kensington Crescent N.W., Calgary, Alberta, T2N 1X7 telephone (403) 670-7377, and are available electronically under the Corporation’s
profile on SEDAR (www.sedar.com) and on EDGAR (www.sec.gov/edgar.shtml).
The following documents, filed with the
securities commissions or similar regulatory authorities in each of the provinces of Canada and filed with, or furnished to, the
SEC are specifically incorporated by reference into, and form an integral part of, the Prospectus:
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our audited consolidated financial statements, together with the notes thereto, as at December 31, 2018 and 2017, which comprise the consolidated statements of financial position as at December 31, 2018 and 2017, and the consolidated statements of loss and comprehensive loss, changes in equity, and cash flows for the years ended December 31, 2018, 2017 and 2016, together with the independent auditors’ report thereon;
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our material change report dated August 15, 2019 in respect of the pricing of its underwritten
public offering (the “Unit Offering”) of Common Shares and warrants to purchase Common Shares for gross proceeds
of approximately U.S.$3.7 million;
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Any documents of the type required by National
Instrument 44-101 - Short Form Prospectus Distributions to be incorporated by reference in a short form Prospectus, including
any annual information form, annual report on Form 20-F, comparative annual consolidated financial statements and the auditors’
report thereon, comparative interim consolidated financial statements, management’s discussion and analysis of financial
condition and results of operations, material change report (except a confidential material change report), business acquisition
report and information circular, if filed by us with the securities commissions or similar authorities in Canada after the date
of this Prospectus Supplement and prior to the date on which the Offering under this Prospectus Supplement ends, shall be deemed
to be incorporated by reference in the Prospectus.
In addition, to the extent that any document
or information incorporated by reference in the Prospectus is included in any report filed with or furnished to the SEC pursuant
to the United States Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”), after the date of
this Prospectus Supplement and prior to the date on which the Offering under this Prospectus Supplement ends, such document or
information shall be deemed to be incorporated by reference as an exhibit to the registration statement of which this Prospectus
Supplement and the Prospectus forms a part (in the case of documents or information deemed furnished on Form 6-K or Form 8-K, only
to the extent specifically stated therein).
Any statement contained in this Prospectus
Supplement, the Prospectus or in a document incorporated or deemed to be incorporated by reference in the Prospectus shall be deemed
to be modified or superseded for the purposes of this Prospectus Supplement and the Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is, or is deemed to be, incorporated by reference in the Prospectus
or therein modifies or supersedes such statement. The modifying or superseding statement need not state that it has modified or
superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making
of a modifying or superseding statement shall not be deemed an admission for any purposes that the modified or superseded statement,
when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that
was required to be stated or that was necessary to make a statement not misleading in light of the circumstances in which it was
made. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus Supplement or the Prospectus.
DOCUMENTS FILED AS
PART OF THE REGISTRATION STATEMENT
The following documents have been or will
be filed with the SEC as part of the registration statement of which this Prospectus Supplement and the Prospectus forms a part:
(i) the documents set out under the heading “Documents Incorporated by Reference” in this Prospectus Supplement
and the Prospectus; (ii) the consents of the Corporation’s auditor and legal counsels; (iii) the powers of attorney from
the directors and certain officers of the Corporation and (iv) the Equity Distribution Agreement described in this Prospectus Supplement.
CURRENCY AND EXCHANGE
RATE INFORMATION
In this Prospectus Supplement and the accompanying
Prospectus, unless otherwise indicated, all dollar amounts and references to “$” and “US$” are to U.S.
dollars and references to “C$” are to Canadian dollars. This Prospectus Supplement and the accompanying Prospectus
and the documents incorporated by reference in the Prospectus contain translations of some Canadian dollar amounts into U.S. dollars
solely for your convenience.
The following table sets forth, for the periods indicated, the
high, low, average and period-end rates of exchange for US$1.00, expressed in Canadian dollars, posted by the Bank of Canada:
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Year Ended December 31(1)
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2019
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2018
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2017
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Highest rate during the period
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C$1.3600
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C$1.3642
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C$1.3743
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Lowest rate during the period
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C$1.2988
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C$1.2288
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C$1.2128
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Average rate for the period
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C$1.3269
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C$1.2957
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C$1.2986
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Rate at the end of the period
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C$1.2988
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C$1.3642
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C$1.2545
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Note:
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Data from the Bank of Canada reflects the daily average
rates.
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On January 2, 2020, the daily average exchange
rate posted by the Bank of Canada for conversion of U.S. dollars into Canadian dollars was US$1.00 = C$ 1.2992. Unless otherwise
indicated, currency translation in this Prospectus Supplement reflect the January 2, 2020 rate.
OFFERING SUMMARY
Issuer:
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Oncolytics Biotech Inc.
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Offering:
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In accordance with the Equity Distribution Agreement, we may offer and sell our common shares through the Agent, as agent, up to an aggregate offering amount of US$30,000,000, subject to an aggregate maximum of US$14,800,000 under this Prospectus Supplement.
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Manner of Offering:
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“At-the-market” offering that may be made from time to time through our sales agent, the Agent. See “Plan of Distribution” on page S- 18.
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Common Shares Outstanding Before this Offering:
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31,938,708 Common Shares (non-diluted)
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Common Shares Outstanding Immediately Following this Offering(1):
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35,685,543 Common Shares (non-diluted) after the issuance of up to 3,746,835 Common Shares, assuming a sales price of US$3.95 per Common Share, which was the closing price of the Common Shares on NASDAQ on January 2, 2020, for the US$30,000,000 that may be sold from time to time through the Agent, subject to a maximum of US$14,800,000 under this Prospectus Supplement. The actual number of Common Shares issued and outstanding will vary depending on the actual sales prices and aggregate dollar amount sold under the Offering.
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Use of Proceeds:
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We intend to use the net proceeds from the Offering, if any, for the advancement of the Corporation’s clinical development program, related support costs and general corporate and administrative expenses. The amounts actually expended for the purposes described above may vary significantly depending upon a number of factors, including those listed under the heading “Risk Factors” in this Prospectus Supplement. See “Use of Proceeds”.
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Listing Symbols:
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NASDAQ: ONCY
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TSX: ONC
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Risk Factors:
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This investment involves a high degree of risk. You should carefully read and consider the information set forth under the heading “Risk Factors” beginning on page S-9 of this Prospectus Supplement and on page 6 of the Prospectus.
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Note:
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Unless otherwise stated, all information contained in this Prospectus Supplement reflects an assumed
public offering price of US$3.95 per Common Share, which was the last reported sale price of our Common Shares on the NASDAQ on
January 2, 2020.
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RISK FACTORS
Prospective purchasers of Common Shares
should consider carefully the risk factors set out in this Prospectus Supplement, the Prospectus and the documents incorporated
by reference in the Prospectus. Discussions of certain risks affecting Oncolytics in connection with its business are set forth
under “Risk Factors” in the Prospectus and in our annual disclosure documents filed with the various securities
regulatory authorities which are incorporated by reference in the Prospectus.
Volatility of market price of the Common
Shares
The market price of the Common Shares may
be volatile. The volatility may affect the ability of holders of Common Shares to sell the Common Shares at an advantageous price.
Market price fluctuations in the Common Shares may be due to the Corporation’s operating results failing to meet the expectations
of securities analysts or investors in any quarter, downward revision in securities analysts’ estimates, governmental regulatory
action, adverse change in general market conditions or economic trends, acquisitions, dispositions or other material public announcements
by the Corporation or its competitors, along with a variety of additional factors, including, without limitation, those set forth
under “Special Notice Regarding Forward-Looking Statements” in this Prospectus Supplement. In addition, the
market price for securities in the stock markets, including the NASDAQ and the TSX, recently experienced significant price and
trading fluctuations. These fluctuations have resulted in volatility in the market prices of securities that often has been unrelated
or disproportionate to changes in operating performance. These broad market fluctuations may adversely affect the market price
of the Common Shares.
Purchasers will suffer immediate and
substantial dilution
Because the price of the Common Shares
under the Offering significantly exceeds the net tangible book value per share of the Common Shares, a purchaser of Common Shares
in the Offering will incur immediate and substantial dilution of his, her or its investment. If the Over-Allotment Option is exercised,
you will incur additional dilution. See “Dilution” in this Prospectus Supplement.
The Corporation will have broad discretion
over the use of the net proceeds from the Offering and the Corporation may not use these proceeds in a manner desired by the Corporation’s
shareholders
Management will have broad discretion with
respect to the use of the net proceeds from the Offering and investors will be relying on the judgment of management regarding
the application of these proceeds. Management could spend most of the net proceeds from the Offering in ways that the Corporation’s
shareholders may not desire or that do not yield a favorable return. You will not have the opportunity, as part of your investment
in the Common Shares, to influence the manner in which the net proceeds of the Offering are used. At the date of this Prospectus
Supplement, the Corporation intend to use the net proceeds from the Offering as described under the heading “Use of Proceeds”.
However, the Corporation’s needs may change as the business and the industry the Corporation addresses evolve. As a result,
the proceeds to be received in the Offering may be used in a manner significantly different from the Corporation’s current
expectations.
The Corporation does not currently intend
to pay any cash dividends on the Common Shares in the foreseeable future; therefore, the Corporation’s shareholders may not
be able to receive a return on their Common Shares until they sell them
The Corporation has never paid or declared
any cash dividends on its Common Shares. The Corporation does not anticipate paying any cash dividends on its Common Shares in
the foreseeable future because, among other reasons, the Corporation currently intends to retain any future earnings to finance
its business. The future payment of dividends will be dependent on factors such as cash on hand and achieving profitability, the
financial requirements to fund growth, the Corporation’s general financial condition and other factors the board of directors
of the Corporation may consider appropriate in the circumstances. Until the Corporation pays dividends, which it may never do,
its shareholders will not be able to receive a return on their Common Shares unless they sell them.
You may be unable to enforce actions
against us, certain of our directors and officers, or the experts named in this Prospectus Supplement under U.S. federal securities
laws.
We are a company continued under the laws
of the Province of Alberta, Canada. Most of our directors and officers as well as the certain of the experts named in this Prospectus
Supplement and the accompanying Prospectus, reside principally in Canada. Because all or a substantial portion of our assets and
the assets of these persons are located outside of the United States, it may not be possible for you to effect service of process
within the United States upon us or those persons. Furthermore, it may not be possible for you to enforce against us or those persons
in the United States, judgments obtained in U.S. courts based upon the civil liability provisions of the U.S. federal securities
laws or other laws of the United States. There is doubt as to the enforceability, in original actions in Canadian courts, of liabilities
based upon U.S. federal securities laws and as to the enforceability in Canadian courts of judgments of U.S. courts obtained in
actions based upon the civil liability provisions of the U.S. federal securities laws. Therefore, it may not be possible to enforce
those actions against us, certain of our directors and officers or certain of the experts named in this Prospectus Supplement.
The Corporation is likely a “passive
foreign investment company” which may have adverse U.S. federal income tax consequences for U.S. shareholders
U.S. holders of Common Shares should be
aware that the Corporation believes it was classified as a passive foreign investment company (“PFIC”) during
the tax year ended December 31, 2019, and based on current business plans and financial expectations, the Corporation expects that
it will be a PFIC for the current tax year and may be a PFIC in future tax years. If the Corporation is a PFIC for any year during
a U.S. shareholder’s holding period of the Common Shares, then such U.S. shareholder generally will be required to treat
any gain realized upon a disposition of Common Shares, or any “excess distribution” received on its Common Shares,
as ordinary income, and to pay an interest charge on a portion of such gain or distribution, unless the shareholder makes a timely
and effective “qualified electing fund” election (“QEF Election”) or a “mark-to-market”
election with respect to the Common Shares. A U.S. shareholder who makes a QEF Election generally must report on a current basis
its share of the Corporation’s net capital gain and ordinary earnings for any year in which the Corporation is a PFIC, whether
or not the Corporation distributes any amounts to its shareholders. A U.S. shareholder who makes a mark-to-market election generally
must include as ordinary income each year the excess of the fair market value of the Common Shares over the taxpayer’s adjusted
tax basis therein. This paragraph is qualified in its entirety by the discussion below under the heading “Material United
States Federal Income Tax Considerations.” Each U.S. shareholder should consult its own tax advisors regarding the PFIC rules
and the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.
THE CORPORATION
Oncolytics Biotech Inc. was incorporated
pursuant to the ABCA on April 2, 1998 as 779738 Alberta Ltd. On April 8, 1998, we amended our articles of incorporation
(the “Articles”) and changed our name to Oncolytics Biotech Inc. On July 29, 1999, we amended our Articles
by removing the private company restrictions included therein and subdivided the 2,222,222 Common Shares issued and outstanding
into 6,750,000 Common Shares. On February 9, 2007, we amended our Articles to permit shareholder meetings to be held at any
place in Alberta or at any other location as determined by our board of directors (the “Board”). On May 22,
2018, we amended our Articles of Incorporation to effect a consolidation of the Common Shares on the basis of 9.5 pre-consolidation
Common Shares for each one post-consolidation Common Share.
We have two material operating subsidiaries:
Oncolytics Biotech (Barbados) Inc. and Oncolytics Biotech (US) Inc., a Delaware corporation. Oncolytics Biotech (Barbados) Inc.
is incorporated pursuant to the laws of Barbados and is a wholly-owned direct subsidiary of the Corporation. Oncolytics Biotech
(U.S.) Inc. is incorporated pursuant to the laws of Delaware and is a wholly-owned direct subsidiary or Oncolytics Biotech (Barbados)
Inc.
Our head office and principal place of
business is located at 210, 1167 Kensington Crescent N.W., Calgary, Alberta, T2N 1X7. Our registered office is located at
4000, 421 - 7th Avenue S.W., Calgary, Alberta, T2P 4K9.
RECENT DEVELOPMENTS
On December 9, 2019, the Corporation announced
positive multiple myeloma data presented at the 61st Annual Meeting & Exposition of the American Society of Hematology. The
poster, titled, “Carfilzomib Impairs the Innate Antiviral Immune Response and promotes cytotoxic T-cell Expansion in Oncolytic
Virus Treated Multiple Myeloma Patients” describes synergies between proteasome inhibitors and pelareorep concerning immune
cell changes and response in myeloma patients.
Key data and conclusions include:
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Demonstrated that pelareorep treatment selectively infected multiple myeloma cells and not normal
bone marrow cells;
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Carfilzomib enhances reovirus entry, infection, and killing of multiple myeloma cells;
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Reovirus significantly increases the frequency and activation of certain killer T cells, and increases
the anti-tumor activity of immune cells in multiple myeloma; and
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Data supports that the combination of pelareorep, and carfilzomib potentiates the expansion of
CD8+ killer T cells
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The poster presentation was authored by
Dr. Flavia Pichiorri, Associate Professor in the Judy and Bernard Briskin Center for Multiple Myeloma Research within the Hematologic
Malignancies and Stem Cell Transplantation Institute at the City of Hope, et al.
