**U.S.
      SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**




(Mark
      One)


(X)
            **QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**





For
      the
      quarterly period ended:  **September
      30, 2005**





(
                )
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF
                THE**


**EXCHANGE
      ACT**





For
      the
      transition period from _______________ to _______________





Commission
      file number: 000-51030





**OccuLogix,
      Inc.**


(Exact
      name of registrant as


specified
      in its charter)


**Delaware**
            
            **59
                343 4771**(State
                or other jurisdiction of incorporation or organization)
            
            (IRS
                EmployerIdentification
                No.)








**2600
      Skymark Avenue, Unit 9, Suite 201, Mississauga, Ontario L4W
      5B2**


(Address
      of principal executive offices)





**(905)
      602-0887**


(Registrant’s
      telephone number)








Check
      whether the registrant (1) filed all reports required to be filed by Section
      13
      or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
      (or for such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days.   Yes **X**    No





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act).   Yes    No
      X





State
      the
      number of shares outstanding of each of the registrant’s classes of common
      equity, as of the latest practical date:   42,060,853
      as of October 28, 2005








1
 Table
          of Contents


Special
      Note Regarding Forward-Looking Statements








**PART
      I.  FINANCIAL
      INFORMATION**


Item
      1. Consolidated
      Financial Statements


Item
      2. Management’s
      Discussion And
      Analysis Of Financial Condition And Results Of Operations


Item
      3.  Quantitative And
      Qualitative Disclosures About Market Risk


Item
      4.  Controls And
      Procedures








**PART
      II.  OTHER
      INFORMATION**


Item
      1.  Legal
      Proceedings


Item
      2.  Unregistered Sales
      Of
      Equity Securities And Use Of Proceeds


Item
      3.  Defaults Upon Senior
      Securities


Item
      4.  Submission Of Matters
      To A Vote Of Security Holders


Item
      5.  Other
      Information


Item
      6.  Exhibits


2
 Table
          of Contents





**SPECIAL
      NOTE REGARDING FORWARD-LOOKING
      STATEMENTS**





This
      Quarterly Report on Form 10-Q contains certain forward-looking statements within
      the meaning of Section 27A of the Securities Act of 1933, as amended, and
      Section 21E of the Securities Exchange Act of 1934, as amended, which statements
      can be identified by the use of forward-looking terminology, such as “may”,
“will”, “expect”, “anticipate”, “estimate”, “plans”, “intends” or “continue” or
      the negative thereof or other variations thereon or comparable terminology.
      Our
      actual results could differ materially from those anticipated in these
      forward-looking statements as a result of certain factors, including but not
      limited to those set forth elsewhere in this Form 10-Q, in the section entitled
      “Management’s Discussion and Analysis of Financial Condition and Results of
      Operations”, and in our Annual Report on Form 10-K for the period ended December
      31, 2004. You should not place undue reliance on our forward-looking statements,
      as we cannot assure you that the plans, assumptions, intentions or expectations
      upon which they are based will be realized. By their nature, forward-looking
      statements involve numerous assumptions, risks and uncertainties. Except as
      required by law, we undertake no obligation to update publicly or otherwise
      revise any forward-looking statements, whether as a result of new information,
      future events or otherwise, or the foregoing list of factors affecting this
      information. Unless the context indicates or requires otherwise, in this
      Quarterly Report on Form 10-Q, references to the “Company” shall mean OccuLogix,
      Inc. and its subsidiaries. References to “$” or “dollars” shall mean U.S.
      dollars unless otherwise indicated. References to “C$” shall mean Canadian
      dollars. **OccuLogix,
      Inc** .





3
 Table
          of Contents


**CONSOLIDATED
      BALANCE SHEETS**


(expressed
      in U.S. dollars **)**


(Unaudited)





**September
                30,**
              **2005**
            
            **December
                31,**
              **2004****ASSETS****Current**Cash
                and cash equivalents
            
            $
            13,389,777
            
            $
            17,530,552Short
                term investments
            
            
            32,435,056
            
            
            42,500,000Amounts
                receivable
            
            
            942,384
            
            
            472,156Due
                from related parties
            
            
            ―
            
            
            8,226Inventory
            
            
            5,951,552
            
            
            1,086,339Prepaid
                expenses
            
            
            442,163
            
            
            480,813Deposit
            
            
            4,891
            
            
            8,996Total
                current assets
            
            
            53,165,823
            
            
            62,087,082Fixed
                assets, net
            
            
            452,390
            
            
            367,589Patents
                and trademarks, net
            
            
            115,606
            
            
            104,654Intangible
                asset, net
            
            
            24,356,361
            
            
            25,643,862Goodwill
            
            
            213,397,444
            
            
            213,397,444**Total
                assets**
            
            $
            291,487,624
            
            $
            301,600,631**LIABILITIES
                AND STOCKHOLDERS’ EQUITY****Current**Accounts
                payable
            
            $
            128,321
            
            $
            221,063Accrued
                liabilities
            
            
            2,683,637
            
            
            2,791,291Deferred
                revenue and rent inducement
            
            
            1,722
            
            
            485,047Due
                to related parties
            
            
            6,718
            
            
            ―Due
                to stockholders
            
            
            143,114
            
            
            516,756Total
                current liabilities
            
            
            2,963,512
            
            
            4,014,157Deferred
                tax liability
            
            
            9,011,854
            
            
            9,488,229Total
                liabilities
            
            
            11,975,366
            
            
            13,502,386**Stockholders’
                equity**Capital
                stockCommon
                stock
            
            
            42,041
            
            
            41,807Par
                value of $0.001 per share;Authorized:
                75,000,000; Issued and outstanding:September
                30, 2005 - 42,040,651; December 31, 2004 - 41,806,768Additional
                paid-in capital
            
            
            336,772,338
            
            
            336,063,557Accumulated
                deficit
            
            
            (57,302,121
            )
            
            (48,007,119
            )Total
                stockholders’ equity
            
            
            279,512,258
            
            
            288,098,245**Total
                liabilities and stockholders’ equity**
            
            $
            291,487,624
            
            $
            301,600,631


*See
      accompanying notes to interim consolidated financial
      statements*


4
 Table
          of Contents


**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


(expressed
      in U.S. dollars)


(Unaudited)


**Three
                months ended,****September
                30, 2005**
            
            **September
                30, 2004**RevenuesSales
                to unrelated parties
            
            $
            629,001
            
            $
            —Sales
                to related parties
            
            
            3,329
            
            
            25,773Total
                revenues
            
            
            632,330
            
            
            25,773Cost
                of goods soldCost
                of goods sold to unrelated parties
            
            
            312,210
            
            
            —Cost
                of goods sold to related parties
            
            
            —
            
            
            13,228Royalty
                costs
            
            
            25,000
            
            
            25,855Total
                cost of goods sold
            
            
            337,210
            
            
            39,083Gross
                margin (loss)
            
            
            295,120
            
            
            (13,310
            )Operating
                expensesGeneral
                and administrative
            
            
            2,225,136
            
            
            2,059,080Clinical
                and regulatory
            
            
            1,140,273
            
            
            970,010Sales
                and marketing
            
            
            324,696
            
            
            22,4543,690,105
            
            
            3,051,544Loss
                from operations
            
            
            (3,394,985
            )
            
            (3,064,854
            )Other
                income (expenses)Interest
                income (expense)
            
            
            411,370
            
            
            (4,605
            )Other
            
            
            (25,996
            )
            
            (14,510
            )385,374
            
            
            (19,115
            )Loss
                before income taxes
            
            
            (3,009,611
            )
            
            (3,083,970
            )Recovery
                of income taxes
            
            
            155,697
            
            
            —**Net
                loss for the period**
            
            $
            (2,853,914
            )
            $
            (3,083,970
            )**Weighted
                average number of shares outstanding**
              **-
                basic and diluted**
            
            
            41,982,057
            
            
            5,287,267Basic
                and diluted net loss per share
            
            $
            (0.07
            )
            $
            (0.58
            )


*See
      accompanying notes to interim consolidated financial
      statements*


5
 Table
          of Contents





**CONSOLIDATED
      STATEMENTS OF OPERATIONS**


(expressed
      in U.S. dollars)


(Unaudited)


