##### Table of Contents






As filed with the Securities and Exchange
Commission on November 15, 2004





Registration No. 333-118204








UNITED STATES

SECURITIES AND EXCHANGE COMMISSION






---




Amendment No. 3 to




FORM S-1


REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933




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OccuLogix, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                                              |  |                                            
|------------------------------------------------------------------ |  | ------------------------------------------------------------ |  | -------------------------------------------
|Delaware                                                           |  | 3841                                                         |  | 59 343 4771                                
|(State or other Jurisdiction of
    incorporation or organization) |  | (Primary Standard Industrial
    Classification Code Number) |  | (I.R.S. Employer
    Identification Number)

5280 Solar Drive, Suite 100

Mississauga, Ontario L4W 5M8


Tel: (905) 238-3910


Fax: (905) 602-7956


(Address, including zip code, and telephone
number, including area code, of registrants principal
executive offices)


Elias Vamvakas

5280 Solar Drive, Suite 100


Mississauga, Ontario L4W 5M8


Tel: (905) 602-2020


Fax: (905) 602-7956


(Name, address, including zip code, and telephone
number, including area code, of agent for service)




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Copies to:

|                                                                                                                              |  |                                                                                                                                                                              |  |                                                                                                                                                        
|----------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|Andrew J. Beck, Esq.
    Torys LLP
    237 Park Avenue
    New York, NY 10017
    Tel: (212) 880-6000
    Fax: (212) 682-0200 |  | David A. Chaikof
    Torys LLP
    79 Wellington Street West
    Box 270, TD Centre
    Toronto, Ontario
    M5K 1N2, Canada
    Tel: (416) 865-0040
    Fax: (416) 865-7380 |  | Marjorie Sybul Adams, Esq.
    Piper Rudnick LLP
    1251 Avenue of the Americas
    New York, NY 10020
    Tel: (212) 835-6000
    Fax: (212) 884-8517



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Approximate date of commencement of proposed
sale to the public:As soon as
practicable after the Registration Statement becomes effective.

If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant
to Rule 415 under the Securities Act of 1933 check the
following box: o

If this Form is filed to register additional
securities for an offering pursuant to Rule 462(b) under
the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering. o

If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same offering. o

If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same offering. o

If delivery of the prospectus is expected to be
made pursuant to Rule 434, please check the following
box. o



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|                                         |  |                    |  |                    
|---------------------------------------- |  | ------------------ |  | -------------------
|                                        
|                                        
|                                         |  | Proposed maximum   |  |                    
|Title of each class of                   |  | aggregate offering |  | Amount of          
|securities to be registered              |  | price(1)(2)        |  | registration fee(3)
|                                        
|                                        
|Common Stock, par value $0.001 per share |  | $100,000,000       |  | $12,670            
|                                        






|    |                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes offering price of shares of common stock
    that may be purchased by the underwriters to cover
    over-allotments.               
|   
|(2) | Estimated solely for the purpose of calculating
    the amount of the registration fee pursuant to Rule 457(o)
    under the Securities Act.
|   
|(3) | Previously paid.                                                                                                                            

The registrant hereby
amends this registration statement on such date or dates as may
be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that
this registration statement shall thereafter become effective in
accordance with section 8(a) of the Securities Act of 1933 or
until the registration statement shall become effective on such
date as the Commission, acting pursuant to said section 8(a),
may determine.





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|The information in this
prospectus is not complete and may be changed. We may not sell
these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and is not soliciting
an offer to buy these securities in any state where the offer or
sale is not permitted.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




SUBJECT TO COMPLETION, DATED
NOVEMBER 15, 2004




PROSPECTUS


(OccuLogix Logo)




8,400,000 Shares




OccuLogix, Inc.

Common Stock




$                  per
share







---




We are selling 5,600,000 shares of our common
stock and the selling stockholders named in this prospectus are
selling 2,800,000 shares. TLC Vision Corporation, our major
stockholder, currently holds 65.8% of our outstanding shares and
plans to sell approximately 2,002,645 shares in this
offering. We will not receive any proceeds from the sale of the
shares by the selling stockholders. The selling stockholders
have granted the underwriters an option to purchase up to
1,260,000 additional shares of common stock to cover
over-allotments.







This is the initial public offering of our common
stock. We currently expect the initial public offering price to
be between $8.00 and $10.00 per share. We have applied to have
the common stock included for quotation on the Nasdaq National
Market under the symbol RHEO.






---

Investing in our common stock involves risks. See Risk
Factors beginning on page 10.

Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved
of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal
offense.



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|                                                           |  |           |  |       |  |   |  | 
|---------------------------------------------------------- |  | --------- |  | ----- |  | - |  | 
|                                                           |  | Per Share |  | Total
|                                                           |  |           |  |      
|Public Offering Price                                      |  | $         |  |       |  | $ |  | 
|Underwriting Discount                                      |  | $         |  |       |  | $ |  | 
|Proceeds to OccuLogix (before expenses)                    |  | $         |  |       |  | $ |  | 
|Proceeds to the selling stockholders (before
    expenses) |  | $         |  |       |  | $ |  | 







The underwriters expect to deliver the shares to
purchasers on or
about                     ,
2004.






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Citigroup



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|               |                         
|-------------- | ------------------------
|SG Cowen & Co. | ThinkEquity Partners LLC

,
2004



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##### Table of Contents



(HUMAN EYE and RHEO SYSTEM)




---










You should rely only on the information
contained in this prospectus. Neither we nor the selling
stockholders have authorized anyone to provide you with
different information. We and the selling stockholders are
offering to sell, and seeking offers to buy, shares of our
common stock only in jurisdictions where offers and sales are
permitted. The information in this prospectus is accurate only
as of the date of this prospectus, regardless of the time of
delivery of this prospectus or of any sale of shares of our
common stock.



---

TABLE OF CONTENTS




|                                                                                              |  |      |     | 
|--------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                              |  | Page
|                                                                                              |  |     
|Summary                                                                                       |  |      | 1   | 
|Risk Factors                                                                                  |  |      | 10  | 
|Forward Looking
    Statements                                                                |  |      | 24  | 
|Use of Proceeds                                                                               |  |      | 25  | 
|Dividend Policy                                                                               |  |      | 25  | 
|Capitalization                                                                                |  |      | 26  | 
|Dilution                                                                                      |  |      | 27  | 
|Selected Consolidated
    Financial Data                                                      |  |      | 29  | 
|Managements Discussion
    and Analysis of Financial Condition and
    Results of Operations |  |      | 31  | 
|Business                                                                                      |  |      | 44  | 
|Reorganization                                                                                |  |      | 66  | 
|Management                                                                                    |  |      | 69  | 
|Certain Relationships and
    Related Party Transactions                                      |  |      | 80  | 
|Principal and Selling
    Stockholders                                                        |  |      | 83  | 
|Description of Capital
    Stock                                                              |  |      | 86  | 
|Shares Eligible for Future
    Sale                                                           |  |      | 91  | 
|Underwriting                                                                                  |  |      | 93  | 
|Legal Matters                                                                                 |  |      | 95  | 
|Experts                                                                                       |  |      | 96  | 
|Where You Can Find More
    Information                                                       |  |      | 96  | 
|Index to Consolidated
    Financial Statements                                                |  |      | F-1 | 
|EX-1.1                                                                                       
|EX-2.1                                                                                       
|EX-3.3                                                                                       
|EX-3.4                                                                                       
|EX-4.1                                                                                       
|EX-5.1                                                                                       
|EX-10.22                                                                                     
|EX-10.23                                                                                     
|EX-23.1                                                                                      









In the United States,
until                     ,
2004 (25 days after the commencement of this offering), all
dealers that buy, sell or trade our common stock, whether or not
participating in this offering may be required to deliver a
prospectus. This requirement is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.




i



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##### Table of Contents






SUMMARY




You should read the following summary together
with the entire prospectus, including the more detailed
information in our audited consolidated financial statements and
related notes included elsewhere in this prospectus. You should
consider carefully, among other matters, the matters we discuss
in Risk Factors. All dollar amounts referred to in
this prospectus are in U.S. dollars unless otherwise
indicated. As of November 11, 2004, the exchange rate for
Canadian to U.S. dollars was Cdn$1.19 = US$1.00 and
the exchange rate for euros to U.S. dollars was
0.78 =
US$1.00.




Our Company

We are an ophthalmic therapeutic company founded
to commercialize innovative treatments for eye diseases,
including age-related macular degeneration, or AMD. AMD is the
leading cause of late onset visual impairment and legal
blindness in people over the age of 50 in the United States and
other Western industrialized societies. We believe that Dry AMD,
the most common form of the disease, afflicts approximately 13.0
to 13.5 million people in the United States, representing
approximately 85% to 90% of all AMD cases. Although the exact
cause of AMD is not known, researchers have identified several
factors that are associated with AMD, including poor
microcirculation and the gradual build-up of cellular waste
material in the retina. We believe that a treatment that
improves microcirculation in the retina can help to enhance the
metabolic efficiency of the retina and the removal of waste
material and thereby aid in the treatment of Dry AMD. We believe
there is a significant market opportunity for such a treatment.




Our product, the RHEO System, is designed to
improve microcirculation in the eye by filtering high molecular
weight proteins and other macromolecules from the patients
plasma. The RHEO System is used to perform Rheopheresis, which
we refer to under our trade name RHEO Therapy. Rheopheresis is a
blood filtration process that selectively removes molecules from
plasma. The RHEO System consists of the OctoNova pump and a
disposable treatment set, containing two filters, through which
the patients blood circulates. We believe that the RHEO
System is the only Dry AMD treatment to target what we
believe to be the underlying cause of AMD rather than its
symptoms and that, based on preliminary data, appears to
demonstrate improved vision in some patients.







We are currently conducting a pivotal clinical
trial, called MIRA-1, which, if successful, is expected to
support our application with the U.S. Food and Drug
Administration, or FDA, to obtain approval to market the RHEO
System in the United States. In late 2001, with the permission
of the FDA, we submitted an interim analysis of 36 complete
data sets from the first 43 patients enrolled. The
remaining seven patients did not complete all of the required
follow-up and thus their results do not qualify as a complete
data set. Of the 36 data sets analyzed, 11 were from
placebo patients. Fifty-eight percent of, or 11 of 19, treated
patients in the MIRA-1 interim analysis entering the clinical
trial with worse than legal driving vision, which is defined as
best corrected visual acuity, or BCVA, of worse than 20/40,
improved to meet or exceed the visual acuity requirements to
regain a drivers license. However, we do not know the
degree of such improvement, since MIRA-1 is a double-masked,
placebo-controlled study. We plan to complete enrollment in
MIRA-1 and submit to the FDA the non-clinical portion of our
Pre-market Approval Application, or PMA, before the end of 2004.
The non-clinical portion of the PMA consists of technical data
relating to the RHEO System components. In addition, we
currently plan to submit the clinical portions of the PMA
following the completion of six-month and 12-month
post-treatment data sets. Since our MIRA-1 protocol does not
require us to follow patients beyond 12 months, we will not
know whether RHEO Therapy is effective on a long-term basis.
Since MIRA-1 is a double masked, placebo-controlled study, we do
not and will not have updated patient results until we have
completed the clinical portion of the MIRA-1 study.




As we cannot begin commercialization in the
United States until we receive FDA approval, we do not
expect to generate revenues in the United States until late
2006, at the earliest. However, in anticipation of
commercialization in the United States, we are establishing a
plan to educate members of the eye care community about RHEO
Therapy. We are currently identifying multi-facility health care
service providers including hospitals, dialysis clinics and
ambulatory surgery centers, as well as private practices, which
we believe may be interested in providing RHEO Therapy in
their facilities. We believe that one of these

1



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##### Table of Contents



potential providers may be TLC Vision
Corporation, an eye care services company, which we believe has
relationships with a large number of optometrists and
ophthalmologists in the United States.





We have exclusive rights to commercialize the
RHEO System for ophthalmic uses in North America and the
Caribbean. Although Rheopheresis for selective removal of
molecules from plasma received CE Mark approval for commercial
use in Europe in 1998, we do not have rights to commercialize
the RHEO System in Europe. Upon receiving Health Canada approval
for the components of the RHEO System in Canada in 2003 for use
in the treatment of patients suffering from dysproteinemia, an
abnormality in protein content of the blood, due, for example,
to abnormal plasma viscosity and/or macular disease, we began
limited commercialization of the RHEO System through sales of
OctoNova pumps and disposable treatment sets to three clinics in
Canada. We believe that as of November 2004, approximately
142 patients in Canada have been treated with the RHEO
System. In September 2004, we signed an agreement with Rheo
Therapeutics Inc., a private Canadian company, which has agreed
to purchase approximately 8,000 treatment sets, and an estimated
20 OctoNova pumps by the end of 2005, with an option to
purchase up to an additional 2,000 treatment sets, subject to
availability. We believe that Rheo Therapeutics plans to open a
number of commercial treatment centers in various Canadian
cities where RHEO Therapy will be performed. Dr. Jeffrey
Machat, who is an investor in and one of the directors of Rheo
Therapeutics, was a co-founder and former director of TLC Vision.




Relationship with TLC Vision




TLC Vision, after this offering, will
beneficially own approximately 52.2% of our outstanding common
stock, or 48.9% on a fully diluted basis. Elias Vamvakas, the
Chairman and former CEO of TLC Vision, became our Chairman
in 2003 and is now also our CEO. In addition, two of our other
directors, Thomas N. Davidson and Richard L.
Lindstrom, are also directors of TLC Vision. These three
directors constitute the majority of our board.
Mr. Vamvakas beneficially owns 3,527,047 common shares of
TLC Vision, representing approximately 5.1% of TLC Visions
outstanding shares. As of April 29, 2004, Mr. Davidson
beneficially owned 54,827 common shares of TLC Vision, and
Dr. Lindstrom beneficially owned 38,500 common shares of
TLC Vision. Stephen Kilmer, our Vice President, Corporate
Affairs, currently holds options to purchase 2,888 shares
of TLC Vision that expire on November 30, 2004 with an
exercise price of Cdn$13.69, options to purchase
1,750 shares that are exercisable or will become
exercisable on December 1, 2004 at an exercise price of
Cdn$4.09 for 875 shares and Cdn$4.04 for the remaining
875 shares, options to purchase 3,750 shares which
will become exercisable on December 15, 2004 with an
exercise price of Cdn $7.95 and options to purchase 2,500 shares
which will become exercisable on January 2, 2005 with an
exercise price of Cdn$1.82. Mr. Kilmer is currently providing
investor relations services to TLC Vision.







Prior to this offering, we carried on our
business directly and indirectly through OccuLogix, L.P., a
Delaware limited partnership, beneficially owned 50% by us and
50% by TLC Vision. Prior to this offering, we will acquire
TLC Visions 50% interest in OccuLogix, L.P. in
exchange for which we will issue 19,070,233 shares of our
common stock to TLC Vision.







A subsidiary of TLC Vision, RHEO Clinic
Inc., is one of our three current customers in Canada.







Dr. Jeffrey Machat, a co-founder of TLC
Vision, served as a director of TLC Vision from 1993 to 1999.
From 1993 to 2001, Dr. Machat served as a Co-National
Medical Director of TLC Vision. Dr. Machat is an
independent contractor to TLC Vision York Mills Centre and pays
the Centre a per-procedure facility fee for using the Centre to
perform LASIK on his patients. Based on public filings, we
believe that Dr. Machat is a shareholder of TLC Vision but
does not own more than 5% of the shares of TLC Vision. We have
been advised that Dr. Machat is a co-founder, shareholder,
one of its three directors and serves as Rheo Therapeutics
National Medical Director. We have recently signed an agreement
to provide the RHEO System in Canada to Rheo Therapeutics.




2



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##### Table of Contents



Overview of AMD

AMD is a chronic, progressive disease of the
macula, or the central part of the retina, that results in the
loss of central vision, and cannot be corrected by refractive
means, such as glasses, contact lenses or laser eye surgery. Dry
AMD is characterized by a gradual decrease of visual acuity,
pigment abnormalities on the macula and the build-up of protein
and lipid deposits, called drusen. This build-up of drusen
affects the microcirculation in the eye. Research suggests that
the retinal cells, overwhelmed by the lack of oxygen and
nutrients and the build-up of debris, enter into a dysfunctional
state. Without treatment, the retinal cells ultimately die and
do not regenerate, leading to irreversible vision loss either
through the progression of Dry AMD or conversion into Wet AMD,
the other form of the disease.




There is currently no cure for Wet AMD. Retinal
specialists may treat the symptoms of Wet AMD using one of a
very few FDA-approved therapies currently available, including
thermal laser treatment and photodynamic therapy. In addition,
there are currently more than 30 therapies being evaluated in
U.S. clinical studies for the treatment of Wet AMD. These
treatments may slow the progression of the disease, but do not
prevent the reoccurrence of abnormal blood vessel growth and do
not restore lost vision. The only currently accepted treatment
option for persons with advanced cases of Dry AMD is to take
over-the-counter vitamins, antioxidants and zinc supplements
which can reduce, but do not eliminate, the risk of conversion
to Wet AMD. According to the Age Related Eye Disease Report, or
AREDS Report, No. 11, vitamins, antioxidants and zinc
supplements only reduce the five-year risk of conversion into
Wet AMD by up to 25% for Category 3 and Category 4,
intermediate-to-late stage, Dry AMD cases. Regardless of the
supplement treatments, Dry AMD may ultimately lead to
irreversible vision loss, whether or not it converts into Wet
AMD.




We believe that approximately 15 million
people in the United States suffer from AMD. According to a
ten-year study published in Ophthalmology in October
2002, the prevalence of AMD among a select sample of U.S.
residents increased sharply with age, from 28.2% among people 65
to 74 years of age to 46.2% among people 75 years and
older. A study by Duke University published in 2003 reported
that the prevalence of AMD among a selected sample of
U.S. residents aged 65 and older was 27% in 1999. According
to the U.S. Census Bureau, the number of people in the United
States aged 50 or older is approximately 80 million and is
expected to increase by approximately 40% over the next two
decades. We expect that this increase in the number of elderly
people will result in a significant increase in the number of
cases of AMD in the United States.

Our Solution




The RHEO System, which consists of a pump and a
disposable treatment set, containing two filters, is designed to
filter high molecular weight proteins and other macromolecules
from the patients plasma and improve microcirculatory
function. The RHEO System pumps blood from a large vein in one
arm and circulates the blood through a filtration system that
separates the whole blood from the plasma. The patients
plasma is filtered to remove high molecular weight proteins and
other macromolecules. The filtered plasma is then remixed with
the whole blood and returned to the patient intravenously
through the other arm. We believe that blood filtered with the
RHEO System is able to flow more easily through the tiny
capillaries of the eye and that the resulting improved
microcirculation more effectively supplies the macular cells
with oxygen and nutrients, facilitating removal of cellular
waste materials. We believe the RHEO System offers the following
potential benefits:






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Addresses a large AMD patient population with
    limited current treatment options.Current Wet AMD treatments are effective only on patients who
    are newly-diagnosed with Wet AMD, of which there are
    approximately 200,000 in the United States each year. RHEO
    Therapy, however, is a treatment for most patients in the
    Category 3 and Category 4 Dry AMD population, which,
    according to the AREDS Report, represents approximately 54% of
    the total U.S. Dry AMD patients, or currently approximately
    8 million people. RHEO Therapy is not appropriate for
    everyone in the Category 3 and Category 4 Dry AMD
    population. For example, RHEO Therapy would not be appropriate
    for potential patients who may have existing ailments that would
    make it unsafe for them to receive any blood transfusion type
    procedure.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Preserves or improves vision of Dry AMD
    patients.Success in treating AMD is
    generally measured by the ability to slow or halt progression of
    the disease. We believe that RHEO Therapy is currently the only
    Dry AMD therapy that, based on preliminary data, appears to
    improve vision in some patients. Fifty-eight percent of, or 11
    of 19, patients in the MIRA-1 interim analysis who entered the
    study with worse than legal driving vision improved to meet or
    exceed the requirements to regain a drivers license.
    However, since our MIRA-1 protocol does not require us to follow
    patients beyond 12 months, we have no data which would
    allow us to evaluate whether RHEO Therapy is effective on a
    long-term basis.                                                                                                                                                                                                                                                                                                                                  
|
|
| |  | Provides a patient-friendly
    procedure.RHEO Therapy is a form of
    therapeutic apheresis, a procedure that selectively removes
    molecules from the plasma. Apheresis has been used safely for
    more than twenty years in the United States and Europe to treat
    various diseases including leukemia, rheumatoid arthritis,
    sickle cell disease and several other medical conditions. Side
    effects of RHEO Therapy observed in MIRA-1 were all temporary
    and generally mild, and included drops in blood pressure,
    abnormal heart rate, nausea, chills and localized bleeding,
    swelling, pain and numbness in the area of the arms where the
    needles were inserted. Although RHEO Therapy is a
    patient-friendly procedure, it is time consuming, with an
    initial course of RHEO Therapy requiring eight procedures taking
    between two and four hours each, given over a 10- to 12-week
    period.                                                                                                                                                               
|
|
| |  | Presents limited barriers to adoption for eye
    care professionals and health care service
    providers.We believe that the RHEO
    System requires lower capital expenditures and less physical
    space than equipment used in many other procedures performed by
    eye care professionals, including laser vision correction and
    cataract surgery. The RHEO System requires no special
    installation and minimal maintenance expenditures. We believe
    that RHEO Therapy, which can be administered by a nurse, can be
    easily integrated into our customers workflow and offers
    an attractive source of additional revenues for facilities and
    providers. However, our success is dependent upon achieving
    widespread acceptance of RHEO Therapy among ophthalmologists and
    optometrists who may be reluctant to accept RHEO Therapy because
    RHEO Therapy can be performed by health care providers other
    than eyecare professionals.                                                                                                                            
|
|
| |  | Offers a cost-effective
    procedure.An initial course of RHEO
    Therapy, consisting of eight procedures given over a 10- to
    12-week period, is initially expected to cost between $16,000
    and $25,600. We believe that Medicare and third-party payors
    will determine that the benefits of RHEO Therapy will justify
    the cost of reimbursement. However, should Medicare and
    third-party payors decline to provide coverage of RHEO Therapy
    or set broad restrictions on patient coverage or on treatment
    settings in which RHEO Therapy is covered, our potential
    revenues may be significantly limited, particularly if potential
    patients deem our treatment to be too expensive. Nonetheless, we
    believe that to the extent that RHEO Therapy is not reimbursed
    by the government or private third-party payors, some patients
    with the economic means to do so will be willing to pay for RHEO
    Therapy themselves in order to avoid the consequences of
    uncorrectable impaired vision, including, but not limited to,
    the inability to drive.

Our Strategy

Our goal is to establish RHEO Therapy as the
leading treatment for Dry AMD in North America. Key elements of
our strategy include:






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Creating a plan to develop market awareness of
    RHEO Therapy by educating eye care professionals and
    patients.If RHEO Therapy is approved
    by the FDA, we intend to increase market awareness of RHEO
    Therapy by identifying and developing relationships with key
    opinion leaders in each of the eye care disciplines, including
    ophthalmologists and optometrists. We believe that these opinion
    leaders, some of whom are investigators in MIRA-1, will help
    establish acceptance for RHEO Therapy. If and when the FDA
    grants approval for the RHEO System, we intend to launch a
    public relations campaign targeted directly at patients and
    advocacy groups to alert them to our treatment. Members of our
    management team were leaders in creating market awareness of
    laser vision




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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | correction when it was introduced to the North
    American market in the 1990s, and, in doing so, were effective
    in creating relationships with a large number of optometrists
    and ophthalmologists in the United States.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
|
| |  | Establishing third-party reimbursement for
    RHEO Therapy.We believe that an
    insurance billing code established by the American Medical
    Association in January 2003 accurately characterizes the RHEO
    Therapy procedure. This code identifies therapeutic apheresis
    with extracorporeal selective adsorption or selective filtration
    and plasma reinfusion. The procedure for which this billing code
    currently applies is low density lipid, or LDL, apheresis, which
    partially filters the bad cholesterol from the blood
    plasma. If and when the FDA grants approval for the RHEO System,
    we plan on seeking a Medicare National Coverage Determination
    for RHEO Therapy for specified patients with Dry AMD, with the
    goal of securing Medicare coverage under the existing procedure
    code for use in treatment of Dry AMD. Currently, Medicare covers
    and pays for other FDA-licensed services billed with this code
    only when performed in a hospital outpatient setting. A payment
    rate for FDA-licensed services billed with this code when
    performed in a physician office-based setting has been
    established by the Centers for Medicare and Medicaid Services,
    or CMS, effective on January 1, 2005. If RHEO Therapy is
    cleared for marketing by the FDA and covered by Medicare for
    treatment of Dry AMD, we believe that this Medicare physician
    office-based reimbursement policy will similarly apply for this
    procedure and will provide a significant positive impact on our
    revenues. We also plan to assist our customers in securing
    coverage and appropriate reimbursement for RHEO Therapy from
    Medicare and private insurers through a dedicated reimbursement
    group and the provision of detailed supporting documentation.                                                                                                                                              
|
|
|
| |  | Securing relationships with key multi-facility
    health care service providers.To
    facilitate a rapid rollout of the RHEO System, if and when we
    receive FDA approval, we are identifying key groups of
    multi-facility health care service providers, including
    hospitals, dialysis clinics and ambulatory surgery centers, as
    well as private practices, which may be future treatment centers
    for the RHEO System. To date our marketing activities have been
    limited to identifying to whom we will choose to market if and
    when we receive FDA approval. We are not currently in
    negotiations with any U.S. healthcare service providers to
    supply or license the RHEO System, nor can we pursue any such
    relationships unless and until we receive FDA approval. In
    advance of commercialization in the United States, we intend to
    develop a plan to ensure that there is an adequate supply of
    trained nurses to support our service provider partners. We
    currently supply the RHEO System to three clinics in Canada,
    which commercially provide RHEO Therapy to Dry AMD patients at
    the direction of their physician. One of the customers we supply
    is RHEO Clinic Inc., a subsidiary of TLC Vision. We have
    recently signed an agreement to provide the RHEO System in
    Canada to a private company called Rheo Therapeutics Inc. Dr.
    Machat, who is an investor in and one of the directors of Rheo
    Therapeutics, was a co-founder and former director of TLC
    Vision. We intend to leverage the experience of clinics in
    Canada currently using the RHEO System to assist in training
    nurses and our service provider partners in advance of FDA
    approval. We believe that our experience in Canada and the
    experience of one of our principal stockholders in Germany will
    allow us to develop best practice guidelines for integrating
    RHEO Therapy into a clinic setting.
|
|
|
| |  | Ensuring sufficient manufacturing capacity and
    inventory to support our commercialization
    plan.We intend to work with our
    manufacturing and supplier partners to ensure that there is
    sufficient capacity and inventory to support our
    commercialization plans. In advance of FDA approval, we intend
    to accumulate an inventory of filters and pumps to support a
    rapid product launch. We have a distribution agreement with
    Asahi Medical Co., Ltd., a subsidiary of Asahi Kasei
    Corporation, which has appointed us as exclusive distributor of
    the filters used in the RHEO System for use in treating AMD in
    the United States, Canada, Mexico and certain other countries.
    We recently signed a purchase order with Asahi Medical for
    9,600 Rheofilters, including 1,600 filters in the
    third quarter of 2004 and 4,000 filters for each of the
    following two quarters. We intend to continue to order 4,000
    filters per quarter in 2005 and 2006 in order to accumulate
    inventory in excess of our current requirements until we receive
    FDA approval. We will be working closely with Asahi Medical to                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|

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##### Table of Contents



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | develop and conduct clinical tests on a next
    generation polysulfone Rheofilter with similar characteristics
    to the current cellulose acetate Rheofilter. We believe that the
    proposed polysulfone Rheofilter will be able to be manufactured
    at significantly higher volumes and lower costs than the current
    filter technology.                                                                                                                                                                                                                                                                                                                                          
|
| |  | Maintaining our intellectual property
    portfolio and other barriers to entry.We believe that our intellectual property position may assist us
    in maintaining our competitive position. We also believe that
    the manufacturing process expertise relating to the production
    by Asahi Medical of the Rheofilter is protected by Asahi Medical
    as a trade secret. We believe that the exclusive nature of our
    supplier relationship with Asahi Medical provides us with a
    competitive advantage. We intend to continue to strengthen our
    relationship with our exclusive supplier and to strengthen our
    current patents and seek additional patent protection.