BUSINESS OF THE CORPORATION
General
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
pelareorep, a systemically administered immuno-oncology (“I-O”) viral agent with the potential to treat a variety
of cancers. 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, pelareorep becomes commercially
viable.
Our potential product for human use, pelareorep,
an unmodified reovirus, is a first in class systemically administered I-O viral agent for the treatment of solid tumors and hematological
malignancies.
Scientific Background
Pelareorep’s anti-tumor activity
is based on three modes of action which are complementary but not interdependent (see Figure 1, below):
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Selective viral replication in permissive cancer cells which leads to tumor cell lysis.
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Activation of innate immunity in response to the infection which results in a cascade of chemokines/cytokines
causing natural killer (“NK”) cells to be activated and attack cancer cells.
|
|
·
|
A specific adaptive immune response triggered by tumor- and viral-associated antigens displayed
by antigen-presenting cells (including infected tumor cells and/or dendritic cells, “APCs”) to T cells.
|
Summary of Research and Development
highlights
Preclinical and Translational Research
data to date indicates the following:
|
·
|
Pelareorep has anticancer effects in models of metastatic cancers that can prolong survival in
these models when using immuno-competent rodents.
|
|
·
|
The survival benefit in animal models can be enhanced when pelareorep is given in combination with
chemotherapy, immunotherapy or radiotherapy.
|
|
·
|
A toxic dose of pelareorep has not been reached/established in animal models and infection presents
with minimal side-effects.
|
Clinical data to date indicate the following:
|
·
|
More than 1,400 patients have been enrolled in clinical studies conducted in the United States,
Canada and the European Union. Of these, more than 1,000 patients received pelareorep, with over 930 via intravenous (“IV”)
administration and over 90 by intratumoral injections (“ITu”). The remaining patients were randomized to control
arms on other therapies.
|
|
·
|
Pelareorep has been administered as single or multiple doses (intratumoral or intravenous), either
as a mono-therapy or in combination with chemotherapy, immunotherapy (e.g., checkpoint inhibitors), and radiotherapy.
|
|
·
|
No Maximum Tolerated Dose (“MTD”) for intravenous pelareorep as mono-therapy
was defined in the two Phase 1 trials (REO 004 and 005). Dose-limiting toxicities (“DLTs”) were seen in some
of the combination trials with pelareorep and chemotherapy, which generally enrolled heavily pre-treated patients.
|
|
·
|
When combined with chemotherapeutic agents, pelareorep does not appear to enhance either the frequency
or severity of the adverse effects of the chemotherapeutic agents.
|
|
·
|
There is emerging evidence that pelareorep may impact overall survival (“OS”)
in metastatic breast cancer (“mBC”) and metastatic adenocarcinoma of the pancreas (“MAP”):
|
|
·
|
In a randomized, controlled Phase 2 study of paclitaxel with pelareorep versus paclitaxel alone
in mBC (Canadian Cancer Trials Group IND. 213) median survival time was greater for subjects treated with paclitaxel and pelareorep
(median 17.4 months) than subjects treated with paclitaxel alone (10.4 months, hazard ratio (“HR”) 0.65).
|
|
·
|
In a single arm study with gemcitabine plus pelareorep in first line MAP (REO 017) the median overall
survival (mOS) was 10 months with a 1-year and 2-year survival of 46% and 24%, respectively.
|
|
·
|
In a two-arm Phase 2 randomized study (NCI 8601), patients with MAP were randomized to receive
either carboplatin, paclitaxel and pelareorep (test arm) or carboplatin and paclitaxel alone (control arm). The median OS was similar
for both arms, but the probability of survival at Year 2 was 20% in the test arm versus 9% in the control arm.
|
Mechanism of Action
Figure 1. Proposed mechanism of action for pelareorep.
Direct cell lysis - Reovirus Replication in Permissive
Cancer Cells
Selective viral replication and lysis in
cancer cells and not normal cells is mediated by the host cellular protein dsRNA-activated protein kinase (“PKR”).
In non-cancer cells that are infected with reovirus, PKR activates in the presence of the virus which in turn inhibits viral gene
translation. However, in permissive cancer cells, PKR activation is inhibited, allowing for viral gene translation and eventual
cell lysis.
It was originally established that selective
lysis with reovirus was mediated by tumor cells with an activated rat sarcoma virus oncogene (“RAS”) pathway,
since active RAS inhibits PKR activation. However, more recent investigations have revealed that reovirus replication is not just
restricted to cells with an active RAS pathway, oncogenic mutations and amplifications in upstream and downstream mediators of
the RAS-pathway also allow for viral replication and oncolysis. Moreover, active RAS is known to stimulate over 18 downstream effector
proteins, many of which have been shown to facilitate viral replication, such as. Cells bearing dysfunctional or deleted tumor
suppressor genes and or chemo- or radiation-induced cell stress also show increased sensitivity to reovirus replication and lysis.
Induction of Innate Immunity
Preclinical and clinical studies provide
compelling lines of evidence that pelareorep functions as an immunogenic agent. Indeed, preclinical studies by Steele and colleagues
demonstrated that melanoma cells infected with pelareorep can produce an innate immune response triggering the release of inflammatory
cytokines. This inflammatory environment promotes a chemotactic response in NK cells, dendritic cells, and cytotoxic T-cells, altering
the tumour microenvironment to support bystander immune-mediated cancer cell death. Intriguingly, preclinical studies have also
demonstrated that the beneficial immunogenic functions of pelareorep can occur independent of viral replication. Pelareorep performs
this immunogenic function, in part, by activating dendritic cells, key regulators of both adaptive and innate immunity. Dendritic
cells activated by reovirus in turn stimulate the innate antitumor activity of natural killer (“NK”) cells and
aid in the priming of specific antitumor cytotoxic lyphocyte, demonstrating that dendritic cells’ recognition of reovirus
may trigger a beneficial innate immune response.
A clinical trial with pelareorep (REO 013)
provided an opportunity to study human NK cell activation in a controlled manner. Ten colorectal cancer patients with liver metastases
received between one and five doses of pelareorep prior to surgical resection of their tumor. NK cell activation peaked 24 to 48
hours post-infection, coincident with a peak of pro-inflammatory cytokines. NK cells within reovirus-treated blood mononuclear
cells were stimulated to kill tumor targets, but not normal hepatocytes. Moreover, peripheral blood mononuclear cells were able
to hand-off virus to tumors for direct oncolytic killing. Similarly, NK cells within liver mononuclear cells became selectively
cytotoxic towards tumor cells when activated by reovirus. These results showed that reovirus modulates human NK cell activity in
vivo and suggest that this may contribute to the therapeutic effect of pelareorep.
Induction of Adaptive Immunity
Adaptive anti-tumor immunity allows for
elimination of existing cancer cells and performs constant surveillance, preventing relapse, and increasing patient overall survival.
An adaptive immune response requires two signals: a signal from an APC, as well as a co-stimulation signal in the form of cytokines.
In the absence of both signals, the adaptive immune response fails. Therapy with pelareorep has the potential to activate both
signals. Following its therapeutic administration, pelareorep enhances the expression of ‘foreign’ antigens/markers
on tumor cells. Oncolysis of tumor cells exposes tumor-associated antigens (“TAAs”) and viral-associated antigens
(“VAAs”) for processing and presentation by APCs, such as dendritic cells. Through the combined actions of these
immunological events, pelareorep facilitates the display of novel ‘foreign’ antigens on the surface of infected tumor
cells and APCs. Simultaneously, pelareorep induces an inflammatory response promoting the expression of co-stimulatory molecules
and inflammatory cytokines. Together, pelareorep mediated immunological events over-rule tumor antigen presentation impairments
and initiate adaptive anti-tumor immunity.
By promoting the expression of novel antigens
and the release of inflammatory cytokines, pelareorep, promotes an inflamed tumor phenotype. An inflamed tumor phenotype is characterized
by NK and T-cell infiltration, increased expression of chemokines/ cytokines, and increased expression of checkpoint ligands. This
phenotype correlates with an increase in overall survival and has a positive prognostic value for early stage cancers. In patients
with metastatic cancer, an inflamed tumor phenotype is associated with better clinical outcomes when treated with immunotherapies,
including immune checkpoint blockade inhibitors, cancer vaccines, and adoptive T-cell therapies. By promoting an inflamed tumor
phenotype, pelareorep primes an anti-cancer immune response (see Figure 2, below).
Figure 2. Pelareorep primes an anti-cancer immune response
Clinical Development Plan
The primary objective of our clinical development
plan is to obtain regulatory approval for pelareorep as quickly as possible and is based on the compelling mBC survival data that
was presented at the 2017 American Association for Cancer Research Annual Meeting, in Washington, D.C. The second objective is
to expand pelareorep into commercially valuable new treatment areas. Our clinical development program focuses on the three components
of pelareorep's mechanism of action and includes the following:
Immunotherapy Combinations
This program focuses on the potential for
pelareorep to cause a specific adaptive immune response in combination with checkpoint inhibitors. In 2017, we announced our first
data set combining a checkpoint inhibitor with pelareorep and pembrolizumab (Keytruda®) in pancreatic cancer, which demonstrated
safety and tolerability and in five efficacy evaluable patients, one had a partial response (six-month duration) and two had stable
disease (lasting 126 and 221 days). In 2019, we announced the regulatory approval of the AWARE-1 study which examines the use of
pelareorep and atezolizumab (Tecentriq®) in a breast cancer window-of -opportunity study. Preliminary AWARE-1 trial data demonstrates
viral replication and promotion of inflammation following systemic administration of pelareorep when combined with Tecentriq®.
Early data suggest a correlation between T cell population and viral replication with highly infected tumors. In 2019, we also
announced an agreement with Merck KGaA, Darmstadt, Germany and Pfizer Inc. to conduct a clinical study of pelareorep in combination
with paclitaxel and avelumab, a human anti-PD-L1 antibody, for the treatment of hormone-receptor positive, human epidermal growth
factor 2-negative (HR+ / HER2-) mBC. The study known as BRACELET-1 (BReast cAnCEr with the Oncolytic Reovirus
PeLareorEp in CombinaTion with anti-PD-L 1 and paclitaxel) is an open label study that will enroll 45 patients.
Chemotherapy Combinations
This program focuses on the investigation
of chemotherapy combination clinical trials investigating the use of different chemotherapy agents in various tumor types. In 2017,
we reported additional clinical data from our randomized clinical program which includes clinical trial collaborations with the
Canadian Cancer Trials Group (formerly known as the National Cancer Institute of Canada). Specifically, subgroup analysis in the
IND 213 trial in mBC revealed a significant improvement in the overall survival of patients that are hormone receptor positive
(HR+) / human epidermal growth factor receptor 2 negative (HER2-). In HR+/HER2- patients, pelareorep therapy in combination with
paclitaxel doubled the overall survival from 10.8 month with paclitaxel therapy alone to 21.8 months with pelareorep plus paclitaxel.
This increase in overall survival is consistent with previous survival data reported from our U.S. NCI pancreatic trial which suggests
a long-term survival benefit when comparing test and control arms at 24 months.
Business Strategy
Our business strategy is to develop and
market pelareorep in an effective and timely manner, and access additional technologies at a time and in a manner that we believe
is best for our development. We intend to achieve our business strategy by focusing on these key areas:
|
·
|
Develop pelareorep through our clinical development plan assessing the safety and efficacy in human
subjects;
|
|
·
|
Establish collaborations with experts to assist us with scientific and clinical developments of
this new potential pharmaceutical product;
|
|
·
|
Implement strategic alliances with select biopharmaceutical companies and laboratories, at a time
and in a manner whereby such alliances may complement and expand our own research and development efforts, and which may eventually
expand to include providing additive sales and marketing capabilities;
|
|
·
|
Utilize our broadening patent base and collaborator network as a mechanism to meet our strategic
objectives; and
|
|
·
|
Develop relationships with companies that could be instrumental in assisting us to access other
innovative therapeutics.
|
Our business strategy is based on attaining
a number of commercial objectives, which, in turn, are supported by a number of product development goals. In this Prospectus Supplement,
statements of our “belief” are based primarily upon our results derived to date from our research and development program
with animals, early stage human trials and our most recent data in HR+/HER2- mBC patients, upon which we believe that we have a
reasonable scientific basis to expect the particular results to occur. It is not possible to predict, based upon studies in animals,
or early stage human trials, whether a new therapeutic will ultimately prove to be safe and effective in humans. There are no assurances
that the particular result expected by us will occur.
As of the date hereof, we do not intend
to become a fully integrated pharmaceutical company with substantial in-house research and development, marketing and distribution
or manufacturing capabilities. We are pursuing a strategy of establishing relationships with larger companies as strategic partners.
It is anticipated that future clinical development into large international or pivotal trials would generally occur in conjunction
with a strategic partner or partners, who would contribute expertise and financial assistance. In exchange for certain product
rights and commitments to market our products, the strategic partners would be expected to share in proceeds from the sale of our
product or products.
USE OF PROCEEDS
The net proceeds from the Offering are
not determinable in light of the nature of the distribution. The net proceeds of any given distribution of common shares through
the Agent in an “at-the-market distribution” will represent the gross proceeds after deducting the compensation payable
to the Agent under the Equity Distribution Agreement and expenses of the distribution. The Agent will receive a cash fee not exceeding
three percent (3%) of the gross proceeds realized from the sale of our common shares for services rendered in connection with the
Offering. We estimate the total expenses of the Offering, excluding the fee paid to the Agent, will be approximately US$50,000.
We intend to use the net proceeds from the Offering, if any, for the advancement of the Corporation’s clinical
development program, related support costs and general corporate and administrative expenses. General corporate and administrative
expenses may include funding ongoing operations and/or capital requirements, discretionary capital programs and potential future
acquisitions. Although, the Corporation intends to expend the net proceeds from the Offering as set forth above, there may be circumstances
where for sound business reasons, a reallocation of funds may be deemed prudent or necessary, and may vary materially from that
set forth above. Pending the uses described above, we plan to invest the net proceeds from the Offering in short- and intermediate-term,
interest bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the
U.S. government.
The amounts actually expended for the purposes
described above may vary significantly depending upon a number of factors, including those listed under the heading “Risk
Factors” in this Prospectus Supplement.
CONSOLIDATED CAPITALIZATION
Except for the issuance of Common Shares
of the Corporation as set forth under the heading “Prior Sales” in this Prospectus Supplement, there has not
been any material change in the share and loan capital of the Corporation, on a consolidated basis, since the Corporation’s
most recently filed financial statements for the three and nine months ended September 30, 2019.
TRADING PRICE AND
VOLUME
The Common Shares are listed and posted
for trading on the TSX under the trading symbol “ONC” and on the NASDAQ under the trading symbol “ONCY”.