**Nine
                months ended,****September
                30, 2005**
            
            
            **September
                30, 2004**RevenuesSales
                to unrelated parties
            
            $
            1,552,316
            
            $
            ―Sales
                to related parties
            
            
            81,593
            
            
            189,373Total
                revenues
            
            
            1,633,909
            
            
            189,373Cost
                of goods soldCost
                of goods sold to unrelated parties
            
            
            922,764
            
            
            ―Cost
                of goods sold to related parties
            
            
            43,236
            
            
            184,309Royalty
                costs
            
            
            75,000
            
            
            80,130Total
                cost of goods sold
            
            
            1,041,000
            
            
            264,439Gross
                margin (loss)
            
            
            592,909
            
            
            (75,066
            )Operating
                expensesGeneral
                and administrative
            
            
            6,605,222
            
            
            5,676,639Clinical
                and regulatory
            
            
            3,794,287
            
            
            2,092,466Sales
                and marketing
            
            
            1,090,603
            
            
            22,45411,490,112
            
            
            7,791,559Loss
                from operations
            
            
            (10,897,203
            )
            
            (7,866,625
            )Other
                income (expenses)Interest
                income (expense)
            
            
            1,187,392
            
            
            (12,130
            )Other
            
            
            (58,471
            )
            
            (16,402
            )1,128,921
            
            
            (28,532
            )Loss
                before income taxes
            
            
            (9,768,282
            )
            
            (7,895,157
            )Recovery
                of income taxes
            
            
            473,280
            
            
            ―**Net
                loss for the period**
            
            $
            (9,295,002
            )
            $
            (7,895,157
            )**Weighted
                average number of shares outstanding**
              **-
                basic and diluted**
            
            
            41,884,829
            
            
            5,143,408**Basic
                and diluted net loss per share**
            
            $
            (0.22
            )
            $
            (1.54
            )


*See
      accompanying notes to interim consolidated financial
      statements*


6
 Table
          of Contents





**CONSOLIDATED
      STATEMENTS OF CHANGES**


**IN
      STOCKHOLDERS’ EQUITY**


(expressed
      in U.S. dollars)


(Unaudited)


**Voting
                common stock**
              **at
                par value**
            **Additional
                paid-in capital**
            **Accumulated
                deficit**
            **Net
                stockholders’ equity****Number
                of shares issued**
            **Value****December
                31, 2004**
            41,806,768
            $
                41,807
            $
                336,063,557
            $
                (48,007,119)
            $
                288,098,245Stock
                based compensation
            ―
            ―
            216,239
            ―
            216,239Common
                Stock issued on exercise of options
            233,883
            234
            186,252
            ―
            186,486Fractional
                payout of converted shares due to preferred stockholders
            ―
            ―
            (45)
            ―
            (45)Subscriptions
                receivable
            ―
            ―
            221,661
            ―
            221,661Share
                issuance costs
            ―
            ―
            (88,714)
            ―
            (88,714)Contribution
                of inventory from related party
            ―
            ―
            173,388
            ―
            173,388Net
                loss for the period
            ―
            ―
            ―
            (9,295,002)
            (9,295,002)**September
                30, 2005**
            42,040,651
            $
                42,041
            $
                336,772,338
            $
                (57,302,121)
            $
                279,512,258


*See
      accompanying notes to interim consolidated financial
      statements*


7
 Table
          of Contents








**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


(expressed
      in U.S. dollars)


(Unaudited)


**Nine
                months ended**
              **September
                30,****2005**
            
            **2004****OPERATING
                ACTIVITIES**Net
                loss for the period
            
            $
            (9,295,002
            )
            $
            (7,895,157
            )Adjustments
                to reconcile net loss tocash
                used in operating activities:Stock-based
                compensation
            
            
            216,239
            
            
            4,654,261Amortization
                of fixed assets
            
            
            68,923
            
            
            29,762Amortization
                of patents and trademarks
            
            
            4,224
            
            
            4,094Amortization
                of intangibles
            
            
            1,287,501
            
            
            ―Amortization
                of premium/discount on short-term investments
            
            
            100,126
            
            
            ―Loss
                (gain) on sale of fixed assets
            
            
            ―
            
            
            (6,000
            )Provision
                for subscriptions receivable
            
            
            34,927Deferred
                income taxes
            
            
            (476,375
            )
            
            ―Net
                change in non-cash working capitalbalances
                related to operations
            
            
            (6,160,969
            )
            
            141,395**Cash
                used in operating activities**
            
            
            (14,220,407
            )
            
            (3,071,645
            )**INVESTING
                ACTIVITIES**Proceeds
                on sale of fixed assets
            
            
            ―
            
            
            6,000Proceeds
                from sale of short-term investments
            
            
            20,550,000
            
            
            ―Purchases
                of short-term investments
            
            
            (10,585,182
            )
            
            ―Purchases
                of patents and trademarks
            
            
            (15,176
            )
            
            (4,353
            )Purchases
                of fixed assets
            
            
            (153,724
            )
            
            (170,528
            )**Cash
                provided by (used in) investing activities**
            
            
            9,795,918
            
            
            (168,881
            )**FINANCING
                ACTIVITIES**Increase
                in long-term convertible debenture
            
            
            ―
            
            
            2,450,000Deferred
                share issue costs
            
            
            ―
            
            
            (685,867
            )Proceeds
                from the exercise of common stock options
            
            
            186,486
            
            
            107,442Proceeds
                from the exercise of common stock warrants
            
            
            ―
            
            
            134,480Proceeds
                from the exercise of Series A convertible preferred stock
                warrants
            
            
            ―
            
            
            764,239Receipt
                of subscriptions receivable on the exercise of Series Aconvertible
                preferred stock warrants
            
            
            186,734
            
            
            ―Fractional
                payout of converted shares due to preferred stockholders
            
            
            (792
            )
            
            ―Share
                issuance costs
            
            
            (88,714
            )
            
            ―**Cash
                provided by financing activities**
            
            
            283,714
            
            
            2,770,294**Net
                decrease in cash and cash equivalents**
              **during
                the period**
            
            
            (4,140,775
            )
            
            (470,232
            )Cash
                and cash equivalents, beginning of period
            
            
            17,530,552
            
            
            1,237,168**Cash
                and cash equivalents, end of period**
            
            $
            13,389,777
            
            $
            766,936


*See
      accompanying notes to interim consolidated financial
      statements*


8
 Table
          of Contents











**NOTES
      TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS**


(expressed
      in U.S. dollars unless otherwise stated)


September
      30, 2005 (Unaudited)






**1.**
            **BASIS
                OF PRESENTATION AND ACCOUNTING
                POLICIES**





The
      accompanying unaudited consolidated financial statements have been prepared
      in
      accordance with United States generally accepted accounting principles (“US
      GAAP”). These consolidated financial statements contain all normal recurring
      adjustments and estimates necessary to present fairly the financial position
      of
      the Company as of September 30, 2005 and the results of its operations for
      the
      three- and nine-month periods then ended. These consolidated financial
      statements should be read in conjunction with the consolidated financial
      statements and notes included in the Company’s latest annual report on Form 10-K
      filed with the U.S. Securities and Exchange Commission (the “SEC”). Interim
      results are not necessarily indicative of results for a full year.





The
      unaudited interim consolidated financial statements for the three- and
      nine-month periods ended September 30, 2004 include certain reclassifications
      to
      conform with classifications for the three- and nine-month periods ended
      September 30, 2005. These interim consolidated financial statements have been
      prepared using accounting policies that are consistent with the policies used
      in
      preparing the Company’s audited consolidated financial statements for the year
      ended December 31, 2004.




**2.**
            **SHORT-TERM
                INVESTMENTS**





Short-term
      investments, as of September 30, 2005, include $21,950,000 of auction rate
      securities, which are available to support the Company’s current operations.
      These investments are classified as available-for-sale securities and are
      recorded at fair value with unrealized gains or losses reported in other
      comprehensive income. Due to the short time period between the reset dates
      of
      the interest rates, there are no unrealized gains or losses associated with
      these securities. All of the auction rate securities have contractual maturities
      of more than three years. The Company previously classified auction rate
      securities as marketable securities in the Company’s latest annual report on
      Form 10-K. In addition, as of September 30, 2005, the balance of the short-term
      investments also included corporate and euro dollar bonds and corporate and
      United States federal agency notes, with maturities of one year or less, which
      are classified as held-to-maturity securities and carried at amortized
      cost.