Corporate Information

We were originally incorporated in Florida in
1996 as RheoLogix Corporation and we were reincorporated in
Delaware in 2002 as Vascular Sciences Corporation. We changed
our name to OccuLogix, Inc. on July 29, 2004.

Our principal executive office is located at 5280
Solar Drive, Suite 100, Mississauga, Ontario L4W 5M8,
and our telephone number is (905) 238-3910. Our Internet
address is www.occulogix.com. The information contained on our
website or on the website of any of the selling stockholders is
not part of this prospectus and is not incorporated in this
prospectus by reference.

OccuLogix, Our Vision is Your Vision, RHEO
Therapy and RheoLogix are trademarks of OccuLogix, Inc. All
other trademarks, trade names or service marks appearing in this
prospectus are the property of their respective owners.

6



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##### Table of Contents



THE OFFERING



|                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                      
|Common stock offered by us                             |  | 5,600,000 shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                      
|                                                      
|                                                      
|Common stock offered by the
    selling stockholders   |  | 2,800,000 shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                      
|                                                      
|                                                      
|Common stock to be outstanding after
    this offering |  | 41,759,567 shares                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                      
|                                                      
|                                                      
|Use of proceeds                                        |  | We intend to use the net proceeds of this
    offering to fund our ongoing pivotal clinical trial, MIRA-1, and
    related clinical trials, and to purchase and accumulate
    inventory and build infrastructure for commercialization of the
    RHEO System in the United States if and when we receive FDA
    approval. We will also use the funds to continue our expansion
    in Canada. We expect to use the remainder of the net proceeds
    for general corporate purposes. We will not receive any proceeds
    from the sale of shares by the selling stockholders.
|                                                      
|                                                      
|Proposed Nasdaq National Market symbol                 |  | RHEO                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

The number of shares of our common stock referred
to above to be outstanding after this offering, and, unless
otherwise indicated, the other information contained in this
prospectus reflects consummation of the following transactions,
which we refer to collectively as the Reorganization:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | the issuance of 4,622,605 shares of common
    stock to be issued upon the automatic conversion of all our
    outstanding shares of series A and series B
    convertible preferred stock immediately prior to this offering;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
|
|
| |  | the issuance of 7,106,454 shares of common
    stock to TLC Vision and Diamed Medizintechnik GmbH upon
    conversion of $7 million aggregate principal amount of
    convertible debentures to be held by them immediately prior to
    this offering. The conversion price is $0.98502 per share; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
|
|
| |  | the issuance of 19,070,233 shares of common
    stock to TLC Vision in connection with the purchase by us
    of TLC Visions 50% interest in OccuLogix, L.P.
    immediately prior to this offering. The number of shares to be
    issued to TLC Vision was determined on the basis that our entire
    value is derived from our 50% interest in OccuLogix, L.P. For a
    more detailed description about how the number of shares to be
    issued to TLC Vision was calculated please refer to the
    Reorganization section in this prospectus beginning
    on page 66. This amount includes 1,569,217 shares of
    common stock which will be issuable in the future upon the
    exchange of shares of OccuLogix ExchangeCo ULC, one of our
    Canadian subsidiaries, issued for tax purposes to
    TLC Vision in connection with the purchase of
    OccuLogix, L.P.
|

This information also assumes no exercise of the
underwriters over-allotment option.

Unless otherwise indicated, all information in
this prospectus excludes:



| |   |                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | 1,943,399 shares of common stock issuable
    upon the exercise of options outstanding as of
    September 30, 2004 granted under our 2002 stock option
    plan, our 1997 stock option plan or outside our stock option
    plan, at a weighted average exercise price of $1.46 per share;                     
|
|
|
| |  | 828,000 shares of common stock issuable upon
    the exercise of options which will be granted under our 2002
    stock option plan to certain of our officers, employees and
    directors upon the closing of this offering at an exercise price
    equal to the price of the shares issued in this offering;
|
|
|
| |  | 2,028,684 shares of common stock reserved
    for future issuance of additional options under our 2002 stock
    option plan; and                                                                                                                                                                               
|
|
|
| |  | 37,500 shares of common stock issuable upon the
    exercise of warrants outstanding as of September 30, 2004
    with an exercise price of $4.00 per share.                                                                                                                                                    
|

7



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##### Table of Contents



SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED
FINANCIAL DATA




The following table provides our summary
historical and pro forma consolidated financial data for the
periods and as of the dates indicated. We derived the summary
historical consolidated financial data for the years ended
December 31, 2001, 2002 and 2003 from our audited
consolidated financial statements included elsewhere in this
prospectus. We derived the summary historical consolidated
financial data as of September 30, 2004 and for the nine
months ended September 30, 2003 and 2004 from our unaudited
consolidated financial statements, included elsewhere in this
prospectus, which include all adjustments, consisting of normal
recurring adjustments, which, in our opinion, are necessary for
a fair presentation of the financial position and results of
operations for these periods. Historical results are not
necessarily indicative of the results of operations to be
expected for future periods, and interim results may not be
indicative of results for the remainder of the year.







The information in the table below is only a
summary and should be read together with our audited
consolidated financial statements as of December 31, 2002
and 2003 and for the years ended December 31, 2001, 2002
and 2003 and the related notes, our unaudited consolidated
financial statements as of September 30, 2004 and for the
nine months ended September 30, 2003 and 2004 and the
related notes, Selected Consolidated Financial Data
and Managements Discussion and Analysis of Financial
Condition and Results of Operations, all as included
elsewhere in this prospectus.







The summary historical consolidated financial
data reflect our 50% interest in OccuLogix, L.P. Prior to
this offering, we will own 100% of OccuLogix, L.P. The summary
pro forma consolidated statements of operations data for the
year ended December 31, 2003 and the nine months ended
September 30, 2004 below give effect to the Reorganization
and the expensing of the unamortized compensation related to
stock options granted to certain employees, directors and
consultants as if they had occurred on January 1, 2003. The
summary pro forma as adjusted consolidated balance sheet data
gives effect to the Reorganization and our receipt of net
proceeds of $44.8 million from this offering at an assumed
initial offering price of $9.00, the midpoint of the range set
forth on the cover of this prospectus, after deducting
underwriting discounts and commissions and estimated offering
expenses, as if these events had occurred on September 30,
2004. The summary pro forma consolidated financial data should
be read together with the historical financial statements for
OccuLogix, L.P. and the pro forma consolidated financial
statements included elsewhere in this prospectus.







|                                                |                                |                                          |        |              |  |               |        |               |  |             |        |           |  |      |         |        |  |   |        |     |  |   |        |       |  |   |        |       | 
|----------------------------------------------- | ------------------------------ | ---------------------------------------- | ------ | ------------ |  | ------------- | ------ | ------------- |  | ----------- | ------ | --------- |  | ---- | ------- | ------ |  | - | ------ | --- |  | - | ------ | ----- |  | - | ------ | ----- | 
|                                                |                                |                                          |        |              |  |               |        |               |  |             |        |          
|                                                |                                |                                          |        |              |  |               |        |               |  | Nine Months |        | Pro Forma
|                                                |                                |                                          |        | Pro Forma    |  | Ended         |        | Nine Months  
|                                                |                                | Year Ended December 31,                  |        | Year Ended   |  | September 30, |        | Ended        
|                                                |                                |                                          |        | December 31, |  |               |        | September 30,
|                                                |                                | 2001                                     |        | 2002         |  | 2003          |        | 2003          |  | 2003        |        | 2004      |  | 2004
|                                                |                                |                                          |        |              |  |               |        |               |  |             |        |           |  |     
|                                                |                                |                                         
|                                                |                                | (in thousands, except per share amounts)
|Consolidated Statements of Operations
    Data: |                                |                                          |        |              |  |               |        |               |  |             |        |           |  |      |         |        |  |   |        |     |  |   |        |       |  |   |        |      
|Revenues from related party                     |                                | $                                        |       |              |  | $             | 94     |               |  | $           | 390    |           |  | $    | 486     |        |  | $ | 360    |     |  | $ | 189    |       |  | $ | 453    |      
|                                                |                                |                                          |        |              |  |               |        |               |  |             |        |           |  |      |         |        |  |   |        |     |  |   |        |       |  |   |        |      
|Cost of sales                                   |                                |                                          |        |              |  |               |        |               |  |             |        |           |  |      |         |        |  |   |        |     |  |   |        |       |  |   |        |      
|                                                | Cost of sales to related party |                                          |        |             |  |               |        | 81            |  |             |        | 373       |  |      |         | 248    |  |   |        | 350 |  |   |        | 184   |  |   |        | 230   | 
|                                                | Royalty costs                  |                                          |        |             |  |               |        | 78            |  |             |        | 109       |  |      |         | 109    |  |   |        | 84  |  |   |        | 80    |  |   |        | 80    | 
|                                                |                                |                                          |        |              |  |               |        |               |  |             |        |           |  |      |         |        |  |   |        |     |  |   |        |       |  |   |        |      
|Gross margin (loss)                             |                                |                                          |       |              |  |               | (65    | )             |  |             | (92    | )         |  |      | 129     |        |  |   | (74    | )   |  |   | (75    | )     |  |   | 143    |      
|Operating expenses                              |                                |                                          |        |              |  |               |        |               |  |             |        |           |  |      |         |        |  |   |        |     |  |   |        |       |  |   |        |      
|                                                | General and administrative     |                                          |        | 911          |  |               |        | 449           |  |             |        | 1,565     |  |      |         | 17,234 |  |   |        | 681 |  |   |        | 5,677 |  |   |        | 1,231 | 
|                                                | Clinical and regulatory        |                                          |        | 1,873        |  |               |        | 1,447         |  |             |        | 731       |  |      |         | 731    |  |   |        | 320 |  |   |        | 2,092 |  |   |        | 2,092 | 
|                                                | Sales and marketing            |                                          |        |             |  |               |        |              |  |             |        |          |  |      |         | 69     |  |   |        |    |  |   |        | 22    |  |   |        | 49    | 
|                                                | Amortization of intangibles    |                                          |        |             |  |               |        |              |  |             |        |          |  |      |         | 1,717  |  |   |        |    |  |   |        |      |  |   |        | 1,288 | 
|                                                |                                |                                          |        |              |  |               |        |               |  |             |        |           |  |      |         |        |  |   |        |     |  |   |        |       |  |   |        |      
|                                                |                                |                                          | 2,784  |              |  |               | 1,896  |               |  |             | 2,296  |           |  |      | 19,751  |        |  |   | 1,001  |     |  |   | 7,791  |       |  |   | 4,660  |      
|Other expenses                                  |                                |                                          | 1,342  |              |  |               | 921    |               |  |             | 82     |           |  |      | 82      |        |  |   | 35     |     |  |   | 29     |       |  |   | 27     |      
|                                                |                                |                                          |        |              |  |               |        |               |  |             |        |           |  |      |         |        |  |   |        |     |  |   |        |       |  |   |        |      
|Earnings from discontinued operations           |                                |                                          | 67     |              |  |               |       |               |  |             |       |           |  |      |        |        |  |   |       |     |  |   |       |       |  |   |       |      
|Net loss for the period                         |                                | $                                        | (4,059 | )            |  | $             | (2,882 | )             |  | $           | (2,470 | )         |  | $    | (19,704 | )      |  | $ | (1,110 | )   |  | $ | (7,895 | )     |  | $ | (4,544 | )    
|                                                |                                |                                          |        |              |  |               |        |               |  |             |        |           |  |      |         |        |  |   |        |     |  |   |        |       |  |   |        |      




8



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|                                                                                         |                                                 |                         |       |              |   |               |       |               |   |             |       |           |   |      |        |       |   |   |       |       |   |   |       |       |   |   |        |       |  
|---------------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------- | ----- | ------------ | - | ------------- | ----- | ------------- | - | ----------- | ----- | --------- | - | ---- | ------ | ----- | - | - | ----- | ----- | - | - | ----- | ----- | - | - | ------ | ----- | -
|                                                                                         |                                                 |                         |       |              |   |               |       |               |   |             |       |          
|                                                                                         |                                                 |                         |       |              |   |               |       |               |   | Nine Months |       | Pro Forma
|                                                                                         |                                                 |                         |       | Pro Forma    |   | Ended         |       | Nine Months  
|                                                                                         |                                                 | Year Ended December 31, |       | Year Ended   |   | September 30, |       | Ended        
|                                                                                         |                                                 |                         |       | December 31, |   |               |       | September 30,
|                                                                                         |                                                 | 2001                    |       | 2002         |   | 2003          |       | 2003          |   | 2003        |       | 2004      |   | 2004
|                                                                                         |                                                 |                         |       |              |   |               |       |               |   |             |       |           |   |     
|Loss per share from continuing operations                                                |                                                 |                         |       |              |   |               |       |               |   |             |       |           |   |      |        |       |   |   |       |       |   |   |       |       |   |   |        |      
|                                                                                         | Basic and diluted                               |                         | $     | (1.15        | ) |               | $     | (0.77         | ) |             | $     | (0.62     | ) |      | $      | (0.57 | ) |   | $     | (0.28 | ) |   | $     | (1.54 | ) |   | $      | (0.13 | )
|                                                                                         | Earnings per share from discontinued operations |                         |       | 0.02         |   |               |       |              |   |             |       |          |   |      |        |      |   |   |       |      |   |   |       |      |   |   |        |      |  
|                                                                                         |                                                 |                         |       |              |   |               |       |               |   |             |       |           |   |      |        |       |   |   |       |       |   |   |       |       |   |   |        |      
|Net loss per share                                                                       |                                                 | $                       | (1.13 | )            |   | $             | (0.77 | )             |   | $           | (0.62 | )         |   | $    | (0.57  | )     |   | $ | (0.28 | )     |   | $ | (1.54 | )     |   | $ | (0.13  | )    
|                                                                                         |                                                 |                         |       |              |   |               |       |               |   |             |       |           |   |      |        |       |   |   |       |       |   |   |       |       |   |   |        |      
|Weighted-average number of shares used in per
    share calculations  basic and diluted |                                                 |                         | 3,603 |              |   |               | 3,735 |               |   |             | 3,977 |           |   |      | 34,776 |       |   |   | 3,905 |       |   |   | 5,143 |       |   |   | 35,943 |      







|                                                                       |                                         |                          |        |             |   |   |         |         |  
|---------------------------------------------------------------------- | --------------------------------------- | ------------------------ | ------ | ----------- | - | - | ------- | ------- | -
|                                                                       |                                         |                         
|                                                                       |                                         | As of September 30, 2004
|                                                                       |                                         |                         
|                                                                       |                                         |                          |        | Pro Forma  
|                                                                       |                                         | Actual                   |        | As Adjusted
|                                                                       |                                         |                          |        |            
|                                                                       |                                         |                         
|                                                                       |                                         | (in thousands)          
|Consolidated Balance Sheet Data:                                       |                                         |                          |        |             |   |   |         |        
|Cash                                                                   |                                         | $                        | 767    |             |   | $ | 48,151  |        
|Working capital (deficiency)                                           |                                         |                          | (6,254 | )           |   |   | 46,617  |        
|Intangible assets                                                      |                                         |                          |       |             |   |   | 25,750  |        
|Goodwill                                                               |                                         |                          |       |             |   |   | 146,136 |        
|                                                                       |                                         |                          |        |             |   |   |         |        
|Total assets                                                           |                                         |                          | 3,952  |             |   |   | 221,800 |        
|                                                                       |                                         |                          |        |             |   |   |         |        
|Long-term debt (including current portion and due
    to stockholders) |                                         |                          | 6,209  |             |   |   | 1,109   |        
|Total liabilities                                                      |                                         |                          | 8,293  |             |   |   | 2,841   |        
|Stockholders equity                                                   |                                         |                          |        |             |   |   |         |        
|                                                                       | Common stock                            |                          |        | 5           |   |   |         | 42      |  
|                                                                       | Series A convertible preferred stock    |                          |        | 2           |   |   |         |        |  
|                                                                       | Series B convertible preferred stock    |                          |        | 1           |   |   |         |        |  
|                                                                       | Additional paid in capital              |                          |        | 29,735      |   |   |         | 263,879 |  
|                                                                       | Accumulated deficit                     |                          |        | (34,083     | ) |   |         | (44,962 | )
|                                                                       |                                         |                          |        |             |   |   |         |        
|                                                                       | Total stockholders equity (deficiency) |                          |        | (4,340      | ) |   |         | 218,959 |  
|                                                                       |                                         |                          |        |             |   |   |         |        
|Total liabilities and stockholders equity
    (deficiency)            |                                         |                          | 3,952  |             |   |   | 221,800 |        
|                                                                       |                                         |                          |        |             |   |   |         |        




9



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##### Table of Contents






RISK FACTORS

Investing in our common stock involves a high
degree of risk. You should consider carefully the following risk
factors, as well as the other information in this prospectus,
before deciding to invest in our common stock. Our business,
financial condition or results of operations could be affected
adversely by any of these risks. The trading price of our common
stock could decline due to any of these risks and you might lose
all or part of your investment in our common stock.

Risks Relating to Our Business



| |                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our financial condition and history of
    losses has caused our auditors to express doubt as to whether we
    will be able to continue as a going concern.




We have prepared our consolidated financial
statements on the basis that we will continue as a going
concern. However, as indicated in their audit report dated
August 13, 2004, our auditors have expressed substantial
doubt as to whether we will be able to continue as a going
concern because of the losses that we have sustained during the
past three years, our working capital deficiency and current
cash position. Our working capital deficiency as of
September 30, 2004 was $6.3 million and our total
stockholders deficiency as of September 30, 2004 was
$4.3 million.







Although there can be no assurance that we will
be able to continue as a going concern, management believes that
the estimated net proceeds from this offering of
$44.8 million at an assumed initial offering price of
$9.00, the midpoint of the range set forth on the cover of this
prospectus, after deducting underwriting discounts and
commissions and estimated offering expenses, together with the
receipt of the remaining funds available as of
September 30, 2004 for borrowing under our convertible
debentures of approximately $1.9 million, will generate
sufficient funds to pay for our operations and other demands and
commitments until the latter half of 2006.









| |                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Several news outlets have published
    information about us and the RHEO System that contained
    incorrect or outdated information. You should rely only on
    statements made in this prospectus in determining whether to
    purchase our shares.







Information about us and the RHEO System has been
published in articles contained in The Globe and Mailand
other news outlets. Some of these articles contained information
that is incorrect or outdated, including information regarding
the timing of the introduction of the RHEO System in the United
States. Furthermore, the articles presented certain statements
about us in isolation and did not disclose many of the related
risks and uncertainties described in this prospectus. As a
result, you shouldnt rely on the information contained in
the articles.




You should carefully evaluate all of the
information in this prospectus, including the risks described in
this section and throughout the prospectus. We have in the past
received, and may continue to receive, media coverage. You
should rely only on the information contained in this prospectus
in making your investment decision.



| |                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------
| | We have incurred losses since inception and
    anticipate that we will incur continued losses for the
    foreseeable future.




We have incurred losses in each year since our
inception in 1996. Our net loss for the nine months ended
September 30, 2004 was $7.9 million, and for the
fiscal years ended December 31, 2003, 2002 and 2001 was
$2.5 million, $2.9 million and $4.1 million,
respectively. As of September 30, 2004, we had an
accumulated deficit of $34.1 million. These losses, among
other things, have had and will continue to have an adverse
effect on our stockholders equity and working capital. We
expect our clinical and regulatory expenses to increase in
connection with MIRA-1 and any other clinical trials that we may
initiate. In addition, subject to FDA approval of the RHEO
System, we expect to incur significant sales, marketing and
procurement expenses. As a result, we expect to continue to
incur significant and increasing operating losses for the next
several years. Because of the numerous risks and uncertainties
associated with developing new




10



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##### Table of Contents



medical therapies, we are unable to predict the
extent of any future losses or when we will become profitable,
if ever.




| |                                                                             
| | ----------------------------------------------------------------------------
| | Our business may not generate the cash
    necessary to fund our operations.




Since inception, we have funded our operations
through private placements of our equity and debt securities and
early stage revenues. Prior to this offering, our current cash
resources were limited. We may need additional capital in the
future, and our prospects for obtaining it are uncertain. We
expect that the funding requirements for our operating
activities will continue to increase substantially in the
future, primarily due to the commercialization of the RHEO
System. We will need to seek additional funds in the future from
a combination of sources, including product licensing, joint
development and other financing arrangements. In addition, we
may issue debt or equity securities if we determine that
additional cash resources could be obtained under favorable
conditions or if future funding requirements cannot be satisfied
with available cash resources. Additional capital may not be
available on terms favorable to us, or at all. If adequate
capital is unavailable, and if our operations do not generate
cash, our commercialization of the RHEO System will be delayed
and we may be unable to continue our operations. Accordingly,
our audited financial statements included elsewhere in this
prospectus include a going concern note.






| |                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We do not know whether we will be able to
    increase our revenues, derive revenues from sources other than
    sales to a related party or become profitable in the
    future.




We were founded in 1996 but the focus of our
operations since 2000 has shifted towards our ongoing pivotal
trial, MIRA-1, for the RHEO System. Prior to 2000, our focus was
on commercializing and performing therapeutic apheresis, or
blood filtering. We generated revenues of approximately $900,200
and $1,277,800 for the years ended June 30, 1999 and 1998,
respectively, all of which were earned in the United States. For
the year ended December 31, 2003, we had revenues of
$390,479, all of which were derived from sales of the RHEO
System to OccuLogix, L.P., a related party, which then sells the
RHEO System to three clinics in Canada, one of which is a
related party, RHEO Clinic Inc., a subsidiary of TLC Vision.
Since July 2002, our only customer has been OccuLogix, L.P., a
related party. Our ability to increase our revenues and to earn
revenues in the United States is dependent on a number of
factors, including:






| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
|
| |  | successfully completing MIRA-1 for the RHEO
    System;                                                    
|
|
|
| |  | obtaining FDA approval to market the RHEO System
    in the United States;                                 
|
|
|
| |  | successfully building the infrastructure and
    manufacturing capacity to market and sell the RHEO System;
|
|
| |  | achieving widespread acceptance of RHEO Therapy
    among physicians and patients; and                     
|
| |  | agreement of governmental and third-party payors
    to reimburse for RHEO Therapy.                        

We do not anticipate that we will generate any
revenues in the United States until late 2006, at the earliest.
If we do not obtain FDA approval and are required to focus our
efforts on marketing the RHEO System to clinics in Canada, or if
we are unable to generate significant revenues in the United
States, we may not become profitable, and we may be unable to
continue our operations.



| |                                         
| | ----------------------------------------
| | We may be unable to complete
    MIRA-1.




We are required to obtain FDA approval to market
the RHEO System in the United States. To support an application
for FDA approval, we are conducting, at our own expense, MIRA-1
to evaluate the safety and efficacy of RHEO Therapy in humans.
Clinical testing is expensive, can take many years and has an
uncertain outcome. Although we have submitted an interim
analysis to the FDA, these results may not be indicative of the
final results for MIRA-1. Failure can occur at any stage of the
testing. We may encounter numerous




11



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factors during, or as a result of, MIRA-1 that
could delay or prevent us from completing MIRA-1 and receiving
FDA approval for a number of reasons, including:




| |   |                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | enrollment may be slower than we currently
    anticipate, or we may be unable to obtain the complete number of
    data sets required by the protocol filed with the FDA if
    patients do not fulfill the requirement to have a 12-month
    follow-up visit, or otherwise;
|
| |  | costs of MIRA-1 may be greater than we currently
    anticipate;                                                                                                                                                                                                              
|
| |  | we, or the regulators, may suspend or terminate
    MIRA-1 if the participating patients are being exposed to
    unacceptable health risks; and                                                                                                                              
|
| |  | MIRA-1 may produce negative or inconclusive
    results, and we may decide, or regulators may require us, to
    conduct additional clinical and/or preclinical testing.                                                                                                      




MIRA-1 is currently being conducted at seven
treatment centers in the United States and Canada. We are
working with our contract research organization, Promedica
International, and the following consulting organizations to
conduct our MIRA-1 trial: McGarvey Group, Center for Clinical
Research (Don Sanders, PhD), Jules Stein Eye Institute, LabCorp,
and Biostat International. If our relationship with any of these
organizations terminates, we believe that we would be able to
enter into arrangements with alternative third parties, however,
such a change may delay the completion of MIRA-1. If these
organizations or any replacements do not successfully carry out
their contractual duties or obligations, do not meet expected
deadlines or need to be replaced, or if the quality or accuracy
of the clinical data they obtain is compromised due to their
failure to adhere to our clinical protocols or for other
reasons, our clinical trial may be extended, delayed or
terminated, and we may not be able to obtain regulatory approval
for the RHEO System.






| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | Even if we complete MIRA-1, we may not
    receive FDA approval to market the RHEO System in the United
    States.




Even if we complete MIRA-1 successfully, we may
not receive FDA approval to market the RHEO System in the United
States. Obtaining FDA approval is a lengthy and expensive
process, and approval is uncertain. We may never receive FDA
approval for the RHEO System or we may experience delays in
receiving approval. Delays in obtaining or failure to obtain FDA
approval would delay or prevent the successful commercialization
of the RHEO System, diminish our competitive advantage and/or
defer or decrease our receipt of revenues. Even if we obtain FDA
approval, this approval may only be for a limited or narrow
class of Dry AMD patients, thereby diminishing the size of the
class of prospective patients for whose use the RHEO System can
be promoted.







In addition, changes to the RHEO System can
require additional FDA approvals. The RHEO System currently uses
a cellulose acetate Rheofilter which is manufactured by Asahi
Medical. We have been informed by Asahi Medical that it intends
to discontinue manufacturing the cellulose acetate filter in
2008 and we are working with Asahi Medical to develop a new
polysulfone filter to replace it. We will require FDA approval
to replace the cellulose acetate Rheofilter with the new
polysulfone Rheofilter which may require the generation and
submission of additional clinical data which could delay the
timing of the application and increase the cost of obtaining
such approval. If we do not receive FDA approval for the new
polysulfone Rheofilter or, if obtaining the approval takes
longer than we expect, we may be unable to market the RHEO
System.









| |                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We currently depend on single sources for
    key components of the RHEO System. The loss of any of these
    sources could delay our clinical trials or prevent or delay
    commercialization of the RHEO System.