On January 2, 2020, the closing bid price of our Common Shares on the NASDAQ was US$3.95 and the closing price of our Common Shares
on the TSX was C$5.13.
The following table sets forth the market
price ranges and the aggregate volume of trading of the Common Shares on the TSX and NASDAQ for the periods indicated:
|
|
|
TSX(1)
|
|
|
NASDAQ
|
|
|
|
|
High
|
|
|
Low
|
|
|
Close
|
|
|
Volume
|
|
|
High
|
|
|
Low
|
|
|
Close
|
|
|
Volume
|
|
Period
|
|
|
(C$)
|
|
|
(C$)
|
|
|
(C$)
|
|
|
(Shares)
|
|
|
(US$)
|
|
|
(US$)
|
|
|
(US$)
|
|
|
(Shares)
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
|
|
|
|
3.25
|
|
|
|
2.43
|
|
|
|
2.72
|
|
|
|
704,629
|
|
|
|
2.50
|
|
|
|
1.76
|
|
|
|
2.09
|
|
|
|
2,008,478
|
|
February
|
|
|
|
3.13
|
|
|
|
2.55
|
|
|
|
2.70
|
|
|
|
605,259
|
|
|
|
2.37
|
|
|
|
1.95
|
|
|
|
2.035
|
|
|
|
1,490,764
|
|
March
|
|
|
|
2.87
|
|
|
|
2.35
|
|
|
|
2.48
|
|
|
|
711,198
|
|
|
|
2.14
|
|
|
|
1.7501
|
|
|
|
1.86
|
|
|
|
1,935,669
|
|
April
|
|
|
|
2.68
|
|
|
|
2.41
|
|
|
|
2.59
|
|
|
|
639,246
|
|
|
|
2.01
|
|
|
|
1.80
|
|
|
|
1.91
|
|
|
|
2,962,881
|
|
May
|
|
|
|
2.75
|
|
|
|
2.20
|
|
|
|
2.32
|
|
|
|
578,061
|
|
|
|
1.96
|
|
|
|
1.5993
|
|
|
|
1.72
|
|
|
|
935,942
|
|
June
|
|
|
|
2.61
|
|
|
|
2.18
|
|
|
|
2.26
|
|
|
|
546,095
|
|
|
|
1.94
|
|
|
|
1.61
|
|
|
|
1.70
|
|
|
|
1,205,291
|
|
July
|
|
|
|
2.26
|
|
|
|
1.75
|
|
|
|
1.79
|
|
|
|
348,974
|
|
|
|
1.78
|
|
|
|
1.31
|
|
|
|
1.34
|
|
|
|
644,978
|
|
August
|
|
|
|
1.75
|
|
|
|
0.74
|
|
|
|
0.81
|
|
|
|
2,218,683
|
|
|
|
1.33
|
|
|
|
0.53
|
|
|
|
0.60
|
|
|
|
8,536,025
|
|
September
|
|
|
|
0.99
|
|
|
|
0.74
|
|
|
|
0.76
|
|
|
|
639,265
|
|
|
|
0.75
|
|
|
|
0.56
|
|
|
|
0.57
|
|
|
|
3,363,096
|
|
October
|
|
|
|
1.75
|
|
|
|
0.48
|
|
|
|
1.61
|
|
|
|
3,323,534
|
|
|
|
1.33
|
|
|
|
0.35
|
|
|
|
1.25
|
|
|
|
13,774,816
|
|
November
|
|
|
|
1.92
|
|
|
|
1.10
|
|
|
|
1.46
|
|
|
|
3,241,718
|
|
|
|
1.47
|
|
|
|
0.82
|
|
|
|
1.12
|
|
|
|
14,214,362
|
|
December
|
|
|
|
7.84
|
|
|
|
1.40
|
|
|
|
6.15
|
|
|
|
10,754,714
|
|
|
|
6.02
|
|
|
|
1.05
|
|
|
|
4.76
|
|
|
|
50,413,513
|
|
PRIOR SALES
Except as disclosed under this heading,
no other Common Shares or securities exchangeable or convertible into Common Shares have been issued during the twelve month period
preceding the date of this Prospectus Supplement.
Common Shares
During the twelve month period prior to
the date of this Prospectus Supplement, the Corporation has issued:
|
(a)
|
an aggregate of 4,425,040 Common Shares pursuant to the Equity Distribution Agreement and a prospectus
supplement dated October 25, 2018 to the Prospectus, at prices ranging from US$0.89 to US$2.35 per Common Share, with the weighted
average price being US$1.44 per Common Share;
|
|
(b)
|
an aggregate of 2,494,943 Common Shares pursuant to a purchase agreement dated September 28, 2018
between the Corporation and Lincoln Park Capital Fund and a prospectus supplement dated September 28, 2018 to the Prospectus, at
prices ranging from US$0.90 to US$2.24 per Common Share, with the weighted average price being US$1.69 per Common Share; and
|
|
(c)
|
an aggregate of 4,619,773 Common Shares pursuant to the Unit Offering;
|
|
(d)
|
an aggregate of 2,675,902 Common Shares upon exercise of Common Share purchase warrants issued
pursuant to the Unit Offering at a price of US$0.90 per Common Share;
|
|
(e)
|
an aggregate of 325,283 Common Shares issued on the exercise of stock options granted pursuant
to its amended and restated stock option plan or on the vesting of restricted share awards granted pursuant to its amended and
restated incentive share award plan, particulars of which are set forth in the following table:
|
Date of Issue
|
Number
of Common Shares Issued
|
Price
per Common Share (US$)
|
January 4, 2019
|
1,982
|
1.78
|
February 22, 2019
|
2,105
|
2.03
|
April 3, 2019
|
2,575
|
1.85
|
April 16, 2019
|
8,354
|
1.90
|
July 4, 2019
|
12,311
|
1.72
|
July 5, 2019
|
2,105
|
1.71
|
October 4, 2019
|
134,481
|
0.57
|
October 7, 2019
|
8,377
|
0.55
|
October 8, 2019
|
16,754
|
0.43
|
October 15, 2019
|
72,899
|
0.62
|
October 28, 2019
|
8,377
|
0.56
|
October 31, 2019
|
54,963
|
0.63
|
Stock Options
During the twelve month period preceding
the date of this Prospectus Supplement, the Corporation granted stock options pursuant to its amended and restated stock option
plan exercisable for an aggregate of 1,020,000 Common Shares. The particulars of such grants are set forth in the following table:
Date of Grant
|
Number
of Options Granted
|
Exercise
Price (C$)
|
July 16, 2019
|
20,000
|
2.12
|
October 2, 2019
|
50,000
|
0.54
|
November 12, 2019
|
50,000
|
1.38
|
December 13, 2019
|
900,000
|
1.45
|
Share Awards
During the twelve month period preceding
the date of this Prospectus Supplement, the Corporation granted restricted share awards pursuant to its amended and restated incentive
share award plan which, upon vesting, will entitle the holders thereof to receive up to an aggregate of 270,098 Shares. The particulars
of such grants are set forth in the following table:
Date of Grant
|
Number
of Share Awards Granted
|
March 31, 2019
|
9,113
|
June 30, 2019
|
10,148
|
September 30, 2019
|
26,702
|
October 1, 2019
|
224,135
|
PLAN OF DISTRIBUTION
We have entered into the Equity Distribution
Agreement with the Agent under which we may issue and sell from time to time up to US$30,000,000 of our Common Shares through the
Agent, as agent, subject to sales of a maximum of US$14,800,000 that may be offered and sold under this Prospectus Supplement.
Sales of the Common Shares will be made
in transactions that are deemed to be “at-the-market distributions” as defined in NI 44-102, including sales made directly
on the NASDAQ or other existing trading markets in the United States. Subject to the terms and conditions of the Equity Distribution
Agreement and upon delivery of a placement notice from us, the Agent will solicit offers to purchase our Common Shares directly
on the NASDAQ or other existing trading markets in the United States. We will instruct the Agent as to the number of Common Shares
to be sold by them from time to time. No Common Shares will be sold on the TSX or on other trading markets in Canada as at-the-market
distributions. We may instruct the Agent not to the sell Common Shares if the sales cannot be effected at or above the price designated
by us from time to time. We or the Agent may suspend the Offering of the Common Shares upon notice and subject to other conditions.
We will pay the Agent commissions, in cash,
for its services in acting as agent in the sale of our Common Shares. The Agent will be entitled to compensation at a fixed commission
rate of 3.0% of the gross sales price per Common Share sold. Because there is no minimum offering amount required as a condition
to close the Offering, the actual total public offering amount, commissions and proceeds to us, if any, are not determinable at
this time. We have also agreed to reimburse the Agent for certain specified expenses, including the fees and disbursements of its
legal counsel, in an amount not to exceed US$10,000. We estimate that the total expenses for the Offering, excluding compensation
and reimbursements payable to the Agent under the terms of the Equity Distribution Agreement, will be approximately US$40,000.
Settlement for sales of our Common Shares
will occur on the second business day following the date on which any sales are made, or on such other date as is industry practice
for regular-way trading, in return for payment of the net proceeds to us. Sales of our Common Shares as contemplated in this Prospectus
will be settled through the facilities of The Depository Trust Company or by such other means as we and the Agent may agree upon.
There is no arrangement for funds to be received in an escrow, trust or similar arrangement.
The Agent will use its commercially reasonable
efforts, consistent with its sales and trading practices, to solicit offers to purchase the Common Shares under the terms and subject
to the conditions set forth in the Equity Distribution Agreement. In connection with the sale of the Common Shares on our behalf,
the Agent will be deemed to be an “underwriter” within the meaning of the U.S. Securities Act, and the compensation
of the Agent will be deemed to be underwriting commissions or discounts. We have agreed to provide indemnification and contribution
to the Agent against certain civil liabilities, including liabilities under the U.S. Securities Act.
The offering of Common Shares pursuant
to the Equity Distribution Agreement will terminate upon the earlier of (i) the sale of all Common Shares subject to the Equity
Distribution Agreement, or (ii) termination of the Equity Distribution Agreement as permitted therein. We and the Agent may each
terminate the Equity Distribution Agreement at any time upon ten days’ prior notice.
The Agent and its affiliates may in the
future provide various investment banking, commercial banking and other financial services for us and our affiliates, for which
services they may in the future receive customary fees. To the extent required by Regulation M, the Agent will not engage in any
market making activities involving our Common Shares while the Offering is ongoing under this Prospectus Supplement.
No underwriter or dealer involved in the
Offering, no affiliate of such an underwriter or dealer, and no person or company acting jointly or in concert with such an underwriter
or dealer has over-allotted, or will over-allot, the Common Shares in connection with the Offering or effect any other transaction
that are intended to stabilize or maintain the market price of the Common Shares.
The TSX has conditionally approved the
listing of the Common Shares offered by this Prospectus Supplement. Listing is subject to us fulfilling all of the requirements
of the TSX. The NASDAQ has authorized, upon official notice of issuance, the listing of the Common Shares offered hereunder.
CERTAIN CANADIAN
FEDERAL INCOME TAX CONSIDERATIONS
The following is, as of the date of this
Prospectus Supplement, a summary of the principal Canadian federal income tax considerations under the Income Tax Act (Canada)
(“Tax Act”) and the regulations thereunder (the “Regulations”) generally applicable to an
investor who acquires as beneficial owner Common Shares pursuant to the Offering and who, for the purposes of the Tax Act and at
all relevant times deals at arm’s length with the Corporation and the Agent, is not affiliated with the Corporation or the
Agent, is not exempt from tax under Part I of the Tax Act, and who acquires and holds the Common Shares, as capital property (a
“Holder”). Generally, the Common Shares will be considered to be capital property to a Holder thereof provided
that the Holder does not use the Common Shares in the course of carrying on a business of trading or dealing in securities and
such Holder has not acquired them or been deemed to have acquired them in one or more transactions considered to be an adventure
or concern in the nature of trade.
This summary is generally applicable to
a Holder who, at all relevant times, for purposes of the Tax Act: (i) is not, and is not deemed to be, resident in Canada for the
purposes of the Tax Act or any applicable income tax treaty or convention; and (ii) does not and will not use or hold, and is not
and will not be deemed to hold, the Common Shares in connection with carrying on a business in Canada (a “Non-Resident
Holder”). This summary is not applicable to a Non-Resident Holder that is (i) an insurer carrying on an insurance business
in Canada and elsewhere; or (ii) an “authorized foreign bank” (as defined in the Tax Act). Such Holders should consult
their own tax advisors with respect to an investment in Common Shares.
This summary is based upon the current
provisions of the Tax Act and the Regulations in force as of the date hereof and counsel’s understanding of the administrative
policies and assessing practices of the Canada Revenue Agency (the “CRA”) published in writing by the CRA prior
to the date hereof. This summary takes into account all specific proposals to amend the Tax Act and the Regulations publicly announced
by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”) and assumes
that the Tax Proposals will be enacted in the form proposed, although no assurance can be given that the Tax Proposals will be
enacted in their current form or at all.
Other than the Tax Proposals, this summary
does not otherwise take into account or anticipate any changes in law, whether by legislative, governmental, administrative or
judicial decision or action, nor does it take into account or consider any provincial, territorial or foreign income tax considerations,
which considerations may differ significantly from the Canadian federal income tax considerations discussed in this summary. This
summary also does not take into account any change in the administrative policies or assessing practices of the CRA.
This summary is of a general nature
only, is not exhaustive of all possible Canadian federal income tax considerations and is not intended to be, nor should it be
construed to be, legal or tax advice to any particular Holder. Holders should consult their own tax advisors with respect to their
particular circumstances.
Currency
For purposes of the Tax Act, all amounts
relating to the acquisition, holding or disposition of the Common Shares (including dividends, adjusted cost base and proceeds
of disposition) must be expressed in Canadian dollars based on the daily noon rate as quoted by the Bank of Canada for the applicable
day or such other rate of exchange that is acceptable to the CRA.
Dividends
Dividends paid or credited or deemed to
be paid or credited to a Non-Resident Holder by the Corporation are subject to Canadian withholding tax at the rate of 25% on the
gross amount of the dividend, unless such rate is reduced by the terms of an applicable tax treaty. For example, under the Canada-United
States Tax Convention (1980), as amended (the “Treaty”), the rate of withholding tax on dividends paid or credited
to a beneficially entitled Non-Resident Holder who is resident in the U.S. for purposes of the Treaty and who is fully entitled
to the benefits of the Treaty (a “U.S. Holder”) is generally limited to 15% of the gross amount of the dividend
(or 5% in the case of a U.S. Holder that is a corporation beneficially owning at least 10% of the Corporation’s voting shares).
Non-Resident Holders are urged to consult their own tax advisors to determine their entitlement to relief under an applicable income
tax treaty.