**3.**
            **LOSS
                PER SHARE**





Loss
      per
      share, basic and diluted, is computed using the treasury method. Potentially
      dilutive shares have not been used in the calculation of loss per share as
      their
      inclusion would be anti-dilutive.


9
 Table
          of Contents




**Three
                months ended**
              **September
                30,**
            
            **Nine
                months ended**
              **September
                30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Weighted
                average number of shares outstanding - basic
            
            
            41,982,057
            
            
            5,287,267
            
            
            41,884,829
            
            
            5,143,408Effect
                of dilutive securities:Warrants
            
            
            ―
            
            
            199,723
            
            
            ―
            
            
            706,671Convertible
                debentures
            
            
            ―
            
            
            4,640,671
            
            
            ―
            
            
            3,770,586Convertible
                Preferred Stock
            
            
            ―
            
            
            4,510,744
            
            
            ―
            
            
            4,160,986Stock
                options
            
            
            1,415,542
            
            
            875,701
            
            
            1,498,728
            
            
            875,701Weighted
                average number of shares - diluted
            
            
            43,397,599
            
            
            15,514,106
            
            
            43,383,557
            
            
            14,657,352Loss
                per share - basic and diluted
            
            $
            (0.07
            )
            $
            (0.58
            )
            $
            (0.22
            )
            $
            (1.54
            )







**4.**
            **RECENT
                ACCOUNTING PRONOUNCEMENT**





In
      December 2004, the Financial Accounting Standards Board (the “FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Share-Based
      Payment”, which revised SFAS No. 123 and supercedes Accounting Principles Board
      Opinion No. 25 (“APB 25”). SFAS No. 123R requires all share-based payments to
      employees, including grants of employee stock options, to be recognized in
      the
      financial statements based on their fair values. The pro forma disclosures
      previously permitted under SFAS No. 123 will no longer be an alternative to
      financial statement recognition. SFAS No. 123R is effective at the beginning
      of
      the first interim or annual period beginning after June 15, 2005. In April
      2005,
      the SEC announced the adoption of a new rule that amends the compliance dates
      for SFAS No. 123R. The SEC’s new rule allows companies to implement SFAS No.
      123R at the beginning of their next fiscal year, instead of the next reporting
      period that begins after June 15, 2005. Accordingly, the Company is required
      to
      adopt SFAS No. 123R beginning January 1, 2006. The Company is currently
      evaluating the requirements of SFAS No. 123R. The Company has not yet determined
      the method of adoption or the effect of adopting SFAS No. 123R, and it has
      not
      determined whether the adoption will result in amounts that are similar to
      the
      current pro forma disclosures under SFAS No. 123.





In
      November 2004, the FASB issued SFAS No. 151, “Inventory Costs - An Amendment of
      ARB No. 43, Chapter 4” (“SFAS No. 151”).  SFAS No. 151 requires that items
      such as idle facility expense, excessive spoilage, double freight, and
      rehandling costs be excluded from the cost of inventory and expensed as
      incurred. Additionally, SFAS No. 151 requires that the allocation of fixed
      overheads be based on the normal capacity of the production facilities. SFAS
      No.151 is effective for fiscal years commencing after June 15, 2005.
      Accordingly, the Company is required to adopt SFAS No. 151 beginning January
      1,
      2006.  The Company is currently evaluating the effect that the adoption of
      SFAS No. 151 will have on its consolidated results of operations and financial
      position.




**5.**
            **ACCOUNTING
                FOR STOCK-BASED
                COMPENSATION**





The
      Company follows SFAS No. 123. The provisions of SFAS No. 123 allow companies
      to
      either expense the estimated fair value of employee stock options or continue
      to
      follow the intrinsic value method set forth in APB 25 but to disclose the pro
      forma effects on net income (loss) as if the fair value of the options had
      been
      expensed. The Company has elected to apply APB 25 in accounting for employee
      stock option incentive plans.


10
 Table
          of Contents





The
      following table illustrates the pro forma net loss and net loss per share of
      common stock as if the fair value method had been applied to all
      awards:


**Three
                months ended**
            
            **Nine
                months ended****September
                30,**
            
            **September
                30,****2005**
            
            
            **2004**
            
            
            **2005**
            
            
            **2004**Net
                loss, as reported
            
            $
            (2,853,914
            )
            $
            (3,083,971
            )
            $
            (9,295,002
            )
            $
            (7,895,157
            )Adjustment
                for APB 25
            
            
            (11,899
            )
            
            1,539,232
            
            
            —
            
            
            4,617,693Adjustment
                for SFAS No. 123
            
            
            (1,100,686
            )
            
            (1,561,637
            )
            
            (2,695,051
            )
            
            (4,684,912
            )Pro
                forma net loss
            
            $
            (3,966,499
            )
            $
            (3,106,376
            )
            $
            (11,990,053
            )
            $
            (7,962,376
            )Pro
                forma net loss per share - basic and diluted
            
            $
            (0.09
            )
            $
            (0.59
            )
            $
            (0.29
            )
            $
            (1.55
            )





During
      the nine months ended September 30, 2005, the Company granted 1,513,750 options
      to employees, directors and certain consultants at a weighted average exercise
      price of $8.47. These options were issued under the Company’s 2002 stock option
      plan. Of the 1,513,750 options granted in the nine months ended September 30,
      2005, 100,000 options vest equally over a period of three years from the date
      of
      grant. The balance of 1,413,750 options vests as to 100% when and if the Company
      receives U.S. Food and Drug Administration, or FDA, approval for the RHEOTM
System before December 1, 2006, as to 80% when and if FDA approval is
      received between December 1, 2006 and January 31, 2007 and as to 60%
      when and if FDA approval is received after January 31, 2007. No options
      were granted during the three months ended September 30, 2005 and the three
      and
      nine months ended September 30, 2004.





Pursuant
      to SFAS No. 123, the weighted average fair value of employee stock options
      granted during the nine months ended September 30, 2005 was $3.53. The estimated
      fair value was determined using the Black-Scholes option pricing
      model.





Compensation
      expense associated with non-employee stock options was $91,051 and $216,239
      for
      the three and nine months ended September 30, 2005 and $10,016 and $36,568
      for
      the three and nine months ended September 30, 2004, respectively. The fair
      value
      of these options was determined using the Black-Scholes fair value options
      model
      and is included in general and administrative expenses within the consolidated
      statements of operations.




**6.**
            **RELATED
                PARTY TRANSACTIONS**





The
      following are the Company’s related party transactions:


**September
                30,**
            
            **December
                31,****2005**
            
            
            **2004**Due
                (to)/from:Rheo
                Clinic Inc.
            
            $
            (6,718
            )
            $
            8,226$
            (6,718
            )
            $
            8,226


One
      of
      OccuLogix, L.P.’s (the “Partnership”) primary customers was Rheo Clinic Inc., a
      subsidiary of TLC Vision Corporation (“TLC Vision”), for which the Partnership
      has reported revenues of $3,329 and $81,593 for the three and nine months ended
      September 30, 2005, respectively, and $159,393 and $343,564 for the three and
      nine months ended September 30, 2004, respectively. Rheo Clinic Inc. used the
      RHEOTM System to treat patients for which it charged its customers (the patients)
      a per-treatment fee. The Company purchased TLC Vision’s 50% interest in the
      Partnership on December 8, 2004, and the results of the Partnership’s operations
      have been included in the consolidated financial statements since that date.
      Accordingly, the results of the Partnership’s operations for the three and nine
      months ended September 30, 2004 are not included in the Company’s consolidated
      financial statements for the periods then ended.