We currently depend on single sources for the
filters and the OctoNova pump used in the RHEO System. We have
entered into a supply agreement for the filters with Asahi
Medical and for the OctoNova pump with Diamed, which designed
the OctoNova pump, and MeSys GmbH, which manufactures the pumps
for Diamed. If any of these suppliers ceases to supply
components to us or does not supply an adequate number of
components, our sales and growth could be restricted,
potentially materially. If we do not achieve FDA approval and
other necessary approvals in the territories for which we have
distribution rights by the end of December 2006, Asahi Medical
can terminate the supply agreement for the filters and Diamed
can terminate the supply




12



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##### Table of Contents






agreement for the pumps. Each of the agreements
has a term ending ten years after the date of FDA approval,
and is automatically renewable for one year terms unless
terminated upon six months notice. In addition,
Diamed may terminate its agreement upon the termination of our
manufacturing agreement with MeSys, which has a term of three
years following FDA approval. We believe that establishing
additional or replacement suppliers for these components may not
be possible as these suppliers have trade secrets, patents and
other intellectual property that may prevent a third party from
manufacturing a suitable replacement product. Even if we switch
to replacement suppliers and the supplier can manufacture the
necessary components without violating any third-party
intellectual property rights, we may face additional regulatory
delays and the distribution of the RHEO System could be
interrupted for an extended period of time, which may delay or
slow the commercialization of RHEO Therapy and adversely impact
our financial condition and results of operations.










| |                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our supply agreement with Asahi Medical
    requires us to transfer the FDA approval of the RHEO System to
    it upon receipt which will limit our control of the FDA
    approval.







In the 2001 supply agreement with Asahi Medical
for the filters that are used in the RHEO System, we agreed to
obtain the FDA approval in the name of Asahi Medical and to
maintain that approval. In a subsequent 2003 amendment to that
agreement, we agreed to transfer FDA approval to Asahi Medical
upon receipt from the FDA. Any clinical data contained in the
application for FDA approval continues to belong to us. Asahi
Medical will have the right to use the data in any territory
where Asahi Medical grants us a distributorship. This agreement
also makes us the exclusive distributor of Asahi Medicals
RHEO System filters in the United States, Canada, Mexico and the
Caribbean for a term of ten years beginning at the date of the
FDA approval, and is automatically renewable for one year terms
unless terminated upon six months notice. The agreement
also provides that Asahi Medical may terminate the exclusivity
provision if certain post-FDA approval minimum purchase
requirements are not met. This transfer of FDA approval to Asahi
Medical may limit our flexibility to make changes in the FDA
approval such as the addition of alternate suppliers of RHEO
System components without Asahi Medicals consent, or limit
our ability to prevent changes to the FDA approval that we might
consider detrimental, such as the addition of labeling changes
or the substitution of alternate component suppliers.









| |                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we or our suppliers fail to comply with
    the extensive regulatory requirements to which we and the RHEO
    System are subject, the RHEO System could be subject to
    restrictions or withdrawals from the market and we could be
    subject to penalties.







We, our suppliers and our products are subject to
numerous FDA requirements covering the design of the RHEO
System, testing, manufacturing, quality control, labeling,
advertising, promotion and export of the RHEO System and other
matters. Failure to comply with statutes and regulations
administered by the FDA could result in, among other things, any
of the following actions:






| |   |                                                               
| | - | --------------------------------------------------------------
| |  | warning letters;                                              
|
| |  | fines and other civil penalties;                              
|
| |  | unanticipated expenditures;                                   
|
| |  | withdrawal of FDA approval;                                   
|
|
| |  | delays in approving or refusal to approve the
    RHEO System;
|
|
| |  | product recall or seizure;                                    
|
| |  | interruption of production;                                   
|
| |  | operating restrictions;                                       
|
| |  | injunctions; and                                              
|
| |  | criminal prosecution.                                         

13



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##### Table of Contents



We and our suppliers are subject to numerous
federal, state and local laws relating to such matters as safe
working conditions, manufacturing practices, environmental
protection, fire hazard control and disposal of hazardous or
potentially hazardous substances. In addition, advertising and
promotional materials relating to medical devices are, in
certain instances, subject to regulation by the Federal Trade
Commission. We and our suppliers may be required to incur
significant costs to comply with such laws and regulations in
the future, and such laws and regulations may materially harm
our business. Unanticipated changes in existing regulatory
requirements, the failure of us or our manufacturers to comply
with such requirements or the adoption of new requirements could
materially harm our business.






| |                                                                                         
| | ----------------------------------------------------------------------------------------
| | We may be unable to commercialize the RHEO
    System successfully in the United States.







Even if we successfully complete MIRA-1 and
obtain FDA approval for the RHEO System, our success depends on
our ability to market and sell the RHEO System. Successful
commercialization of the RHEO System depends on a number of
factors, including:






| |   |                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | achieving widespread acceptance of RHEO Therapy
    among physicians and patients;                                                                                                
|
| |  | agreement of governmental and third-party payors
    to provide reimbursement for RHEO Therapy;                                                                                   
|
| |  | maintaining our relationships with our single
    source suppliers;                                                                                                               
|
|
| |  | obtaining sufficient quantities of components for
    the RHEO System;                                                                                                            
|
|
| |  | establishing adequate sales and marketing
    capabilities;                                                                                                                       
|
| |  | obtaining sufficient facility space;                                                                                                                                              
|
|
| |  | our ability to identify and sell the RHEO System
    to key multi-facility health care providers as well as to
    private eye care professional practices;                       
|
|
|
| |  | our ability to successfully sell the RHEO System
    at our projected selling price;                                                                                              
|
|
|
| |  | whether there are adverse side effects or
    unfavorable publicity concerning the RHEO System; and                                                                               
|
|
|
| |  | whether there is competition for the RHEO System
    from new or existing products, which may prove to be safer, more
    efficacious or more cost-effective than the RHEO System.
|



| |                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | RHEO Therapy is based on a model that has
    not achieved widespread acceptance, and may be proven incorrect.
    If we are unsuccessful in achieving widespread acceptance of
    RHEO Therapy among physicians and patients, our business may not
    succeed.

AMD is not a well-understood disease and its
underlying cause is not known. RHEO Therapy is based on a
disease model that has not achieved widespread acceptance with
eye care professionals. Unlike traditional therapeutic
treatments for eye diseases, RHEO Therapy is a systemic approach
for the treatment of Dry AMD, rather than a localized approach.
Our success is dependent upon achieving widespread acceptance of
RHEO Therapy among ophthalmologists and optometrists. Eye care
professionals and health care service providers may not be
willing to integrate RHEO Therapy into their workflow. In
addition, because RHEO Therapy can be performed by health care
providers other than eye care professionals, eye care
professionals may be reluctant to endorse RHEO Therapy.

Even if we are successful in achieving widespread
acceptance of RHEO Therapy among physicians, we may be unable to
achieve widespread acceptance among potential patients. An
initial course of RHEO Therapy is time consuming, requiring
eight procedures over a 10- to 12-week period, with each
procedure lasting between two and four hours. Some patients may
be reluctant to undergo RHEO Therapy because of the time
commitment. In addition, RHEO Therapy providers may not be
easily accessible to all patients and some patients may be
unwilling or unable to travel to receive RHEO Therapy. If we are
unable to achieve widespread acceptance, our financial condition
and results of operations will be adversely affected.

In August 1997, our predecessor opened its sole
client facility, the Rheotherapy Center, in Tampa, Florida to
perform therapeutic apheresis commercially. In 1999, the
FDAs Office of Compliance issued a

14



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##### Table of Contents



directive notifying our predecessor that further
conducting of therapeutic apheresis would need to be conducted
under the authority of an Investigational Device Exemption filed
with the FDA. In a related action, our predecessor, on behalf of
one of our founders, Dr. Richard C. Davis, made a
payment in the amount of $10,000 to cover legal expenses
incurred by the Florida Board of Medicine in prosecuting our
predecessors unauthorized advertising of new medical
therapies. Our predecessor closed the Rheotherapy Center in 1999
and we have since received an Investigational Device Exemption
and focused our resources on completing MIRA-1 in order to
obtain FDA approval of the RHEO System. Dr. Davis was our
Chief Executive Officer from January to June 2003 and was our
Chief Science Officer from July 2003 to April 2004 and since
then has served as a consultant to us. We believe that the
activities of the Rheotherapy Center engendered opposition in
certain segments of the eye care community to RHEO Therapy and
if this opposition continues, acceptance of RHEO Therapy among
eye care professionals and patients may be difficult to achieve.




| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If RHEO Therapy is not reimbursed by
    governmental and other third-party payors, or is only reimbursed
    on a limited basis, our business may not succeed.




RHEO Therapy is expensive, with an initial course
of treatment expected to initially cost between $16,000 and
$25,600 in the United States. Continuing efforts of governmental
and third-party payors to contain or reduce the costs of health
care could negatively affect the sale of the RHEO System. Our
ability to commercialize the RHEO System successfully will
depend in substantial part on favorable determinations by
governmental payors, most prominently Medicare, private health
insurers and state-funded health care coverage programs. Without
the establishment of timely, favorable coverage and
reimbursement policies, we may be unable to set or maintain
price levels sufficient to realize an appropriate return on our
investment in product development. Other significant insurance
coverage limitations, such as narrow restrictions on patient
coverage criteria and restrictions on treatment settings in
which RHEO Therapy is covered, may also limit our potential
revenues.






| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | Our patents may not be valid and we may not
    be able to obtain and enforce patents to protect our proprietary
    rights from use by competitors.

Our owned and licensed patents may not be valid
and we may not be able to obtain and enforce patents and to
maintain trade secret protection for our technology. The extent
to which we are unable to do so could materially harm our
business.




We have applied for and will continue to apply
for patents for certain processes used in the RHEO System. Such
applications may not result in the issuance of any patents, and
any patents now held or that may be issued may not provide us
with adequate protection from competition. In addition, we
expect that we will seek to have the patent licensed to us
re-examined in the next 12 months at the U.S. Patent and
Trademark Office, and we believe that a more detailed claim set
will be issued. The re-examination of this patent may result in
the patent being rejected or no claims of commercial value being
issued or it may result in competitors acquiring intervening
rights. Furthermore, it is possible that patents issued or
licensed to us may be challenged successfully. In that event, if
we have a preferred competitive position because of such
patents, any preferred position held by us would be lost. If we
are unable to secure or to continue to maintain a preferred
position, the RHEO System could become subject to competition
from the sale of generic products.




Patents issued or licensed to us may be infringed
by the products or processes of others. The cost of enforcing
our patent rights against infringers, if such enforcement is
required, could be significant, and the time demands could
interfere with our normal operations. There has been substantial
litigation and other proceedings regarding patent and other
intellectual property rights in the pharmaceutical,
biotechnology and medical technology industries. We may become a
party to patent litigation and other proceedings. The cost to us
of any patent litigation, even if resolved in our favor, could
be substantial. Some of our competitors may be able to sustain
the costs of such litigation more effectively than we can
because of their substantially greater financial resources.
Litigation may also absorb significant management time.

15



---



##### Table of Contents



Unpatented trade secrets, improvements,
confidential know-how and continuing technological innovation
are important to our scientific and commercial success. Although
we attempt to and will continue to attempt to protect our
proprietary information through reliance on trade secret laws
and the use of confidentiality agreements with our corporate
partners, collaborators, employees and consultants and other
appropriate means, these measures may not effectively prevent
disclosure of our proprietary information, and, in any event,
others may develop independently, or obtain access to, the same
or similar information.

Certain of our patent rights are licensed to us
by third parties. If we fail to comply with the terms of these
license agreements, our rights to those patents may be
terminated, and we will be unable to conduct our business.



| |                                                                                                 
| | ------------------------------------------------------------------------------------------------
| | Patents of other companies could require us
    to stop using or pay to use required technology.




It is possible that a court may find us to be
infringing upon validly issued patents of third parties. In that
event, in addition to the cost of defending the underlying suit
for infringement, we may have to pay license fees and/or damages
and we may be enjoined from conducting certain activities.
Obtaining licenses under third-party patents can be costly, and
such licenses may not be available at all. Under such
circumstances, we may need to materially alter our products or
processes and we may be unable to do so successfully.






| |                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to establish adequate
    sales and marketing capabilities, we may not be able to generate
    significant revenue and may not become profitable.




While our management team has some experience in
marketing medical technology, we do not have a sales
organization and have limited experience as a company in the
sales, marketing and distribution of ophthalmic therapy
products. In order to commercialize RHEO Therapy, we must
develop our sales, marketing and distribution capabilities or
make arrangements with a third party to perform these functions.
If and when marketing of the RHEO System is approved by the FDA,
we currently plan to establish our own sales force to market the
RHEO System in the United States. Developing a sales force is
expensive and time consuming and we may not be able to develop
this capacity. If we are unable to establish adequate sales,
marketing and distribution capabilities, independently or with
others, we may not be able to generate significant revenue and
may not become profitable.






| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | Our suppliers may not have sufficient
    manufacturing capacity and inventory to support our
    commercialization plans.




Our success requires that our suppliers have
adequate manufacturing capacity and inventory in order to
facilitate a rapid rollout of the RHEO System. We have been
informed by Asahi Medical that the current Rheofilter being used
in the RHEO System will be discontinued in 2008 and that, even
if it is not discontinued, Asahi Medical would not be able to
produce enough of the current cellulose acetate Rheofilter to
meet our anticipated demand. Although we are working with Asahi
Medical to develop a new polysulfone filter that we believe
Asahi Medical will be able to manufacture in larger quantities
and at a lower cost to us, there can be no assurance that we and
Asahi Medical will be successful in these efforts. Even if we
are able to develop a new filter, we may not be able to obtain
FDA approval for the new filter and the new filter may not be
manufactured at a lower cost to us. If we are unable to obtain
FDA approval for, or the necessary quantities of, this new
filter, we may not be able to generate product revenue and may
not become profitable.







We plan to use between $9.5 million and
$10.5 million of our net proceeds to stockpile an inventory
of filters from Asahi Medical. We recently signed a purchase
order with Asahi Medical for 9,600 Rheofilters, including
1,600 filters in the third quarter of 2004 and 4,000 filters for
each of the following two quarters. We intend to accumulate
inventory in advance of FDA approval in order to maximize the
number of filters available to us due to manufacturing
constraints on the number of cellulose acetate filters that
Asahi Medical can produce. However, we will not be in a position
to commercially market the RHEO System in the United States
until late 2006, at the earliest. Each filter has a shelf life
of approximately three years. It is possible that some or all of
these filters will expire before they are used. Moreover,
holding inventory in this manner will decrease our short term
liquidity.




16



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##### Table of Contents






Our ability to conduct MIRA-1 and commercialize
the RHEO System, depends, in large part, on our ability to have
components manufactured at a competitive cost and in accordance
with FDA and other regulatory requirements. We do not control
the manufacturing processes of our suppliers. If current
manufacturing processes are modified, or the source or location
of our product supply is changed, voluntarily or involuntarily,
the FDA will require us to demonstrate that the material
produced from the modified or new process or facility is
equivalent to the material used in the clinical trials or
products previously approved. Any such modifications to the
manufacturing process or supply may not achieve or maintain
compliance with the applicable regulatory requirements. In many
cases, prior approval by regulatory authorities may be required
before any changes can be made, which may adversely affect our
business.






| |                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------
| | Our success depends upon our ability to
    sell to key multi-facility health care providers as well as
    private eye care professional practices.




In order to facilitate a rapid rollout of the
RHEO System if and when we receive FDA approval, we will need to
establish relationships with key organized groups of
multi-facility health care service providers, including
hospitals, dialysis clinics and ambulatory surgery centers, as
well as private practices. We may be unsuccessful in
establishing these relationships, which could limit our ability
to commercialize the RHEO System.




We anticipate that RHEO Therapy will be
prescribed by physicians and administered by nurses, and
therefore our service provider customers will need the support
of an adequate supply of trained nurses. Training nurses to
administer RHEO Therapy may be costly, and our customers may
experience shortages of nurses from time to time. If there is a
shortage of trained nurses to work in our customers
facilities, our commercialization of RHEO Therapy may be
unsuccessful.



| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| | RHEO Therapy may produce adverse side
    effects in patients that prevent its adoption or that
    necessitate withdrawal from the market.




RHEO Therapy may produce unexpected side effects
not previously observed during clinical trials. These
undesirable and unintended side effects in patients may prevent
or limit its commercial adoption and use. Side effects that have
been observed in MIRA-1 were all temporary and generally mild,
and included temporary drops in blood pressure, abnormal heart
rate, nausea, chills and localized bleeding, pain, numbness and
swelling in the area of the arms where the needles were
inserted. Even after approval by the FDA and other regulatory
authorities, the RHEO System may later be found to produce
adverse side effects that prevent widespread use or necessitate
withdrawal from the market. The manifestation of such side
effects could cause our business to suffer. In some cases,
regulatory authorities may require additional disclosure to
patients that could add warnings or restrict usage based on
unexpected side effects seen after marketing a medical treatment.






| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | We may face future product liability claims
    that may result from the use of our products.




The testing, manufacturing, marketing and sale of
therapeutic products entails significant inherent risks of
allegations of product liability. Our use of such products in
clinical trials and our sale of the RHEO System may expose us to
liability claims. These claims might be made directly by
patients, health care providers or others selling the RHEO
System. We carry clinical trials and product liability insurance
to cover certain claims that could arise during MIRA-1 or during
the commercial use of RHEO Therapy. We currently maintain
clinical trials and product liability insurance with coverage
limits of $1,000,000 in the aggregate annually. Such coverage,
and any coverage obtained in the future, may be inadequate to
protect us in the event of a successful product liability claim,
and we may not be able to increase the amount of such insurance
coverage or even renew it. A successful product liability claim
could materially harm our business. In addition, substantial,
complex or extended litigation could cause us to incur large
expenditures and divert significant resources.




17



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##### Table of Contents





| |                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------
| | We will need to increase the size of our
    organization, and we may experience difficulties in managing our
    growth.




In order to commercialize the RHEO System, we
will need to expand our employee base for management of
operational, sales and marketing, financial and other resources.
We do not expect to be able to commercially launch the RHEO
System until late 2006, at the earliest. Future growth will
impose significant additional responsibilities on members of
management, including the need to identify, recruit, maintain
and integrate additional employees. Our future financial
performance and our ability to commercialize the RHEO System and
to compete effectively will depend, in part, on our ability to
manage any future growth effectively. To that end, we must be
able to:






| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | manage MIRA-1 effectively;                                                                          
|
| |  | integrate additional management, administrative,
    distribution and sales and marketing personnel;
|
| |  | develop our administrative, accounting and
    management information systems and controls; and     
|
| |  | hire and train additional qualified personnel.                                                      

We may not be able to accomplish these tasks, and
our failure to accomplish any of them could prevent us from
achieving or maintaining profitability.



| |                                                                        
| | -----------------------------------------------------------------------
| | We may face competition and may not be
    successful in addressing it.

The pharmaceutical, biotechnology and medical
technology industries are characterized by rapidly changing
technology and intense competition. AMD is not a well-understood
disease and researchers are continuing to investigate different
theories of the cause of AMD. If the cause of AMD is determined,
competitors could potentially develop a treatment for Dry AMD
that would replace RHEO Therapy. In addition, competitors may
develop alternative treatments for Dry AMD that prove to be
superior to, or more cost-effective than, RHEO Therapy. Some of
these competitors may include companies which have access to
financial, technical and marketing resources significantly
greater than ours and substantially greater experience in
developing, manufacturing and distributing products, conducting
preclinical and clinical testing and obtaining regulatory
approvals.




We are aware of a number of companies which have
developed or are in the process of developing treatments for Wet
AMD, including Eyetech Pharmaceuticals, Inc./ Pfizer Inc.,
Genentech, Inc./ Novartis Ophthalmics, Alcon Laboratories, Inc.,
Iridex Corporation, Genaera Corporation, QLT, Inc. and GenVec,
Inc. Some of these treatments are in late-stage clinical
development or have been approved by the FDA. Some of these
companies may develop new treatments for Dry AMD or may develop
modifications to their treatments for Wet AMD that may be
effective for Dry AMD as well. In addition, other companies also
may be involved in competitive activities of which we are not
aware.






| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | We may be unable to attract and retain key
    personnel which may adversely affect our business.

Our success depends on the continued
contributions of our executive officers and scientific
personnel. Many of our key responsibilities have been assigned
to a relatively small number of individuals. We will be required
to hire eyecare specialists as well as personnel with skill sets
in apheresis, nursing, training, equipment maintenance, finance,
distribution, logistics, warehousing, sales and service to meet
our personnel needs. There is competition for qualified
personnel, and the failure to secure the services of key
personnel or loss of services of key personnel could adversely
affect our business.

18



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##### Table of Contents



Risks Related to This Offering






| |                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our current stockholders own a significant
    interest in our common stock and may be able to exert
    significant influence over our management and affairs. In
    particular, for as long as TLC Vision owns a substantial portion
    of our common stock, our other stockholders may be effectively
    unable to affect the outcome of stockholder
    voting.







Upon completion of this offering, TLC Vision will
beneficially own approximately 52.2% of our outstanding common
stock or 48.9%, on a fully diluted basis. Accordingly, TLC
Vision on its own could possess an effective controlling vote on
matters submitted to a vote of the holders of our common stock.







While it owns a substantial portion of our common
stock, TLC Vision will effectively control decisions with
respect to:






| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | our business direction and policies, including
    the election and removal of our directors;
|
| |  | mergers or other business combinations involving
    us;                                     
|
| |  | the acquisition or disposition of assets by us;                                              
|
| |  | our financing; and                                                                           
|
| |  | amendments to our certificate of incorporation
    and bylaws.                               

Furthermore, TLC Vision may be able to cause or
prevent a change of control of our company, and this
concentration of ownership may have the effect of discouraging
others from pursuing transactions involving a potential change
of control of our company, in either case regardless of whether
a premium is offered over then-current market prices.



| |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Conflicts of interest may arise between us
    and TLC Vision, which has three directors on our board and for
    which our Chief Executive Officer and Chairman serves as
    Chairman. Our Chairman and Chief Executive Officer and our Vice
    President, Corporate Affairs will also devote a portion of their
    time to TLC Vision, which may divert their attention from our
    business and operations.




Upon completion of this offering, TLC Vision will
beneficially own approximately 52.2% of our outstanding common
stock or 48.9%, on a fully diluted basis. Messrs. Vamvakas and
Davidson and Dr. Lindstrom, who comprise a majority of the
members of our board of directors, are also directors of TLC
Vision. Mr. Vamvakas beneficially owns 3,527,047 common
shares of TLC Vision, representing approximately 5.1% of
TLC Visions outstanding shares. As of April 29,
2004, Mr. Davidson beneficially owned 54,827 common shares
of TLC Vision and Dr. Lindstrom beneficially owned 38,500
common shares of TLC Vision. Because they are directors of TLC
Vision, a conflict of interest could arise. Conflicts may arise
between TLC Vision and us as a result of our ongoing agreements.
We may not be able to resolve all potential conflicts with TLC
Vision, and even if we do, the resolution may be less favorable
to us than if we were dealing with an unaffiliated third party.







In addition, our Chairman and Chief Executive
Officer, Mr. Vamvakas, will also serve as Chairman of TLC
Vision and, therefore, will devote a portion of his time to
matters other than our business and operations. We believe that
Mr. Vamvakas will devote approximately 20% of his time, on
average, to TLCs operations, which may divert his
attention from our business operations and which may adversely
affect our business. Stephen Kilmer, our Vice President,
Corporate Affairs, will also provide investor relations services
to TLC Vision under a consulting contract. Mr. Kilmer
currently holds options to purchase 2,888 shares of TLC
Vision that expire on November 30, 2004 with an exercise
price of Cdn$13.69, options to purchase 1,750 shares that are
exercisable or will become exercisable on December 1, 2004,
with an exercise price of Cdn$4.09 for 875 options and
Cdn$4.04 for the remaining 875 options, options to purchase
3,750 shares which will become exercisable on
December 15, 2004 with an exercise price of Cdn$7.95 and
options to purchase 2,500 shares which will become
exercisable on January 2, 2005 with an exercise price of
Cdn$1.82.




19



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##### Table of Contents





| |                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There has been no prior trading market for
    our common stock, the trading price of our common stock is
    likely to be volatile and you may not be able to sell your
    shares at or above the public offering price of this
    offering.

The initial public offering price for our common
stock will be determined through negotiations with the
underwriters and may not bear any relationship to the market
price at which it will be traded after this offering. Prior to
this offering there has been no public market for our common
stock. We cannot predict the extent to which investor interest
will lead to the development of an active trading market in our
common stock or whether that market will be sustained. Moreover,
we cannot assure you that any securities analysts will initiate
or maintain research coverage of our company and our common
stock. Additionally, the trading prices of the securities of
medical technology companies have been highly volatile.
Accordingly, the trading price of our common stock is likely to
be subject to wide fluctuations. Factors that could affect the
trading price of our common stock include, among other things:



| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
|
| |  | results of MIRA-1 and whether we receive FDA
    approval to market the RHEO System in the United States;
|
|
| |  | results of ongoing research into the underlying
    causes of AMD;                                       
|
|
| |  | whether we will receive FDA approval to use the
    new polysulfone filter with the RHEO System;         
|
|
| |  | developments relating to patents, proprietary
    rights and potential infringement;                     
|
| |  | announcements by us or our competitors of
    technological innovations or new commercial products;      
|
| |  | reimbursement policies of various governmental
    and third-party payors;                               
|
|
| |  | public concern over the safety and efficacy of
    the RHEO System;                                      
|
|
| |  | changes in estimates of our revenue and operating
    results;                                           
|
| |  | variances in our revenue or operating results
    from forecasts or projections;                         
|
| |  | recommendations of securities analysts regarding
    investment in our stock; and                        
|
| |  | market conditions in our industry and the economy
    as a whole.                                        

If our future quarterly or annual operating
results are below the expectations of securities analysts or
investors, the price of our common stock will likely decline. In
addition, share price fluctuations may be exaggerated if the
trading volume of our common stock is too low.

From time to time, we estimate the timing of the
accomplishment of various scientific, clinical, regulatory and
other product development goals, or milestones. These milestones
may include the commencement or completion of scientific studies
and clinical trials, such as MIRA-1, and the submission of
regulatory filings. From time to time, we expect that we will
publicly announce the anticipated timing of some of these
milestones. All of these milestones are based on a variety of
assumptions. The actual timing of these milestones can vary
dramatically compared to our estimates, in some cases for
reasons beyond our control. If we do not meet these milestones
as publicly announced, our stock price may decline and the
commercialization of our products may be delayed.



| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | If you purchase shares of common stock in
    this offering, you will experience significant and immediate
    dilution.




The assumed initial public offering price will be
substantially higher than the pro forma net tangible book value
per share of our outstanding common stock. As a result,
purchasers of our common stock will experience immediate
dilution of $7.87 per share, based on an assumed initial
public offering price of $9.00 per share, the midpoint of
the range set forth on the cover of this prospectus. This
dilution is due in large part to the fact that our earlier
investors paid substantially less than the assumed initial
public offering price when they purchased their shares.
Investors purchasing shares in this offering will pay a price
per share that substantially exceeds the book value of our
assets after subtracting our liabilities. In addition, the
exercise




20



---



##### Table of Contents






of outstanding warrants and options will, and
future equity issuances may, result in further dilution to
investors. As a result of this dilution, investors purchasing
shares from us in this offering will have contributed 60.1% of
the total amount of our net funding to date, on a fully diluted
basis, but will own only 12.6% of our equity, on a fully diluted
basis, without giving effect to any shares that the investors
will purchase directly from the selling stockholders.







| |                                                                   
| | ------------------------------------------------------------------
| | Future sales of our common stock could
    reduce our stock price.