Dispositions of Common Shares
Upon a disposition (or a deemed disposition)
of a Common Share (other than to the Corporation unless purchased by the Corporation in the open market in the manner in which
shares are normally purchased by any member of the public in the open market), a Non-Resident Holder generally will realize a capital
gain (or a capital loss) equal to the amount by which the proceeds of disposition of such security, as applicable, net of any reasonable
costs of disposition, are greater (or are less) than the adjusted cost base of such security to the Non-Resident Holder.
A Non-Resident Holder generally will not
be subject to tax under the Tax Act in respect of a capital gain realized on the disposition or deemed disposition of a Common
Share, unless the Common Share constitutes “taxable Canadian property” to the Non-Resident Holder thereof for purposes
of the Tax Act, and the Non-Resident Holder is not entitled to relief under the terms of an applicable tax treaty. In addition,
capital losses arising on the disposition or deemed disposition of a Common Share will not be recognized under the Tax Act, unless
the Common Share constitutes “taxable Canadian property” to the Non-Resident Holder thereof for purposes of the Tax
Act, and the Non-Resident Holder is not entitled to relief under the terms of an applicable tax treaty.
Provided the Common Shares are listed on
a “designated stock exchange”, as defined in the Tax Act (which currently includes the NASDAQ and TSX), at the time
of disposition, the Common Shares generally will not constitute taxable Canadian property of a Non-Resident Holder at that time,
unless at any time during the 60 month period immediately preceding the disposition the following two conditions are met concurrently:
(i) one or any combination of (a) the Non-Resident Holder, (b) persons with whom the Non-Resident Holder did not deal at arm’s
length, or (c) partnerships in which the Non-Resident Holder or a person with whom the Non-Resident Holder did not deal at arm’s
length held a membership interest directly or indirectly through one or more partnerships owned 25% or more of the issued shares
of any class or series of shares of the Corporation; and (ii) more than 50% of the fair market value of the shares of the Corporation
was derived directly or indirectly from one or any combination of (a) real or immovable property situated in Canada, (b) “Canadian
resource properties” (as defined in the Tax Act), (c) “timber resource properties” (as defined in the Tax Act)
or (d) an option, an interest or right in any of the foregoing property, whether or not such property exists. Notwithstanding the
foregoing, a Common Share may otherwise be deemed to be taxable Canadian property to a Non-Resident Holder for purposes of the
Tax Act.
Non-Resident Holders whose Common Shares
are taxable Canadian property should consult their own tax advisors.
MATERIAL UNITED STATES
FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain
material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from and relating to the
acquisition, ownership, and disposition of Common Shares acquired pursuant to this Offering.
This summary is for general information
purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations
that may apply to a U.S. Holder arising from and relating to the acquisition, ownership, and disposition of Common Shares. In addition,
this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the
U.S. federal income tax consequences to such U.S. Holder, including, without limitation, specific tax consequences to a U.S. Holder
under an applicable income tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or
U.S. federal income tax advice with respect to any U.S. Holder. This summary does not address the U.S. federal alternative minimum,
U.S. federal net investment income, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences to U.S. Holders
of the acquisition, ownership, and disposition of Common Shares. In addition, except as specifically set forth below, this summary
does not discuss applicable tax reporting requirements. Each prospective U.S. Holder should consult its own tax advisors regarding
the U.S. federal, U.S. federal alternative minimum, U.S. federal net investment income, U.S. federal estate and gift, U.S. state
and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of Common Shares.
No legal opinion from U.S. legal counsel
or ruling from the Internal Revenue Service (the “IRS”) has been requested, or will be obtained, regarding the
U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares. This summary is not binding
on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, the positions taken in
this summary. In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS
and the U.S. courts could disagree with one or more of the conclusions described in this summary.
Scope of this Summary
Authorities
This summary is based on the Internal Revenue
Code of 1986, as amended (the “Code”), Treasury Regulations (whether final, temporary, or proposed), published
rulings of the IRS, published administrative positions of the IRS, the Convention Between Canada and the United States of America
with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the “Canada-U.S. Tax Convention”),
and U.S. court decisions that are applicable, and, in each case, as in effect and available, as of the date of this document. Any
of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change
could be applied retroactively. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed
legislation.
U.S. Holders
For purposes of this summary, the term
“U.S. Holder” means a beneficial owner of Common Shares acquired pursuant to this Offering that is for U.S.
federal income tax purposes:
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) organized
under the laws of the United States, any state thereof or the District of Columbia;
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an estate whose income is subject to U.S. federal income taxation regardless of its source; or
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a trust that (1) is subject to the primary supervision of a court within the U.S. and the control
of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable Treasury Regulations
to be treated as a U.S. person.
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U.S. Holders Subject to Special U.S.
Federal Income Tax Rules Not Addressed
This summary does not address the U.S.
federal income tax considerations applicable to U.S. Holders that are subject to special provisions under the Code, including,
but not limited to, U.S. Holders that: (a) are tax-exempt organizations, qualified retirement plans, individual retirement accounts,
or other tax-deferred accounts; (b) are financial institutions, underwriters, insurance companies, real estate investment trusts,
or regulated investment companies; (c) are broker-dealers, dealers, or traders in securities or currencies that elect to apply
a mark-to-market accounting method; (d) have a “functional currency” other than the U.S. dollar; (e) own Common Shares
as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than
one position; (f) acquire Common Shares in connection with the exercise of employee stock options or otherwise as compensation
for services; (g) hold Common Shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property
held for investment purposes); (h) are required to accelerate the recognition of any item of gross income with respect to Common
Shares as a result of such income being recognized on an applicable financial statement; or (i) own, have owned or will own (directly,
indirectly, or by attribution) 10% or more of the total combined voting power or value of the outstanding shares of the Corporation.
This summary also does not address the U.S. federal income tax considerations applicable to U.S. Holders who are: (a) U.S. expatriates
or former long-term residents of the U.S.; (b) persons that have been, are, or will be a resident or deemed to be a resident in
Canada for purposes of the Income Tax Act (Canada) (the “Tax Act”); (c) persons that use or hold, will
use or hold, or that are or will be deemed to use or hold Common Shares in connection with carrying on a business in Canada; (d)
persons whose Common Shares constitute “taxable Canadian property” under the Tax Act; or (e) persons that have a permanent
establishment in Canada for the purposes of the Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions
under the Code, including, but not limited to, U.S. Holders described immediately above, should consult their own tax advisors
regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal net investment income, U.S. federal estate and gift,
U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of Common Shares.
If an entity or arrangement that is classified
as a partnership (or other “pass-through” entity) for U.S. federal income tax purposes holds Common Shares, the U.S.
federal income tax consequences to such entity or arrangement and the partners (or other owners or participants) of such entity
or arrangement generally will depend on the activities of the entity or arrangement and the status of such partners (or owners
or participants). This summary does not address the tax consequences to any such partner (or owner or participants). Partners (or
other owners or participants) of entities or arrangements that are classified as partnerships or as “pass-through”
entities for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences
arising from and relating to the acquisition, ownership, and disposition of Common Shares.
Passive Foreign Investment Company Rules
PFIC Status of the Corporation
If the Corporation were to constitute a
“passive foreign investment company” under the meaning of Section 1297 of the Code (a “PFIC”, as
defined below) for any year during a U.S. Holder’s holding period, then certain potentially adverse rules would affect the
U.S. federal income tax consequences to a U.S. Holder as a result of the acquisition, ownership and disposition of Common Shares.
The Corporation believes that it was classified as a PFIC during the tax year ended December 31, 2019, and based on current business
plans and financial expectations, the Corporation expects that it will be a PFIC for the current tax year and may be a PFIC in
future tax years. No opinion of legal counsel or ruling from the IRS concerning the status of the Corporation as a PFIC has been
obtained or is currently planned to be requested. The determination of whether any corporation was, or will be, a PFIC for a tax
year depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations.
In addition, whether any corporation will be a PFIC for any tax year depends on the assets and income of such corporation over
the course of each such tax year and, as a result, cannot be predicted with certainty as of the date of this document. Accordingly,
there can be no assurance that the IRS will not challenge any determination made by the Corporation (or any subsidiary of the Corporation)
concerning its PFIC status. Each U.S. Holder should consult its own tax advisors regarding the PFIC status of the Corporation and
each subsidiary of the Corporation.
In any year in which the Corporation is
classified as a PFIC, a U.S. Holder will be required to file an annual report with the IRS containing such information as Treasury
Regulations and/or other IRS guidance may require. In addition to penalties, a failure to satisfy such reporting requirements may
result in an extension of the time period during which the IRS can assess a tax. U.S. Holders should consult their own tax advisors
regarding the requirements of filing such information returns under these rules, including the requirement to file an IRS Form
8621 annually.
The Corporation generally will be a PFIC
if, for a tax year, (a) 75% or more of the gross income of the Corporation is passive income (the “PFIC income test”)
or (b) 50% or more of the value of the Corporation’s assets either produce passive income or are held for the production
of passive income, based on the quarterly average of the fair market value of such assets (the “PFIC asset test”).
“Gross income” generally includes all sales revenues less the cost of goods sold, plus income from investments and
from incidental or outside operations or sources, and “passive income” generally includes, for example, dividends,
interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities
transactions.
For purposes of the PFIC income test and
PFIC asset test described above, if the Corporation owns, directly or indirectly, 25% or more of the total value of the outstanding
shares of another corporation, the Corporation will be treated as if it (a) held a proportionate share of the assets of such other
corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes
of the PFIC income test and PFIC asset test described above, and assuming certain other requirements are met, “passive income”
does not include certain interest, dividends, rents, or royalties that are received or accrued by the Corporation from certain
“related persons” (as defined in Section 954(d)(3) of the Code) also organized in Canada, to the extent such items
are properly allocable to the income of such related person that is not passive income.
Under certain attribution rules, if the
Corporation is a PFIC, U.S. Holders will generally be deemed to own their proportionate share of the Corporation’s direct
or indirect equity interest in any company that is also a PFIC (a ‘‘Subsidiary PFIC’’), and will
generally be subject to U.S. federal income tax on their proportionate share of (a) any “excess distributions,” as
described below, on the stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of the stock of a Subsidiary PFIC
by the Corporation or another Subsidiary PFIC, both as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In
addition, U.S. Holders may be subject to U.S. federal income tax on any indirect gain realized on the stock of a Subsidiary PFIC
on the sale or disposition of Common Shares. Accordingly, U.S. Holders should be aware that they could be subject to tax under
the PFIC rules even if no distributions are received and no redemptions or other dispositions of Common Shares are made.
Default PFIC Rules
Under Section 1291 of the Code
If the Corporation is a PFIC for any tax
year during which a U.S. Holder owns Common Shares, the U.S. federal income tax consequences to such U.S. Holder of the acquisition,
ownership, and disposition of Common Shares will depend on whether and when such U.S. Holder makes an election to treat the Corporation
and each Subsidiary PFIC, if any, as a “qualified electing fund” or “QEF” under Section 1295 of the Code
(a “QEF Election”) or makes a mark-to-market election under Section 1296 of the Code (a “Mark-to-Market
Election”). A U.S. Holder that does not make either a QEF Election or a Mark-to-Market Election will be referred to in
this summary as a “Non-Electing U.S. Holder.”
A Non-Electing U.S. Holder will be subject
to the rules of Section 1291 of the Code (described below) with respect to (a) any gain recognized on the sale or other taxable
disposition of Common Shares and (b) any “excess distribution” received on the Common Shares. A distribution generally
will be an “excess distribution” to the extent that such distribution (together with all other distributions received
in the current tax year) exceeds 125% of the average distributions received during the three preceding tax years (or during a U.S.
Holder’s holding period for the Common Shares, if shorter).
Under Section 1291 of the Code, any gain
recognized on the sale or other taxable disposition of Common Shares (including an indirect disposition of the stock of any Subsidiary
PFIC), and any “excess distribution” received on Common Shares or with respect to the stock of a Subsidiary PFIC, must
be ratably allocated to each day in a Non-Electing U.S. Holder’s holding period for the respective Common Shares. The amount
of any such gain or excess distribution allocated to the tax year of disposition or distribution of the excess distribution and
to years before the entity became a PFIC, if any, would be taxed as ordinary income (and not eligible for certain preferred rates).
The amounts allocated to any other tax year would be subject to U.S. federal income tax at the highest tax rate applicable to ordinary
income in each such year, and an interest charge would be imposed on the tax liability for each such year, calculated as if such
tax liability had been due in each such year. A Non-Electing U.S. Holder that is not a corporation must treat any such interest
paid as “personal interest,” which is not deductible.
If the Corporation is a PFIC for any tax
year during which a Non-Electing U.S. Holder holds Common Shares, the Corporation will continue to be treated as a PFIC with respect
to such Non-Electing U.S. Holder, regardless of whether the Corporation ceases to be a PFIC in one or more subsequent tax years.
A Non-Electing U.S. Holder may terminate this deemed PFIC status by electing to recognize gain (which will be taxed under the rules
of Section 1291 of the Code discussed above), but not loss, as if such Common Shares were sold on the last day of the last tax
year for which the Corporation was a PFIC.
QEF Election
A U.S. Holder that makes a timely and effective
QEF Election for the first tax year in which the holding period of its Common Shares begins generally will not be subject to the
rules of Section 1291 of the Code discussed above with respect to its Common Shares. A U.S. Holder that makes a timely and effective
QEF Election will be subject to U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the net capital gain
of the Corporation, which will be taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary earnings of the Corporation,
which will be taxed as ordinary income to such U.S. Holder. Generally, “net capital gain” is the excess of (a) net
long-term capital gain over (b) net short-term capital loss, and “ordinary earnings” are the excess of (a) “earnings
and profits” over (b) net capital gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax
on such amounts for each tax year in which the Corporation is a PFIC, regardless of whether such amounts are actually distributed
to such U.S. Holder by the Corporation. However, for any tax year in which the Corporation is a PFIC and has no net income or gain,
U.S. Holders that have made a QEF Election would not have any income inclusions as a result of the QEF Election. If a U.S. Holder
that made a QEF Election has an income inclusion, such a U.S. Holder may, subject to certain limitations, elect to defer payment
of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any
such interest paid will be treated as “personal interest,” which is not deductible.
A U.S. Holder that makes a timely and effective
QEF Election with respect to the Corporation generally (a) may receive a tax-free distribution from the Corporation to the extent
that such distribution represents “earnings and profits” of the Corporation that were previously included in income
by the U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in the Common Shares to
reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. Holder
that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of Common Shares.