11
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Included
      in the balance due to/from Rheo Clinic Inc. as of September 30, 2005 and
      December 31, 2004 is the amount owing to the Partnership for the purchase of
      the
      components of the RHEOTM System, net of the amount owing to Rheo Clinic Inc. for
      clinical and administrative support provided by Rheo Clinic Inc. for the
      Company’s MIRA-1 and other clinical trials. Rheo Clinic Inc. will not be a
      source of revenue, going forward, as it has ceased the treatment of commercial
      patients. On July 29, 2005, the Company entered into an agreement with Rheo
      Clinic Inc. to purchase fixed assets and intellectual property valued at
      C$61,812 to be used for the Company’s clinical trial activities and other
      purposes. The Company agreed to share equally in losses incurred by Rheo Clinic
      Inc., to a maximum of C$28,952, for assets that Rheo Clinic Inc. is not able
      to
      dispose of. The Company reimbursed Rheo Clinic Inc. C$281,581, which amount
      represented that proportion of the costs incurred by Rheo Clinic Inc. deemed
      applicable to clinical trial activities for the period from October 1, 2004
      to
      June 30, 2005 **.**





**TLC
      Vision and Diamed Medizintechnik GmbH** ***(see
      note 8)***





On
      June
      25, 2003, the Company entered into agreements with TLC Vision and Diamed
      Medizintechnik GmbH (“Diamed”) to issue grid debentures in the maximum aggregate
      principal amount of $12,000,000. $7,000,000 of the aggregate principal amount
      was convertible into shares of common stock of the Company at a price of
      $0.98502 per share, and $5,000,000 was non-convertible. On December 8, 2004,
      as
      part of the corporate reorganization relating to the Company’s initial public
      offering, the Company issued 7,106,454 shares of common stock to TLC Vision
      and
      Diamed, upon conversion of $7,000,000 aggregate principal amount of convertible
      debentures.





The
      $5,000,000 portion of the $12,000,000 commitment which was not convertible
      into
      the Company’s common stock was not advanced, and the commitment was terminated
      prior to the completion of the initial public offering.





Collectively,
      as at September 30, 2005, TLC Vision and Diamed control at least a combined
      56.03% of the equity interest in the Company on a fully diluted
      basis.





The
      Company is economically dependent on Diamed to control the supply of the
      OctoNova pumps used in the RHEOTM System. The Company believes that the OctoNova
      pump is a critical component in the RHEOTM System.





Included
      in amounts due to stockholders as of September 30, 2005 and December 31, 2004
      are $62,898 and $473,929, respectively, owing to TLC Vision for its payment
      of
      the salaries and related benefits of certain employees of the Company and for
      computer and administrative support.


12
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          of Contents





**Asahi
      Medical Co., Ltd.**





The
      Company is party to a distributorship agreement with Asahi Medical Co., Ltd.
      (“Asahi Medical”) pursuant to which Asahi Medical supplies the filter products
      used in the RHEOTM System. This agreement, amended effective October 17, 2005,
      provides the Company with, among other things, distribution rights in certain
      territories in which the Company did not have rights previously.





The
      Company is economically dependent on Asahi Medical to continuously provide
      filters and believes that the filter products provided by Asahi Medical are
      a
      critical component in the RHEOTM System. In the event the Company is not able to
      obtain regulatory approval for the RHEOTM System from the FDA and other necessary
      approvals in certain of the territories for which the Company has distribution
      rights by December 31, 2006, Asahi Medical can terminate the distributorship
      agreement.





The
      Company receives free inventory from Asahi Medical for purposes of the MIRA-1
      and related clinical studies. The Company has accounted for this inventory
      at a
      value equivalent to the cost the Company pays for the same filters for
      commercial sales. The value of the free inventory received was $173,388 and
      $146,905 as at September 30, 2005 and December 31, 2004,
      respectively.





**Mr.
      Hans Stock** ***(see
      note 7)***





On
      February 21, 2002, the Company entered into an agreement with Mr. Stock as
      a
      result of his assistance in procuring a distributor agreement for the filter
      products used in the RHEOTM System from Asahi Medical. Mr. Stock agreed to
      further assist the Company in procuring new product lines from Asahi Medical
      for
      marketing and distribution by the Company. The agreement will remain effective
      for a term consistent with the term of the distributorship agreement with Asahi
      Medical, and Mr. Stock will receive a 5% royalty payment on the purchase of
      the
      filters from Asahi Medical. Royalty payments made or owing to Mr. Stock in
      respect of products supplied to the Company from Asahi Medical in the three-
      and
      nine-month periods ended September 30, 2005 and 2004 were $67,716, $210,330,
      $855 and $5,130, respectively.





Under
      its
      October 25, 2004 patent license and royalty agreement with Mr. Stock,
      pursuant to which the Company obtained an exclusive license to U.S. Patent
      No.
      6,245,038, the Company is required to make royalty payments, totaling 1.5%
      of
      product sales, to Mr. Stock, subject to minimum advance royalty payments of
      $12,500 per quarter. The advance payments are credited against future royalty
      payments to be made in accordance with the agreement. This agreement replaced,
      amended and restated prior agreements with Mr. Stock. Payments made under this
      and predecessor agreements for the three- and nine-month periods ended September
      30, 2005 and 2004 were $12,500, $37,500, $12,500 and $37,500,
      respectively.


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**Apheresis
      Technologies, Inc.**





On
      May 1,
      2002, the Company entered into an exclusive distribution services agreement
      with
      Apheresis Technologies Inc. (“ATI”), a company controlled by certain
      stockholders of the Company pursuant to which the Company paid ATI 5% of the
      Company’s cost of components of the RHEOTM System. Under this agreement, ATI was
      the exclusive provider of warehousing, order fulfillment, shipping, billing
      services and customer service related to shipping and billing to the Company.
      This agreement was terminated on March 28, 2005.




**Other**




Effective
      September 1, 2005, the Company entered into a consulting agreement with AMD
      Medical Services Inc. ("AMD"), a corporation of which Irving Siegel, the Vice
      President, Clinical Affairs of the Company, is a beneficial owner, director
      and
      officer.  Pursuant to this consulting agreement, AMD provides medical
      services to the Company in general support and furtherance of the clinical
      trial
      activities of the Company.  The fees payable by the Company under this
      consulting agreement consist of a monthly fee of Cdn.$6,250 and an additional
      daily fee of Cdn.$1,000 for each physician who provides medical services for
      each day on which such physician provides medical services.




Effective
      April 1, 2005, the Company terminated its reimbursement agreement with ATI
      such
      that the Company no longer compensates ATI in respect of any salary paid to,
      or
      benefits provided to, Mr. Cornish by ATI. Until April 1, 2005, Mr. Cornish
      did
      not have an employment contract with the Company and received no compensation
      from the Company directly. On April 1, 2005, Mr. Cornish entered into an
      employment agreement with the Company under which he has been receiving an
      annual base salary of $106,450, representing compensation to him for devoting
      80% of his time to the business and affairs of the Company. Effective June
      1,
      2005, the Company amended its employment agreement with Mr. Cornish such that
      he
      has been receiving an annual base salary of $113,103, representing compensation
      to him for devoting 85% of his time to the business and affairs of the Company.
      Mr. Cornish continues to participate in the Company’s bonus plan. Mr. Cornish is
      one of the Company’s stockholders and the Company’s Vice President,
      Operations.





Effective
      January 1, 2004, the Company entered into a rental agreement with a related
      party whereby the Company has been leasing space from Cornish Properties
      Corporation, a corporation controlled by Mr. Cornish, at $2,745 per month.
      The
      term of the lease extends to December 31, 2005. In the three- and
      nine-month periods ended September 30, 2005 and 2004, the Company paid Cornish
      Properties Corporation $8,235, $24,705, $8,235 and $24,705, respectively.
      Amounts are paid monthly, and no balance is owing as at September 30, 2005
      and
      December 31, 2004.





Effective
      June 25, 2003, Elias Vamvakas, the Chairman of TLC Vision, became the Chairman,
      the Chief Executive Officer and the Secretary of the Company and the President
      and the Secretary of the General Partner of the Partnership. 500,000 options
      issued to Mr. Vamvakas in December 2003 were accounted for in accordance with
      APB 25. The Company estimated the intrinsic value of these options granted
      to
      Mr. Vamvakas to be approximately $5,880,000. Management estimated the fair
      value
      of the underlying common stock based on management’s estimate of the Company’s
      value. The intrinsic value of the options is being amortized over the vesting
      period. However, upon the successful completion of the Company’s initial public
      offering, the options vested immediately, and therefore, any unvested
      compensation expense was expensed immediately and therefore did not impact
      the
      results for the nine-month period ended September 30, 2005. The impact of this
      stock compensation expense for the three- and nine-month periods ended September
      30, 2005 and 2004 was nil, nil, $569,032 and $1,707,097,
      respectively.