After this offering, holders of approximately
33.5 million shares of common stock will have piggyback
registration rights with respect to their shares. Sales by
stockholders of substantial amounts of our shares, or the
perception that these sales may occur in the future, could
affect materially and adversely the market price of our common
stock. The shares we and the selling stockholders are offering
for sale in this offering will be freely tradeable immediately
following this offering. Our officers and directors and the
selling stockholders have agreed not to sell their shares for a
period of 180 days after the date of the underwriting
agreement. As these restrictions on resale end, the market price
of our common stock could drop significantly if the holders of
these restricted shares sell them or are perceived by the market
as intending to sell them. As at September 30, 2004, there
were options to purchase 1,943,399 shares of our
common stock and warrants to purchase 37,500 shares of
our common stock outstanding with weighted average exercise
prices of $1.46, and $4.00, respectively. Upon the closing of
this offering, options to purchase 828,000 shares of common
stock will be granted under our 2002 stock option plan to
certain of our officers, employees and directors. These shares
will be exercisable at an exercise price equal to the price of
the shares issued in this offering. We also have
2,028,684 shares reserved for issuance of additional
options under our 2002 stock option plan.






| |                                                                                  
| | ---------------------------------------------------------------------------------
| | We may use the proceeds of this offering in
    ways with which you may disagree.

We intend to use the net proceeds of this
offering to fund MIRA-1 and related clinical trials and to
purchase and accumulate inventory and build infrastructure for
our commercialization of the RHEO System in the United States if
and when we receive FDA approval. We expect to use the remainder
of the net proceeds for general corporate purposes. Accordingly,
we will have significant discretion in the use of a substantial
portion of the net proceeds of this offering received by us, and
it is possible that we may allocate the proceeds differently
than investors in this offering desire, or that we will fail to
maximize our return on these proceeds.



| |                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------
| | Payment of cash dividends on shares of our
    common stock is at the discretion of our board of
    directors.

We have never declared or paid any cash dividends
on shares of our common stock. We intend to retain all available
earnings to fund the operation and expansion of our business.
Any determination related to payments of future dividends will
be at the discretion of our board of directors after taking into
account various factors that our board of directors deems
relevant, including our financial condition, operating results,
current and anticipated cash needs, plans for expansion and debt
restrictions.



| |                                                                         
| | ------------------------------------------------------------------------
| | We will incur increased costs as a result
    of being a public company.

As a public company, we will incur significant
legal, accounting and other expenses that we did not incur as a
private company. We will incur costs associated with our public
company reporting requirements, costs associated with recently
adopted corporate governance requirements, including
requirements under the Sarbanes-Oxley Act of 2002, as well as
new rules implemented by the Securities and Exchange Commission
and the Nasdaq National Market. We expect these rules and
regulations to increase our legal and financial compliance costs
and to make some activities more time-consuming and costly. We
also expect these new rules and regulations may make it more
difficult and more expensive for us to obtain director and
officer liability insurance and we may be required to accept
reduced policy limits and coverage or incur substantially higher
costs to obtain the same or similar coverage. As a result, it
may be more difficult for us to attract and retain qualified
individuals to serve on our board of directors or as executive
officers. We are currently evaluating and monitoring
developments with respect to these new rules, and we cannot
predict or estimate the amount of additional costs we may incur
or the timing of such costs.

21



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##### Table of Contents





| |                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have entered into a number of related
    party transactions with suppliers, creditors, stockholders and
    other parties, each of which may have interests which conflict
    with those of our public stockholders.

We have entered into several related party
transactions with our suppliers, creditors, stockholders and
other parties, each of which may have interests which conflict
with those of our public stockholders.




We purchase the OctoNova pump pursuant to a
marketing and distributorship agreement with Diamed, the
developer of the OctoNova pump, and a distribution agreement
with MeSys, the company that manufactures the pump for Diamed.
The distribution agreement with MeSys provides for a minimum
purchase of 25 OctoNova pumps per year beginning after FDA
approval of the RHEO System, representing an annual commitment
of 405,000, or
approximately $522,450 based on current exchange rates. The
marketing and distributorship agreement with Diamed provides for
a minimum purchase of 1,000 OctoNova pumps during the period
from the date of the agreement until five years after FDA
approval, representing an aggregate commitment of
16,219,000, or
approximately $20,922,510 based on current exchange rates. Upon
completion of this offering, Diamed will beneficially own
approximately 9.5% of our common stock. Mr. Hans Stock, who
is the controlling stockholder of Diamed, is also our
stockholder and is a party to two agreements with us:






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | a patent license and royalty agreement that
    requires us to make royalty payments of 1.5% based on our sales
    of the RHEO System, with a minimum required payment of $12,500
    during each calendar quarter. Payments made under the agreement
    in the nine months ended September 30, 2004 and for the
    years ended December 31, 2003 and 2002 were $37,500,
    $50,000 and $37,500, respectively.                                                                                                                                                                                                          
|
|
|
| |  | an agreement in consideration for his assistance
    in procuring for us a distribution agreement with Asahi Medical
    and for his commitment to assist in the procurement of
    distribution rights for new product lines. The agreement
    requires us to pay royalties of 5% of the purchase price that we
    pay to Asahi Medical for all products it supplies us. Royalty
    payments made to Mr. Stock in respect of products supplied
    to us by Asahi Medical in the nine months ended
    September 30, 2004 and the years ended December 31,
    2003 and 2002 were $5,130, $9,234 and $598, respectively.
|




On February 11, 1997, Apheresis Technologies
entered into an agreement with Diamed to pay $1,000,000 for the
purpose of supporting Diameds conduct of research and
gathering of clinical data in Germany. On May 20, 1998, we
agreed to assume the obligation to make this payment. Payments
of $250,000 were made in each of December 1997 and June 1999.
The balance of $500,000 remained unpaid as at September 30,
2004 and December 31, 2003. The balance is unsecured, due
on demand and no interest is payable on the outstanding balance.







During the nine months ended September 30,
2004 and during the period between November 1, 2003 and
December 31, 2003, we paid $3,647 and $826, respectively,
to a subsidiary of TLC Vision for office space.






| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | Stock options issued in late 2003 may have
    a financial impact on future operations.




In December 2003 we issued stock options to
purchase an aggregate of 1,352,500 shares of common stock to
certain employees, directors and consultants. The exercise price
of these options was $0.99 per share. The issuance of the stock
options will result in a total charge to us of $15,905,400,
which amount reflected the intrinsic value of the options at
that time. In December 2003, we expensed $513,077. In 2004, we
expensed $1,539,231 in each of the first, second and third
quarters. Since all of the options vest upon completion of this
offering, we will expense any unamortized compensation related
to stock options, which was $10,774,630 as of September 30,
2004, in the quarter in which we complete this offering.






| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | Certain of our directors and management
    team members have been with us for only a short
    time.

Thomas P. Reeves, our President and Chief
Operating Officer, Stephen Kilmer, our Vice President, Corporate
Affairs, Julie Fotheringham, our Vice President, Marketing,
Joseph Zawaideh, our Vice President, Sales and our directors
Thomas Davidson, Jay T. Holmes, and Richard L.
Lindstrom have all served as

22



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##### Table of Contents



members of our management team for less than one
year. This poses a number of risks, including the risk that
these persons may:




| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | have limited familiarity with our past practices;                                         
|
| |  | lack experience in communicating effectively
    within the team and with other employees;
|
| |  | lack settled areas of responsibility; and                                                 
|
| |  | lack an established track record in managing our
    projected growth.                    



| |                                                                         
| | ------------------------------------------------------------------------
| | Exchange rate fluctuations may have adverse
    effects on our revenues.




A portion of our expenses are denominated in
euros and Canadian dollars. However, our revenues are
denominated in U.S. dollars. As a result, we will be exposed to
currency exchange rate risk. Our reported earnings could
fluctuate materially as a result of foreign exchange rate
fluctuations. We reported a foreign currency exchange gain of
$2,063 in the year ended December 31, 2003 and a foreign
currency exchange loss of $22,402 in the nine months ended
September 30, 2004.




23



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##### Table of Contents






FORWARD LOOKING STATEMENTS

This prospectus contains forward-looking
statements that are based on our managements beliefs and
assumptions and on information currently available to our
management. The forward looking statements are contained
principally in the sections entitled Summary,
Risk Factors, Managements Discussion and
Analysis of Financial Condition and Results of Operations
and Business. Forward-looking statements include,
but are not limited to, statements about:



| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | our successful completion of MIRA-1;                                                                            
|
|
| |  | our obtaining FDA approval to market the RHEO
    System in the United States;                                  
|
|
|
| |  | our successful building of the infrastructure and
    manufacturing capacity to market and sell the RHEO System;
|
|
| |  | our obtaining the agreement of governmental and
    third-party payors to reimburse patients for RHEO Therapy;  
|
| |  | our estimates of future revenue, costs and
    expenses, cash flow and profitability; and                       
|
| |  | our estimates regarding our capital requirements
    and our need for additional financing.                     




In some cases, you can identify forward-looking
statements by terms such as may, will,
should, could, would,
expects, plans, intends,
anticipates, believes,
estimates, projects,
predicts, potential and similar
expressions intended to identify forward-looking statements.
These statements involve known and unknown risks, uncertainties
and other factors that may cause our actual results, performance
or achievements to be materially different from any future
results, performances, time frames or achievements expressed or
implied by the forward-looking statements. Such factors include,
among other things, those listed under Risk Factors
and elsewhere in this prospectus.







Given these risks, uncertainties and other
factors, you should not place undue reliance on these
forward-looking statements. Also, these forward-looking
statements represent our estimates and assumptions only as of
the date of this prospectus. You should read this prospectus and
the documents that we reference in this prospectus and have
filed as exhibits to the registration statement, of which this
prospectus is a part, completely and with the understanding that
our actual future results may be materially different from what
we expect. We hereby qualify all of our forward-looking
statements by these cautionary statements. The forward-looking
statements contained in this prospectus are excluded from the
safe harbor protection provided by the Private Securities
Litigation Reform Act of 1995 and Section 27A of the
Securities Act of 1933, as amended.




Information regarding market and industry
statistics contained in the Summary and
Business sections of this prospectus is included
based on information available to us that we believe is
accurate. It is generally based on academic and other
publications that are not produced for purposes of securities
offerings or economic analysis. We have not reviewed or included
data from all sources and cannot assure you of the accuracy of
the market and industry data we have included.

Except as required by law, we assume no
obligation to update these forward-looking statements publicly,
or to update the reasons actual results could differ materially
from those anticipated in these forward-looking statements, even
if new information becomes available in the future.

24



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##### Table of Contents






USE OF PROCEEDS




We estimate that the net proceeds we will receive
from this offering will be approximately $44.8 million, at
an assumed public offering price of $9.00 per share, the
midpoint of the range set forth on the cover of this prospectus,
after deducting estimated underwriting discounts and commissions
payable by us and estimated offering costs. We will not receive
any proceeds from the sale of shares by the selling stockholders
in this offering.







We estimate we will use approximately
$5.3 million to $6.6 million of the net proceeds of
this offering received by us to complete our MIRA-1 trial, a
related crossover trial and additional anticipated clinical
trials and complete the FDA approval process.







We estimate we will use approximately
$17.5 million to $18.8 million of the net proceeds of
this offering received by us to build our infrastructure,
including distribution, sales and marketing, and to facilitate
the commercialization of the RHEO System if and when we receive
FDA approval. We estimate that infrastructure growth will result
in increased employee related costs of approximately
$11.0 million to $11.5 million, with related travel
and administrative costs of approximately $4.7 million to
$5.0 million. We estimate the costs of consultants to
support our infrastructure development will be approximately
$1.3 million and capital costs for office leaseholds and
home office support will be approximately $0.5 million to
$1.0 million.







We estimate we will use approximately
$9.5 million to $10.5 million of the net proceeds of
this offering received by us to purchase and accumulate
inventory of components of the RHEO System to facilitate rapid
commercialization in the United States if and when we receive
FDA approval.




We expect to use the remainder of the net
proceeds of this offering received by us for general corporate
purposes.

The amount and timing of what we actually spend
for these purposes may vary significantly and will depend on a
number of factors, including our future sales and cash generated
by operations and the other factors we describe in Risk
Factors. Therefore, we will have broad discretion in the
way we use the net proceeds from this offering received by us.




DIVIDEND POLICY

We have never declared or paid any cash dividends
on shares of our capital stock. We currently intend to retain
all available funds to support operations and to finance the
growth and development of our business. Any determination
related to payments of future dividends will be at the
discretion of our board of directors after taking into account
various factors that our board of directors deems relevant,
including our financial condition, operating results, current
and anticipated cash needs, plans for expansion and debt
restrictions.

25



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##### Table of Contents






CAPITALIZATION




The following table sets forth our capitalization
as of September 30, 2004:






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | on an actual basis;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
|
| |  | on a pro forma basis to give effect to the
    Reorganization and the expensing of the unamortized compensation
    related to stock options granted to certain employees, directors
    and consultants; and                                                                                                                                                                                                                                                                                                              
|
|
|
| |  | on a pro forma as adjusted basis, to give effect
    to (1) the Reorganization; and (2) the sale by us of
    5,600,000 shares of common stock at an assumed initial
    public offering price of $9.00 per share, the midpoint of
    the range set forth on the cover of this prospectus, resulting
    in the receipt of the estimated $44.8 million in net
    proceeds from this offering, after deducting underwriting
    discounts and commissions and estimated offering expenses
    payable by us of $2,100,000.
|




You should read this table together with our
consolidated financial statements and related notes,
Managements Discussion and Analysis of Financial
Condition and Results of Operations, the historical
financial statements for OccuLogix, L.P. and the pro forma
consolidated financial statements included elsewhere in this
prospectus.







|                                        |                                                                                                                                                                                                                                                                                             |                          |         |           |  |             |         |    |  |   |         |    | 
|--------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | ------- | --------- |  | ----------- | ------- | -- |  | - | ------- | -- | 
|                                        |                                                                                                                                                                                                                                                                                             |                         
|                                        |                                                                                                                                                                                                                                                                                             | As of September 30, 2004
|                                        |                                                                                                                                                                                                                                                                                             |                         
|                                        |                                                                                                                                                                                                                                                                                             |                          |         | Pro Forma
|                                        |                                                                                                                                                                                                                                                                                             | Actual                   |         | Pro Forma |  | As Adjusted
|                                        |                                                                                                                                                                                                                                                                                             |                          |         |           |  |            
|                                        |                                                                                                                                                                                                                                                                                             |                         
|                                        |                                                                                                                                                                                                                                                                                             | (in thousands)          
|Convertible debentures                  |                                                                                                                                                                                                                                                                                             | $                        | 5,100   |           |  | $           |        |    |  | $ |        |   
|                                        |                                                                                                                                                                                                                                                                                             |                          |         |           |  |             |         |    |  |   |         |   
|Stockholders equity (deficiency):      |                                                                                                                                                                                                                                                                                             |                          |         |           |  |             |         |    |  |   |         |   
|                                        | Common stock, $0.001 par value, 25,000,000 shares
    authorized and 5,360,275 shares issued and outstanding,
    actual; 75,000,000 shares authorized and 36,159,567 shares
    issued and outstanding, pro forma, and 41,759,567 shares issued
    and outstanding, pro forma as adjusted |                          |         | 5         |  |             |         | 36 |  |   |         | 42 | 
|                                        | Series A convertible preferred stock $0.001
    par value; 2,500,000 shares authorized and
    2,147,024 shares issued and outstanding, actual; no shares
    authorized and no shares issued and outstanding, pro forma and
    pro forma as adjusted;                                     |                          |         | 2         |  |             |         |   |  |   |         |   | 
|                                        | Series B convertible preferred stock $0.001
    par value; 2,000,000 shares authorized and 620,112 shares
    issued and outstanding, actual; no shares authorized and no
    shares issued and outstanding, pro forma and pro forma as
    adjusted                                        |                          |         | 1         |  |             |         |   |  |   |         |   | 
|Additional paid-in capital              |                                                                                                                                                                                                                                                                                             |                          | 29,735  |           |  |             | 219,113 |    |  |   | 263,879 |   
|Accumulated deficit                     |                                                                                                                                                                                                                                                                                             |                          | (34,083 | )         |  |             | (44,962 | )  |  |   | (44,962 | ) 
|                                        |                                                                                                                                                                                                                                                                                             |                          |         |           |  |             |         |    |  |   |         |   
|Total stockholders equity (deficiency) |                                                                                                                                                                                                                                                                                             | $                        | (4,340  | )         |  | $           | 174,187 |    |  | $ | 218,959 |   
|                                        |                                                                                                                                                                                                                                                                                             |                          |         |           |  |             |         |    |  |   |         |   
|Total capitalization                    |                                                                                                                                                                                                                                                                                             | $                        | 760     |           |  | $           | 174,187 |    |  | $ | 218,959 |   
|                                        |                                                                                                                                                                                                                                                                                             |                          |         |           |  |             |         |    |  |   |         |   




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DILUTION




If you invest in our common stock in this
offering, your ownership interest will be diluted to the extent
of the difference between the initial public offering price per
share and the pro forma as adjusted net tangible book value per
share of our common stock after this offering. Net tangible book
value per share as of September 30, 2004 was ($0.25), which
was determined by dividing the number of outstanding shares of
our common stock into our total tangible assets (total assets
less intangible assets) less total liabilities. Our pro forma
net tangible book value as of September 30, 2004 was
approximately $2.6 million, or approximately $0.07 per
share, based on the number of shares outstanding as of
September 30, 2004, after giving effect to the
Reorganization.







As a result of the Reorganization, we have issued
to TLC Vision shares equivalent to the number of shares
outstanding, on a fully diluted basis, immediately prior to the
Reorganization as consideration for our purchase of TLC
Visions 50% interest in OccuLogix, L.P. This resulted in
an increase in the number of shares issued to TLC Vision from
4,735,014 to 23,805,247.







After giving effect to the sale of
5,600,000 shares of common stock by us in this offering at
an assumed public offering price of $9.00 per share, the
midpoint of the range set forth on the cover page of this
prospectus, and after deducting the estimated underwriting
discounts and commissions and estimated offering expenses
payable by us, our pro forma as adjusted net tangible book value
as of September 30, 2004 would have been approximately
$47.3 million, or approximately $1.13 per share, based
on 41,759,567 shares outstanding upon the completion of
this offering. This represents an immediate increase in pro
forma as adjusted net tangible book value of $1.06 per
share to existing stockholders and an immediate dilution of
$7.87 per share to new investors participating in this
offering. The following table illustrates this per share
dilution:







|                                                                                |                                                                                 |  |   |      |  |   |      |  | 
|------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- |  | - | ---- |  | - | ---- |  | 
|Assumed initial public offering price per share                                 |                                                                                 |  |   |      |  | $ | 9.00 | 
|                                                                                | Pro forma net tangible book value per share as of
    September 30, 2004        |  | $ | 0.07 |  |   |      |  | 
|                                                                                | Increase in net tangible book value per share
    attributable to this offering |  | $ | 1.06 |  |   |      |  | 
|                                                                                |                                                                                 |  |   |      |  |   |      | 
|Pro forma as adjusted net tangible book value per
    share after this offering |                                                                                 |  |   |      |  | $ | 1.13 | 
|                                                                                |                                                                                 |  |   |      |  |   |      | 
|Dilution per share to new investors                                             |                                                                                 |  |   |      |  | $ | 7.87 | 
|                                                                                |                                                                                 |  |   |      |  |   |      | 







The following table presents, on a pro forma as
adjusted basis, as of September 30, 2004, the differences
between the number of shares of common stock purchased from us,
the total consideration paid to us and the average price per
share paid by existing stockholders and by new investors:







|                      |  |                  |            |                     |  |               |      |         |  |           |             |  |  |  |      |   |  |   |      | 
|--------------------- |  | ---------------- | ---------- | ------------------- |  | ------------- | ---- | ------- |  | --------- | ----------- |  |  |  | ---- | - |  | - | ---- | 
|                      |  |                  |            |                     |  |              
|                      |  | Shares Purchased |            | Total Consideration |  |              
|                      |  |                  |            |                     |  | Average Price
|                      |  | Number           |            | Percent             |  | Amount        |      | Percent |  | Per Share
|                      |  |                  |            |                     |  |               |      |         |  |          
|Existing stockholders |  |                  | 36,159,567 |                     |  |               | 86.6 | %       |  | $         | 219,149,173 |  |  |  | 81.3 | % |  | $ | 6.06 | 
|New investors         |  |                  | 5,600,000  |                     |  |               | 13.4 | %       |  | $         | 50,400,000  |  |  |  | 18.7 | % |  | $ | 9.00 | 
|                      |  |                  |            |                     |  |               |      |         |  |           |             |  |  |  |      |   |  |   |      | 
|Total                 |  |                  | 41,759,567 |                     |  |               | 100  | %       |  | $         | 269,549,173 |  |  |  | 100  | % |  |   |      | 
|                      |  |                  |            |                     |  |               |      |         |  |           |             |  |  |  |      |   |  |   |      | 







If all outstanding options and warrants were
exercised, shares purchased by existing stockholders would be
38,140,466 shares, or 87.2%, and by new investors would be
5,600,000 shares, or 12.8%. In addition, if all outstanding
options and warrants were exercised, total consideration paid by
existing stockholders would be $222,137,702, or 81.5% and by new
investors would be $50,400,000, or 18.5%.







Sales by the selling stockholders in this
offering will cause the number of shares of our common stock
held by existing stockholders to be reduced to 33,359,567, or
79.9% of the total number of shares of our common stock
outstanding after this offering, and will increase the total
number of shares held by new investors to 8,400,000, or 20.1% of
the total number of shares of our common stock outstanding after
this offering. If the underwriters over-allotment option
is exercised in full, the number of shares held by existing
stockholders after this offering would be reduced to 32,099,567,
or 76.9% of the total number of shares of our common stock
outstanding after this offering, and the number of shares held
by new investors would




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increase to 9,660,000, or 23.1% of the total
number of shares of our common stock outstanding after this
offering. If all options and warrants outstanding on
September 30, 2004 were exercised, pro forma net tangible
book value per share would be $0.15 and dilution to new
investors would be $7.85.





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##### Table of Contents






SELECTED CONSOLIDATED FINANCIAL DATA




You should read the selected consolidated
financial data below together with Managements
Discussion and Analysis of Financial Condition and Results of
Operations and our consolidated financial statements and
the related notes included elsewhere in this prospectus. The
following table sets forth our consolidated balance sheet data
as of December 31, 1999, 2000, 2001, 2002 and 2003 and as
of September 30, 2004, and our consolidated statements of
operations data for the years ended December 31, 1999, 2000,
2001, 2002 and 2003 and the nine months ended September 30,
2003 and 2004. We derived the selected consolidated financial
data as of December 31, 2002 and 2003 and for the years
ended December 31, 2001, 2002 and 2003 from our audited
consolidated financial statements included elsewhere in this
prospectus. In the opinion of management, the information as of
December 31, 1999, 2000 and 2001 and for the years ended
December 31, 1999 and 2000 has been prepared on the same
basis as the audited consolidated financial statements as of
December 31, 2002 and 2003 and for the years ended December
31, 2001, 2002 and 2003, appearing elsewhere in the prospectus,
and all necessary adjustments, consisting only of normal
recurring adjustments, have been included in the amounts stated
below to present fairly the results when read in conjunction
with our audited consolidated financial statements and the notes
to those statements. The selected consolidated financial data as
of September 30, 2004 and for the nine months ended
September 30, 2003 and 2004 have been derived from our
unaudited consolidated financial statements included elsewhere
in this prospectus and include all normal recurring adjustments,
which, in our opinion, are necessary for a fair presentation of
our financial position and results of operations at such date
and our results of operations for such periods. Historical
results are not necessarily indicative of the results of
operations to be expected for future periods, and interim
results may not be indicative of results for the remainder of
the year.