The procedure for making a QEF Election,
and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely. A QEF
Election will be treated as “timely” if such QEF Election is made for the first year in the U.S. Holder’s holding
period for the Common Shares in which the Corporation was a PFIC. A U.S. Holder may make a timely QEF Election by filing the appropriate
QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such year. If a U.S. Holder does
not make a timely and effective QEF Election for the first year in the U.S. Holder’s holding period for the Common Shares,
the U.S. Holder may still be able to make a timely and effective QEF Election in a subsequent year if such U.S. Holder meets certain
requirements and makes a “purging” election to recognize gain (which will be taxed under the rules of Section 1291
of the Code discussed above) as if such Common Shares were sold for their fair market value on the day the QEF Election is effective.
If a U.S. Holder makes a QEF Election but does not make a “purging” election to recognize gain as discussed in the
preceding sentence, then such U.S. Holder shall be subject to the QEF Election rules and shall continue to be subject to tax under
the rules of Section 1291 discussed above with respect to its Common Shares. If a U.S. Holder owns PFIC stock indirectly through
another PFIC, separate QEF Elections must be made for the PFIC in which the U.S. Holder is a direct shareholder and the Subsidiary
PFIC for the QEF rules to apply to both PFICs.
A QEF Election will apply to the tax year
for which such QEF Election is timely made and to all subsequent tax years, unless such QEF Election is invalidated or terminated
or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes a QEF Election and, in a subsequent tax year, the
Corporation ceases to be a PFIC, the QEF Election will remain in effect (although it will not be applicable) during those tax years
in which the Corporation is not a PFIC. Accordingly, if the Corporation becomes a PFIC in another subsequent tax year, the QEF
Election will be effective and the U.S. Holder will be subject to the QEF rules described above during any subsequent tax year
in which the Corporation qualifies as a PFIC.
The Corporation: (a) will make available
to U.S. Holders, upon their written request, information as to its status as a PFIC and the PFIC status of any subsidiary in which
the Corporation owns more than 50% of such subsidiary’s total aggregate voting power and (b) for each year in which the Corporation
is a PFIC, provide to a U.S. Holder, upon written request, such information and documentation that a U.S. Holder making a QEF Election
with respect to the Corporation and such more than 50% owned subsidiary which constitutes a PFIC is reasonably required to obtain
for U.S. federal income tax purposes. The Corporation may elect to provide such information on its website. With respect to any
Subsidiary PFIC in which the Corporation owns 50% or less of the aggregate voting power, upon the written request of a U.S. Holder
acquiring Common Shares, the Corporation will request that such Subsidiary PFIC provide such U.S. Holder with the information that
such U.S. Holder requires to report under the QEF rules; provided, however, the Corporation can provide no assurances that such
Subsidiary PFIC will provide such information.
A U.S. Holder makes a QEF Election by attaching
a completed IRS Form 8621, including a PFIC Annual Information Statement, to a timely filed United States federal income tax return.
However, if the Corporation does not provide the required information with regard to the Corporation or any of its Subsidiary PFICs,
U.S. Holders will not be able to make a QEF Election for such entity and will continue to be subject to the rules of Section 1291
of the Code discussed above that apply to Non-Electing U.S. Holders with respect to the taxation of gains and excess distributions.
Mark-to-Market Election
A U.S. Holder may make a Mark-to-Market
Election only if the Common Shares are marketable stock. The Common Shares generally will be “marketable stock” if
the Common Shares are regularly traded on (a) a national securities exchange that is registered with the Securities and Exchange
Commission, (b) the national market system established pursuant to section 11A of the Securities and Exchange Act of 1934, or (c)
a foreign securities exchange that is regulated or supervised by a governmental authority of the country in which the market is
located, provided that (i) such foreign exchange has trading volume, listing, financial disclosure, and surveillance requirements,
and meets other requirements, and the laws of the country in which such foreign exchange is located, together with the rules of
such foreign exchange, ensure that such requirements are actually enforced and (ii) the rules of such foreign exchange effectively
promote active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, such stock generally
will be “regularly traded” for any calendar year during which such stock is traded, other than in de minimis quantities,
on at least 15 days during each calendar quarter. Provided that the Common Shares are “regularly traded” as described
in the preceding sentence, the Common Shares are expected to be marketable stock. However, each U.S. Holder should consult its
own tax advisor in this matter.
A U.S. Holder that makes a Mark-to-Market
Election with respect to its Common Shares generally will not be subject to the rules of Section 1291 of the Code discussed above
with respect to such Common Shares. However, if a U.S. Holder does not make a Mark-to-Market Election beginning in the first tax
year of such U.S. Holder’s holding period for the Common Shares for which the Corporation is a PFIC and such U.S. Holder
has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions
of, and distributions on, the Common Shares.
A U.S. Holder that makes a Mark-to-Market
Election will include in ordinary income, for each tax year in which the Corporation is a PFIC, an amount equal to the excess,
if any, of (a) the fair market value of the Common Shares, as of the close of such tax year over (b) such U.S. Holder’s adjusted
tax basis in such Common Shares. A U.S. Holder that makes a Mark-to-Market Election will be allowed a deduction in an amount equal
to the excess, if any, of (a) such U.S. Holder’s adjusted tax basis in the Common Shares, over (b) the fair market value
of such Common Shares (but only to the extent of the net amount of previously included income as a result of the Mark-to-Market
Election for prior tax years).
A U.S. Holder that makes a Mark-to-Market
Election generally also will adjust such U.S. Holder’s tax basis in the Common Shares to reflect the amount included in gross
income or allowed as a deduction because of such Mark-to-Market Election. In addition, upon a sale or other taxable disposition
of Common Shares, a U.S. Holder that makes a Mark-to-Market Election will recognize ordinary income or ordinary loss (not to exceed
the excess, if any, of (a) the amount included in ordinary income because of such Mark-to-Market Election for prior tax years over
(b) the amount allowed as a deduction because of such Mark-to-Market Election for prior tax years). Losses that exceed this limitation
are subject to the rules generally applicable to losses provided in the Code and Treasury Regulations.
A U.S. Holder makes a Mark-to-Market Election
by attaching a completed IRS Form 8621 to a timely filed United States federal income tax return. A Mark-to-Market Election applies
to the tax year in which such Mark-to-Market Election is made and to each subsequent tax year, unless the Common Shares cease to
be “marketable stock” or the IRS consents to revocation of such election. Each U.S. Holder should consult its own tax
advisors regarding the availability of, and procedure for making, a Mark-to-Market Election.
Although a U.S. Holder may be eligible
to make a Mark-to-Market Election with respect to the Common Shares, no such election may be made with respect to the stock of
any Subsidiary PFIC that a U.S. Holder is treated as owning, because such stock is not marketable. Hence, the Mark-to-Market Election
will not be effective to avoid the application of the default rules of Section 1291 of the Code described above with respect to
deemed dispositions of Subsidiary PFIC stock or excess distributions from a Subsidiary PFIC to its shareholder.
Other PFIC Rules
Under Section 1291(f) of the Code, the
IRS has issued proposed Treasury Regulations that, subject to certain exceptions, would cause a U.S. Holder that had not made a
timely QEF Election to recognize gain (but not loss) upon certain transfers of Common Shares that would otherwise be tax-deferred
(e.g., gifts and exchanges pursuant to corporate reorganizations). However, the specific U.S. federal income tax consequences to
a U.S. Holder may vary based on the manner in which Common Shares are transferred.
Certain additional adverse rules may apply
with respect to a U.S. Holder if the Corporation is a PFIC, regardless of whether such U.S. Holder makes a QEF Election. For example,
under Section 1298(b)(6) of the Code, a U.S. Holder that uses Common Shares as security for a loan will, except as may be provided
in Treasury Regulations, be treated as having made a taxable disposition of such Common Shares.
Special rules also apply to the amount
of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC. Subject to such special rules, foreign taxes
paid with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit. The rules
relating to distributions by a PFIC and their eligibility for the foreign tax credit are complicated, and a U.S. Holder should
consult with its own tax advisors regarding the availability of the foreign tax credit with respect to distributions by a PFIC.
The PFIC rules are complex,
and each U.S. Holder should consult its own tax advisors regarding the PFIC rules and how the PFIC rules may affect the U.S. federal
income tax consequences of the acquisition, ownership, and disposition of Common Shares.
General Rules Applicable to the Ownership and Disposition
of Common Shares
The following discussion describes the
general rules applicable to the ownership and disposition of the Common Shares but is subject in its entirety to the special rules
described above under the heading “Passive Foreign Investment Company Rules.”
Distributions on Common Shares
A U.S. Holder that receives a distribution,
including a constructive distribution, with respect to a Common Share will be required to include the amount of such distribution
in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of
the current and accumulated “earnings and profits” of the Corporation, as computed for U.S. federal income tax purposes.
A dividend generally will be taxed to a U.S. Holder at ordinary income tax rates if the Corporation is a PFIC for the tax year
of such distribution or the preceding tax year. To the extent that a distribution exceeds the current and accumulated “earnings
and profits” of the Corporation, such distribution will be treated first as a tax-free return of capital to the extent of
a U.S. Holder’s tax basis in the Common Shares and thereafter as gain from the sale or exchange of such Common Shares. (See
“Sale or Other Taxable Disposition of Common Shares” below). However, the Corporation may not maintain the calculations
of its earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder may have to assume that
any distribution by the Corporation with respect to the Common Shares will constitute ordinary dividend income. Dividends received
on Common Shares by corporate U.S. Holders generally will not be eligible for the “dividends received deduction.” Subject
to applicable limitations and provided the Corporation is eligible for the benefits of the Canada-U.S. Tax Convention or the Common
Shares are readily tradable on a United States securities market, dividends paid by the Corporation to non-corporate U.S. Holders,
including individuals, generally will be eligible for the preferential tax rates applicable to long-term capital gains for dividends,
provided certain holding period and other conditions are satisfied, including that the Corporation not be classified as a PFIC
in the tax year of distribution or in the preceding tax year. The dividend rules are complex, and each U.S. Holder should consult
its own tax advisors regarding the application of such rules.
Sale or Other Taxable Disposition of
Common Shares
Upon the sale or other taxable disposition
of Common Shares, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the
U.S. dollar value of cash received plus the fair market value of any property received and such U.S. Holder’s tax basis in
such Common Shares sold or otherwise disposed of. A U.S. Holder’s tax basis in Common Shares generally will be such holder’s
U.S. dollar cost for such Common Shares. Gain or loss recognized on such sale or other disposition generally will be long-term
capital gain or loss if, at the time of the sale or other disposition, the Common Shares have been held for more than one year.
Preferential tax rates currently apply
to long-term capital gain of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates
for long-term capital gain of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations
under the Code.
Additional Considerations
Receipt of Foreign Currency
The amount of any distribution paid to
a U.S. Holder in foreign currency, or on the sale, exchange or other taxable disposition of Common Shares, generally will be equal
to the U.S. dollar value of such foreign currency based on the exchange rate applicable on the date of receipt (regardless of whether
such foreign currency is converted into U.S. dollars at that time). A U.S. Holder will have a basis in the foreign currency equal
to its U.S. dollar value on the date of receipt. Any U.S. Holder who converts or otherwise disposes of the foreign currency after
the date of receipt may have a foreign currency exchange gain or loss that would be treated as ordinary income or loss, and generally
will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method
of tax accounting. Each U.S. Holder should consult its own U.S. tax advisors regarding the U.S. federal income tax consequences
of receiving, owning, and disposing of foreign currency.
Foreign Tax Credit
Subject to the PFIC rules discussed above,
a U.S. Holder that pays (whether directly or through withholding) Canadian income tax with respect to dividends paid on the Common
Shares generally will be entitled, at the election of such U.S. Holder, to receive either a deduction or a credit for such Canadian
income tax. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis,
whereas a deduction will reduce a U.S. Holder’s income that is subject to U.S. federal income tax. This election is made
on a year-by-year basis and applies to all foreign taxes paid (whether directly or through withholding) by a U.S. Holder during
a year. The foreign tax credit rules are complex and involve the application of rules that depend on a U.S. Holder’s particular
circumstances. Accordingly, each U.S. Holder should consult its own U.S. tax advisors regarding the foreign tax credit rules.
Backup Withholding and Information Reporting
Under U.S. federal income tax law, certain
categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation.
For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. Holders that hold
certain specified foreign financial assets in excess of certain thresholds. The definition of specified foreign financial assets
includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained
by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment
that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity. U.S. Holders may be subject to
these reporting requirements unless their Common Shares are held in an account at certain financial institutions. Penalties for
failure to file certain of these information returns are substantial. U.S. Holders should consult with their own tax advisors regarding
the requirements of filing information returns, including the requirement to file an IRS Form 8938.
Payments made within the U.S., or by a
U.S. payor or U.S. middleman, of dividends on, and proceeds arising from the sale or other taxable disposition of, Common Shares
will generally be subject to information reporting and backup withholding tax if a U.S. Holder (a) fails to furnish such U.S. Holder’s
correct U.S. taxpayer identification number (generally on Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number,
(c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding tax,
or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification
number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding tax. However, certain exempt
persons generally are excluded from these information reporting and backup withholding rules. Backup withholding is not an additional
tax. Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder’s
U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in
a timely manner.
The discussion of reporting requirements
set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S. Holder.
A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess
a tax and, under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting
requirement. Each U.S. Holder should consult its own tax advisors regarding the information reporting and backup withholding rules.
THE ABOVE SUMMARY IS NOT INTENDED TO
CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE ACQUISITION, OWNERSHIP,
AND DISPOSITION OF COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO
THEM IN THEIR OWN PARTICULAR CIRCUMSTANCES.
WHERE YOU CAN FIND
ADDITIONAL INFORMATION
The Corporation has filed with the SEC
a registration statement on Form F-10 relating to, among other securities, the Common Shares. This Prospectus Supplement and the
Prospectus, both of which constitute a part of the registration statement, do not contain all of the information contained in the
registration statement, certain items of which are contained in the exhibits to the registration statement as permitted by the
rules and regulations of the SEC. See “Documents Filed as Part of the Registration Statement” in this Prospectus
Supplement and the Prospectus. Statements contained in this Prospectus Supplement, the Prospectus or a document incorporated by
reference in the Prospectus about the contents of any contract, agreement or other documents referred to are not necessarily complete,
and in each instance you should refer to the exhibits to the registration statement for a more complete description of the matter
involved. The registration statement, and the items of information omitted from this Prospectus Supplement and the Prospectus but
contained in the registration statement, will be available on EDGAR (www.sec.gov/edgar.shtml).
The Corporation is subject to the information
requirements of the U.S. Exchange Act and applicable Canadian securities legislation and, in accordance therewith, files and
furnishes annual and quarterly financial information and material change reports, business acquisition reports and other material
with the securities commission or similar regulatory authority in each of the provinces of Canada and with the SEC. Under MJDS
adopted by the United States and Canada, documents and other information that the Corporation files with the SEC may be prepared
in accordance with the disclosure requirements of Canada, which are different from those of the United States. As a foreign private
issuer within the meaning of rules made under the U.S. Exchange Act, the Corporation is exempt from the rules under the U.S. Exchange
Act prescribing the furnishing and content of proxy statements, and the Corporation’s officers, directors and principal shareholders
are exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the U.S. Exchange
Act. In addition, the Corporation is not required to publish financial statements as promptly as United States companies.