In
      addition, the Company entered into a consultancy and non-competition agreement
      on July 1, 2003 with the Center for Clinical Research, which requires the
      Company to pay a fee of $5,000 per month. In the year ended December 31,
      2003, the related party agreed to forego the payment of $75,250 due to it in
      exchange for options to purchase 20,926 shares of common stock of the Company
      at
      an exercise price of $0.13. In addition, the Center for Clinical
      Research also agreed to the repayment of the balance of $150,500 due to it
      at $7,500 per month beginning in July 2003. Included in accounts payable as
      at
      September 30, 2005 and December 31, 2004 are nil and $15,500, respectively,
      due
      to the related party. In April, 2005, the Company authorized the increase of
      the
      fee payable to the related party from $5,000 to $15,000 per month effective
      January 1, 2005, the payment of a one-time bonus of $200,000 upon FDA approval
      of the RHEOTM System and the grant of 60,000 options, approved by the board on
      April 18, 2005,to the related party at an exercise price of $7.15. These options
      vest on FDA approval of the RHEOTM System. This resulted in a consulting expense
      for the three- and nine-months ended September 30, 2005 of $69,646 and $180,185,
      respectively, of which $24,646 and $45,185 related to the amortization of stock
      options.





On
      September 29, 2004, the Partnership signed a product purchase agreement with
      Veris Health Services Inc. (“Veris”) (formerly Rheo Therapeutics Inc.) for the
      purchase from the Partnership of 8,004 treatment sets over the period from
      October 2004 to December 2005, a transaction valued at $6,003,000, after
      introductory rebates. However, due to delays in opening its planned number
      of
      clinics throughout Canada, Veris will no longer require the contracted number
      of
      treatment sets in the period. OccuLogix has agreed to the original pricing
      for
      the reduced number of treatment sets required in the period. Dr. Machat, who
      is
      an investor in and one of the directors of Veris, was a co-founder and former
      director of TLC Vision *.* As
      of
      September 30, 2005, the Partnership had received a total of $1,560,806 from
      Veris. Included in amounts receivable as at September 30, 2005 and December
      31,
      2004 are $513,901 and $322,920, respectively, due from Veris for the purchase
      of
      additional pumps and treatment sets, the payment of which is expected before
      the
      end of the current fiscal year.


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          of Contents





On
      March 28, 2005, the Company entered into a supply and co-marketing
      agreement with Rheogenx Biosciences Corporation (“Rheogenx”), an unrelated
      party, for the supply of pumps and disposable treatment sets to Rheogenx and
      its
      affiliates, including PhereSys Therapeutics Corporation (“PhereSys”), Rheogenx’s
      wholly-owned subsidiary. Under this agreement, the Company will provide
      marketing support for PhereSys’ mobile apheresis business upon obtaining FDA
      approval to market the RHEOTM System in the United States. In connection with
      entering into this agreement, the Company also entered into an asset purchase
      agreement with Rheogenx on March 28, 2005 to effectively terminate the
      patent, know-how and trademark rights to non-ophthalmic indications for the
      RHEOTM treatment in North America which the Company had previously licensed to
      Rheogenx. The purchase price of the assets under the asset purchase agreement
      was $10.




**7.**
            **DUE
                TO STOCKHOLDERS**


**September
                30,**
            
            **December
                31,****2005**
            
            **2004****Due
                to:**TLC
                Vision Corporation
            
            $
            62,898
            
            $
            473,929Other
                stockholders
            
            
            80,216
            
            
            42,827$
            143,114
            
            $
            516,756








Included
      in amounts due to stockholders as at September 30, 2005 and December 31, 2004
      are $62,898 and $473,929, respectively, owing to TLC Vision for its payment
      of
      the salaries and related benefits of certain employees of the Company and for
      computer and administrative support.





The
      balance due to other stockholders as of September 30, 2005 and December 31,
      2004
      is $80,216 and $42,827, respectively, and are amounts due to Mr. Hans Stock
      for
      royalty fees *(note
      6).*




**8.**
            **COMMITMENTS**





On
      March
      4, 2005, the Company placed an order with MeSys GmbH (“MeSys”) for the purchase
      of 70 OctoNova pumps representing a total commitment of €1,135,330 or
      approximately $1,367,278 based on exchange rates as of September 30, 2005.
      The
      pumps are to be manufactured throughout the remainder of 2005, with the final
      shipment of pumps being made in December 2005. The Company expects to make
      monthly payments to MeSys for the pumps as manufacturing is completed. As of
      September 30, 2005, a total payment of €327,170 or approximately $410,524 had
      been made to MeSys on the above purchase order for 20 OctoNova pumps, all of
      which have been received as at September 30, 2005.


15
 Table
          of Contents




**9.**
            **CONSOLIDATED
                STATEMENTS OF CASH FLOWS**





The
      net
      change in non-cash working capital balances related to operations consists
      of
      the following:


**Nine
                months ended**
              **September
                30,****2005**
            
            
            **2004**Due
                to/from related parties
            
            $
            14,944
            
            $
            (196,120
            )Amounts
                receivable
            
            
            (470,228
            )
            
            (62,547
            )Inventory
            
            
            (4,691,825
            )
            
            (489,986
            )Prepaid
                expenses
            
            
            38,650
            
            
            (5,018
            )Deposit
            
            
            4,105
            
            
            ―Accounts
                payable and accrued liabilities
            
            
            (199,647
            )
            
            829,461Deferred
                revenue and rent inducement
            
            
            (483,325
            )
            
            ―Due
                to stockholders
            
            
            (373,642
            )
            
            65,605$
            (6,160,969
            )
            $
            141,395





The
      following table lists those items that have been excluded from the consolidated
      statements of cash flows as they relate to non-cash transactions and additional
      cash flow information:


**Nine
                months ended****September
                30,****2005**
            
            **2004**Non-cash
                investing and financing activitiesFree
                inventory
            
            $
            173,388
            
            $
            159,870Cashless
                exercise of warrants to purchase shares of Series A convertible preferred
                stock
            
            
            ―
            
            
            1,269,845







**10.**
            **SUBSEQUENT
                EVENTS**





N one .





**I** **TEM
      2.  MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS**





**OVERVIEW**





We
      are an
      ophthalmic therapeutic company founded to commercialize innovative treatments
      for eye diseases, including age-related macular degeneration, or AMD. Our
      product, the RHEOTM System, is used to perform the RheopheresisTM procedure, a
      procedure that selectively removes molecules from plasma and which is designed
      to treat Dry AMD, the most common form of the disease. Shortly after our
      inception, we focused on commercializing therapeutic apheresis, including the
      opening and operation of the Rheotherapy Center, which generated revenues of
      $900,200 and $1,277,800 for the fiscal years ended June 30, 1999 and 1998
      respectively. In 1999, the FDA’s Office of Compliance issued a directive
      notifying the Rheotherapy Center that any further conducting of therapeutic
      apheresis would need to be conducted under the authority of an Investigational
      Device Exemption filed with the FDA which resulted in the closure of the
      Rheotherapy Center. Subsequent to the closure of the Rheotherapy Center, our
      focus changed primarily to conducting clinical trials and seeking regulatory
      approval for the RHEOTM System. In September 1999, we received an Investigational
      Device Exemption from the FDA to begin a pivotal clinical trial, MIRA-1, for
      the
      RHEOTM System. Between early 2000 and August 2001, we enrolled 98 patients in
      MIRA-1. In August 2001, due to financial constraints, we downsized and
      temporarily suspended the enrollment of new patients. However, we continued
      to
      follow up with the existing patients enrolled in MIRA-1. In late 2001, with
      permission of the FDA, we submitted for independent third party analysis data
      for the 43 enrolled patients for whom we had collected complete 12-month
      post-treatment data sets. The results of this data analysis were used to support
      our efforts to secure additional financing.


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In
      2002
      and 2003, we received a net aggregate of $5,951,870 of additional financing
      from
      Diamed, TLC Vision and other investors. As a result of this incremental funding,
      in October 2003, we hired new management and began screening additional patients
      for enrollment in MIRA-1. In addition, in 2003, we began limited
      commercialization of the RHEOTM System in three clinics in Canada.





On
      September 29, 2004, the Partnership signed a product purchase agreement with
      Veris Health Services Inc. (“Veris”) formerly Rheo Therapeutics Inc. (an
      Ontario, Canada corporation), for the purchase from the Partnership of 8,004
      treatment sets over the period from October 2004 to December 2005, a transaction
      valued at $6,003,000, after introductory rebates. However, due to delays in
      opening its planned number of clinics throughout Canada, Veris will no longer
      require the contracted number of treatment sets in the period. OccuLogix has
      agreed to the original pricing for the reduced number of treatment sets required
      in the period. As at September 30 th ,
      Veris
      operated three commercial treatment centers where RHEOTM therapy is offered,
      opened a fourth in October, and we believe that it plans to open additional
      centers in various Canadian cities. Dr. Jeffrey Machat, who is an investor
      in
      and one of the directors of Veris, was a co-founder and former director of
      TLC
      Vision.