Our selected consolidated financial data reflects
our 50% interest in OccuLogix, L.P. Prior to this offering, we
will own 100% of OccuLogix, L.P. The selected consolidated
financial data should be read together with the historical
financial statements for OccuLogix, L.P. and with the pro
forma consolidated financial statements included elsewhere in
this prospectus.







|                                                |                                     |                                          |        |                   |  |      |        |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |     |  |   |        |       | 
|----------------------------------------------- | ----------------------------------- | ---------------------------------------- | ------ | ----------------- |  | ---- | ------ | ----- |  | ---- | ------ | ----- |  | ---- | ------ | ----- |  | - | ------ | ----- |  | - | ------ | --- |  | - | ------ | ----- | 
|                                                |                                     |                                          |        |                   |  |      |        |       |  |      |        |      
|                                                |                                     |                                          |        | Nine Months Ended
|                                                |                                     | Year Ended December 31,                  |        | September 30,    
|                                                |                                     |                                          |        |                  
|                                                |                                     | 1999                                     |        | 2000              |  | 2001 |        | 2002  |  | 2003 |        | 2003  |  | 2004
|                                                |                                     |                                          |        |                   |  |      |        |       |  |      |        |       |  |     
|                                                |                                     |                                         
|                                                |                                     | (in thousands, except per share amounts)
|Consolidated Statements of Operations
    Data: |                                     |                                          |        |                   |  |      |        |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |     |  |   |        |      
|Revenues from related party                     |                                     | $                                        |       |                   |  | $    |       |       |  | $    |       |       |  | $    | 94     |       |  | $ | 390    |       |  | $ | 360    |     |  | $ | 189    |      
|                                                |                                     |                                          |        |                   |  |      |        |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |     |  |   |        |      
|Revenues from third parties                     |                                     |                                          | 272    |                   |  |      |       |       |  |      |       |       |  |      |       |       |  |   |       |       |  |   |       |     |  |   |       |      
|                                                |                                     |                                          |        |                   |  |      |        |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |     |  |   |        |      
|Total revenues                                  |                                     |                                          | 272    |                   |  |      |       |       |  |      |       |       |  |      | 94     |       |  |   | 390    |       |  |   | 360    |     |  |   | 189    |      
|                                                |                                     |                                          |        |                   |  |      |        |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |     |  |   |        |      
|                                                | Cost of goods sold to related party |                                          |        |                  |  |      |        |      |  |      |        |      |  |      |        | 81    |  |   |        | 373   |  |   |        | 350 |  |   |        | 184   | 
|                                                | Cost of goods sold to third parties |                                          |        | 139               |  |      |        |      |  |      |        |      |  |      |        |      |  |   |        |      |  |   |        |    |  |   |        |      | 
|                                                | Royalty costs                       |                                          |        | 478               |  |      |        | 6     |  |      |        |      |  |      |        | 78    |  |   |        | 109   |  |   |        | 84  |  |   |        | 80    | 
|                                                |                                     |                                          |        |                   |  |      |        |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |     |  |   |        |      
|Gross margin (loss)                             |                                     |                                          | (345   | )                 |  |      | (6     | )     |  |      |       |       |  |      | (65    | )     |  |   | (92    | )     |  |   | (74    | )   |  |   | (75    | )    
|Operating expenses                              |                                     |                                          |        |                   |  |      |        |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |     |  |   |        |      
|                                                | General and administrative          |                                          |        | 1,631             |  |      |        | 1,373 |  |      |        | 911   |  |      |        | 449   |  |   |        | 1,565 |  |   |        | 681 |  |   |        | 5,677 | 
|                                                | Clinical and regulatory             |                                          |        | 1,836             |  |      |        | 3,202 |  |      |        | 1,873 |  |      |        | 1,447 |  |   |        | 731   |  |   |        | 320 |  |   |        | 2,092 | 
|                                                | Sales and marketing                 |                                          |        |                  |  |      |        |      |  |      |        |      |  |      |        |      |  |   |        |      |  |   |        |    |  |   |        | 22    | 
|                                                |                                     |                                          |        |                   |  |      |        |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |     |  |   |        |      
|                                                |                                     |                                          | 3,467  |                   |  |      | 4,575  |       |  |      | 2,784  |       |  |      | 1,896  |       |  |   | 2,296  |       |  |   | 1,001  |     |  |   | 7,791  |      
|Other (expenses) income                         |                                     |                                          | 67     |                   |  |      | (709   | )     |  |      | (1,342 | )     |  |      | (921   | )     |  |   | (82    | )     |  |   | (35    | )   |  |   | (29    | )    
|                                                |                                     |                                          |        |                   |  |      |        |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |     |  |   |        |      
|Earnings (loss) from discontinued operations    |                                     |                                          |       |                   |  |      | (15    | )     |  |      | 67     |       |  |      |       |       |  |   |       |       |  |   |       |     |  |   |       |      
|Net loss for the period                         |                                     | $                                        | (3,745 | )                 |  | $    | (5,305 | )     |  | $    | (4,059 | )     |  | $    | (2,882 | )     |  | $ | (2,470 | )     |  | $ | (1,110 | )   |  | $ | (7,895 | )    
|                                                |                                     |                                          |        |                   |  |      |        |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |     |  |   |        |      




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|                                                                                         |  |                         |       |                   |  |      |       |      |  |      |       |      |  |      |       |   |  |   |       |   |  |   |       |   |  |   |       |  
|---------------------------------------------------------------------------------------- |  | ----------------------- | ----- | ----------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ----- | - |  | - | ----- | - |  | - | ----- | -
|                                                                                         |  |                         |       |                   |  |      |       |      |  |      |       |     
|                                                                                         |  |                         |       | Nine Months Ended
|                                                                                         |  | Year Ended December 31, |       | September 30,    
|                                                                                         |  |                         |       |                  
|                                                                                         |  | 1999                    |       | 2000              |  | 2001 |       | 2002 |  | 2003 |       | 2003 |  | 2004
|                                                                                         |  |                         |       |                   |  |      |       |      |  |      |       |      |  |     
|Per Share Data:                                                                          |  |                         |       |                   |  |      |       |      |  |      |       |      |  |      |       |   |  |   |       |   |  |   |       |   |  |   |       |  
|Loss per share from continuing
    operations  basic and diluted                        |  | $                       | (1.04 | )                 |  | $    | (1.47 | )    |  | $    | (1.15 | )    |  | $    | (0.77 | ) |  | $ | (0.62 | ) |  | $ | (0.28 | ) |  | $ | (1.54 | )
|Earnings per share from discontinued operations                                          |  |                         |      |                   |  |      |      |      |  |      | 0.02  |      |  |      |      |   |  |   |      |   |  |   |      |   |  |   |      |  
|                                                                                         |  |                         |       |                   |  |      |       |      |  |      |       |      |  |      |       |   |  |   |       |   |  |   |       |   |  |   |       |  
|Net loss per share                                                                       |  | $                       | (1.04 | )                 |  | $    | (1.47 | )    |  | $    | (1.13 | )    |  | $    | (0.77 | ) |  | $ | (0.62 | ) |  | $ | (0.28 | ) |  | $ | (1.54 | )
|                                                                                         |  |                         |       |                   |  |      |       |      |  |      |       |      |  |      |       |   |  |   |       |   |  |   |       |   |  |   |       |  
|Weighted average number of shares used in per
    share calculations  basic and diluted |  |                         | 3,603 |                   |  |      | 3,603 |      |  |      | 3,603 |      |  |      | 3,735 |   |  |   | 3,977 |   |  |   | 3,905 |   |  |   | 5,143 |  







|                                                                   |  |                    |         |               |  |      |         |      |  |      |         |      |  |   |         |   |  |   |         |   |  |   |         |  
|------------------------------------------------------------------ |  | ------------------ | ------- | ------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                   |  |                    |         |              
|                                                                   |  | As of December 31, |         | As of        
|                                                                   |  |                    |         | September 30,
|                                                                   |  | 1999               |         | 2000          |  | 2001 |         | 2002 |  | 2003 |         | 2004
|                                                                   |  |                    |         |               |  |      |         |      |  |      |         |     
|                                                                   |  |                   
|                                                                   |  | (in thousands)    
|Consolidated Balance
    Sheet Data:                               |  |                    |         |               |  |      |         |      |  |      |         |      |  |   |         |   |  |   |         |   |  |   |         |  
|Cash                                                               |  | $                  | 194     |               |  | $    | 83      |      |  | $    | (8      | )    |  | $ | 602     |   |  | $ | 1,237   |   |  | $ | 767     |  
|Working capital (deficiency)                                       |  |                    | (64     | )             |  |      | (834    | )    |  |      | (2,848  | )    |  |   | (1,780  | ) |  |   | (2,538  | ) |  |   | (6,254  | )
|Total assets                                                       |  |                    | 503     |               |  |      | 1,135   |      |  |      | 768     |      |  |   | 1,038   |   |  |   | 1,868   |   |  |   | 3,952   |  
|Long-term debt (including current portion due to
    stockholders) |  |                    | 2,215   |               |  |      | 5,220   |      |  |      | 7,820   |      |  |   | 1,507   |   |  |   | 3,694   |   |  |   | 6,209   |  
|Total liabilities                                                  |  |                    | 2,599   |               |  |      | 6,321   |      |  |      | 9,526   |      |  |   | 2,693   |   |  |   | 4,134   |   |  |   | 8,293   |  
|Common stock                                                       |  |                    | 4       |               |  |      | 4       |      |  |      | 4       |      |  |   | 4       |   |  |   | 5       |   |  |   | 5       |  
|Series A preferred stock                                           |  |                    | 1       |               |  |      | 1       |      |  |      | 1       |      |  |   | 2       |   |  |   | 2       |   |  |   | 2       |  
|Series B preferred stock                                           |  |                    |        |               |  |      |        |      |  |      |        |      |  |   | 1       |   |  |   | 1       |   |  |   | 1       |  
|Additional paid-in capital                                         |  |                    | 9,150   |               |  |      | 11,415  |      |  |      | 11,839  |      |  |   | 22,057  |   |  |   | 23,915  |   |  |   | 29,735  |  
|Accumulated deficit                                                |  |                    | (11,251 | )             |  |      | (16,606 | )    |  |      | (20,602 | )    |  |   | (23,718 | ) |  |   | (26,188 | ) |  |   | (34,083 | )
|Total stockholders deficiency                                     |  |                    | (2,096  | )             |  |      | (5,186  | )    |  |      | (8,759  | )    |  |   | (1,655  | ) |  |   | (2,266  | ) |  |   | (4,340  | )




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MANAGEMENTS DISCUSSION AND ANALYSIS
OF

FINANCIAL CONDITION AND RESULTS OF
OPERATIONS


The following discussion and analysis of our
financial condition and results of operations should be read in
conjunction with Selected Consolidated Financial
Data and our consolidated financial statements and related
notes, included elsewhere in this prospectus. In addition to
historical consolidated financial information, the following
discussion and analysis contains forward looking statements that
involve risks, uncertainties and assumptions. The forward
looking statements contained in this prospectus are excluded
from the safe harbor protection provided by the Private
Securities Litigation Reform Act of 1995 and Section 27A of
the Securities Act of 1933, as amended. Our financial condition
and results of operations may change as a result of many
factors, including those we discuss in Risk Factors
and elsewhere in this prospectus.

Overview




We are an ophthalmic therapeutic company founded
to commercialize innovative treatments for eye diseases,
including AMD. The RHEO System is used to perform Rheopheresis,
a procedure that selectively removes molecules from plasma,
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 RHEO
System. In September 1999, we received an Investigational Device
Exemption from the FDA to begin a pivotal clinical trial,
MIRA-1, for the RHEO 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.







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 RHEO System in
three clinics in Canada.







In September 2004, we signed an agreement with
Rheo Therapeutics Inc., a private Canadian company, which has
agreed to purchase approximately 8,000 treatment sets, and an
estimated 20 OctoNova pumps by the end of 2005, with an
option to purchase up to an additional 2,000 treatment sets,
subject to availability. We believe that Rheo Therapeutics plans
to open a number of commercial treatment centers in various
Canadian cities where RHEO Therapy will be performed.
Dr. Jeffrey Machat, who is an investor in and one of the
directors of Rheo Therapeutics, was a co-founder and former
director of TLC Vision.







As of November 12, 2004, we have enrolled a
total of 161 patients in MIRA-1. We have collected complete
12-month post-treatment data sets for 85 of these patients. Of
the remaining 76 patients, 63 are in the process of
treatment or follow-up and the treatment of 13 patients did
not result in complete data sets. We are seeking to enroll an
additional 19 patients in MIRA-1 with the goal of enrolling
a total of 180 patients, from which we intend to derive the
required 150 complete 12-month post-treatment data sets. We
are seeking to complete enrollment for MIRA-1 by the end of
2004. We intend to submit to the FDA the first three of four
modules of the PMA filing, the non-clinical portion, before the
end of 2004. We intend to submit the fourth module, which
consists of the follow-up clinical data, in two components. We
expect that we will submit the first component following
completion of our six-month data on at least 150 data sets,
including the 12-month data sets for all patients for whom it is
available; and that we will submit the second component
following completion of our 12-month data on at least
150 data sets.




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Revenues




To date, we have derived the majority of our
revenues from sales of the OctoNova pump and disposable
treatment sets, which include two disposable filters and tubing,
to OccuLogix, L.P., which then sells the pumps and treatment
sets to three clinics in Canada, one of which is a related
party, RHEO Clinic Inc., a subsidiary of TLC Vision.
Historically, we set sales prices at a level which would
reimburse our cost of sales excluding the effects of ongoing
minimum royalty commitment costs. Following the Reorganization,
we expect that we will derive our revenues from sales of the
OctoNova pump and disposable treatment sets directly to RHEO
Clinic Inc., and to other commercial providers of RHEO Therapy
in Canada. We believe that, in the future, sales of disposable
treatment sets will provide a recurring source of revenue and
that the percentage of our revenues that we derive from
disposable treatment sets will increase over time as our
installed base of OctoNova pumps increases. We also expect to
derive additional revenues from miscellaneous services for
calibration, maintenance and training, which are not already
included in the initial sale and service of the RHEO System.







OccuLogix, L.P.s primary customer is RHEO
Clinic Inc., a subsidiary of TLC Vision, for which OccuLogix,
L.P. has reported revenues of $343,564, $409,685, $459,730 and
$0 for the nine months ended September 30, 2004 and 2003
and the years ended December 31, 2003 and 2002,
respectively. RHEO Clinic uses the RHEO System to treat
patients, for which it charges its customers (the patients) a
per-treatment fee. RHEO Clinic has advised us that the OctoNova
pumps purchased from OccuLogix, L.P. are capitalized as fixed
assets to be depreciated over a period of five years on a
straight line basis and the treatment sets are disposed of after
each treatment and expensed as a cost of sale. RHEO Clinic has
further advised us that all of its revenues, in Canadian
dollars, of $507,834, $662,702, $836,696 and $0 for the nine
months ended September 30, 2004 and 2003 and the years
ended December 31, 2003 and 2002, respectively, are derived
from sales to unrelated third parties. The revenues reported
from RHEO Clinic are unaudited and have not been independently
verified by us. However, management believes the amounts to be
accurate.




Cost of Sales




Cost of sales includes costs of goods sold and
royalty costs. Our cost of goods sold consists primarily of
costs for the manufacture of the RHEO System, including the
costs we incur for the purchase of component parts from our
suppliers, applicable freight and shipping costs, fees related
to warehousing, logistics inventory management and recurring
regulatory costs associated with conducting business in Canada
and ISO certification. We currently have a contract with a
related party which performs warehousing, shipping and inventory
management for us in exchange for a fee. This contract permits
us to terminate the contract upon notice at any time. We expect
that we will terminate this contract once we have the necessary
infrastructure to perform such functions internally.







To acquire the necessary licensing and
distribution rights for the components of the RHEO System, we
have entered into agreements with Mr. Hans Stock and
Dr. Richard Brunner, the owners of a patent that we
license, that require us to pay them an aggregate of 2% of sales
of the products we sell, with minimum required payments to
Mr. Stock and Dr. Brunner in the aggregate amount of
$25,000 during each calendar quarter. This resulted in royalty
payments for the nine months ended September 30, 2004 and
the years ended December 31, 2003 and 2002 of $75,000,
$100,000 and $75,000, respectively. To date, the minimum
required quarterly payments have exceeded the amounts that would
have been payable absent the requirement of a minimum payment,
and we are entitled to apply this excess in future periods if
and when our revenue increases sufficiently to generate royalty
payments in excess of the minimum payments. We treat these
minimum royalty payments as an expense. We intend to use a
portion of the net proceeds of this offering to accumulate
inventory levels to help ensure our ability to meet forecasted
sales levels if and when we obtain FDA approval. As a result of
the expected increase in sales, we expect royalty payments to
increase in the future.







We have entered into an agreement with
Mr. Stock in consideration for assisting us in procuring a
distribution agreement with Asahi Medical relating to the
filters used in the RHEO System and for his commitment to assist
in the procurement of distribution rights for new product lines.
This agreement with




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Mr. Stock requires us to pay royalties of 5%
of the price we pay to Asahi Medical for all products it
supplies to us. We record these royalties as an expense when we
sell the products. Royalty expenses incurred as a result of this
agreement in the nine months ended September 30, 2004 and
years ended December 31, 2003 and 2002 were $5,130, $9,234
and $598, respectively.





Operating Expenses

Our operating expenses consist primarily of
clinical and regulatory expenses and general and administrative
expenses. Clinical and regulatory expenses consist primarily of
those expenses related to MIRA-1. These expenses include
payments to clinical trial sites for conducting the trial, costs
of contract research organization and other non-employee
consultants and experts and compensation and overhead for those
of our employees who are primarily involved in clinical trial
activities. We expect clinical and regulatory expenses to remain
relatively constant until MIRA-1 and the related clinical trials
are complete.




General and administrative expenses consist
primarily of the costs of corporate operations and personnel,
rent and legal and accounting expenses. As of October, 2004, we
had 17 full-time employees. We expect that general and
administrative expenses will increase in the future as we incur
additional costs related to the growth of our business, as well
as the costs associated with becoming a public company,
including the costs of annual and periodic reporting and
investor relations programs. General and administrative expenses
also include the cost of 1,352,500 stock options granted to
seven employees, five directors and three consultants in
December 2003 at an exercise price of $0.99, the intrinsic value
of which management estimated to be $15,905,400. The value of
the options is being expensed over the vesting period with a
monthly charge to general and administrative expenses of
$513,077. In December 2003, we expensed $513,077. In 2004, we
expensed $1,539,231 in each of the first, second and third
quarters. We will expense the remainder of $10,774,630 during
the period in which we complete this offering. Of these stock
options, 500,000 options were granted to Elias Vamvakas,
300,000 options were granted to Irving Siegel, 100,000
options were granted to William Dumencu and 80,000 options
were granted to David Eldridge. 372,500 options were
granted to other employees, directors and consultants.
Management estimated the intrinsic value of these options based
on a range of then expected offering prices of our initial
public offering. Management expects to issue stock options in
the future to compensate and attract employees and directors.







Historically, we have not incurred any sales and
marketing expense because we have had limited commercialization
and because recent sales have been to OccuLogix, L.P. In
September 2004, we hired two full-time employees to begin
establishing sales and marketing efforts to promote the use of
the RHEO System in Canada and, upon FDA approval, in the United
States. We expect to begin incurring sales and marketing
expenses following the Reorganization and we expect these
expenses to increase substantially in the future.




Other (Expenses) Income

Other (expenses) income consists primarily of
interest, foreign exchange and a 50% share of equity earnings
from OccuLogix, L.P.s activities. Interest expense
includes interest on convertible debentures and promissory
notes, interest on amounts due to stockholders and the accretion
of the value we assign to our outstanding warrants.

Results of Operations




The components of the RHEO System have been given
regulatory approval in Canada. Our sole customer, OccuLogix,
L.P., is actively commercializing the sale of the RHEO System in
Canada. Currently the cost of the treatments in Canada is not
covered by third parties such as insurance companies or
government health programs. As a result, sales levels have
remained modest. We intend to pursue reimbursement of the
treatment in Canada but believe that it will be necessary that
both FDA approval of the RHEO System and a National Coverage
Decision to reimburse patients for RHEO Therapy treatments be
obtained before we will be successful in obtaining reimbursement
in Canada.







At September 30, 2004, we had 1,943,399
options outstanding, of which 1,352,500 were issued in
December 2003, which is within twelve months of our most
recent balance sheet date, and which have been




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accounted for based on their intrinsic value as
determined based on a range of the then expected price of our
initial public offering. While we believe that the exercise
price of these options was based on fair value at the time of
grant, we understand that the SEC has provided guidance which
suggests that options issued within twelve months of an initial
public offering should be retrospectively accounted for using
the intrinsic value unless supported by significant third party
transactions.








The original value assigned to the options in
December 2003 was consistent with the price used in the
conversion of the Asahi Medical note to common stock at $0.98502
per share on November 30, 2003. It was also consistent with
the price used in a subsequent offering to existing investors
under our Investor Rights Agreement which provided an
opportunity for our stockholders to maintain their ownership
percentages subsequent to the Asahi Medical conversion. The
$0.98502 per share price was established based on the pricing of
our June 2003 agreement with TLC Vision and Diamed to fund
$7.0 million in convertible debt. Discussions with Asahi
Medical were ongoing at the time of the TLC Vision and Diamed
transaction and we established a price that remained constant
until the Asahi Medical note conversion occurred in November
2003. During the intervening period from June 2003 to November
2003, we did not experience any significant changes in our
operations, including but not limited to our efforts related to
clinical and regulatory activities which would have generated
increased share value.







We believe that prior to 2004 there was no
progression in the value of the common stock. In early 2004,
enrollment in the MIRA-1 clinical trial increased which in turn
resulted in analysts following TLC Vision to ascribe increasing
value in analysts reports to the investment by TLC Vision in us.
In March 2004, we began discussions with underwriters about the
current offering process. Continued enrolment in MIRA-1 and the
related clinical trials, expansion of the management team, a
signed sales agreement for Canadian clinics and a greater
acceptance of RHEO Therapy have had an impact on the value
ascribed to us in this offering.




The exercise price of stock options issued prior
to 2003 was based on our most recent financing transactions. We
consider these transactions to be indicative of fair value of
our common stock.




The options granted in December 2003 have an
intrinsic value of $15,905,400, which would decrease to
$10,833,525 based on the mid-point of our current estimated
initial public offering price range. The remaining 590,899
options outstanding were not accounted for based on their
intrinsic value and the estimated fair value for these options
as based on the mid-point of our current estimated offering
range is $5,318,091.







Significantly impacting the results of operations
is the issuance of 1,352,500 options in December 2003 at an
exercise price of $0.99, of which 657,500 were issued to
employees, 600,000 were issued to directors and 95,000 were
issued to consultants. We estimated the intrinsic value of these
stock options to be $15,905,400, to be expensed over the
31 month vesting period at $513,077 per month starting
in the month of December 2003. Management estimated the
intrinsic value of these options based on a range of then
expected offering prices of our initial public offering.







Subsequent to the transaction in June 2003 in
which TLC Vision and Diamed agreed to invest a combined
$7.0 million in convertible debentures and
$5.0 million in non-convertible debentures issued by us, we
increased our efforts to complete the MIRA-1 clinical trial,
resulting in increased clinical trial costs in the second half
of 2003 as new trial sites were established. Clinical trial
costs increased further in the first half of 2004 as these trial
sites started incurring costs for the screening and enrollment
of patients. The total potential funding of $12.0 million
from TLC Vision and Diamed represented the forecasted costs to
complete the MIRA-1, associated crossover clinical trials and
associated corporate overhead costs. Enrollment in the MIRA-1
clinical trial had fully resumed by June 30, 2004, with a
goal of achieving enrollment of the remaining patients by
December 2004. We are planning to use approximately
$5.3 million to $6.6 million of the proceeds of this
offering to complete the MIRA-1 trial, a related crossover trial
and additional anticipated clinical trials.







Following the Reorganization, we expect revenues
to increase to reflect direct sales to clinics using the RHEO
System, while cost of sales is expected to remain materially
unchanged. Clinical and regulatory expenses will not be impacted
by the Reorganization but general and administrative expenses
will increase,




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reflecting the creation of the organizational
structure necessary for the commercialization process. We will
also begin to incur sales and marketing expenses related to
establishing sales and marketing efforts to promote the use of
the RHEO System in Canada and, upon FDA approval, in the United
States.








Nine Months
Ended September 30, 2004 and 2003







Revenues.Revenues decreased by 47% to
$189,373 for the nine months ended September 30, 2004
from $360,239 for the nine months ended September 30,
2003. This decrease was due to lower patient volumes in the
first half of 2004 which we principally attribute to the impact
of the SARS outbreak in Toronto in 2003. As a result of the
outbreak, we believe our customers Toronto-based clinics
experienced a decline in patient volumes and accumulated excess
inventory in the second half of 2003 and therefore reduced their
orders in early 2004. In the third quarter of 2004, our
customers Toronto-based clinics increased their orders as
patient volumes increased. OccuLogix, L.P. had revenues and
net profit of $453,164 and $16,845, respectively, for the
nine months ended September 30, 2004 and revenues and
net profit of $414,185 and $36,137, respectively, for the
nine months ended September 30, 2003.







Cost of Sales.Cost of sales decreased by 39% to
$264,439 for the nine months ended September 30, 2004
from $434,125 for the nine months ended September 30,
2003, as a result of the decrease in sales in the period.







General and Administrative Expenses.General and administrative
expenses increased by 734% to $5,676,639 for the
nine months ended September 30, 2004 from $680,585 for
the nine months ended September 30, 2003. This increase
resulted primarily from the requirement to expense the intrinsic
value of options granted in December 2003 over the 31 month
vesting period of these options. Management estimated the
intrinsic value of these options to be $15,905,400 which
resulted in a monthly expense of $513,077 over the vesting
period of these options. The expense for the nine months ended
September 30, 2004 was $4,617,693, with no comparable
expense for the nine months ended September 30, 2003. These
options fully vest upon an initial public offering, at which
time any unamortized intrinsic value is to be fully expensed.
Employee and related travel costs increased 36% to $454,660 for
the nine months ended September 30, 2004 from $334,194 for
the nine months ended September 30, 2003 as a result of our
having received sufficient additional funding at the end of the
first half of 2003 to fully resume operations and the hiring of
new employees in 2004. Expenses related to the hiring of
professionals increased 115% to $425,037 for the nine months
ended September 30, 2004 from $197,456 for the nine months
ended September 30, 2003, due primarily to costs related to
the audit process.







Clinical and Regulatory Expenses.Clinical and regulatory expenses
increased by 554% to $2,092,466 for the nine months ended
September 30, 2004 from $319,882 for the nine months ended
September 30, 2003, as a result of increased activities
associated with MIRA-1. We increased our activities as a result
of additional funding we have received from TLC Vision and
Diamed since July 2003.







Sales and Marketing Expenses.Sales and marketing expenses were
$22,454 for the nine months ended September 30, 2004 with
no comparable expense for the nine months ended
September 30, 2003. In the third quarter of 2004, we hired
new employees to begin establishing sales and marketing efforts
to promote the use of the RHEO System in Canada and, upon FDA
approval, in the United States.







Other (Expenses) Income.Other (expenses) income totaled an
expense of $28,532 for the nine months ended September 30,
2004, a decrease of 19% from an expense of $35,386 for the nine
months ended September 30, 2003. This change was due
primarily to a 79% decrease in net interest expense to $12,130
in the nine months ended September 30, 2004 from $56,371 in
the nine months ended September 30, 2003 due to the
conversion of certain debt into common stock. This decrease was
partially offset by the net reduction in the equity income from
our investment in OccuLogix, L.P. from $15,569 for the nine
months ended September 30, 2003 to $0 for the nine months
ended September 30, 2004 due to OccuLogix, L.P.s
cumulative loss to September 30, 2004 of $8,431. Also,
foreign currency exchange loss was $22,402 for the nine months
ended September 30, 2004, as compared to a foreign exchange
gain of $2,063 for the nine months ended September 30, 2003
due to foreign exchange rate fluctuations.




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Years Ended
December 31, 2003 and 2002

Revenues.Revenues increased by 315% to
$390,479 for the year ended December 31, 2003 from $94,100
for the year ended December 31, 2002 reflecting the first
full year of our commercial sales subsequent to the closure of
the Rheotherapy Center in the United States in 1999. Revenues in
the second half of 2003 of $30,240 were substantially lower than
first half 2003 revenues of $360,239. We believe this decrease
resulted from the outbreak of SARS in Toronto which caused our
customers Toronto-based clinics to experience a decline in
patient volumes. This caused our customers to accumulate excess
inventory in the second half of 2003 due to fixed ordering
commitments. As a consequence, our customers reduced orders in
early 2004 to reduce inventory. OccuLogix, L.P.s revenues
and net loss increased to $486,394 and $20,308, respectively,
for the year ended December 31, 2003, from revenues and a
net loss of $0 and $5,068, respectively, for the period ended
December 31, 2002.

Cost of Sales.Cost of sales increased by 204% to
$482,780 for the year ended December 31, 2003 from $158,694
for the year ended December 31, 2002. This increase was due
to an increase in the number of treatment sets sold and a
resulting increase in the amount of royalty payments paid.




General and Administrative Expenses.General and administrative
expenses increased by 249% to $1,564,362 for the year ended
December 31, 2003 from $448,856 for the year ended
December 31, 2002. This increase resulted primarily from
the requirement to expense the intrinsic value of options
granted in December 2003 over the 31 month vesting period
of these options. Management estimated the total intrinsic value
of these options to be $15,905,400, resulting in an additional
expense of $513,077 for the month of December 2003, representing
one month in which this expense was incurred in 2003. There was
no comparable expense for the year ended December 31, 2002.
These options fully vest upon an initial public offering at
which time any unamortized intrinsic value would be fully
expensed. Employee and related travel costs increased 131% to
$468,000 for the year ended December 31, 2003 from $203,000
for the year ended December 31, 2002 reflecting the receipt
of sufficient funding in the second half of 2002 and the end of
the first half of 2003 to fully resume operations. Expenses
related to the hiring of professionals increased 307% to
$374,000 for the year ended December 31, 2003 from $92,000
for the year ended December 31, 2002 due to the increased
costs of finance support and audit fees not incurred in 2002 and
increased legal costs incurred to reestablish agreements, review
and adjust as required existing contracts and address
operational legal issues. Director fees, which include the
amortization of vesting options granted to directors, increased
42% to $98,000 for the year ended December 31, 2003 from
$69,000 for the year ended December 31, 2002 due to the
resumption of reimbursement of directors in the second half of
2003. Administrative costs increased 35% to $100,000 for the
year ended December 31, 2003 from $74,000 for the year
ended December 31, 2002 reflecting the receipt of
sufficient funding in the second half of 2002 and the end of the
first half of 2003 to fully resume operations.




Clinical and Regulatory Expenses.Clinical and regulatory expenses
decreased by 49% to $731,166 in the year ended December 31,
2003 from $1,446,662 for the year ended December 31, 2002.
This reflects a decrease in clinical trial activity as a result
of reduced available funding for MIRA-1.

Other (Expenses) Income.Other (expenses) income, decreased
by 91% to an expense of $82,059 for the year ended
December 31, 2003 from an expense of $921,485 for the year
ended December 31, 2002. This decrease was primarily due to
lower interest expense as a result of the conversion of certain
convertible debentures into convertible preferred stock.