You may read any document that the Corporation
has filed with the SEC on EDGAR at www.sec.gov/edgar.shtml and such information can also be inspected and copies ordered at the
SEC’s public reference room in Washington, D.C. You may also obtain copies of those documents from the public reference room
of the SEC at 100 F Street, N.E., Washington, D.C. 20549 by paying a fee. You should call the SEC at 1-800-SEC-0330
or access its website at www.sec.gov for further information about the public reference rooms. You may read and download any public
document that the Corporation has filed with the Canadian securities regulatory authorities under the Corporation’s profile
on SEDAR (www.sedar.com).
LEGAL MATTERS AND
INTEREST OF EXPERTS
The auditors of the Corporation are Ernst
& Young LLP, Chartered Accountants, 1000, 440 – 2nd Avenue S.W., Calgary, Alberta, T2P 5E9. Ernst & Young
LLP is independent of the Corporation in accordance with the Rules of Professional Conduct as outlined by the Chartered Professional
Accountants of Alberta. Ernst & Young LLP is registered with the U.S. Public Corporation Accounting Oversight Board.
Certain legal matters relating to the Offering
will be passed upon on our behalf by McCarthy Tetrault LLP with respect to certain Canadian legal matters and by Dorsey & Whitney
LLP with respect to certain U.S. legal matters and on behalf of the Agent by Goodwin Procter LLP with respect to certain U.S. legal
matters. As at the date hereof, the partners and associates of each of McCarthy Tetrault LLP beneficially own, directly or indirectly,
less than 1% of the Common Shares.
AGENT FOR SERVICE
OF PROCESS
Messrs. Wayne Pisano, William G. Rice and
Leonard Kruimer and Dr. Bernd R. Seizinger are directors of the Corporation who reside outside of Canada. Messrs. Pisano, Rice
and Kruimer and Dr. Seizinger have appointed the Corporation, at its principal place of business, as agent for service of process.
Purchasers are advised that it may not be possible for investors to enforce judgments obtained in Canada against any person that
resides outside of Canada, even if the party has appointed an agent for service of process.
BASE SHELF PROSPECTUS
May 4, 2018
Cdn.$150,000,000
Common Shares
Subscription Receipts
Warrants
Units
______________
Oncolytics Biotech Inc. (the “Corporation”,
“Oncolytics”, “we”, “our” or “us”) may from time to
time offer and issue the following securities: (i) common shares in the capital of the Corporation (“Common Shares”);
(ii) subscription receipts of the Corporation exchangeable for Common Shares and/or other securities of the Corporation (“Subscription
Receipts”); (iii) warrants exercisable to acquire Common Shares and/or other securities of the Corporation (“Warrants”);
and (iv) securities comprised of more than one of Common Shares, Subscription Receipts and/or Warrants offered together as a unit
(“Units”), or any combination thereof, up to an aggregate offering price of $150,000,000 (or the equivalent
thereof, at the date of issue, in any other currency or currencies, as the case may be) at any time during the 25-month period
that this short form base shelf prospectus (including any amendments hereto, the “Prospectus”) remains valid.
The Common Shares, Subscription Receipts, Warrants and Units (collectively, the “Securities”) offered hereby
may be offered separately or together, in separate series, in amounts, at prices and on terms to be set forth in one or more prospectus
supplements (collectively or individually, as the case may be, “Prospectus Supplements”).
The specific terms of any offering of Securities
will be set forth in the applicable Prospectus Supplement and may include, without limitation, where applicable: (i) in the case
of Common Shares, the number of Common Shares being offered, the offering price (in the event the offering is a fixed price distribution),
the manner of determining the offering price(s) (in the event the offering is not a fixed price distribution) and any other specific
terms; (ii) in the case of Subscription Receipts, the number of Subscription Receipts being offered, the offering price, the terms,
conditions and procedures for the exchange of the Subscription Receipts into or for Common Shares and/or other securities of the
Corporation and any other specific terms; (iii) in the case of Warrants, the number of such Warrants offered, the offering price,
the terms, conditions and procedures for the exercise of such Warrants into or for Common Shares and/or other securities of the
Corporation and any other specific terms; and (iv) in the case of Units, the number of Units being offered, the offering price,
the terms of the Common Shares, Subscription Receipts and/or Warrants, as the case may be, underlying the Units, and any other
specific terms.
This offering is made by a Canadian issuer
that is permitted, under a multijurisdictional disclosure system adopted by the United States and Canada (“MJDS”),
to prepare this Prospectus in accordance with Canadian disclosure requirements. Prospective investors in the United States should
be aware that such requirements are different from those of the United States. Financial statements included or incorporated by
reference herein have been prepared in accordance with International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board (“IASB”) and may not be comparable to financial statements
of United States companies. Such financial statements are subject to Canadian generally accepted auditing standards and auditor
independence standards, in addition to the standards of the Public Company Accounting Oversight Board (United States) and the United
States Securities and Exchange Commission (“SEC”) independence standards.
Prospective investors should be aware that
the acquisition of the securities described herein may have tax consequences both in the United States and in Canada. Such consequences
for investors who are resident in, or citizens of, the United States may not be described fully herein. Prospective investors should
read the tax discussion contained in the applicable Prospectus Supplement with respect to a particular offering of Securities.
The enforcement by investors of civil
liabilities under the United States federal securities laws may be affected adversely by the fact that the Corporation is incorporated
under the laws of Alberta, Canada, that the majority of its officers and directors are residents of Canada, that many of the experts
named in the registration statement are not residents of the United States, and that a substantial portion of the assets of the
Corporation and said persons are located outside the United States.
NEITHER THE SEC NOR ANY STATE OR CANADIAN
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THE SECURITIES OFFERED HEREBY OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
Any investment in Securities involves
significant risks that should be carefully considered by prospective investors before purchasing Securities. The risks outlined
in this Prospectus and in the documents incorporated by reference herein, including the applicable Prospectus Supplement, should
be carefully reviewed and considered by prospective investors in connection with any investment in Securities. See “Risk
Factors”.
All shelf information permitted under applicable
securities legislation to be omitted from this Prospectus including, without limitation, the information disclosed in the specific
terms of any offering of Securities, as discussed above, will be contained in one or more Prospectus Supplements that will be delivered
to purchasers together with this Prospectus, except in cases where an exemption from such delivery requirements has been obtained.
Each Prospectus Supplement will be incorporated by reference into this Prospectus for the purposes of securities legislation as
of the date of such Prospectus Supplement and only for the purposes of the distribution of the Securities to which that Prospectus
Supplement pertains.
We may sell the Securities to or through
one or more underwriters or dealers purchasing as principals and may also sell the Securities to one or more purchasers directly,
through applicable statutory exemptions, or through one or more agents designated by us from time to time. The Securities may be
sold from time to time in one or more transactions at fixed prices or not at fixed prices, such as market prices prevailing at
the time of sale, prices related to such prevailing market prices or prices to be negotiated with purchasers, which prices may
vary as between purchasers and during the period of distribution of the Securities. The Prospectus Supplement relating to a particular
offering of Securities will identify each underwriter, dealer or agent engaged in connection with the offering and sale of such
Securities, as well as the method of distribution and the terms of the offering of such Securities, including the initial offering
price (in the event the offering is a fixed price distribution), the manner of determining the offering price(s) (in the event
the offering is not a fixed price distribution), the net proceeds to us and, to the extent applicable, any fees, discounts or any
other compensation payable to underwriters, dealers or agents and any other material terms. See “Plan of Distribution”.
In connection with any offering of the
Securities other than an “at-the-market distribution” (as defined under applicable Canadian legislation) (unless otherwise
specified in the relevant Prospectus Supplement), the underwriters or agents may over-allot or effect transactions that stabilize
or maintain the market price of the offered Securities at a level above that which might otherwise prevail on the open market.
Such transactions, if commenced, may be interrupted or discontinued at any time. See “Plan of Distribution”.
No underwriter or dealer involved in an
“at-the-market distribution” under this Prospectus, no affiliate of such an underwriter or dealer and no person or
company acting jointly or in concert with such underwriter or dealer will over-allot securities in connection with such distribution
or effect any other transactions that are intended to stabilize or maintain the market price of the Securities.
Owning the Securities may subject you to
tax consequences. This Prospectus and any applicable Prospectus Supplement may not describe the tax consequences fully. You should
read the tax discussion in any applicable Prospectus Supplement and consult with your own tax advisor with respect to your own
particular circumstances.
Unless otherwise specified in the applicable
Prospectus Supplement, the Subscription Receipts, Warrants and Units will not be listed on any securities exchange. There is no
market through which these securities may be sold and purchasers may not be able to resell such securities purchased under this
Prospectus. This may affect the pricing of such securities in the secondary market, the transparency and availability of trading
prices, the liquidity of such securities, and the extent of issuer regulation. See “Forward-Looking Statements”
and “Risk Factors”.
Our outstanding securities are listed
for trading on the Toronto Stock Exchange (“TSX”) under the trading symbol “ONC” and are
quoted for trading on the OTCQX Best Market (“OTCQX”) under the trading symbol “ONCYF”.
On May 3, 2018, the closing price of our Common Shares on the TSX was $0.63 per Common Share.
Messrs. Wayne Pisano, William G. Rice and
Bernd R. Seizinger are directors of the Corporation who reside outside of Canada. Messrs. Pisano, Rice and Seizinger have appointed
the Corporation, at its principal place of business, as agent for service of process. Purchasers are advised that it may not be
possible for investors to enforce judgments obtained in Canada against any person that resides outside of Canada, even if the party
has appointed an agent for service of process.
No underwriter, agent or dealer has
been involved in the preparation of this Prospectus or performed any review of the contents of this Prospectus.
Our head office and principal place of
business is located at 210, 1167 Kensington Crescent N.W., Calgary, Alberta, T2N 1X7. Our registered office is located at
4000, 421 - 7th Avenue S.W., Calgary, Alberta, T2P 4K9.
TABLE
OF CONTENTS
Page
ABOUT THIS PROSPECTUS
AND OTHER MATTERS
In this Prospectus and any Prospectus Supplement,
unless otherwise indicated, references to “we”, “us”, “our”, “issuer”
“Oncolytics” or the “Corporation” are to Oncolytics Biotech Inc., including, where the context
requires, its subsidiaries and affiliates.
In this Prospectus and in any Prospectus
Supplement, unless otherwise specified or the context otherwise requires, all references to “dollars” or “$”
are to Canadian dollars and all references to “US$” are to United States dollars.
Unless otherwise indicated, all financial
information included and incorporated by reference in this Prospectus and any Prospectus Supplement is determined using IFRS as
issued by IASB and adopted by the Accounting Standards Board of Canada.
This Prospectus provides you with a general
description of the Securities that the Corporation may offer. Each time the Corporation sells Securities under this Prospectus,
the Corporation will file and deliver, except in cases where an exemption from such delivery requirement has been obtained, a Prospectus
Supplement that will contain specific information about the terms of that offering of Securities. The Prospectus Supplement also
may add, update or change information contained in this Prospectus. Before investing, investors should read both this Prospectus
and any applicable Prospectus Supplement together with additional information described under the heading “Documents Incorporated
by Reference”.
You should rely only on the information
contained in or incorporated by reference in this Prospectus or any applicable Prospectus Supplement. The Corporation has not authorized
anyone to provide you with different or additional information. The Corporation is not making an offer of these Securities in any
jurisdiction where the offer is not permitted by law.
FORWARD-LOOKING STATEMENTS
This Prospectus and the documents incorporated
by reference herein contain certain statements relating to future events or the Corporation’s future performance which constitute
forward-looking statements within the meaning of applicable Canadian securities laws and within the meaning of the United States
Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or achievements of the Corporation, or industry results, to be
materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Forward-looking statements are statements that are not historical facts, and include, but are not limited to, estimates and their
underlying assumptions; statements regarding plans, objectives and expectations with respect to the efficacy of our technologies;
the timing and results of clinical studies related to our technologies; future operations, products and services; the impact of
regulatory initiatives on our operations; the size of and opportunities related to the markets for our technologies; general industry
and macroeconomic growth rates; expectations related to possible joint and/or strategic ventures and statements regarding future
performance. Forward-looking statements generally, but not always, are identified by the words “expects,” “anticipates,”
“believes,” “intends,” “estimates,” “projects”, “potential”, “possible”
and similar expressions, or that events or conditions “will,” “may,” “could” or “should”
occur.
The forward-looking statements in this
Prospectus are subject to various risks and uncertainties, most of which are difficult to predict and generally beyond our control,
including without limitation:
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risks related to all of our products, including REOLYSIN®, being in the research and development
stage and requiring further development and testing before they can be marketed commercially;
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risks inherent in pharmaceutical research and development;
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risks related to timing and possible delays in our clinical trials;
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risks related to some of our clinical trials being conducted in, and subject to the laws of foreign
countries;
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risks related to our pharmaceutical products being subject to intense regulatory approval processes
in the United States and other foreign jurisdictions;
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risks related to being subject to government manufacturing and testing regulations;
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risks related to the extremely competitive biotechnology industry and our competition with larger
companies with greater resources;
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risks related to our reliance on patents and proprietary rights to protect our technology;
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risks related to potential product liability claims;
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risks related to our limited manufacturing experience and reliance on third parties to commercially
manufacture our products, if and when developed;
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risks related to our new products not being accepted by the medical community or consumers;
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risks related to our technologies becoming obsolete;
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risks related to our dependence on third party relationships for research and clinical trials;
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risks related to our license, development, supply and distribution agreement with Adlai Nortye
Biopharma Co. Ltd.;
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risks related to our lack of operating revenues and history of losses;
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uncertainty regarding our ability to obtain third-party reimbursement for the costs of our product;
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risks related to other third-party arrangements;
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risks related to our ability to obtain additional financing to fund future research and development
of our products and to meet ongoing capital requirements;
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risks related to potential increases in the cost of director and officer liability insurance;
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risks related to our dependence on key employees and collaborators;
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risks related to Barbados law, including those relating to the enforcement of judgments obtained
in Canada or the United States;
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risks related to the effect of changes in the law on our corporate structure;
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risks related to expenses in foreign currencies and our exposure to foreign currency exchange rate
fluctuations;
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risks related to fluctuations in interest rates;
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risks related to information technology systems; and
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risks related to our Common Shares.
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This list is not exhaustive of the factors
that may affect any of the Corporation’s forward-looking statements. Some of the important risks and uncertainties that could
affect forward-looking statements are described further under the heading “Risk Factors” in our Annual Report.