On
      December 8, 2004, we purchased TLC Vision’s 50% interest in OccuLogix, L.P.,
      which resulted in OccuLogix, L.P. becoming a wholly-owned subsidiary of us.
      Accordingly, 100% of the results of OccuLogix, L.P.’s operations are included in
      our consolidated financial statements since that date. We believe that our
      value
      resides solely in OccuLogix, L.P. to which we licensed all of the distribution
      and marketing rights for the RHEOTM System for ophthalmic indications to which we
      are entitled. Prior to the acquisition, our only profit stream came from our
      share of OccuLogix, L.P. earnings. Our acquisition of TLC Vision’s 50% ownership
      interest in OccuLogix, L.P. has transferred the earnings potential for sales
      of
      the RHEOTM System entirely to us.





In
      December 2004, 5,600,000 shares of our common stock at $12.00 per share were
      issued in connection with our initial public offering for gross cash proceeds
      of
      $67,200,000 (less issuance costs of $7,858,789).





As
      of
      December 31, 2004, we had enrolled a total of 185 patients in MIRA-1 which
      completes the enrollment phase of MIRA-1, exceeding our goal of enrolling 180
      subjects by December 31, 2004. All subjects have completed the treatment phase
      of the study. As of September 30, 2005, we have collected complete 12-month
      post-treatment data sets for 135 of these patients. Of the remaining 50
      patients, 35 are in the process of follow-up and 16 subjects will not result
      in
      complete data sets. We intend to derive the required 150 complete 12-month
      post-treatment data sets from our enrolled subjects. ****** As
      of
      December 31, 2004, we had also submitted to the FDA the first three of four
      modules of the PMA filing, the non-clinical portion. The Company and the FDA
      have agreed on a Statistical Analysis Plan and a Filing Plan with respect to
      our
      Pre-Market Approval Application (“PMA”) for the RHEOTM System. We intend to file
      with the FDA, in the first quarter of 2006, only one PMA clinical module
      following completion of the twelve-month data collection.


17
 Table
          of Contents





**RECENT
      DEVELOPMENTS**





None





**CRITICAL
      ACCOUNTING POLICIES**





Our
      consolidated financial statements are prepared in accordance with accounting
      principles generally accepted in the United States. The preparation of these
      financial statements requires us to make estimates and judgments that affect
      the
      reported amounts of assets, liabilities, revenues and expenses, and related
      disclosures. On an ongoing basis, we evaluate our estimates and assumptions.
      We
      base our estimates on historical experience and on various other assumptions
      that are believed to be reasonable under the circumstances, the results of
      which
      form the basis for making judgments about the carrying values of assets and
      liabilities that are not readily apparent from other sources. Actual results
      may
      differ from these estimates under different assumptions or
      conditions.








**RESULTS
      OF OPERATIONS**





**Three
      Months Ended September 30, 2005 and 2004**





***Revenues.*** Revenues
      increased by 2,353% to $632,330 for the three months ended September 30, 2005
      from $25,773 for the three months ended September 30, 2004. This increase was
      due primarily to sales of treatment sets to Veris of $621,000 as well as revenue
      from the recalibration of pumps and the training of Veris employees on the
      operation of the pumps of $8,000 in the three-month period. The reported
      revenues for the three months ended September 30, 2004 reflect sales made to
      OccuLogix, L.P. prior to the acquisition of TLC Vision’s 50% interest in
      OccuLogix, L.P.





***Cost
      of Sales and Gross Margin.*** Cost
      of
      sales increased by 763% to $337,210 for the three months ended September 30,
      2005 from $39,083 for the three months ended September 30, 2004, as a result
      of
      the increase in sales from the prior period and the impact of the acquisition
      of
      TLC Vision’s 50% ownership interest in OccuLogix, L.P.





Gross
      margin on sales increased to $295,120 for the three months ended September
      30,
      2005 from a loss of $13,310 during the comparative prior year period due to
      the
      acquisition of OccuLogix, L.P. on December 8, 2004. Gross profit from sales
      as a
      percentage of sales increased to 47% for the three months ended September 30,
      2005 from a loss of 52% for the comparative 2004 period. On a pro forma basis,
      had the Company acquired OccuLogix, L.P. on January 1, 2004, the gross margin
      percentage would have been 36% for the three months ended September 30, 2004.
      The Company’s gross margins are affected by product mix. As our customers’
treatment sites are established, they will purchase a continuous supply of
      disposable treatment sets for which the margins are much higher.





***General
      and Administrative Expenses.*** General
      and administrative expenses were $2,225,136 for the three months ended September
      30, 2005, an increase of 8% from $2,059,080 for the comparative prior year
      period. This increase is due to increased professional fees to establish
      agreements, review and adjust existing contracts, the fees associated with
      compliance with Section 404 of the Sarbanes-Oxley Act of 2002 as well as other
      public company costs, the hiring of several key executives and employees part
      way through the third quarter of 2004, and amortization expense of the
      intangible assets acquired on the purchase of TLC Vision’s 50% interest in
      OccuLogix, L.P. These costs in the three months ended September 30, 2004, were
      primarily due to the requirement to expense the intrinsic value of options
      granted in December, 2003 over the vesting period of these options. All of
      these
      options became fully vested upon the Company’s initial public offering, and,
      therefore, the remaining unamortized balance of stock based compensation charges
      as of December 31, 2003 was expensed in the year ended December 31, 2004.
      Therefore, there was no comparable expense in the three months ended September
      30, 2005.


18
 Table
          of Contents





***Clinical
      and Regulatory Expenses.*** Clinical
      and regulatory expenses were $1,140,273 for the three months ended September
      30,
      2005, an increase of 18% from $970,010 for the three months ended September
      30,
      2004, as a result of increased activities associated with the MIRA-1, LEARN
      and
      other clinical trials.





***Sales
      and Marketing Expenses.*** Sales
      and
      marketing expenses were $324,696 for the three months ended September 30, 2005,
      an increase of 1,346% from $22,454 for the three months ended September 30,
      2004
      since virtually all sales and marketing expenses had been incurred by OccuLogix,
      L.P. prior to our acquisition of TLC Vision’s 50% interest in OccuLogix, L.P. In
      the third and fourth quarters of 2004, we hired three new employees to begin
      establishing sales and marketing efforts to promote the use of the RHEOTM System
      in Canada and, upon FDA approval, in the United States.





***Other
      Income (Expenses).*** Other
      income was $385,374 for the three months ended September 30, 2005, compared
      to
      an expense of $19,116 for the three months ended September 30, 2004. This change
      was due primarily to interest income earned in the current period as a result
      of
      the Company’s cash and short-term investment position following the raising of
      capital in the Company’s initial public offering.





***Income
      Tax Recovery.*** Income
      tax recovery of $155,697 for the three months ended September 30, 2005
      represents the amortization of the deferred tax liability which was recorded
      based on the difference between the fair value of the intangible asset acquired
      in December 2004 and its tax basis. The deferred tax liability of $9,527,500
      is
      being amortized over 15 years, the estimated useful life of the intangible
      asset. There was no corresponding tax recovery in the three months ended
      September 30, 2004.





**Nine
      Months Ended September 30, 2005 and 2004**





***Revenues.*** Revenues
      increased by 763% to $1,633,909 for the nine months ended September 30, 2005
      from $189,373 for the nine months ended September 30, 2004. This increase was
      due to sales of treatment sets and pumps to Veris of $1,552,316 in the period
      and reflects the impact of the acquisition of TLC Vision’s 50% ownership
      interest in OccuLogix, L.P. Included in revenues for the nine months ended
      September 30, 2005 are sales made to Rheo Clinic Inc., for which we have
      reported revenues of $81,593 in the period. We do not expect that Rheo Clinic
      Inc. will be a significant source of revenue going forward.





***Cost
      of Sales and Gross Margin.***Cost of sales increased by 294% to
      $1,041,000 for the nine months ended September 30, 2005 from $264,439 for the
      nine months ended September 20, 2004, as a result of the increase in sales
      from
      the prior period and the impact of the acquisition of TLC Vision's 50% ownership
      interest in Occulogix, L.P.