Years Ended
December 31, 2002 and 2001




Revenues.Revenues increased to $94,100 for
the year ended December 31, 2002 from $0 for the year ended
December 31, 2001, due to the commencement of commercial
activities in July 2002. OccuLogix, L.P. was formed on
July 25, 2002. Revenues and net loss for the period from
July 25, 2002 to December 31, 2002, was $0 and $5,068,
respectively.

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Cost of Sales.Cost of sales increased to
$158,694 for the year ended December 31, 2002 from $0 for
the year ended December 31, 2001, due to the commencement
of sales activities in July 2002 and the resulting related
royalty payments.

General and Administrative Expenses.General and administrative
expenses decreased by 51% to $448,856 for the year ended
December 31, 2002 from $911,100 for the year ended
December 31, 2001, primarily due to a reduction of employee
and related travel costs of 69% to $203,000 for the year ended
December 31, 2002 from $645,000 for the year ended
December 31, 2001. The reduced employee and related travel
costs reflect the reduction in staffing levels from ten
employees to one in August 2001 as a result of reduced available
funding. Staffing levels did not increase again until August
2002 when sufficient additional funding was raised to increase
clinical trial activities. Remaining general and administrative
costs decreased 8% to $246,000 for the year ended
December 31, 2002 from $266,000 for the year ended
December 31, 2001 in line with the reduced available funds.

Clinical and Regulatory Expenses.Clinical and regulatory expenses
decreased by 23% to $1,446,662 in the year ended
December 31, 2002 from $1,873,223 for the year ended
December 31, 2001. This was caused by a decrease in
clinical trial activity as a result of reduced available funding
during the first half of 2002.

Other (Expenses) Income.Other (expenses) income decreased
by 31% to an expense of $921,485 for the year ended
December 31, 2002 from an expense of $1,342,303 for the
year ended December 31, 2001, due to lower interest expense
as a result of the conversion of certain convertible debentures
into convertible preferred stock.

Liquidity and Capital Resources

Since inception, we have funded our operations
through private placements of our equity securities and through
borrowings from financial institutions and others.




Cash at September 30, 2004 was
$0.8 million. To date we have used the largest portion of
our cash to finance the ongoing costs of the MIRA-1 clinical
trial, as well as losses generated by our operations. In the
future, we expect that we will continue to use our cash
resources to fund losses generated by our operations, to conduct
the MIRA-1 clinical trial, to accumulate inventory, to undertake
other commercialization activities and to treat placebo patients
from the MIRA-1 clinical trial.







Since July 2003, we have used the monthly
combined funding received from TLC Vision and Diamed of up to
$350,000 in connection with our issuance of convertible
debentures to fund current clinical trial activities. Our sole
customer, OccuLogix, L.P., has recently experienced cash
constraints resulting from its decreased sales, which has
resulted in an increase in our amounts due from related parties.
Despite declining sales, we continue to maintain our level of
orders in line with supplier expectations, resulting in
increased levels of inventory. We have reported an increased
level of prepaid expenses in 2003 and 2004, representing advance
payments to our participating MIRA-1 clinical research
organization and clinical trial sites, and to insurance
providers.




As a result of increased funding in 2003 and 2004
from our convertible debenture transaction with TLC Vision and
Diamed, we have been able to reduce our accounts payable and we
continue to keep payments current to maintain positive supplier
relationships. Expense accruals are increasing as a result of
higher levels of clinical trial activity and costs associated
with this offering.




We have incurred losses since inception and have
had a working capital deficiency in each of the last three
years. As a result, we require additional funding to continue
our operations. TLC Vision and Diamed have agreed to fund the
remaining $1,900,000 available as of September 30,
2004 for borrowing under the convertible debentures prior to the
closing of this offering. The convertible debentures require
that these funds be used to complete MIRA-1 and related clinical
trials. As indicated in the independent registered public
accounting firms report included in this prospectus, our
financial condition and history of losses has caused our
auditors to express doubt as to whether we will be able to
continue as a going concern. Management believes that the
receipt of the funds available for borrowing under the
convertible debentures and the




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estimated net proceeds of $44.8 million to
be received from this offering, at an assumed offering price of
$9.00 per share, the midpoint of the range set forth on the
cover of this prospectus, after deducting estimated underwriting
discounts and commissions payable by us and estimated offering
costs, will generate sufficient funds for our operations and
other demands and commitments until the latter half of 2006.








We are planning on using approximately
$17.5 million to $18.8 million of the proceeds of this
offering to build our organizational structure to prepare for
commercialization in the United States, approximately
$5.3 million to $6.3 million to complete the MIRA-1
clinical trial and related trials and approximately
$9.5 million to $10.5 million to purchase and
accumulate an inventory of components of the RHEO System to
facilitate the rapid commercialization of the RHEO System in the
United States if and when we receive FDA approval. The use of
funds will be impacted by any delay in the completion of the
MIRA-1 trial which would result in a corresponding delay in our
commercialization efforts in the United States.




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, including the factors discussed in the Risk
Factors section of this prospectus. 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 MIRA-1;                                                                          
|
|
| |  | our ability to obtain FDA approval to market and
    sell the RHEO System and the timing of such approval;                 
|
|
| |  | whether government and third-party payors agree
    to reimburse RHEO Therapy;                                             
|
| |  | the cost and timing of building the
    infrastructure and manufacturing capacity to market and sell the
    RHEO System;  
|
| |  | the costs of filing, prosecuting, defending and
    enforcing any patent claims and other intellectual property
    rights;
|
| |  | the costs of establishing sales, marketing and
    distribution capabilities; and                                          
|
| |  | the effect of competing technological and market
    developments.                                                         




Even if we receive regulatory approval for the
RHEO System, we will not have significant product revenue until
late 2006, at the earliest. Until we can generate a sufficient
amount of product revenue, we expect to finance future cash
needs through public or private equity offerings, debt
financings, corporate collaboration or licensing arrangements or
other arrangements, as well as through interest income earned on
cash balances. 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, and 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, reduce the scope of or eliminate some of our
commercialization efforts.







The following table summarizes our contractual
commitments as of September 30, 2004 and the effect those
commitments are expected to have on liquidity and cash flow in
future periods.







|                                          |  |       |           |                        |  |              |         |           |  |   |         |  |  |   |         | 
|----------------------------------------- |  | ----- | --------- | ---------------------- |  | ------------ | ------- | --------- |  | - | ------- |  |  | - | ------- | 
|                                          |  |       |           |                       
|                                          |  |       |           | Payments Due by Period
|                                          |  |       |           |                       
|                                          |  |       |           | Less than              |  |              |         | More than
|Contractual Commitments                   |  | Total |           | 1 year                 |  | 1 to 3 years |         | 3 years  
|                                          |  |       |           |                        |  |              |         |          
|Operating leases                          |  | $     | 41,175    |                        |  | $            | 32,940  |           |  | $ | 8,235   |  |  | $ |        | 
|Royalty payments                          |  | $     | 1,275,000 |                        |  | $            | 100,000 |           |  | $ | 300,000 |  |  | $ | 875,000 | 
|Consulting and non-competition agreements |  | $     | 75,000    |                        |  | $            | 60,000  |           |  | $ | 15,000  |  |  | $ |        | 




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Pursuant to the terms of our distribution
agreement with MeSys GmbH, dated January 1, 2002, we
undertook a minimum purchase commitment of 25 OctoNova pumps per
year beginning after FDA approval of the RHEO System,
representing an annual commitment after FDA approval of
405,000, or
approximately $522,450. The marketing and distributorship
agreement with Diamed provides for a minimum purchase of 1,000
OctoNova pumps during the period from the date of the agreement
until five years after FDA approval, representing an aggregate
commitment of
16,219,000, or
approximately $20,922,510 based on current exchange rates.




To ensure there is sufficient capacity and
inventory to support our commercialization plan, we intend, in
advance of FDA approval, to accumulate an inventory of filters
and pumps to support a rapid product launch. In line with these
intentions, in July 2004, we placed a purchase order with Asahi
Medical for 9,600 Rheofilters for the period ended
March 31, 2005, representing a total commitment of
$1,920,000. This purchase order for 9,600 Rheofilters is in
addition to our minimum purchase commitment under our agreement
with Asahi Medical. Our minimum purchase obligations under our
agreement with Asahi Medical are triggered six months after we
receive FDA approval of the RHEO System.

Pursuant to the terms of the distribution
agreement with Asahi Medical, dated January 1, 2002, the
Company undertook a commitment to purchase a minimum of 9,000,
15,000, and 22,500 each of Plasmaflo and Rheofilters in years 1,
2 and 3 respectively beginning six months after FDA approval of
the RHEO System. Minimum purchase orders for the fourth year
shall be determined immediately after the term of the first year
by mutual consent but shall not be less than that of the
previous year. This same method shall be used in subsequent
years to determine future minimum purchase quantities such that
minimum purchase quantities are always fixed for three years.
Future minimum annual commitments after FDA approval are
approximately as follows:

|       |  |   |           | 
|------ |  | - | --------- | 
|Year 1 |  | $ | 2,565,000 | 
|Year 2 |  | $ | 4,275,000 | 
|Year 3 |  | $ | 6,412,500 | 

In July 2004, we amended our Distribution
Services Agreement with Apheresis Technologies, Inc. such that
we would have the sole discretion as to when the agreement would
terminate. In consideration of this amendment, we agreed to pay
Apheresis Technologies $100,000 on the successful completion of
our initial public offering.

Cash Used in
Operating Activities




Cash used in operating activities for the nine
months ended September 30, 2004 was $3,071,645. Changes in
net cash provided by operating activities reflect net loss and
other non-cash items netted against changes in working capital.
Changes in working capital in 2001 reflected increased
liabilities due to reduced funding and in 2002 and 2003 reflect
the reduction of these liabilities due to the receipt of
additional funding. Cash used in operating activities was
$2,374,822, $2,125,533 and $1,461,439 for the years ended
December 31, 2003, 2002 and 2001, respectively.




Cash Used in
Investing Activities




Cash used in investing activities was $168,881
for the nine months ended September 30, 2004 and $175,780,
$31,045 and $69,589 for the years ended December 31, 2003,
2002 and 2001, respectively. The primary use of the funds was
the purchase of fixed assets of $170,528 for the nine months
ended September 30, 2004 and $164,716, $24,151 and $39,430
for the years ended December 31, 2003, 2002 and 2001,
respectively. Fixed asset expenditures were for medical
equipment and OctoNova pumps to be used in clinical trials.




Cash Provided
by Financing Activities




Cash provided by financing activities was
$2,770,294 for the nine months ended September 30, 2004 and
$3,185,311, $2,766,559 and $1,519,386 for years ended
December 31, 2003, 2002 and 2001, respectively.




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Cash provided by financing activities primarily
reflects issuances of convertible debentures, as well as the
issuance of common stock in 2003 and the issuance of convertible
preferred stock. In 2001, we issued $510,475 in series B
convertible debentures and a secured promissory note for
$1,000,000. In 2002, we issued $492,500 in series B
convertible debentures, a $1,000,000 subordinated promissory
note and 345,843 shares of series B preferred stock
for gross cash proceeds of $2,000,000 less share issue costs of
$725,854. Cash provided by financing activities in 2003 was from
the issue of $2,650,000 in convertible grid debentures less
issuance costs of $24,796 and 613,292 shares of common
stock for $604,092. In the nine months ended September 30,
2004, we issued an additional $2,450,000 in convertible grid
debentures and 327,370 shares of common stock for cash
proceeds of $241,922. We also issued 379,284 shares of
series A preferred stock for total cash proceeds of
$1,281,841, of which $764,239 has been received and the balance
of $517,602 has yet to be received as of September 30, 2004
and has been included in stockholders deficiency.




Critical Accounting Policies and
Estimates

Our discussion and analysis of financial
condition and results of operations is based upon our audited
consolidated financial statements, which have been 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 amount of assets, liabilities, sales and expenses, and
related disclosure of contingent assets and liabilities. On an
ongoing basis, we evaluate our estimates, including those
related to uncollectible receivables, inventories, income taxes,
financial income, warranty obligations, excess component and
order cancellation costs, and contingencies and litigation. We
base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Because this
can vary in each situation, actual results may differ from these
estimates under different assumptions or conditions.

We believe the following critical accounting
policies affect our more significant judgments and estimates
used in the preparation of our audited consolidated financial
statements.

Revenue
Recognition

We recognize revenue from the sale of products
when persuasive evidence of an arrangement exists, delivery has
occurred, the selling price is fixed or determinable, and
collectibility is reasonably assured. Title passes upon shipment
from our distribution facility. Since July 2002, our only
customer has been OccuLogix, L.P. We have appointed
OccuLogix, L.P. the sole distributor of the RHEO System and
its component parts in North America, the Caribbean and Israel
for commercial purposes. Pricing is reviewed quarterly and
adjusted as required for futures sales. To date,
OccuLogix, L.P.s primary customer has been a
subsidiary of TLC Vision.

Inventory
Valuation

Inventory is recorded at the lower of cost and
net realizable value and consists of finished goods. Cost is
accounted for on a first-in, first-out basis.

Functional
Currency

The currency of the primary economic environment
in which we operate is the U.S. dollar. Substantially all of our
sales are derived in U.S. dollars or in other currencies linked
to the U.S. dollar. Purchases of substantially all of our
materials and components are carried out in U.S. dollars or are
linked to the U.S. dollar. As a result, we have determined
that our functional currency is the U.S. dollar.

Monetary balances in non-U.S. dollar currencies
are translated into U.S. dollars using current exchange rates.
Non-monetary balances in non-U.S. dollar currencies are
translated into U.S. dollars using historic exchange rates. For
non-U.S. dollar transactions reflected in our statements of
operations, we use the exchange rates as of the transaction
dates. Depreciation, amortization and changes in inventories and
other

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changes deriving from non-monetary items are
based on historical exchange rates. We record the resulting
translation gains or losses as financial income or expenses, as
appropriate.


Stock-based
Compensation




We follow Statement of Financial Accounting
Standard (SFAS) No. 123 Accounting for
Stock-Based Compensation, (SFAS No. 123).
The provisions of SFAS No. 123 allow companies to either
expense the estimated fair value of stock options or to continue
to follow the fair value method set forth in Accounting
Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees (APB 25) but
disclose the pro forma effects on net income (loss) had the fair
value of the options been expensed. We have elected to continue
to apply APB 25 in accounting for stock-based compensation.







During the year ended December 31, 2003, we
issued stock options on a date that, on such date, we expected
would be within twelve months of the filing of the registration
statement to which this prospectus relates. Accordingly, we
estimated the intrinsic value of these stock options based on
the estimated offering price of our common stock in this
offering, which we are expensing over the vesting period of
these options. These options will become fully vested upon the
closing of this offering. Therefore, we will record the
remaining unamortized stock compensation expense immediately
during the period in which this offering occurs.







Pursuant to SFAS No. 123, the
weighted-average fair values of employee options granted during
the years ended December 31, 2003, 2002 and 2001 (other
than the stock options described immediately above) were $0.56,
$0.77 and $0.17, respectively. The estimated fair value was
determined using the following assumptions:






| |   |                                                                                       
| | - | --------------------------------------------------------------------------------------
| |  | Volatility: 2003  75%,
    2002  83%, 2001  83%                                    
|
| |  | Expected life of option: 2003 
    4.1 years, 2002  8.9 years,
    2001  10.0 years
|
| |  | Risk-free interest rate: 2003  2.15%,
    2002  4.95%, 2001  4.88%                 




Compensation expense associated with non-employee
stock options was $36,568 and $150,994 for the nine months ended
September 30, 2004 and 2003, respectively, and $196,686,
$134,948 and $190,351 for the years ended December 31,
2003, 2002 and 2001, respectively. The fair value of these
options was determined using the Black-Scholes fair value
options model using the same assumptions above and is included
in general and administrative expenses within the consolidated
statement of operations.




Effective Corporate Tax Rate

Income
Taxes

As of December 31, 2003, we had net
operating loss carryforwards for federal income taxes of
$25.6 million. Our utilization of the net operating loss
and tax credit carryforwards may be subject to annual
limitations pursuant to Section 382 of the Internal Revenue
Code, and similar state provisions, as a result of changes in
our ownership structure. The annual limitations may result in
the expiration of net operating losses and credits prior to
utilization.

At December 31, 2003, we had deferred tax
assets representing the benefit of net operating loss
carryforwards and certain stock issuance costs capitalized for
tax purposes. We did not record a benefit for the deferred tax
asset because realization of the benefit was uncertain and,
accordingly, a valuation allowance is provided to offset the
deferred tax asset.

Quantitative and Qualitative Disclosure of
Market Risk

Currency
Fluctuations and Exchange 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

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U.S. dollar would increase the
U.S. dollar cost of our operations, and 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.

Recent Accounting Pronouncements




In November 2002, the FASB issued FASB
Interpretation (FIN) No. 45,
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others (FIN No. 45). FIN No. 45
clarifies and expands on existing disclosure requirements for a
guarantor regarding its obligations under certain guarantees it
has issued. FIN No. 45 also requires that the guarantor
must recognize a liability for the fair value of its obligations
under certain guarantees. The provisions of FIN No. 45 are
effective for guarantees entered into after December 31,
2002. At December 31, 2003 and September 30, 2004, the
Company had no outstanding guarantees.




In January 2003 (as amended in
December 2003), the FASB issued FIN No. 46,
Consolidation of Variable Interest Entities
(FIN No. 46). FIN No. 46 requires
consolidation of a variable interest entity (VIE) by
the primary beneficiary of the entitys expected results of
operations. FIN No. 46 also requires certain disclosures by
all holders of a significant variable interest in a VIE that are
not the primary beneficiary. FIN No. 46 is effective
immediately for VIEs created or acquired after January 31,
2003. For VIEs created or acquired prior to February 1,
2003, FIN No. 46 is effective in the first reporting period
ending after December 31, 2003 for those VIEs that are
considered to be special purpose entities, and after
March 15, 2004 for those VIEs that are not considered to be
special purpose entities. The adoption of FIN No. 46 had no
effect on our financial position or results of operations.

In March 2003, the FASB reached a consensus on
EITF Issue No. 00-21, Accounting for Revenue
Arrangements with Multiple Deliverables
(Issue 00-21). Issue 00-21 sets out
criteria for whether revenue can be recognized separately from
other deliverables in a multiple deliverable arrangement. The
criteria consider whether the delivered item has stand-alone
value to the customer, whether the fair value of the delivered
item can be reliably determined and the rights of return for the
delivered item. Adoption of Issue 00-21 is required for
fiscal years beginning after June 15, 2003 and has not had
an effect on the Companys financial position or results of
operations.




In May 2003, the Financial Accounting Standards
Board issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities
and Equity, (SFAS No. 150). SFAS
No. 150 establishes standards for how to classify and
measure financial instruments with characteristics of both
liabilities and equity. SFAS No. 150 requires that an
issuer classify a financial instrument that is within its scope
as a liability, or an asset in some circumstances. SFAS
No. 150 is effective for financial instruments entered into
or modified after May 31, 2003, and other is effective at
the beginning of the first interim period beginning after
June 15, 2003. On August 27, 2003, the FASB issued a
deferral of SFAS No. 150 for mandatorily redeemable shares
of non-public companies and non-public companies will not be
required to apply the provisions of SFAS No. 150 to
mandatorily redeemable financial instruments until periods
beginning after December 15, 2004. Based on securities
outstanding as at September 30, 2004 the adoption of this
standard is not expected to have an effect on our financial
position or results of operations.




Recent Developments




Immediately prior to the completion of this
offering, we will acquire all of TLC Visions 50% ownership
in OccuLogix, L.P. in exchange for the issuance to TLC
Vision of 19,070,233 shares of our common stock.




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This acquisition is contingent on the execution
of an underwriting agreement for this offering and will result
in us holding all of the licensing rights for the RHEO System in
North America and the Caribbean.


We intend to build the necessary infrastructure
to implement our commercialization plans for the RHEO System
throughout North America, purchase sufficient product to sustain
projected sales requirements during the 12 to 18 months
immediately following FDA approval, if and when received, and
complete additional crossover treatments of placebo patients
from MIRA-1 or other related filter trials required to fully
effect the commercialization strategy utilizing the proceeds
from this offering.




We believe that the following represents a
reasonable estimate of what the loss for the year ended
December 31, 2003 and the nine months ended
September 30, 2004 would have been if the transactions
described under the Reorganization and in the notes
to the unaudited pro forma financial statements included in this
prospectus had occurred on January 1, 2003. The estimated
loss for the year ended December 31, 2003 is due primarily
to the expense of $15,905,400, representing the total intrinsic
value of options granted in December 2003, which will fully vest
upon an initial public offering. The total intrinsic value of
these options is currently being expensed over the vesting
period of the options in our historical statements of operations
resulting in an expense of $513,077 for the year ended
December 31, 2003, representing the first month in which
this expense was incurred, and $4,617,693 for the nine-month
period ended September 30, 2004. Also, included in
operating expense in the pro forma statement of operations for
the year ended December 31, 2003 is the amortization
expense of $1,716,667 for the intangible asset acquired on the
acquisition of OccuLogix, L.P., which is being amortized over a
period of 15 years. Our acquisition of OccuLogix, L.P. will
allow us to better control and retain all profits resulting from
OccuLogix, L.P.s Canadian operations and from our proposed
commercialization. The estimated loss for the nine months ended
September 30, 2004 includes an amortization of intangible
asset expense of $1,287,500 which is not included in the
historical statement of operations for the nine months ended
September 30, 2004. However, the expense of $4,617,693,
included in the historical statement of operations for the nine
month period ended September 30, 2004, representing the
intrinsic value of the vested portion of stock options granted
in December 2003, will be reversed as the following summarized
pro forma statements of operations have been prepared as if the
transactions described under the Reorganization
occurred on January 1, 2003.







This analysis is neither a forecast nor a
projection of future results. This analysis should be read
together with our unaudited pro forma consolidated financial
statements for the nine month period ended September 30,
2004 and the year ended December 31, 2003 and the related
notes, all as included elsewhere in this prospectus.







|                        |                    |                                          |         |                    |  |   |        |     | 
|----------------------- | ------------------ | ---------------------------------------- | ------- | ------------------ |  | - | ------ | --- | 
|                        |                    |                                         
|                        |                    | Pro Forma Statement of Operations       
|                        |                    |                                         
|                        |                    | Year Ended                               |         | Nine Months Ended 
|                        |                    | December 31, 2003                        |         | September 30, 2004
|                        |                    |                                          |         |                   
|                        |                    |                                         
|                        |                    | (expressed in thousands of U.S. dollars)
|                        |                    | (unaudited)                             
|Revenues                |                    | $                                        | 486     |                    |  | $ | 453    |    
|                        |                    |                                          |         |                    |  |   |        |    
|Cost of Sales           |                    |                                          |         |                    |  |   |        |    
|                        | Cost of goods sold |                                          |         | 248                |  |   |        | 230 | 
|                        | Royalty costs      |                                          |         | 109                |  |   |        | 80  | 
|                        |                    |                                          |         |                    |  |   |        |    
|Gross margin            |                    |                                          | 129     |                    |  |   | 143    |    
|Operating expenses      |                    |                                          | 19,751  |                    |  |   | 4,660  |    
|Other expenses          |                    |                                          | 82      |                    |  |   | 27     |    
|                        |                    |                                          |         |                    |  |   |        |    
|Net loss for the period |                    | $                                        | (19,704 | )                  |  | $ | (4,544 | )  
|                        |                    |                                          |         |                    |  |   |        |    




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BUSINESS


Overview

We are an ophthalmic therapeutic company founded
to commercialize innovative treatments for eye diseases,
including age-related macular degeneration, or AMD. AMD is the
leading cause of late onset visual impairment and legal
blindness in people over the age of 50 in the United States and
other Western industrialized societies. We believe that Dry AMD,
the most common form of the disease, afflicts approximately 13.0
to 13.5 million people in the United States, representing
approximately 85% to 90% of all AMD cases. Although the exact
cause of AMD is not known, researchers have identified several
factors that are associated with AMD, including poor
microcirculation and the gradual build-up of cellular waste
material in the retina. We believe that improved
microcirculation increases the supply of oxygen and nutrients to
the compromised retina and facilitates the removal of cellular
waste material from the retina. We believe that a treatment that
improves microcirculation in the retina can help to enhance the
metabolic efficiency of the retina and the removal of waste
material and thereby aid in the treatment of Dry AMD. We believe
there is a significant opportunity for such a treatment.




Our product, the RHEO System, is designed to
improve microcirculation in the eye by filtering high molecular
weight proteins and other macromolecules from the patients
plasma. The RHEO System is used to perform Rheopheresis, which
we refer to under our trade name RHEO Therapy. Rheopheresis is a
blood filtration process that selectively removes molecules from
plasma. The RHEO System consists of the OctoNova Pump and a
disposable treatment set, containing two filters, through which
the patients blood circulates. We believe that the RHEO
System is the only Dry AMD treatment to target what we believe
to be the underlying cause of AMD rather than its symptoms and
that, based on preliminary data, appears to demonstrate improved
vision in some patients. The only currently accepted treatment
option for persons with advanced cases of Dry AMD are
over-the-counter vitamins, antioxidants and zinc supplements
that can reduce the five-year risk of conversion to Wet AMD, the
other form of the disease, by approximately 25%.







We are currently conducting a pivotal clinical
trial, called MIRA-1, which, if successful, is expected to
support our application to the FDA to obtain approval to market
the RHEO System in the United States. The MIRA-1 protocols
require us to obtain a minimum of 150 complete clinical data
sets. To that end, we intend to enroll a maximum of 180 patients
in MIRA-1. We have enrolled 161 patients in MIRA-1 as of
November 12, 2004. We plan to complete enrollment for
MIRA-1 of the remaining 19 patients and submit the first three
of four modules of the PMA filing to the FDA before the end of
2004. The non-clinical portion of the PMA consists of technical
data relating to components of the RHEO System. In late 2001,
with the permission of the FDA, we submitted an interim analysis
of 36 complete data sets from the first 43 patients enrolled.
The remaining seven patients did not complete all of the
required follow-up and thus their results do not qualify as a
complete data set. Of the 36 data sets analyzed, 11 were from
placebo patients. Fifty-eight percent of, or 11 of 19, patients
in the MIRA-1 interim analysis entering the clinical trial with
worse than legal driving vision, which is defined as best
corrected visual acuity, or BCVA, of worse than 20/40, improved
to meet or exceed the requirements to regain a drivers
license. However, since MIRA-1 is a double masked,
placebo-controlled study, we do not know the degree of such
improvement, and we do not and will not have updated patient
results until we have completed the clinical portion of the
MIRA-1 study.




As we cannot begin commercialization in the
United States until we receive FDA approval, we do not expect to
generate revenues in the United States until late 2006, at the
earliest. However, in anticipation of commercialization in the
United States, we are establishing a plan to educate members of
the eye care community about RHEO Therapy. We are currently
identifying multi-facility health care service providers
including hospitals, dialysis clinics and ambulatory surgery
centers, as well as private practices, which we believe may be
interested in providing RHEO Therapy in their facilities. We
believe that one of these potential providers may be TLC Vision
Corporation, an eye care services company, which we believe has
relationships with a large number of optometrists and
ophthalmologists in the United States.