If one or more of these risks or uncertainties materializes, or if underlying assumptions prove incorrect, our actual results may
vary materially from those expected, estimated or projected. Forward-looking statements in this document are not a prediction of
future events or circumstances, and those future events or circumstances may not occur. Given these uncertainties, users of the
information included herein, including investors and prospective investors, are cautioned not to place undue reliance on such forward-looking
statements. 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 forward-looking statements. The Corporation does not undertake any obligation
to publicly update or revise any forward-looking statements other than as required under applicable securities laws.
Prospective investors should carefully
consider the information contained under the heading “Risk Factors” in our Annual Report and all other information
included in or incorporated by reference in this Prospectus before making investment decisions with regard to the Securities.
RISK FACTORS
An investment in the Securities involves
a high degree of risk. Prospective investors should note that there is no market through which the Subscription Receipts, Warrants
or Units may be sold and purchasers may not be able to resell the Subscription Receipts, Warrants or Units purchased under this
Prospectus. This may affect the pricing of these securities in the secondary market, the transparency and availability of trading
prices, the liquidity of the securities, and the extent of issuer regulation.
Prospective investors should consider carefully
the risks described in the documents incorporated by reference in this Prospectus (including in subsequently filed documents incorporated
by reference) and those described in any Prospectus Supplement before purchasing the Securities offered hereby. Discussions of
certain risks affecting the Corporation in connection with its business are provided under the heading “Risk Factors”
in our Annual Report filed with the various securities regulatory authorities, which is incorporated by reference in this Prospectus.
DOCUMENTS INCORPORATED
BY REFERENCE
Information has been incorporated
by reference in this Prospectus from documents filed with securities commissions or similar authorities in Canada. Copies
of the documents incorporated herein by reference may be obtained on request without charge from our Corporate Secretary at 210,
1167 Kensington Crescent N.W., Calgary, Alberta, T2N 1X7 telephone (403) 670-7377, and are available electronically
under the Corporation’s profile on SEDAR (www.sedar.com) and on EDGAR (www.sec.gov/edgar.shtml).
We have filed the following documents with
the securities commissions or similar regulatory authorities in certain of the provinces of Canada and such documents are specifically
incorporated by reference in, and form an integral part of, this Prospectus:
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(a)
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our annual report on Form 20-F (“Annual Report”) dated March 19, 2018, for the
year ended December 31, 2017 (filed in Canada with the Canadian securities regulatory authorities in lieu of an annual information
form);
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our management information circular dated March 27, 2018 relating to the annual general meeting
of shareholders to be held on May 3, 2018;
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(c)
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our audited consolidated financial statements, together with the notes thereto, as at December 31,
2017 and 2016, which comprise the consolidated statements of financial position as at December 31, 2017 and 2016, and the
consolidated statements of loss and comprehensive loss, changes in equity, and cash flows for the years ended December 31,
2017 and 2016, together with the independent auditors’ report thereon; and
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our management’s discussion and analysis of financial condition and results of operations
dated March 8, 2018, for the year ended December 31, 2017.
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Any documents of the type required by National
Instrument 44-101 - Short Form Prospectus Distributions to be incorporated by reference in a short form prospectus, including
any annual information form, annual report on Form 20-F, comparative annual consolidated financial statements and the auditors’
report thereon, comparative interim consolidated financial statements, management’s discussion and analysis of financial
condition and results of operations, material change report (except a confidential material change report), business acquisition
report and information circular, if filed by us with the securities commissions or similar authorities in Canada after the date
of this Prospectus and prior to the date which is 25 months from the date of this Prospectus, shall be deemed to be incorporated
by reference in this Prospectus.
In addition, to the extent that any document
or information incorporated by reference into this Prospectus is included in any report filed with or furnished to the SEC pursuant
to the United States Securities Exchange Act of 1934, as amended (the “U.S. Exchange Act”), after the date of
this Prospectus, such document or information shall be deemed to be incorporated by reference as an exhibit to the registration
statement of which this Prospectus forms a part (in the case of documents or information deemed furnished on Form 6-K or Form 8-K,
only to the extent specifically stated therein)
Any statement contained in this Prospectus
or in a document incorporated or deemed to be incorporated by reference herein will be deemed to be modified or superseded for
the purposes of this Prospectus to the extent that a statement contained in this Prospectus or in any other subsequently filed
document which also is, or is deemed to be, incorporated by reference into this Prospectus modifies or supersedes that statement.
The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other
information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement shall
not be deemed an admission for any purposes that the modified or superseded statement, when made, constituted a misrepresentation,
an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary
to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute part of this Prospectus.
Upon a new annual information form and
the related audited annual financial statements and management’s discussion and analysis being filed by us with the applicable
securities regulatory authorities during the term of this Prospectus, the previous annual information form, the previous audited
annual financial statements and related management’s discussion and analysis, all unaudited interim financial statements
and related management’s discussion and analysis, material change reports and business acquisition reports filed prior to
the commencement of our financial year in which the new annual information form and the related audited annual financial statements
and management’s discussion and analysis are filed shall be deemed no longer to be incorporated into this Prospectus for
purposes of future offers and sales of Securities hereunder. Upon new interim financial statements and related management’s
discussion and analysis being filed by us with the applicable securities regulatory authorities during the term of this Prospectus,
all interim financial statements and related management’s discussion and analysis filed prior to the new interim consolidated
financial statements and related management’s discussion and analysis shall be deemed no longer to be incorporated into this
Prospectus for purposes of future offers and sales of Securities hereunder. Upon a new information circular relating to an annual
general meeting of holders of Common Shares being filed by us with the applicable securities regulatory authorities during the
term of this Prospectus, the information circular for the preceding annual general meeting of holders of Common Shares shall be
deemed no longer to be incorporated into this Prospectus for purposes of future offers and sales of Securities hereunder.
Any “template version”
of any “marketing materials” (as such terms are defined in National Instrument 41-101) pertaining to a distribution
of Securities will be filed under the Corporation’s profile on SEDAR (www.sedar.com). In the event that such marketing materials
are filed subsequent to the date of filing of the applicable prospectus supplement pertaining to the distribution of the Securities
to which such marketing materials relates and prior to the termination of such distribution, such filed versions of the marketing
materials will be deemed to be incorporated by reference into the Prospectus for purposes of future offers and sales of Securities
hereunder.
One or more Prospectus Supplements containing
the specific variable terms for an issue of the Securities and other information in relation to such Securities will be delivered
to purchasers of such Securities together with this Prospectus, except in cases where an exemption from such delivery requirement
has been obtained, and will be deemed to be incorporated by reference into this Prospectus as of the date of the Prospectus Supplement
solely for the purposes of the offering of the Securities covered by any such Prospectus Supplement.
DOCUMENTS FILED AS
PART OF THE REGISTRATION STATEMENT
The following documents have been or
will be filed with the SEC as part of the registration statement of which this Prospectus forms a part: (i) the documents
set out under the heading “Documents Incorporated by Reference”; (ii) the consents of the Corporation’s
auditor and legal counsel; and (iii) the powers of attorney from the directors and certain officers of the Corporation. A
copy of the form of warrant indenture, unit indenture or subscription receipt agreement, as applicable, will be filed by post-effective
amendment or by incorporation by reference to documents filed or furnished with the SEC under the U.S. Exchange Act.
ADDITIONAL INFORMATION
The Corporation has filed with the
SEC a registration statement on Form F-10 relating to the Securities. This Prospectus, which constitutes a part of the registration
statement, does not contain all of the information contained in the registration statement, certain items of which are contained
in the exhibits to the registration statement as permitted by the rules and regulations of the SEC. See “Documents Filed
as Part of the Registration Statement”. Statements included or incorporated by reference in this Prospectus about the
contents of any contract, agreement or other documents referred to are not necessarily complete, and in each instance you should
refer to the exhibits to the registration statement for a more complete description of the matter involved. The registration statement,
and the items of information omitted from this Prospectus but contained in the registration statement, will be available on EDGAR
(www.sec.gov/edgar.shtml). Each time we sell Securities under the registration statement, we will provide a Prospectus Supplement
that will contain specific information about the terms of that offering. The Prospectus Supplement may also add to, update or
change information contained in this Prospectus.
The Corporation is subject to the information
requirements of the U.S. Exchange Act and applicable Canadian securities legislation and, in accordance therewith, files
and furnishes annual and quarterly financial information and material change reports, business acquisition reports and other material
with the securities commission or similar regulatory authority in each of the provinces of Canada and with the SEC. Under MJDS
adopted by the United States and Canada, documents and other information that the Corporation files with the SEC may be prepared
in accordance with the disclosure requirements of Canada, which are different from those of the United States. As a foreign private
issuer within the meaning of rules made under the U.S. Exchange Act, the Corporation is exempt from the rules under the U.S. Exchange
Act prescribing the furnishing and content of proxy statements, and the Corporation’s officers, directors and principal
shareholders are exempt from the reporting and shortswing profit recovery provisions contained in Section 16 of the U.S. Exchange
Act. In addition, the Corporation is not required to publish financial statements as promptly as United States companies.
You may read any
document that the Corporation has filed with the SEC on EDGAR at www.sec.gov/edgar.shtml and such information can also be inspected
and copies ordered at the SEC’s public reference room in Washington, D.C. You may also obtain copies of those documents
from the public reference room of the SEC at 100 F Street, N.E., Washington, D.C. 20549 by paying a fee. You
should call the SEC at 1-800-SEC-0330 or access its website at www.sec.gov for further information about the public reference
rooms. You may read and download any public document that the Corporation has filed with the Canadian securities regulatory authorities
under the Corporation’s profile on SEDAR (www.sedar.com).
THE CORPORATION
Oncolytics Biotech Inc. was incorporated
pursuant to the ABCA on April 2, 1998 as 779738 Alberta Ltd. On April 8, 1998, we amended our articles of incorporation
(the “Articles”) and changed our name to Oncolytics Biotech Inc. On July 29, 1999, we further amended our
Articles by removing the private company restrictions included therein and subdivided the 2,222,222 Common Shares issued and outstanding
into 6,750,000 Common Shares. On February 9, 2007, we further amended our Articles to permit shareholder meetings to be held
at any place in Alberta or at any other location as determined by our board of directors (the “Board”).
We have two material operating subsidiaries:
Oncolytics Biotech (Barbados) Inc. and Oncolytics Biotech (US) Inc., a Delaware corporation. Oncolytics Biotech (Barbados) Inc.
is incorporated pursuant to the laws of Barbados and is a wholly-owned direct subsidiary of the Corporation. Oncolytics Biotech
(U.S.) Inc. is incorporated pursuant to the laws of Delaware and is a wholly-owned direct subsidiary or Oncolytics Biotech (Barbados)
Inc.
Our head office and principal place of
business is located at 210, 1167 Kensington Crescent N.W., Calgary, Alberta, T2N 1X7. Our registered office is located at
4000, 421 - 7th Avenue S.W., Calgary, Alberta, T2P 4K9.
BUSINESS OF THE CORPORATION
General
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 (pelareorep), a systemically administered immuno-oncology (“I-O”) viral agent with the potential to
treat a variety of cancers. 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, pelareorep
becomes commercially viable.
Our potential product for human use, pelareorep,
an unmodified reovirus, is a first in class systemically administered I-O viral agent for the treatment of solid tumors and hematological
malignancies.
Further information regarding the business
of the Corporation is contained in the Annual Report under the heading “Item 4 – Information on the Company”,
which document is incorporated by reference in this Prospectus. See “Documents Incorporated by Reference.”
Recent Developments
On February 23, 2018, the Corporation received
approval from the holders of Common Shares to amend the Articles to effect the consolidation of the issued and outstanding Common
Shares on the basis of a consolidation ratio to be selected by the Board, in its sole discretion, provided that the ratio may be
not less than two (2), and not more than fifteen (15), pre-consolidation Common Shares for each one post-consolidation Common Share,
such amendment to become effective at a date in the future to be determined by the Board when the Board considers it to be in the
best interests of the Corporation, but in any event no later than February 22, 2019, subject to approval of the Toronto Stock Exchange.
CONSOLIDATED CAPITALIZATION
There has been no material change in the
share and loan capital of the Corporation on a consolidated basis since December 31, 2017.
USE OF PROCEEDS
The use of proceeds from the issue and
sale of specific Securities pursuant to this Prospectus will be described in the Prospectus Supplement relating to the issuance
and sale of such Securities.
DESCRIPTION OF SHARE
CAPITAL
Authorized Capital
Our authorized capital consists of an unlimited
number of Common Shares. The following is a summary of the provisions attached to our Common Shares.
Common Shares
The holders of our Common Shares are entitled
to one vote per share at meetings of shareholders, to receive such dividends as declared by the Board and to receive our remaining
property and assets upon dissolution or wind up. Our Common Shares are not subject to any future call or assessment and there are
no pre-emptive, conversion or redemption rights attached to such shares.
As at the date hereof, we have 142,325,222
Common Shares issued and outstanding. After giving effect to the exercise of all outstanding options to acquire Common Shares and
all outstanding share awards granted under the Corporation’s Incentive Share Award Plan, we would have 154,164,330 Common
Shares issued and outstanding.
Common Share Purchase
Warrants
As of the date hereof, we have 16,445,000
Common Share purchase warrants (the “2017 Warrants”) issued and outstanding. Each 2017 Warrant entitles the
holder to purchase one Common Share until June 1, 2022, at an exercise price of $0.95. The 2017 Warrants are subject to acceleration
if the volume weighted average price of the Common Shares equals or exceeds $2.50 for a period of 15 consecutive trading dates.
In addition, as of the date hereof, the
Corporation has outstanding Common Share purchase warrants as follows:
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a Common Share purchase warrant (the “First Adlai Warrant”) exercisable by the
holder thereof until May 14, 2018 to purchase such number of Common Shares as is calculated by dividing US$2,000,000 by the Exercise
Price (as defined below); and
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a Common Share purchase warrant (the “Second Adlai Warrant”) exercisable by
the holder thereof until November 14, 2020 to purchase such number of Common Shares as is calculated by dividing US$6,000,000 by
the Exercise Price.
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For purposes of the First Adlai Warrant
and the Second Adlai Warrant, the term “Exercise Price” means an amount equal to 120% of the volume weighted
average trading price of the Common Shares on the TSX (or, if the Common Shares begin trading on The NASDAQ Capital Market, on
The NASDAQ Capital Market as of the date such trading commences) for the five trading days immediately preceding the exercise date.
The First Adlai Warrant is subject to a
right to call by the Corporation upon the later of: (i) May 14, 2018; and (ii) the date of the enrollment of the first patient
in a Phase III Study related to pelareorep. The Second Adlai Warrant is subject to a right to call by the Corporation upon the
date of the enrollment of the fiftieth (50th) patient in a Phase III Study related to pelareorep.