Gross
      margin on sales increased to 36% in the nine months ended September 30, 2005
      from a loss of 40% during the prior year period due to the acquisition of
      OccuLogix, L.P. on December 8, 2004. On a pro forma basis, had the Company
      acquired OccuLogix, L.P. on January 1, 2004, the gross margin percentage would
      have been 32% for the nine months ended September 30, 2004. The Company’s gross
      margins are affected by product mix. As our customers’ treatment sites are
      established, they are expected to purchase a continuous supply of disposable
      treatment sets for which the margins are much higher.





***General
      and Administrative Expenses.*** General
      and administrative expenses were $6,605,222 for the nine months ended September
      30, 2005 an increase of 16% from $5,676,639 for the nine months ended September
      30, 2004. This increase is due to increased professional fees to establish
      agreements, review and adjust existing contracts, the fees associated with
      compliance with Section 404 of the Sarbanes-Oxley Act of 2002 as well as other
      public company costs, the hiring of several key executives and employees part
      way through the third quarter of 2004, and amortization expense of the
      intangible assets acquired on the purchase of TLC Vision’s 50% interest in
      OccuLogix, L.P. These costs in the nine months ended September 30, 2004 were
      primarily due to the requirement to expense the intrinsic value of options
      granted in December, 2003 over the vesting period of these options. All of
      these
      options became fully vested upon the Company’s initial public offering and
      therefore the remaining unamortized balance of stock based compensation charges
      as of December 31, 2003 was expensed in the year ended December 31, 2004.
      Therefore, there was no comparable expense in the nine months ended September
      30, 2005.


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***Clinical
      and Regulatory Expenses.*** Clinical
      and regulatory expenses were $3,794,287 for the nine months ended September
      30,
      2005, an increase of 81% from $2,092,466 for the nine months ended September
      30,
      2004, as a result of increased activities associated with the MIRA-1, LEARN
      and
      other clinical trials.





***Sales
      and Marketing Expenses.*** Sales
      and
      marketing expenses were $1,090,603 for the nine months ended September 30,
      2005
      an increase of 4,757% from $22,454 for the nine months ended September 30,
      2004,
      since virtually all sales and marketing expenses had been incurred by OccuLogix,
      L.P. prior to our acquisition of TLC Vision’s 50% interest in OccuLogix, L.P. In
      the third and fourth quarters of 2004, we hired three new employees to begin
      establishing sales and marketing efforts to promote the use of the RHEOTM System
      in Canada and, upon FDA approval, in the United States.





***Other
      Income (Expenses).*** Other
      income was $1,128,921 for the nine months ended September 30, 2005, compared
      to
      an expense of $28,532 for the nine months ended September 30, 2004. This change
      was due primarily to interest income earned for the nine months ended September
      30, 2005 as a result of the Company’s cash and short-term investment position
      following the raising of capital in the Company’s initial public
      offering.





***Income
      Tax Recovery.*** Income
      tax of $473,280 for the nine months ended September 30, 2005 represents the
      amortization of the deferred tax liability which was recorded based on the
      difference between the fair value of the intangible asset acquired in December
      2004 and its tax basis. The deferred tax liability of $9,527,500 is being
      amortized over 15 years, the estimated useful life of the intangible asset.
      There was no corresponding tax benefit in the nine months ended September 30,
      2004.





**LIQUIDITY
      AND CAPITAL RESOURCES**





In
      December 2004, the Company raised $67,200,000 of gross cash proceeds (less
      issuance costs of $7,858,789) in an initial public offering. Immediately prior
      to the offering, the primary source of the Company’s liquidity was cash raised
      through the issuance of debentures.





To
      date,
      cash has been primarily utilized to finance increased infrastructural costs,
      to
      accumulate inventory and to fund ongoing costs of the MIRA-1 clinical trial
      and
      more recently the LEARN trials. In the future, we expect that we will continue
      to use our cash resources to fund the development of our infrastructure, to
      complete the MIRA-1, LEARN and other clinical trials, to accumulate inventory
      and to undertake other commercialization activities. Cash and cash equivalents
      and short-term investments as at September 30, 2005 were $45,825,833 compared
      to
      $60,030,552 as at December 31, 2004. Working capital as at September 30, 2005
      was $50,202,311, a decrease of $7,870,614 from $58,072,925 as at December 31,
      2004.





Management
      believes that the existing cash and cash equivalents and short-term investments
      will be sufficient to fund the Company’s anticipated level of operations and
      other demands and commitments into 2007.


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Our
      forecast of the period of time through which our financial resources will be
      adequate to support our operations is a forward-looking statement and involves
      risks and uncertainties. Actual results could vary as a result of a number
      of
      factors. We have based this estimate on assumptions that may prove to be wrong,
      and we could utilize our available capital resources sooner than we currently
      expect. Our future funding requirements will depend on many factors, including
      but not limited to:


- the
          rate of progress, cost and results of the MIRA-1, LEARN and related clinical
          trials;
- our
            ability to obtain FDA approval to market and sell the RHEOTM System in the
            United States and the timing of such approval;
- whether
                government and third-party payors agree to reimburse treatments using
                the
                RHEOTM System;
- the
                  costs and timing of strengthening the infrastructure to market
                  and sell the
                  RHEOTM System;
- the
                    ability of our suppliers to continue to supply pumps and filter
                    products;
- the
                      continued success of our ongoing and future clinical
                      trials;
- the
                        costs of filing, prosecuting, defending and enforcing any
                        patent claims and
                        other intellectual property
                        rights;
- the
                          effect of competing technological and market
                          developments.

Even
      if
      we receive regulatory approval for the sale of the RHEOTM System in the United
      States, we will not have significant product revenue until late 2006, at the
      earliest. Until such a time where we can generate a sufficient amount of
      revenue, we expect to finance future cash needs through public or private equity
      offerings, debt financings, corporate collaboration or licensing or other
      arrangements. We cannot be certain that additional funding will be available
      on
      acceptable terms, or at all. To the extent that we raise additional funds by
      issuing equity securities, our stockholders may experience dilution. In
      addition, future debt financing, if available, may involve restrictive
      covenants. To the extent that we raise additional funds through collaboration
      and licensing arrangements, it may be necessary to relinquish some rights to
      our
      technologies, or grant licenses on terms that are not favorable to us. If
      adequate funds are not available, we may be required to delay or reduce the
      scope of, or eliminate, some of our commercialization efforts.





**Cash
      Used in Operating Activities**





Net
      cash
      used in operating activities was $14,220,407 for the nine months ended September
      30, 2005. Changes in net cash provided by operating activities in the period
      reflect a net loss of $9,295,002 adjusted for non-cash items of $1,235,564
      and
      netted against changes in working capital of $6,160,969. Non-cash items are
      made
      up primarily of the amortization of intangibles, fixed assets, patents and
      trademarks and the premium/discounts on investments of $1,460,773, netted by
      applicable deferred income taxes of $476,375. Additional non-cash items result
      from stock-based compensation expense of $216,239 and the provision for doubtful
      collections of subscriptions receivable of $34,927. Changes in working capital
      in the period reflect a $470,228 increase in amounts receivable primarily from
      accrued interest receivable on investments and amounts due from Veris for the
      purchase of treatment sets and pumps, a $4,691,826 increase in inventory as
      we
      continue to maintain our order level in line with supplier expectations and
      a
      $38,650 decrease in prepaid expenses. Amounts due to related parties increased
      by $14,944 primarily due to the amount owed to Rheo Clinic Inc. for clinical
      and
      administrative support it provided. Accounts payable and accrued liabilities
      decreased by $199,647 as payments are being made for costs associated with
      the
      Company’s activities and the related corporate reorganization. Amounts due to
      stockholders also decreased by $373,642 with the payment of $411,829 due to
      TLC
      Vision. In addition, deferred revenue decreased by $483,325 due to the shipment
      of treatment sets.


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**Cash
      Provided by Investing Activities**





Net
      cash
      provided by investing activities was $9,795,918 for the nine months ended
      September 30, 2005, resulting from the net sale of short-term investments of
      $9,964,818, offset by cash used to protect and maintain patents and trademarks
      in the amount of $15,176 and the purchase of fixed assets of
      $153,724.