In 2003, we received Health Canada approval for
the components of the RHEO System. The approval allows us to
market the RHEO System in Canada for use in the treatment of
patients suffering from dysproteinemia due, for example, to
abnormal plasma viscosity and/or macular disease. Upon receiving
our




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approval, we began limited commercialization of
the RHEO System through sales of OctoNova pumps and disposable
treatment sets to three clinics in Canada. We believe that as of
November 2004 approximately 142 patients in Canada have
been treated by the RHEO System. In September 2004, we signed an
agreement with a private Canadian company called Rheo
Therapeutics Inc., which has agreed to purchase approximately
8,000 treatment sets and 20 OctoNova pumps by the end of 2005,
with an option to purchase up to an additional 2,000 treatment
sets, subject to availability. We believe that Rheo Therapeutics
plans to open a number of commercial treatment centers in
various Canadian cities where RHEO Therapy will be performed.
Dr. Jeffrey Machat, who is an investor in and one of the
directors of Rheo Therapeutics, was a co-founder and former
director of TLC Vision.








We have exclusive rights to commercialize the
RHEO System for ophthalmic uses in North America and the
Caribbean. In order to sell or export a medical device in the
European community, a Conformité Européene, or
CE Mark, is required. Although Rheopheresis for the
selective removal of molecules from plasma received CE Mark
approval in 1998, we do not have the rights to commercialize the
RHEO System in Europe.




Our History and Major Relationships




Shortly after our inception, we began
commercialization of therapeutic apheresis by opening a
therapeutic apheresis center in Florida. This site generated
revenues of $900,200 and $1,277,800 for the years ended
June 30, 1999 and 1998, respectively. The therapeutic
apheresis center was closed in 1999 pursuant to a directive
issued by the FDA. After obtaining an FDA investigational device
exemption, we initiated a pivotal clinical trial called MIRA-1
to support an application to FDA for approval to market the RHEO
System, and have conducted this trial since 1999.






| |                             
| | ----------------------------
| | Relationship with TLC Vision




TLC Vision, after this offering, will
beneficially own approximately 52.2% of our outstanding common
stock, or 48.9% on a fully diluted basis. Elias Vamvakas, the
Chairman and former CEO of TLC Vision, became our Chairman
in 2003 and is now also our CEO. In addition, two of our other
directors, Thomas N. Davidson and Richard L.
Lindstrom, are also directors of TLC Vision. These three
directors constitute the majority of our board.
Mr. Vamvakas beneficially owns 3,527,047 common shares
of TLC Vision, representing approximately 5.1% of TLC
Visions outstanding shares. As of April 29, 2004,
Mr. Davidson beneficially owned 54,827 common shares
of TLC Vision and Dr. Lindstrom beneficially owned
38,500 common shares of TLC Vision. Stephen Kilmer, our
Vice President, Corporate Affairs, is currently providing
investor relations services to TLC Vision. Mr. Kilmer
currently holds options to purchase 2,888 shares of TLC
Vision that expire on November 30, 2004 with an exercise
price of Cdn$13.69, options to purchase 1,750 shares that
are exercisable or will become exercisable on December 1,
2004 at an exercise price of Cdn$4.09 for 875 shares and
Cdn$4.04 for the remaining 875 shares, options to purchase
3,750 shares which will become exercisable on
December 15, 2004 with an exercise price of Cdn$7.95 and
options to purchase 2,500 shares which will become
exercisable on January 2, 2005 with an exercise price of
Cdn$1.82.







Prior to this offering, we carried on our
business directly and indirectly through OccuLogix, L.P., a
Delaware limited partnership, beneficially owned 50% by us and
50% by TLC Vision. Prior to this offering, we will acquire
TLC Visions 50% interest in OccuLogix, L.P. in
exchange for which we will issue 19,070,233 shares of our
common stock to TLC Vision.




As part of the formation of OccuLogix, L.P. in
July 2002, we licensed certain patent rights, trademark rights
and know-how rights to OccuLogix, L.P. We also provided
OccuLogix, L.P. with licenses to our in-house software as well
as sublicensing software that we have licensed from TLC Vision.
TLC Vision agreed to provide OccuLogix, L.P., upon request, with
$200,000 in funding at an annual interest rate equal to the Bank
of America prime rate of interest on the date the loan is made,
plus two percent.




Occulogix, L.P.s primary customer is RHEO
Clinic Inc., a subsidiary of TLC Vision, for which Occulogix,
L.P. has reported revenues of $343,564, $409,685, $459,730 and
$0 for the nine months ended




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September 30, 2004 and 2003 and the years
ended December 31, 2003 and 2002, respectively. RHEO Clinic
uses the RHEO System to treat patients, for which it charges its
customers (the patients) a per-treatment fee. RHEO Clinic has
advised us that the OctoNova pumps purchased from Occulogix,
L.P. are capitalized as fixed assets to be depreciated over a
period of five years on a straight line basis and the treatment
sets are disposed of after each treatment and expensed as a cost
of sale. Rheo Clinic has further advised us that all of its
revenues, in Canadian dollars, of $507,834, $662,702, $836,696
and $0 for the nine months ended September 30, 2004 and
2003 and the years ended December 31, 2003 and 2002,
respectively, are derived from sales to unrelated third parties.
The revenues reported from RHEO Clinic are unaudited and have
not been independently verified by us. However, management
believes the amounts to be accurate.








Dr. Jeffrey Machat, a co-founder of TLC
Vision, served as a director of TLC Vision from 1993 to 1999.
From 1993 to 2001, Dr. Machat served as a Co-National
Medical Director of TLC Vision. Dr. Machat is an
independent contractor to TLC Vision York Mills Centre and pays
the Centre a per-procedure facility fee for using the Centre to
perform LASIK on his patients. Based on public filings, we
believe that Dr. Machat is a shareholder of TLC Vision but
does not own more than 5% of the shares of TLC Vision. We have
been advised that Dr. Machat is a co-founder, shareholder,
one of its three directors and serves as Rheo Therapeutics
National Medical Director. We have recently signed an agreement
to provide the RHEO System in Canada to Rheo Therapeutics.






| |                          
| | -------------------------
| | Other Major Relationships




In October 2003, our stockholders created a new
company called Rheogenx BioSciences Corporation to further
develop the use of the current components of the RHEO System for
non-ophthalmic uses. At that time, we licensed our rights to the
RHEO System and associated intellectual property to them for
these non-ophthalmic uses, only to the extent that we have them
or acquire them in the future. Under the terms of our license
with Rheogenx, Rheogenx has the right to use the RHEO System
patent rights, know-how rights and trademark rights for
non-ophthalmic uses in Canada, the United States and Mexico.
Rheogenx is responsible for obtaining its regulatory approval to
market any products that it develops or sells. In exchange for
these rights, Rheogenx compensates us for the full cost of the
license, including royalties and applicable license fees. The
license agreement may be terminated upon any breach of a
material provision.







The components of the RHEO System were developed
by our suppliers, Diamed and Asahi Medical. In 2002, Apheresis
Technologies, which is managed by John Cornish, one of our
stockholders, was spun off from us. Apheresis Technologies
provides us with logistical support, including warehousing,
order fulfillment, shipping and billing services. We have the
right to terminate this agreement at any time. Our primary
activities include commercialization of the RHEO System in
Canada, working to obtain FDA regulatory approval for the RHEO
System, and building an operating infrastructure to support
potential U.S. sales following approval by the FDA. For a
detailed description of our corporate structure and our
subsidiaries, before and after the Reorganization, and following
this offering, please refer to the Reorganization
section in this prospectus beginning on page 66.




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Industry



| |                          
| | -------------------------
| | Overview of the Human Eye

The human eye is composed of focusing elements in
the front, the cornea and lens, and a light-sensing element in
the back, the retina. Light falls on the photoreceptors that are
part of the retina and is converted into electrical energy,
which travels via the optic nerve to the brain. The brain
processes the complex signals sent from the retina into vision.
The central 5% of the area of the retina is the macula, the
region responsible for seeing color and for the central vision
necessary for activities including reading, face recognition,
watching television and driving. Due to its extremely small
size, any damage to the macula can result in significant visual
impairment, including legal blindness. In the Western World, the
major diseases that usually result in blindness in adults are
those affecting the retina, including AMD.

(Photo of Eyeball)



| |                                           
| | ------------------------------------------
| | Age-Related Macular Degeneration
    (AMD)

AMD is a chronic, progressive disease of the
macula that results in the loss of central vision. The most
common symptoms include central distortion, loss of contrast
sensitivity and loss of color vision, none of which can be
corrected by refractive means, including glasses, contact lenses
or laser eye surgery. Peripheral vision usually remains
unaffected so that patients are often forced to look to the side
of objects to see them, but are still unable to see detail. AMD
typically affects people initially in one eye, with a high
probability of occurrence in the second eye over time. People
with AMD often have difficulty living independently and
performing routine daily activities.

We believe that approximately 15 million
people in the United States suffer from AMD. According to a
ten-year study published in Ophthalmologyin October
2002, the prevalence of AMD among a selected sample of U.S.
residents increased sharply with age, from 28.2% among people 65
to 74 years of age to 46.2% among people 75 years and
older. A study by Duke University published in 2003 reported
that the prevalence of AMD among a selected sample of U.S.
residents aged 65 and older was 27% in 1999. According to the
U.S. Census Bureau, the number of people in the United States
aged 50 or older is approximately 80 million and is
expected to increase by approximately 40% over the next two
decades. We expect that this increase in the number of elderly
people will result in a significant increase in the number of
cases of AMD in the United States.

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AMD occurs in two forms  a
non-exudative dry form and an exudative
wet form.

Dry AMD.Dry
AMD is the most common form of the disease. We believe that Dry
AMD affects approximately 13.0 to 13.5 million people in
the United States, or approximately 85% to 90% of all AMD cases.
Dry AMD is characterized by a gradual decrease of visual acuity,
by pigment abnormalities on the macula and by the build-up of
protein and lipid deposits, called drusen. This build-up of
macromolecules affects the microcirculation in the eye. Research
suggests that the retinal cells, overwhelmed by the lack of
oxygen and nutrients and the build-up of debris, enter into a
dysfunctional state of dormancy. Without treatment, the retinal
cells ultimately die and do not regenerate, leading to
irreversible vision loss either through the progression of Dry
AMD or conversion to Wet AMD. Patients with Dry AMD are
classified at the time of diagnosis into four categories of
worsening severity. The higher the category, the greater the
risk of progression, or conversion, to Wet AMD within five years.

The following table contains the principal
characteristics of each category as described by the AREDS
Report No. 8:

|              |  |                 |                 |  |  |                     |  |                                                                               
|------------- |  | --------------- | --------------- |  |  | ------------------- |  | ------------------------------------------------------------------------------
|              |  | Risk of Wet AMD |                 |  |  |                    
|Category      |  | in Five Years   |                 |  |  | Key Characteristics
|              |  |                 |                 |  |  |                    
|Category 1    |  |                 | No Risk         |  |  |                    |  | no pigment changes and less than five small drusen                            
|              |  |                 |                 |  |  |                    |  | BCVA(1)better than 20/32 in each eye                                          
|              |  |                 |                 |  |  |                    |  | neither eye with Wet AMD                                                      
|Category 2    |  |                 | Low Risk        |  |  |                    |  | any combination of multiple small drusen, one
    isolated                    
|              |  |                 | (Less than 2%)  |  |  |                     |  | intermediate drusen or mild pigment abnormalities
    in one or both eyes     
|              |  |                 |                 |  |  |                    |  | BCVA better than 20/32 in each eye                                            
|              |  |                 |                 |  |  |                    |  | neither eye with Wet AMD                                                      
|Category 3(2) |  |                 | Moderate Risk   |  |  |                    |  | any combination of at least one large drusen,
    extensive                   
|              |  |                 | (18%)           |  |  |                     |  | intermediate drusen or geographic atrophy not
    involving the central macula
|              |  |                 |                 |  |  |                    |  | neither eye with Wet AMD                                                      
|              |  |                 |                 |  |  |                    |  | BCVA better than 20/32 in at least one eye                                    
|Category 4(2) |  |                 | High Risk       |  |  |                    |  | one eye with no signs of Wet AMD                                              
|              |  |                 | (More than 42%) |  |  |                    |  | other eye with either Wet AMD or BCVA worse than
    20/32 due to Dry AMD.    






|    |                                                                       
|--- | ----------------------------------------------------------------------
|(1) | BCVA means best corrected visual acuity.                              
|   
|(2) | Categories 3 and 4 are commonly referred to
    as Advanced Dry AMD.

Wet AMD.We
believe that Wet AMD affects approximately 1.5 to
2.0 million people in the United States, representing
approximately 10% to 15% of all cases of AMD in the United
States. Wet AMD occurs when new blood vessels grow into the
macular tissues of the eye. This abnormal blood vessel growth
generally is known as neovascularization. These new blood
vessels tend to be fragile and often bleed, leaking fluid into
the macula, resulting in loss of vision. Untreated, this blood
vessel growth and leakage can lead to scarring, atrophy and,
eventually, macular cell death. Wet AMD patients experience
vision loss more rapidly than Dry AMD patients, usually within
months of diagnosis. If treatment is not received in this small
window of time, the damage is usually irreversible. As a result,
the number of people who have Wet AMD that are considered
potentially treatable, or hoping for significant,
positive visual outcomes, will stay relatively small each year
as opposed to the number of people who have Dry AMD.

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Treatment Alternatives for Wet and Dry
AMD



| |        
| | -------
| | Wet AMD

There is currently no cure for Wet AMD. However,
retinal specialists may treat the symptoms in an attempt to
reduce blood vessel growth and leakage, using one of very few
approved therapies currently available  thermal laser
treatment, photodynamic therapy and drug therapies. In addition,
there are currently more than 30 therapies being evaluated in
U.S. clinical studies for the treatment of Wet AMD. These
treatments may slow the progression of the disease, but do not
prevent the reoccurrence of abnormal blood vessel growth and do
not restore lost vision.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Thermal Laser Treatment and Photodynamic
    Therapy.Thermal laser treatment
    of Wet AMD entails the use of a high-energy laser to destroy the
    abnormal blood vessels that are growing and leaking in the
    macula. This is a surgical procedure involving a medical device
    that was approved more than two decades ago by the FDA. Because
    the laser-treated portions of the retina are irreversibly
    destroyed due to collateral damage from intense heat, thermal
    laser treatment generally is now used only for the minority of
    Wet AMD patients whose abnormal blood vessel growth and vessel
    leakage occur away from the center of the macula. A more
    targeted approach, photodynamic therapy, involves the use of a
    light-activated drug named Visudyne, which was developed by QLT,
    Inc. This therapy involves a two-step process in which the drug
    is administered systemically by intravenous infusion, after
    which a dose of low energy light is delivered to the target site
    to activate the drug and destroy the newly-grown abnormal blood
    vessels.
|
| |  | Drug Therapies.Rather than attempting to destroy
    abnormal blood vessels, many drug therapies are designed to slow
    or stop the proliferation of abnormal blood vessels before they
    can further damage the retina. Current ongoing drug therapies in
    clinical trials for Wet AMD, which have been developed by
    Eyetech Pharmaceuticals, Inc., Genentech, Inc. and Genaera
    Corporation, are believed to block the effect of vascular
    endothelial growth factor, a natural protein that stimulates the
    production and growth of blood vessels, using different
    mechanisms of action. Alcon Laboratories, Inc.s Retaane is
    a modified steroid targeting enzymes produced by stimulated
    blood vessels by blocking the effects of multiple growth factors.                                                                                                                                                                                                                                                                                                                             



| |        
| | -------
| | Dry AMD

Dry AMD is not a well-understood disease and
there is no medical consensus regarding its underlying cause. As
a result, there have been few resources devoted to developing a
therapy for Dry AMD. However, there is some research that
suggests a vascular component to the disease. This
vascular model suggests that Dry AMD results from a
disorder of the vascular microcirculation in the retina which
leads to a reduction in the amount of oxygen and nutrients that
reach the retina. This disorder also results in the accumulation
of debris between the cellular layers of the retina and the
subsequent formation of drusen. In addition, new studies have
shown that AMD progression may be related to the presence of
elevated blood levels of certain macromolecules. Current
research has identified a number of high molecular weight blood
components that may have a detrimental effect on normal cellular
functions and microcirculation.

There is currently no FDA-approved therapy for
Dry AMD. Dry AMD is diagnosed and monitored by a primary eye
care doctor, such as an optometrist or ophthalmologist, through
a routine retinal exam. The AREDS Report provides evidence that
vitamin, antioxidant and zinc supplements only reduce the
five-year risk of conversion into Wet AMD by up to 25% for
Category 3 and Category 4 Dry AMD cases. Regardless of the
supplement treatments, Dry AMD may ultimately lead to
irreversible vision loss, whether or not it converts into Wet
AMD.

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Potential Causes of AMD

The precise cause of AMD is not known. However,
researchers have identified certain factors that are associated
with AMD:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Reduced Metabolic Efficiency of Retina.The macula must be able to
    function at an extremely high rate of metabolic efficiency to
    provide sharp vision. The macula, therefore, has an unusually
    high nutrient and oxygen requirement. Intact cell transport
    mechanisms are required to supply the necessary nutrients and
    oxygen. In addition to blood vessels in the retina, the macula
    receives its blood supply from a tiny meshwork of blood vessels,
    called the choroid, which lies underneath the retina. The blood
    supply in this network decreases in older people but even more
    so in some AMD patients. It has been proposed that the decreased
    blood flow in the retina of AMD patients reduces the metabolism
    in the retina resulting in significant degradation of visual
    function.
|
| |  | Poor Waste Material Disposal.Conversion of light in the retina
    into electrical energy is a photochemical process which produces
    a large quantity of cellular waste materials. Some researchers
    believe that life-long environmental, oxidative and chemical
    stresses progressively injure eye tissues, making it more
    difficult to clear away the waste material generated by the
    vision-producing cells. This may explain why waste products like
    drusen are often seen in the retinas of AMD patients and why
    their presence is associated with an increased risk of
    progressive vision loss.                                                                                                                                                                                                           

We believe that a treatment that improves
microcirculation in the retina can help to enhance the metabolic
efficiency of the retina and the removal of waste material and
thereby aid in the treatment of Dry AMD. We believe there is a
significant market opportunity for such a treatment.

Our Solution




The RHEO System, which consists of a pump and a
disposable treatment set, containing two filters, is designed to
filter high molecular weight proteins and macromolecules from
the patients plasma, leading to improved microcirculatory
function. Researchers involved in MIRA-1 believe that blood
filtered with the RHEO System is able to flow more easily
through the tiny capillaries of the eye and that the resulting
improved microcirculation more effectively supplies the macular
cells with oxygen and nutrients which facilitates removal of
cellular waste materials. RHEO Therapy represents a
fundamentally new approach to treatment of Dry AMD and offers
the following potential benefits:






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Addresses a large AMD patient population
    with limited current treatment
    options.Current Wet AMD
    treatments are effective only on patients who are
    newly-diagnosed with Wet AMD, of which there are approximately
    200,000 in the United States each year. RHEO Therapy, however,
    is a treatment for most patients in the Category 3 and
    Category 4 Dry AMD populations, which, according to the
    AREDS Report, represents approximately 54% of the total U.S. AMD
    patients, or currently approximately 8 million people. RHEO
    Therapy is not appropriate for everyone in the Category 3
    and Category 4 Dry AMD population. For example, RHEO
    Therapy would not be appropriate for potential patients who may
    have existing ailments that would make it unsafe for them to
    receive any blood transfusion type procedure.
|
|
| |  | Preserves or improves vision of Dry AMD
    patients.Success in treating AMD
    is generally measured by the ability to slow or halt progression
    of the disease. We believe that RHEO Therapy is currently the
    only Dry AMD therapy that, based on preliminary data, appears to
    demonstrate improved vision in some patients. Furthermore, 58%
    of, or 11 of 19, patients in the MIRA-1 interim analysis
    entering the clinical trial with worse than legal driving vision
    improved to meet or exceed the requirements to regain a
    drivers license. However, since our MIRA-1 protocol does
    not require us to follow patients beyond 12 months, we have
    no data which would allow us to evaluate whether RHEO Therapy is
    effective on a long-term basis.                                                                             
|
|
| |  | Patient-friendly procedure.RHEO Therapy is a form of
    therapeutic apheresis, a procedure that selectively removes
    molecules from the plasma. Apheresis has been used safely for
    more than twenty years in the United States and Europe to treat
    various diseases including leukemia, rheumatoid                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | arthritis, sickle cell disease and several other
    medical conditions. The initial course of RHEO Therapy requires
    eight procedures over a 10- to 12-week period, with each
    procedure lasting between two and four hours depending on
    patient weight and height. Patients recline in a comfortable
    chair and typically listen to music or otherwise relax during
    the procedure. As with any medical procedure, there are
    potential side effects associated with RHEO Therapy, which are
    all temporary and generally mild, including drops in blood
    pressure, abnormal heart rate, nausea, chills and localized
    bleeding, swelling, pain and numbness in the area of the arms
    where the needles are inserted. Although RHEO Therapy is a
    patient-friendly procedure, it is time consuming, with an
    initial course of RHEO Therapy requiring eight procedures taking
    between two and four hours each, given over a 10- to 12-week
    period.                             
|
|
| |  | Limited barriers to adoption for eye care
    professionals and health care service
    providers.We believe that the
    RHEO System requires lower capital expenditures and less
    physical space than equipment used in many other procedures
    performed by eye care professionals, including laser vision
    correction and cataract surgery. The RHEO System requires no
    special installation and minimal maintenance costs. We believe
    that RHEO Therapy, which can be administered by a nurse, can be
    easily integrated into our customers workflow and offers
    an attractive source of additional revenues for both facilities
    and providers. However, our success is dependent upon achieving
    widespread acceptance of RHEO Therapy among ophthalmologists and
    optometrists who may be reluctant to accept RHEO Therapy.                                                                                                                                                           
|
|
| |  | Cost-effective procedure.The initial course of RHEO Therapy
    is initially expected to cost between $16,000 and $25,600. We
    believe that Medicare and third-party payors will determine that
    the benefits of RHEO Therapy will justify the cost of
    reimbursement. However, should Medicare and third-party payors
    decline to provide coverage of RHEO Therapy or set broad
    restrictions on patient coverage or on treatment settings in
    which RHEO Therapy is covered, our potential revenues may be
    significantly limited, particularly if potential patients deem
    our treatment to be too expensive. Nonetheless, we believe that
    to the extent that RHEO Therapy is not reimbursed by the
    government or private third-party payors, some patients with the
    economic means to do so will be willing to pay for RHEO Therapy
    themselves in order to avoid the consequences of uncorrectable
    impaired vision, including, but not limited to, the inability to
    drive.

Our Strategy

Our goal is to establish RHEO Therapy as the
leading treatment for Dry AMD in North America. Key elements of
our strategy include:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Creating a plan to develop market awareness
    of RHEO Therapy by educating eye care professionals and
    patients.If RHEO Therapy is
    approved by the FDA, we intend to increase market awareness of
    RHEO Therapy by identifying and developing relationships with
    key opinion leaders in each of the eye care disciplines,
    including ophthalmologists and optometrists. We believe that
    these opinion leaders, some of whom are investigators in MIRA-1,
    will help establish acceptance for RHEO Therapy. If and when the
    FDA grants approval for the RHEO System, we intend to launch a
    public relations campaign targeted directly at patients and
    advocacy groups to alert them of our treatment. Members of our
    management team were leaders in creating market awareness of
    laser vision correction when it was introduced to the North
    American market in the 1990s, and, in doing so, were effective
    in creating relationships with a large number of optometrists
    and ophthalmologists in the United States.
|
|
|
| |  | Establishing third-party reimbursement for
    RHEO Therapy.We believe that an
    insurance billing code established by the American Medical
    Association in January 2003 accurately characterizes the RHEO
    Therapy procedure. This code identifies therapeutic apheresis
    with extracorporeal selective adsorption or selective filtration
    and plasma reinfusion. The procedure for which this billing code
    currently applies is a category of low density lipids, or LDL,
    apheresis, which partially filters the bad
    cholesterol from the blood plasma. If and when the FDA grants
    marketing clearance for the                                                                                                                                                                                                                                                                                                                                                                                                                              
|

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |   | RHEO System, we plan on seeking a Medicare
    National Coverage Determination for RHEO Therapy for specified
    patients with Dry AMD, with the goal of securing Medicare
    coverage under the existing procedure code for use in treatment
    of Dry AMD. Currently, Medicare covers and pays for other
    FDA-licensed services billed with this code only when performed
    in a hospital outpatient setting. A payment rate for
    FDA-licensed services billed with this code when performed in a
    physician Medicare office-based setting has been established by
    CMS effective on January 1, 2005. If RHEO Therapy is
    cleared for marketing by the FDA and covered by Medicare for
    treatment of Dry AMD, we believe that this Medicare office-based
    reimbursement policy will similarly apply for this procedure and
    will provide a significant positive impact on our revenues. We
    also plan to assist our customers in securing coverage and
    appropriate reimbursement for RHEO Therapy from Medicare and
    private insurers through a dedicated reimbursement group and the
    provision of detailed supporting documentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
|
|
| |  | Securing relationships with key
    multi-facility health care service
    providers.To facilitate a rapid
    rollout of the RHEO System if and when we receive FDA approval,
    we are identifying key groups of multi-facility health care
    service providers, including hospitals, dialysis clinics and
    ambulatory surgery centers, as well as private practices, which
    may be future treatment centers for the RHEO System. To date our
    marketing activities have been limited to identifying to whom we
    will choose to market if and when we receive FDA approval. We
    are not currently in negotiations with any U.S. healthcare
    service provider to supply or license the RHEO System, nor can
    we pursue any such relationship unless and until we receive FDA
    approval. In advance of commercialization in the United States,
    we intend to develop a plan to ensure that there is an adequate
    supply of trained nurses to support our service provider
    partners. We intend to leverage the experience of clinics in
    Canada currently using the RHEO System to assist in training
    nurses and our service provider partners in advance of FDA
    approval. The components of the RHEO System have had Health
    Canada approval since 2003. We currently supply three clinics in
    Canada which commercially provide RHEO Therapy to Dry AMD
    patients with the RHEO System at the direction of their
    physician. We have recently signed an agreement to provide the
    RHEO System in Canada to a private company called Rheo
    Therapeutics Inc. Dr. Machat, who is an investor in and one
    of the directors of Rheo Therapeutics, was a co-founder and
    former director of TLC Vision. We believe that our experience in
    Canada and the experience of one of our principal stockholders
    in Germany will allow us to develop best practice guidelines for
    integrating RHEO Therapy into a clinic setting.
|
|
|
| |  | Ensuring sufficient manufacturing capacity
    and inventory to support our commercialization
    plan.We intend to work with our
    manufacturing and supplier partners to ensure that there is
    sufficient capacity and inventory to support our
    commercialization plans. In advance of FDA approval, we intend
    to accumulate an inventory of filters and pumps to support a
    rapid product launch. We have a distribution agreement with
    Asahi Medical which appoints us as Asahi Medicals
    exclusive distributor of filters in the United States, Canada,
    Mexico and certain other countries. We recently signed a
    purchase order with Asahi Medical for 9,600 Rheofilters,
    including 1,600 filters in the third quarter of 2004 and 4,000
    filters for each of the following two quarters. We intend to
    order 4,000 filters per quarter in 2005 and 2006 in order
    to accumulate inventory in excess of our current requirements
    until we receive FDA approval in order to maximize the number of
    filters available to us due to manufacturing constraints on the
    number of cellulose acetate filters that Asahi Medical can
    produce. Each filter has a shelf life of three years. Based on
    our expected current requirements, we do not believe that the
    accumulated filters will expire before use. While we believe
    this strategy is prudent to maximize future revenues, holding
    inventory in this manner will decrease our short term liquidity.
    We will be working closely with Asahi Medical to develop and
    conduct clinical tests on a next generation polysulfone
    Rheofilter with similar characteristics to the current cellulose
    acetate Rheofilter. We believe that the proposed polysulfone
    Rheofilter will be able to be manufactured at significantly
    higher volumes and lower costs than the current filter
    technology.                                                    
|
|
| |  | Maintaining our intellectual property
    portfolio and other barriers to
    entry.We believe that our
    intellectual property position may assist us in maintaining our
    competitive position. We also believe                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | that the manufacturing process expertise relating
    to the production by Asahi Medical of the Rheofilter is
    protected by Asahi Medical as a trade secret. We believe that
    the exclusive nature of our supplier relationship with Asahi
    Medical gives us a competitive advantage. We intend to continue
    to strengthen our relationships with our exclusive suppliers and
    to strengthen our current patents and seek additional patent
    protection.