DESCRIPTION OF SUBSCRIPTION
RECEIPTS
The following description of the terms
of Subscription Receipts sets forth certain general terms and provisions of Subscription Receipts in respect of which a Prospectus
Supplement may be filed. The particular terms and provisions of Subscription Receipts offered by any Prospectus Supplement, and
the extent to which the general terms and provisions described below may apply thereto, will be described in the Prospectus Supplement
filed in respect of such Subscription Receipts.
Subscription Receipts may be offered
separately or in combination with one or more other Securities. The Subscription Receipts will be issued under a subscription
receipt agreement (the ”Subscription Receipt Agreement”). A copy of the Subscription Receipt Agreement
will be filed by us with the applicable securities regulatory authorities after it has been entered into by us and will be available
electronically under the Corporation’s profile on SEDAR (www.sedar.com) and, if applicable, we will file with the SEC via
EDGAR (www.sec.gov/edgar.shtml) as exhibits to the registration statement of which this Prospectus is a part, or will incorporate
by reference from a Report of Foreign Private Issuer on Form 6-K that we file with the SEC, any Subscription Agreement describing
the terms and conditions of such Subscription Receipts that we are offering before the issuance of such Subscription Receipts.
Pursuant to the Subscription Receipt Agreement,
original purchasers of Subscription Receipts will have a contractual right of rescission against the Corporation, following the
issuance of the underlying Common Share or other securities to such purchasers upon the surrender or deemed surrender of the Subscription
Receipts, to receive the amount paid for the Subscription Receipts in the event that this Prospectus or a Prospectus Supplement,
and any amendment thereto, contains a misrepresentation or is not delivered to such purchaser, provided such remedy for rescission
is exercised within 180 days from the closing date of the offering of Subscription Receipts.
The description of general terms and provisions
of Subscription Receipts described in any Prospectus Supplement will include, where applicable:
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the number of Subscription Receipts offered;
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the price at which the Subscription Receipts will be offered;
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if other than Canadian dollars, the currency or currency unit in which the Subscription Receipts
are denominated;
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the procedures for the exchange of the Subscription Receipts into Common Shares or other securities;
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the number of Common Shares or other securities that may be obtained upon exercise of each Subscription
Receipt;
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the designation and terms of any other Securities with which the Subscription Receipts will be
offered, if any, and the number of Subscription Receipts that will be offered with each Security;
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the terms applicable to the gross proceeds from the sale of the Subscription Receipts plus any
interest earned thereon;
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the material Canadian tax consequences of owning such Subscription Receipts; and
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any other material terms, conditions and rights (or limitations on such rights) of the Subscription
Receipts.
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We reserve the right to set forth in a
Prospectus Supplement specific terms of the Subscription Receipts that are not within the options and parameters set forth in this
Prospectus. In addition, to the extent that any particular terms of the Subscription Receipts described in a Prospectus Supplement
differ from any of the terms described in this Prospectus, the description of such terms set forth in this Prospectus shall be
deemed to have been superseded by the description of such differing terms set forth in such Prospectus Supplement.
DESCRIPTION OF WARRANTS
The following description of the terms
of Warrants sets forth certain general terms and provisions of Warrants in respect of which a Prospectus Supplement may be filed.
The particular terms and provisions of Warrants offered by any Prospectus Supplement, and the extent to which the general terms
and provisions described below may apply thereto, will be described in the Prospectus Supplement filed in respect of such Warrants.
Warrants may be offered separately or in combination with one or more other Securities. If applicable, we will file with the SEC
as exhibits to the registration statement of which this Prospectus is a part, or will incorporate by reference from a current report
on Form 6-K that we file with the SEC, any warrant indenture or form of warrant describing the terms and conditions of such Warrants
that we are offering before the issuance of such Warrants.
The description of general terms and provisions
of Warrants described in any Prospectus Supplement will include, where applicable:
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the designation and aggregate number of Warrants offered;
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the price at which the Warrants will be offered;
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if other than Canadian dollars, the currency or currency unit in which the Warrants are denominated;
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the designation and terms of the Common Shares that may be acquired upon exercise of the Warrants;
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the date on which the right to exercise the Warrants will commence and the date on which the right
will expire;
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the number of Common Shares that may be purchased upon exercise of each Warrant and the price at
which and currency or currencies in which that amount of securities may be purchased upon exercise of each Warrant;
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the designation and terms of any Securities with which the Warrants will be offered, if any, and
the number of the Warrants that will be offered with each Security;
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the date or dates, if any, on or after which the Warrants and the related Securities will be transferable
separately;
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the minimum or maximum amount, if any, of Warrants that may be exercised at any one time;
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whether the Warrants will be subject to redemption or call, and, if so, the terms of such redemption
or call provisions; and
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any other material terms, conditions and rights (or limitations on such rights) of the Warrants.
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We reserve the right to set forth in a
Prospectus Supplement specific terms of the Warrants that are not within the options and parameters set forth in this Prospectus.
In addition, to the extent that any particular terms of the Warrants described in a Prospectus Supplement differ from any of the
terms described in this Prospectus, the description of such terms set forth in this Prospectus shall be deemed to have been superseded
by the description of such differing terms set forth in such Prospectus Supplement.
DESCRIPTION OF UNITS
We may issue Units comprised of one or
more of the other Securities described in this Prospectus in any combination. Each Unit will be issued so that the holder of the
Unit is also the holder of each Security included in the Unit. Thus, the holder of a Unit will have the rights and obligations
of a holder of each included Security. The unit agreement, if any, under which a Unit is issued may provide that the Securities
comprising the Unit may not be held or transferred separately, at any time or at any time before a specified date. If applicable,
we will file with the SEC as exhibits to the registration statement of which this Prospectus is a part, or will incorporate by
reference from a current report on Form 6-K that we file with the SEC, any unit agreement describing the terms and conditions of
such Units that we are offering before the issuance of such Units.
The particular terms and provisions of
Units offered by any Prospectus Supplement, and the extent to which the general terms and provisions described below may apply
to them, will be described in the Prospectus Supplement filed in respect of such Units.
The particular terms of each issue of Units
will be described in the related Prospectus Supplement. This description will include, where applicable:
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the designation and aggregate number of Units offered;
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the price at which the Units will be offered;
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if other than Canadian dollars, the currency or currency unit in which the Units are denominated;
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the terms of the Units and of the Securities comprising the Units, including whether and under
what circumstances those securities may be held or transferred separately;
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any provisions for the issuance, payment, settlement, transfer or exchange of the Units or of the
Securities comprising the Units; and
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any other material terms, conditions and rights (or limitations on such rights) of the Units.
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We reserve the right to set forth in a
Prospectus Supplement specific terms of the Units that are not within the options and parameters set forth in this Prospectus.
In addition, to the extent that any particular terms of the Units described in a Prospectus Supplement differ from any of the terms
described in this Prospectus, the description of such terms set forth in this Prospectus shall be deemed to have been superseded
by the description of such differing terms set forth in such Prospectus Supplement with respect to such Units.
PLAN OF DISTRIBUTION
We may sell the Securities to or through
one or more underwriters or dealers purchasing as principals and we may also sell the Securities to one or more purchasers directly,
through applicable statutory exemptions, or through one or more agents designated from time to time. The Securities may be sold
from time to time in one or more transactions at fixed prices or not at fixed prices, such as market prices prevailing at the time
of sale, prices related to such prevailing market prices or prices to be negotiated with purchasers, which prices may vary as between
purchasers and during the period of distribution of the Securities. The Prospectus Supplement relating to a particular offering
and sale of Securities will identify each underwriter, dealer or agent engaged in connection with the offering and sale of such
Securities, as well as the method of distribution and the terms of the offering and sale of such Securities, including the initial
offering price (in the event the offering is a fixed price distribution), the manner of determining the offering price(s) (in the
event the offering is not a fixed price distribution), the net proceeds to us and, to the extent applicable, any fees, discounts
or any other compensation payable to underwriters, dealers or agents and any other material terms. Only underwriters so named in
the Prospectus Supplement are deemed to be underwriters in connection with the Securities offered and sold thereby.
If the underwriters purchase Securities
from us as principal, the Securities will be acquired by the underwriters for their own account and may be resold from time to
time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined
at the time of sale, at market prices prevailing at the time of sale or at prices related to such prevailing market prices. The
obligations of the underwriters to purchase such Securities as principal will be subject to certain conditions precedent, and the
underwriters will be obligated to purchase all the Securities offered and sold by the Prospectus Supplement if any of such Securities
are purchased. Any public offering price and any discounts or concessions allowed or re-allowed or paid to underwriters, dealers
or agents may be changed from time to time.
The Securities may be sold from time to
time in one or more transactions at a fixed price or prices which may be changed or at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated prices, including sales in transactions that are deemed
to be “at-the-market distributions” as defined in National Instrument 44-102 – Shelf Distributions, including
sales made directly on the TSX or other existing trading markets for the Common Shares. In the event that we elect to pursue an
“at-the-market distribution” in Canada, we will apply for the required exemptive relief from the applicable securities
commissions or similar regulatory authorities in Canada. The prices at which the Securities may be offered may vary as between
purchasers and during the period of distribution. If, in connection with the offering of Securities at a fixed price or prices,
the underwriters have made a bona fide effort to sell all of the Securities at the initial offering price fixed in the applicable
Prospectus Supplement, the public offering price may be decreased and thereafter further changed, from time to time, to an amount
not greater than the initial public offering price fixed in such Prospectus Supplement, in which case the compensation realized
by the underwriters will be decreased by the amount that the aggregate price paid by purchasers for the Securities is less than
the gross proceeds paid to us by the underwriters. Any such reduction to the public offering price will not affect the net proceeds
received by the Corporation.
The Securities may also be sold directly
by us, pursuant to applicable statutory exemptions, at such prices and upon such terms as agreed to by us and the purchaser or
through one or more agents designated by us from time to time. Any agent involved in the offering and sale of the Securities in
respect of which this Prospectus is delivered will be named, and any commissions payable by us to such agent will be set forth,
in the Prospectus Supplement. Unless otherwise indicated in the Prospectus Supplement, any agent would be acting on a best efforts
basis for the period of its appointment.
We may agree to pay the underwriters a
commission for various services relating to the issue and sale of any Securities offered hereby. Any such commission will be paid
out of our general funds. Underwriters, dealers and agents who participate in the distribution of the Securities may be entitled
under agreements to be entered into with us to indemnification by us against certain liabilities under securities legislation,
or to contribution with respect to payments which such underwriters, dealers or agents may be required to make in respect thereof.
Any offering of Subscription Receipts,
Warrants or Units will be a new issue of securities with no established trading market. Unless otherwise specified in the applicable
Prospectus Supplement, the Subscription Receipts, Warrants or Units will not be listed on any securities exchange. Certain dealers
may make a market in these Securities, but will not be obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given that any dealer will make a market in these Securities or as to the liquidity of the trading
market, if any, for these Securities. See “Risk Factors”.
Unless otherwise specified in a Prospectus
Supplement, in connection with any offering of the Securities, the underwriters or agents may over-allot or effect transactions
which stabilize or maintain the market price of the Securities offered at a higher level than that which might exist in the open
market. Such transactions, if commenced, may be interrupted or discontinued at any time.
PRIOR SALES
Information regarding prior sales of Securities
will be provided as required in a Prospectus Supplement with respect to the issuance of Securities pursuant to such Prospectus
Supplement.
TRADING PRICE AND
VOLUME
Information regarding trading price and
volume of the Securities will be provided as required for all of the Corporation’s issued and outstanding Securities that
are listed on any securities exchange, as applicable, in each Prospectus Supplement.
CERTAIN INCOME TAX
CONSIDERATIONS
The applicable Prospectus Supplement may
describe certain Canadian federal income tax consequences which may be applicable to a purchaser of Securities offered thereunder,
and may also include a discussion of certain United States federal income tax consequences to the extent applicable.
LEGAL MATTERS AND
INTEREST OF EXPERTS
Unless otherwise specified in the Prospectus
Supplement relating to an offering and sale of Securities, certain legal matters relating to such offering and sale of Securities
will be passed upon on behalf of the Corporation by McCarthy Tétrault LLP with respect to matters of Canadian law and Dorsey
& Whitney LLP, with respect to matters of U.S. law. In addition, certain legal matters in connection with an offering and sale
of Securities will be passed upon for any underwriters, dealers or agents by counsel to be designated at the time of such offering
and sale by such underwriters, dealers or agents with respect to matters of Canadian and, if applicable, United States or other
foreign law. As at the date hereof, the partners and associates of McCarthy Tétrault LLP, as a group, own less than 1% of
the outstanding securities of the Corporation.
AUDITORS, TRANSFER
AGENT AND REGISTRAR
The auditor of the Corporation is Ernst
& Young LLP, Chartered Professional Accountants, Calgary, Alberta. Ernst & Young LLP has confirmed that it is independent
of the Corporation within the meaning of the relevant rules and related interpretations prescribed by the relevant professional
bodies in Canada and applicable legislation or regulations.
The transfer agent and registrar for the
Common Shares is Computershare Trust Company of Canada at its principal offices located in Calgary, Alberta and Toronto, Ontario.
AGENT FOR SERVICE
OF PROCESS
Messrs. Wayne Pisano, William G. Rice and
Bernd R. Seizinger are directors of the Corporation who reside outside of Canada. Messrs. Pisano, Rice and Seizinger have appointed
the Corporation, at its principal place of business, as agent for service of process. Purchasers are advised that it may not be
possible for investors to enforce judgments obtained in Canada against any person that resides outside of Canada, even if the party
has appointed an agent for service of process.
ENFORCEABILITY OF
CIVIL LIABILITIES AGAINST NON-U.S. PERSONS
The Corporation is a corporation existing
under the Business Corporations Act (Alberta). Most of the Corporation’s directors and officers, and some or all
of the experts named in this Prospectus, are residents of Canada or otherwise reside outside the United States, and all or a substantial
portion of their assets, and substantially all of the Corporation’s assets, are located outside the United States. The Corporation
has appointed an agent for service of process in the United States, but it may be difficult for holders of Securities who reside
in the United States to effect service within the United States upon those directors, officers and experts who are not residents
of the United States. It may also be difficult for holders of Securities who reside in the United States to realize in the United
States upon judgments of courts of the United States predicated upon the Corporation’s civil liability and the civil liability
of its directors, officers and experts under the United States federal securities laws.
The Corporation filed with the SEC,
concurrently with its registration statement on Form F-10 of which this Prospectus is a part, an appointment of agent for
service of process on Form F-X. Under the Form F-X, the Corporation appointed DL Services Inc. as its agent for
service of process in the United States in connection with any investigation or administrative proceeding conducted by the SEC,
and any civil suit or action brought against or involving the Corporation in a United States court arising out of or related to
or concerning the offering of the Securities under this Prospectus.
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