**Cash
      Provided by Financing Activities**





Net
      cash
      provided by financing activities was $283,714 for the nine months ended
      September 30, 2005 and is a result of the exercise of stock options for cash
      proceeds of $186,486 and the receipt of $186,734 as part of the balance due
      from
      stockholders from the exercise of warrants, offset by additional share issue
      costs of $88,714 in the nine months ended September 30, 2005 in relation to
      our
      initial public offering.





SUBSEQUENT
      EVENTS





None.





RECENT
      ACCOUNTING PRONOUNCEMENT





In
      December 2004, FASB issued SFAS No. 123R, “Share-Based Payment”, which revised
      SFAS No. 123 and supercedes APB 25. SFAS No. 123R requires all share-based
      payments to employees, including grants of employee stock options, to be
      recognized in the financial statements based on their fair values. The pro
      forma
      disclosures previously permitted under SFAS No. 123 will no longer be an
      alternative to financial statement recognition. SFAS No. 123R is effective
      at
      the beginning of the first interim or annual period beginning June 15, 2005.
      In
      April 2005, the SEC announced the adoption of a new rule that amends the
      compliance dates for SFAS No. 123R. The SEC’s new rule allows companies to
      implement SFAS No. 123R at the beginning of their next fiscal year, instead
      of
      the next reporting period that begins after June 15, 2005. Accordingly, the
      Company is required to adopt SFAS No. 123R beginning January 1, 2006. The
      Company is currently evaluating the requirements of SFAS No. 123R. The Company
      has not yet determined the method of adoption or the effect of adopting SFAS
      No.
      123R, and it has not determined whether the adoption will result in amounts
      that
      are similar to the current pro forma disclosures under SFAS No.
      123.





In
      November 2004, the FASB issued SFAS No. 151, “Inventory Costs - An Amendment of
      ARB No. 43, Chapter 4” (“SFAS No. 151”).  SFAS No. 151 requires that items
      such as idle facility expense, excessive spoilage, double freight, and
      rehandling costs be excluded from the cost of inventory and expensed as
      incurred. Additionally, SFAS No. 151 requires that the allocation of fixed
      overheads be based on the normal capacity of the production facilities. SFAS
      No.151 is effective for fiscal years commencing after June 15, 2005.
      Accordingly, the Company is required to adopt SFAS No. 151 beginning January
      1,
      2006.  The Company is currently evaluating the effect that the adoption of
      SFAS No. 151 will have on its consolidated results of operations and financial
      position.


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ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK





All
      of
      our sales are in U.S. dollars or are linked to the U.S. dollar, while a portion
      of our expenses are in Canadian dollars and euros. We cannot predict any future
      trends in the exchange rate of the Canadian dollar or euro against the U.S.
      dollar. Any strengthening of the Canadian dollar or euro in relation to the
      U.S.
      dollar would increase the U.S. dollar cost of our operations and would affect
      our U.S. dollar measured results of operations. We do not engage in any hedging
      or other transactions intended to manage these risks. In the future, we may
      undertake hedging or other similar transactions or invest in market risk
      sensitive instruments if we determine that is advisable to offset these
      risks.





**Interest
      Rate Risk**





The
      primary objective of our investment activity is to preserve principal while
      maximizing interest income we receive from our investments, without increasing
      risk. We believe this will minimize our market risk.





ITEM
      4. CONTROLS AND PROCEDURES





(a) Management’s
      Report on Internal Control over Financial Reporting and Evaluation of Disclosure
      Controls and Procedures .
      As of
      the end of the nine-month period ended September 30, 2005, an evaluation of
      the
      effectiveness of our “disclosure controls and procedures” (as such term is
      defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
      1934,
      as amended (the “Exchange Act”)) was carried out by our principal executive
      officer (the “CEO”) and principal financial officer (the “CFO”). Based upon that
      evaluation, the CEO and the CFO have concluded that as of the end of that fiscal
      period, our disclosure controls and procedures are effective to ensure that
      information required to be disclosed by us in reports that we file or submit
      under the Exchange Act is recorded, processed, summarized and reported within
      the time periods specified in SEC rules and forms.





(b) Limitations
      on the Effectiveness of Controls .
      The
      Company maintains a system of internal accounting controls to provide reasonable
      assurance that assets are safeguarded and that transactions are executed in
      accordance with management’s authorization and recorded properly to permit the
      preparation of financial statements in accordance with accounting principles
      generally accepted in the United States. However, the Company’s management,
      including the CEO and CFO, does not expect that the Company’s disclosure
      controls or internal controls will prevent all errors and all fraud. A control
      system, no matter how well conceived and operated, can provide only reasonable,
      not absolute, assurance that the objectives of the control system are met.
      Further, the design of a control system must reflect the fact that there are
      resource constraints, and the benefits of more controls must be considered
      relative to their costs. Because of the inherent limitations in all control
      systems, no evaluation of controls can provide absolute assurance that all
      control issues and instances of fraud, if any, within the Company have been
      detected. These inherent limitations include the realities that judgments in
      decision-making can be faulty and that breakdowns can occur because of a simple
      error or mistake. Additionally, controls can be circumvented by the individual
      acts of some persons, by collusion of two or more people or by management
      override of the controls. The design of any system of controls also is based
      in
      part upon certain assumptions about the likelihood of future events, and there
      can be no absolute assurance that any design will succeed in achieving its
      stated goals under all potential future conditions. Over time, controls may
      become inadequate because of changes in conditions, or the degree of compliance
      with the policies or procedures may deteriorate. Because of the inherent
      limitations in a cost-effective control system, misstatement due to error or
      fraud may occur and not be detected.


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(c) Changes
      in Internal Control over Financial Reporting .
      During
      the nine-month period ended September 30, 2005, there were no changes in our
      internal control over financial reporting that has materially affected, or
      is
      reasonably likely to materially affect, our internal control over financial
      reporting.





PART
      II. OTHER INFORMATION





I TEM
      1. LEGAL PROCEEDINGS





We
      are
      not aware of any litigation involving us that is outstanding, threatened or
      pending.





ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS





On
      July
      29, 2005, we issued an aggregate of 13,750 shares of Common Stock to Richard
      Davis as a result of the exercise of options to purchase common shares at an
      exercise price per share of $1.30 in consideration for cash.





On
      August
      1, 2005, we issued an aggregate of 9,583 shares of Common Stock to Ramon
      Gonzales as a result of the exercise of options to purchase common shares at
      an
      exercise price per share of $0.80 in consideration for cash.





On
      August
      1, 2005, we issued an aggregate of 150,000 shares of Common Stock to Richard
      Davis as a result of the exercise of options to purchase common shares at an
      exercise price per share of $0.99 in consideration for cash.





Each
      of
      these issuances was exempt from registration under the Securities Act of 1933,
      as amended, pursuant to Rule 701 thereunder.





ITEM
      3. DEFAULTS UPON SENIOR SECURITIES





There
      has
      not been any default upon our senior securities.





ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





None.





ITEM
      5. OTHER INFORMATION





None.


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ITEM
      6. EXHIBITS





Index
      to Exhibits




10.1
            Amending
                Agreement between the Registrant and Irving Siegel, dated as
                of September 1**,**2005, amending the Employment Agreement between the Registrant and
                Irving
                Siegel dated as of August 1,
                2003.10.2
            Consulting Agreement among the Registrant, AMD
                Medical
                Services Inc. and Irving Siegel dated as of September 1,
                2005.10.3
            Employment
                Agreement between Steve Parks and the Registrant dated as ofOctober
                4, 2005.10.4
            Option
                Agreement between Steve Parks and the Registrant dated as of October
                4,
                2005.14.1
            Code
                of Conduct.31.1
            CEO’s
                Certification required by Rule 13A-14(a) of the Securities Exchange
                Act of
                1934.31.2
            CFO’s
                Certification required by Rule 13A-14(a) of the Securities Exchange
                Act of
                1934.32.1
            CEO’s
                Certification of periodic financial reports pursuant to Section 906
                of the
                Sarbanes-Oxley Act of 2002, U.S.C. Section 1350.32.2
            CFO’s
                Certification of periodic financial reports pursuant to Section 906
                of the
                Sarbanes-Oxley Act of 2002, U.S.C. Section 1350.








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In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, hereunto duly
      authorized.








**OCCULOGIX,
                INC.**Date:  November
                10,
                2005
              By:
              /s/ Elias
                VamvakasChief
                Executive Officer