Our Product




The RHEO
System







The RHEO System employs a double filtration
apheresis process, whereby a pair of single use blood and plasma
filters sequentially separate and partially remove the targeted
plasma components. The system removes macromolecules greater
than a specified size from the plasma. The RHEO System consists
of two primary components:






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | OctoNova Pump.The OctoNova pump is a
    microprocessor controlled device used to circulate blood and
    plasma from the patient through the filters, and back to the
    patient. The OctoNova pump is complemented by single-use
    sterilized tubing which creates a closed-loop system. Blood is
    pumped through the tubing with small gear-like sprockets that
    create a peristaltic action in the tube similar to that which
    occurs in our intestines. The smooth-edged teeth of the
    sprockets press against the outside surface of the tube pushing
    the blood along the length of the tube as the wheels turn all at
    the same rate and direction. No blood ever leaves the
    closed-loop system. The OctoNova pump was developed in the 1990s
    by Diamed and licensed to us in 2002. We are seeking FDA
    approval of the OctoNova pump as part of the RHEO System PMA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
|
|
| |  | Disposable Treatment Sets.Disposable treatment sets consist
    of the tubing and two filters, the Plasmaflo filter and the
    Rheofilter. One treatment set is used for each treatment
    undertaken by the patient. The Plasmaflo filter performs the
    initial function of separating the blood cells from the plasma.
    The Rheofilter is a single-use, hollow-fiber nanopore membrane,
    which is used to filter specific high molecular weight proteins
    and other macromolecules from the plasma. Following this, the
    filtered plasma is reconstituted with the blood cells and
    returned into the patient. The tubing and the filters are easily
    disposed after each patient procedure by the administering
    nurse, providing us with a recurring source of revenue. The
    Rheofilter was developed in the early 1980s by Asahi Medical. We
    are seeking FDA approval of the tubing and two filters as part
    of the RHEO System PMA. We are working to complete the PMA with
    Asahi Medical, and upon FDA approval of the PMA we have an
    agreement to transfer this FDA approval to them. In that same
    agreement, Asahi Medical agreed to us being the exclusive
    distributor of the Plasmaflo filter and the Rheofilter in the
    United States, Canada, Mexico and the Caribbean for a term of
    ten years beginning at the date of the FDA approval, which
    term is automatically renewable for one year terms unless
    terminated upon six months notice. The Rheofilter is
    currently made of a cellulose acetate filter material. We are
    working with Asahi Medical to develop a new filter made of
    polysulfone to replace the current filter. We believe Asahi
    Medical has delivered two versions of its new polysulfone filter
    to Germany to begin clinical trials to support the safety data
    necessary to obtain a CE Mark. Asahi Medical has informed us
    that the clinical trials should begin before the end of 2004 and
    should take approximately a year to complete. Following
    obtaining a CE Mark, we will work with Asahi to obtain the
    necessary approvals to use the new polysulfone filter in the
    RHEO System in Canada and the United States.
|




The disposable treatment sets received Health
Canada regulatory approval in 2002. The OctoNova pump received
Health Canada approval in 2003. The Rheopheresis system
components have also been granted a CE Mark in Europe, where the
commercialization rights for Rheopheresis are exclusively held
by Diamed, one of our stockholders and suppliers. We are
currently conducting clinical studies with the goal of obtaining
FDA approval and widespread physician acceptance of RHEO Therapy.




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The RHEO
Procedure

Each RHEO Therapy procedure typically takes
between two and four hours to complete and begins by placing one
intravenous line in each forearm of the patient. Blood is pumped
from a large vein in one arm and circulated through the
filtration system where the whole blood is separated from the
plasma by the Plasmaflo filter. The plasma is filtered through
the Rheofilter, which filters high molecular weight proteins and
other macromolecules from the patients plasma. The plasma
is then remixed with the blood and is returned to the patient
intravenously. Only approximately 1.25 pints of blood are
outside the patients body and at all times blood remains
in a sterile closed circuit. Throughout the RHEO Therapy
procedure, the attending nurse monitors the blood pressure,
heart rate, oxygen saturation, cardiac rhythm and activated
clotting time of the patient. The attending nurse also gauges
the flow rates, temperature and pressures of the filters. No
blood products or medications are added, other than a small
amount of heparin to prevent clotting in the tubing system. We
believe the initial course of eight procedures of RHEO Therapy
given over a 10- to 12-week period provides the best results for
patients with Dry AMD. Typically, one or two booster procedures
are given each 12 to 18 months thereafter to maintain the
clinical benefits derived from the initial course of RHEO
Therapy. The referring physician monitors post-procedure
follow-up. The following graphic shows the RHEO Therapy process:

(THE RHEO SYSTEM)



| |                           
| | --------------------------
| | Background of Rheopheresis

Researchers discovered Rheopheresis for AMD
during the search for a blood treatment for elevated cholesterol
levels in the mid-1980s. Asahi Medical developed a filter aimed
at selectively removing the low-density lipid, or LDL,
macromolecules known as the bad cholesterol in an
apheresis procedure. Although the filter successfully removed
LDL, it also removed several other large molecules, including
von Willebrands factor, fibrinogen, lipoprotein A and
C reactive protein. Researchers have confirmed that
apheresis, a plasma filtering or exchange procedure, is a
relatively safe procedure and that there do not appear to be
negative consequences to also filtering out these large
molecules. At approximately the same time, however, the first
statin drug was proven to be effective in lowering LDL levels in
the blood, thereby eliminating the need for an apheresis
procedure to remove LDL. Shortly thereafter, Asahi Medical
ceased its efforts to develop and commercialize apheresis
treatment for elevated LDL levels.

In the late 1980s, researchers at the University
of Cologne in Germany were searching for a treatment for a small
group of patients referred to the university with a condition
known as refractory uveitis, a chronic inflammatory eye
condition that was not responding to conventional therapy.
Having learned that the Asahi Medical filters had the ability to
remove large molecules from the blood and that the eye condition
was related to significant levels of many of the same molecules,
the researchers performed a small pilot study.

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The filtration procedure was effective for
uveitis but also showed preliminary success in improving the
vision of two patients in the study that also had AMD. This led
the researchers to conduct several years of clinical research to
develop apheresis for AMD in Germany. The research suggested
that eight procedures over a 10- to 12-week period was the
optimal treatment regime.


Clinical Studies

We are currently conducting our FDA clinical
trial, MIRA-1. Two other clinical trials have been conducted by
third parties: MAC-1, which was conducted in Germany from 1995
to 1998; and the Rheopheresis pilot study which was conducted by
the University of Utah from 1997 to 1998. While the protocols of
these three clinical trials were not identical, the results of
each of them to date have been generally consistent.

MIRA-1 is currently being conducted at eight
treatment centers in the United States and Canada. We have an
agreement with Promedica International, a contract research
organization, to oversee each center. Promedica International
provides study monitoring and site and data management services.
We expect to pay Promedica International a total of
approximately $1,500,000 for certain fees and expenses for the
period from 2003 to the completion of the MIRA-1 study. Either
party may terminate this agreement by giving the other thirty
days written notice.

MIRA-1

MIRA-1, or Multicenter Investigation of
Rheopheresis for AMD, is a randomized, placebo-controlled trial
designed to evaluate the safety and efficacy of RHEO Therapy in
patients with intermediate-to-late stage, or Category 3 and
Category 4, Dry AMD.




In September 1999, we received an Investigational
Device Exemption from the FDA to begin MIRA-1. Between early
2000 and August 2001, we enrolled 98 patients in MIRA-1. In
August 2001, due to financial constraints, we temporarily
suspended the new enrollment of patients but continued to pursue
follow-up with the remaining patients in MIRA-1. In late 2001,
with permission of the FDA, we submitted the data sets of the
43 patients who had reached their full 12-month follow-up
in MIRA-1 for independent third-party analysis. Over the course
of the next several months, the FDA addressed a number of
matters relating to MIRA-1. First, the FDA allowed us to submit
the PMA in modules. Second, the FDA acknowledged that MIRA-1 is
intended to be the pivotal trial for obtaining FDA approval for
RHEO Therapy. Third, the FDA allowed us to treat the patients in
the placebo group with RHEO Therapy free of charge once their
full 12-month follow-up data had been obtained. Fourth, the FDA
confirmed that we would be required to submit at least 150 full
data sets from the 180 patients that were to be enrolled in
the trial. Following disclosure of the interim results of MIRA-1
and these changes to the MIRA-1 protocol, we were able to obtain
new financing. As a result of the new financing, in October
2003, we began screening additional patients for enrollment in
MIRA-1 and since then we have opened five additional MIRA-1
sites and are now currently operating seven MIRA-1 sites.







As of November 12, 2004, we have enrolled a
total of 161 patients, of which 85 have reached the full
12-month follow-up, 63 are in the process of treatment, and the
treatment of 13 patients resulted in incomplete data sets. We
are seeking to enroll an additional 19 patients with the goal of
enrolling 180 patients from which we need to obtain at
least 150 full data sets. We are seeking to complete enrollment
for MIRA-1 by the end of 2004. We intend to submit to the FDA
the first three of four modules of the PMA filing before the end
of 2004. These first three modules contain non-clinical results
of bench tests and quality assurance, and document manufacturing
processes on the components of the RHEO System. The FDA has
allowed us to submit the fourth module containing the clinical
results in two parts, referred to as modules 4A and 4B.
Module 4A will be submitted following completion of our
six-month data on at least 150 data sets, including the
12-month data sets for all patients for whom they are available.
Module 4B will be submitted following completion of our
12-month data on at least 150 data sets.




To be included in MIRA-1, a patients eyes
must demonstrate intermediate-to-late stage Dry AMD,
corresponding to Category 3 and Category 4, with ten
or more intermediate or large drusen. Additionally,

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patients must show elevated serum levels of at
least two out of three macromolecules associated in previous
studies that suggested the best positive treatment outcomes.
Primary eyes in the study must show no signs of Wet AMD,
and must demonstrate best corrected visual acuity, or BCVA,
between 20/32 and 20/125, inclusive.


Two out of every three patients are treated in
the trial, while the third is a placebo or control patient.
Patients receive eye exams prior to treatment and at three-,
six-, nine-, and 12-month follow-up intervals. Each patient
receives either eight RHEO Therapy procedures or eight placebo
procedures over ten weeks. Patients in the placebo-control group
are made to believe that they are receiving RHEO Therapy. All
subjects including those randomized to the placebo group are
shrouded from the neck down to prevent them from observing their
treatment and receive actual needle sticks in both arms.
Additionally, a partition is positioned in front of the OctoNova
pump so that the patient cannot see the system. The machine is
activated so that the patients can hear the background noise of
the machine, but those patients in the placebo group are not
connected to the tubing circuit. In addition, all subjects,
including those randomized in the placebo group, are required to
take the same dose of antioxidant vitamins that are commonly
recommended for Dry AMD patients as a possible inhibitor of
conversion into Wet AMD.

The studys primary endpoint is the mean
change in BCVA. In this trial, visual acuity is measured as the
number of letters that the patient can read on the Early
Treatment Diabetic Retinopathy Study, or ETDRS, eye chart. This
is the standard eye chart used in these types of trials. Five
letters on the ETDRS eye chart equates to one line of visual
acuity. Secondary and tertiary endpoints include:



| |   |                                                                                      
| | - | -------------------------------------------------------------------------------------
| |  | the ability to pass a vision test in order to
    regain a drivers license;         
|
| |  | vision improvement;                                                                  
|
| |  | vision loss;                                                                         
|
| |  | drusen reduction;                                                                    
|
| |  | the Pepper Visual Skills for Reading Test, which
    is a measure of reading ability;
|
| |  | the National Eye Institute visual functioning
    questionnaire; and                 
|
| |  | progression to legal blindness.                                                      

The following chart presents the interim 12-month
results of the first 43 patients in the MIRA-1 study. Of these
43 patients, we only obtained 12-month results from
36 patients because three treated patients and four
patients in the placebo group did not complete all of the
required follow-up.

|                                        |         |              |      |         |    |            |       |         |    |  |      |  |  |  |        |  | 
|--------------------------------------- | ------- | ------------ | ---- | ------- | -- | ---------- | ----- | ------- | -- |  | ---- |  |  |  | ------ |  | 
|                                        |         |             
|                                        |         | Total Cohort
|                                        |         |             
|                                        |         | Primary Eyes |      | Placebo |    | Net lines  |       |        
|                                        |         | (n=25)       |      | (n=11)  |    | difference |       | P Value
|                                        |         |              |      |         |    |            |       |        
|Mean change BCVA                        |         |              | 0.74 |         |    |            | -0.87 |         |    |  | 1.61 |  |  |  | 0.0011 | 
|Vision improvement greater or equal to: |         |              |      |         |    |            |       |         |    |  |      |  |  |  |        | 
|                                        | 3 lines |              |      | 3(12    | %) |            |       | 0(0     | %) |  |      |  |  |  |        |  | 
|                                        | 2 lines |              |      | 7(28    | %) |            |       | 2(18    | %) |  |      |  |  |  |        |  | 
|                                        | 1 line  |              |      | 12(48   | %) |            |       | 3(27    | %) |  |      |  |  |  |        |  | 
|Vision loss greater or equal to:        |         |              |      |         |    |            |       |         |    |  |      |  |  |  |        | 
|                                        | 3 lines |              |      | 1(4     | %) |            |       | 2(18    | %) |  |      |  |  |  |        |  | 
|                                        | 2 lines |              |      | 2(8     | %) |            |       | 2(18    | %) |  |      |  |  |  |        |  | 
|Drusen reduction                        |         |              | 29   | %       |    |            | 13    | %       |    |  |      |  |  |  |        | 
|Progression to legal blindness          |         |              | 0    | %       |    |            | 18    | %       |    |  |      |  |  |  |        | 

56



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The following chart represents the subgroup of
28 patients with worse than legal driving vision, or a BCVA
of worse than 20/40, prior to enrolling in the trial. Twenty-six
patients (19 treatment and seven placebo) completed the
entire twelve month follow-up; the remaining two patients in the
placebo group who did not complete 12 month follow up are
not included.




|                                          |         |                                |       |         |    |            |      |         |    |  |      |  |  |  |        |  | 
|----------------------------------------- | ------- | ------------------------------ | ----- | ------- | -- | ---------- | ---- | ------- | -- |  | ---- |  |  |  | ------ |  | 
|                                          |         |                               
|                                          |         | Cohort (Sub-Group) With BCVA  
|                                          |         | Worse Than 20/40 at Enrollment
|                                          |         |                               
|                                          |         | Treatment Group                |       | Placebo |    | Net lines  |      |        
|                                          |         | (n=19)                         |       | (n=7)   |    | difference |      | P value
|                                          |         |                                |       |         |    |            |      |        
|Mean change BCVA                          |         |                                | +1.1  |         |    |            | -1.9 |         |    |  | 3.00 |  |  |  | 0.0014 | 
|Improved to> 20/40 (legal driving vision) |         |                                | 11(58 | %)      |    |            | 1(14 | %)      |    |  |      |  |  |  |        | 
|Vision improvement greater or equal to:   |         |                                |       |         |    |            |      |         |    |  |      |  |  |  |        | 
|                                          | 3 lines |                                |       | 3(16    | %) |            |      | 0(0     | %) |  |      |  |  |  |        |  | 
|                                          | 2 lines |                                |       | 6(31    | %) |            |      | 1(14    | %) |  |      |  |  |  |        |  | 
|                                          | 1 line  |                                |       | 11(58   | %) |            |      | 2(29    | %) |  |      |  |  |  |        |  | 
|Vision loss greater or equal to:          |         |                                |       |         |    |            |      |         |    |  |      |  |  |  |        | 
|                                          | 3 lines |                                |       | 1(5     | %) |            |      | 2(29    | %) |  |      |  |  |  |        |  | 
|                                          | 2 lines |                                |       | 1(5     | %) |            |      | 2(29    | %) |  |      |  |  |  |        |  | 
|Drusen reduction                          |         |                                | 35    | %       |    |            | 14   | %       |    |  |      |  |  |  |        | 




Vision research typically uses a standard
measurement called the change in BCVA, which
is measured using a chart that provides five letters per
line of decreasing size or increasing difficulty. Each letter
has a relative value of 0.2 or 20% of the entire line. A patient
entering the study who gains two lines of vision will be
able to read ten additional letters or two complete lines of
vision.







Mean change is the cumulative
averaging of all patient results in a specific category. For
example, a patient entering the study with 20/40 vision and
gaining 1.4 lines following treatment would have improved
to 20/32 plus two letters on the 20/25 line. This number, 1.4,
would be included in the calculation with all other individual
patient results when calculating the cumulative average.







We do not know whether the completed MIRA-1
results will be consistent with the interim results, which are
based on a very small number of subjects, or whether, if the
results are consistent, the FDA would consider them sufficient
to support our approval.




MAC-1

The MAC-1 trial was a 40-patient study conducted
in Germany by the University of Cologne from 1995 to 1998 and
resulted in Rheopheresis for Dry AMD achieving the CE Mark.
The patients were randomized into two groups, a treatment group
and a placebo-control group. The treatment group was treated ten
times over a period of 21 weeks.

Unlike MIRA-1, the investigators and each patient
knew whether that patient was in the treatment group or the
control group because the 20 patients in the control group
did not receive placebo treatments but were simply examined at
the designated follow-up intervals. The MAC-1 study also
included patients with signs of Wet AMD and included patients
with significant soft drusen. Eighteen of the patients in the
study had signs of Wet AMD and would have been excluded from
MIRA-1 under the MIRA-1 protocol.

The main parameter of the study was BCVA.
Electrical activity in the eye was also recorded. Plasma and
whole-blood speed and volume in the macular region were also
measured. The results of MAC-1 were similar to the interim
results that have been seen in MIRA-1: statistically significant
relative improvement of 1.6 lines of BCVA immediately
following the course of treatment, with the same level of
benefit seen at 12-months. For patients with soft drusen, the
average difference was 2.3 lines (p<0.01); for patients
without soft drusen, the difference was only 0.64 lines
(p=0.43). In the treated group, improvement in electrical
activity was statistically significant, indicating that the
cells of the retina were functioning more efficiently. The speed
and

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volume of blood flow in the choridial arteries
which supply blood to the retina were found to be decreased by
37% and 33%, respectively, in patients with AMD. Following
treatment of those patients, blood flow increased by 22%. There
were no serious adverse events noted.


Rheopheresis
Pilot Study

The study was conducted by physicians at the
University of Utah Health Sciences Center in Salt Lake City,
Utah under an Investigational Device Exemption from the FDA. The
University of Utahs Institutional Review Board also
provided approval for human experimentation prior to enrollment.
The study involved 30 patients. The trial measured
electrical activity in the cells of the macula before and after
treatment. The results of this study were used to support the
application for the Investigational Device Exemption to conduct
MIRA-1.

PERC
Study

In April 2004, RHEO Clinic Inc., a subsidiary of
TLC Vision, received Institutional Review Board approval for and
launched a new study called the Prospective Evaluation of
Rheopheresis in Canada, or PERC.




PERC is a single center study in Canada designed
to examine the effect of RHEO Therapy on the outcome variables
for 60 patients with Dry AMD to gain a greater understanding of
the treatments method of action. As of July 23, 2004,
16 patients were enrolled in PERC. Each patient will
receive a series of eight RHEO Therapy procedures over a 10- to
12-week period. Clinical data will be collected at three-month
intervals for one year following the initial treatments.




One objective of the study is to develop a
complete description of the physiological changes produced by
RHEO Therapy. This will be done using structural and functional
objective tests and subjective measures of vision in its broad
context. This includes measurements of the size and shape of the
retina, retinal electrical activity and vascular function as
well as general visual performance using standard measurements
of acuity, reading speed, and color and contrast sensitivity.
Subjective vision assessments using the National Eye Institute
Visual Functioning Questionnaire 25 will also be evaluated to
gain understanding about general quality of life and
AMD-specific visual symptoms.

David T. Wong, MD, FRCSC or Fellow of the
Royal College of Surgeons of Canada, is the principal
investigator of the PERC study. Dr. Wong has been our
Medical Director since July 2004. Dr. Wong is an Assistant
Professor of Ophthalmology at the University of Toronto, Active
Staff Ophthalmologist at St. Michaels Hospital and
Director of Fellowship Training in Ophthalmology at the
University of Toronto. Dr. Wong is a sub-specialist
surgical ophthalmologist in the areas of the vitreous and retina
of the eye. Dr. Wong is a member of numerous organizations
including the Canadian Ophthalmology Society, American Academy
of Ophthalmology, the American Society of Retina Specialists and
the Association for Research in Vision and Ophthalmology.
Dr. Wong is a frequently invited lecturer in North America,
Asia and Europe, has authored numerous scientific papers and
publications and is an investigator in numerous FDA clinical
trials, including trials for QLTs Visudyne, Eyetechs
Macugen and Alcons Retaane.

RHEONET
Registry

The RHEONET Registry is a collaborative effort
between the Apheresis Research Institute in Cologne, Germany and
us. The registry contains a database of Rheopheresis procedures
from centers and clinics performing the Rheopheresis
commercially in Germany, using systems sold by Diamed, and in
Canada, using systems sold by us. In March 2004, a total of
3,314 Rheopheresis procedures on 529 patients were registered,
including 365 patients with AMD. Ophthalmological data of 149
eyes of 108 patients with Dry AMD could be analyzed from the
registry as of March 2004.

Supplier Relationships

We have three key supplier
arrangements  with Asahi Medical, who manufacturers
the treatment sets, including the Rheofilter and the Plasmaflo
filter, and with Diamed and MeSys, the designer and the

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manufacturer, respectively, of the OctoNova pump.
The Rheofilter, the Plasmaflo filter and the OctoNova pump are
all key components in the RHEO System.





Rheofilter and Plasmaflo Filter.We purchase the Rheofilter and
Plasmaflo filter from Asahi Medical. We make these purchases
pursuant to a distribution agreement which appoints us as Asahi
Medicals exclusive distributor of the Rheofilter and the
Plasmaflo filter for use in treating AMD in the United States,
Canada, Mexico and certain Caribbean countries, subject to us
obtaining necessary regulatory approvals in those agreed
countries where we choose to sell the filters. Under this
agreement:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we may not market or sell any product that is
    similar to or competitive with the filters;                                                                                                                                                                                                                                                                                                                  
|
|
| |  | we must use our best efforts to support providers
    in their efforts to secure reimbursement from public and private
    U.S. health insurers on behalf of patients whose Dry AMD
    treatment involves utilization of these filters;                                                                                                                                                                       
|
|
|
| |  | we must purchase a minimum annual quantity of
    filters following FDA approval; and                                                                                                                                                                                                                                                                                                                          
|
|
|
| |  | we must transfer the whole ownership of the FDA
    approval to Asahi Medical upon receipt. We will, however,
    continue to own the clinical trial data from MIRA-1. We have
    agreed with Asahi Medical to allow them to use the clinical data
    from MIRA-1 to obtain approval to sell the Rheofilters in other
    countries so long as we are granted a distributorship in those
    other countries.
|

Although we have an obligation to purchase a
minimum annual quantity of filters, Asahi Medical has the right
to reject any order but may not unreasonably reject any order
placed by us in order to satisfy our minimum purchase
requirements. Under the agreement, Asahi Medical can cease to
supply Rheofilters and Plasmaflo filters to us, after a
12 month notice period, in the event that: (1) Asahi
Medical cannot economically supply the product; (2) due to
special circumstances, such as patent infringement liability or
product liability issues, Asahi Medical cannot supply the
product; or (3) Asahi Medical develops an improved product,
in which case, we have a right of first refusal to become the
exclusive distributor of that new product in the same
territories where we are the exclusive distributor of the
Rheofilter on terms and conditions satisfactory to Asahi Medical
and to us.




Asahi Medical has indicated that they intend to
discontinue manufacturing the cellulose acetate Rheofilter in
2008 and replace it with a newer polysulfone Rheofilter. We
believe that Asahi Medical has delivered two versions of its new
polysulfone filter to Germany to begin clinical tests to support
the safety data necessary to obtain a CE Mark. Following
obtaining a CE Mark, we will work with Asahi Medical to
obtain the necessary approvals to use the new polysulfone filter
in the RHEO System in Canada and the United States. Based on the
discussion we have had with Asahi Medical to date, we expect to
obtain distribution rights to this new filter on terms
substantially equivalent to the terms for the existing filter.
We are currently not seeking an alternative supplier of the
Rheofilter because we believe that Asahi is the only
manufacturer possessing the requisite technological and
production capabilities to produce the Rheofilter.







This agreement has a term of ten years from
our obtaining FDA approval to use the filters to treat AMD, and
is automatically renewable for one year terms unless terminated
upon six months notice. In addition, Asahi Medical
may terminate our agreement in certain circumstances, including:






| |   |                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | if we become insolvent or are petitioned into
    bankruptcy;                                                                                                                                  
|
| |  | if we transfer all or an important part of our
    business to a third party;                                                                                                                  
|
| |  | if we are unable to obtain FDA approval and other
    necessary approvals in the territories for which we have
    distribution rights by the end of December 2006;                            
|
| |  | if we breach the agreement and do not remedy the
    default within 30 days of Asahi Medical notifying us that we are
    in default; or                                                       
|
| |  | if any essential changes in our management or
    ownership of our shares would adversely affect the sale of
    filters in the territories in which we have exclusive
    distribution rights.

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OctoNova Pump.We purchase the OctoNova pump
pursuant to a marketing and distribution agreement with Diamed,
the developer of the OctoNova pump, and a distribution agreement
with MeSys GmbH, the company that manufactures the pumps for
Diamed.

Under the agreement with Diamed we have been
appointed Diameds exclusive distributor of the OctoNova
pump in the United States, Canada, Mexico and the Caribbean.
Under this agreement:



| |   |                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we have committed to use our best efforts in
    promoting the sale and use of, and securing orders and
    developing the market for, the OctoNova pump in the territories
    for which we have distribution rights; and
|
| |  | we are obligated to use our best efforts in
    promoting public and private medical insurance reimbursement for
    the treatment of hemo-rheological disorders in microcirculation
    in the United States.            




This agreement has a term of ten years from FDA
approval of the RHEO System, and is automatically renewable for
one year terms unless terminated upon six months notice.
In addition, Diamed may terminate this agreement in certain
circumstances, including:






| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | if we become insolvent or are petitioned into
    bankruptcy;                                                                                                    
|
| |  | if the whole or an important part of our business
    is transferred to a third party and such transfer would
    adversely affect the sale of the OctoNova pump;
|
| |  | if we breach the agreement and do not remedy the
    default within 30 days of Diamed notifying us that we are
    in default;                                   
|
| |  | if any essential changes in our management or our
    share ownership would adversely affect the sale of the OctoNova
    pump;                                  
|
| |  | if our distribution agreement with MeSys is
    terminated; or                                                                                                   
|
| |  | if we are unable to obtain FDA approval and
    other necessary approvals in the territories for which we have
    distribution rights by the end of 2006.       

Under this agreement, we have an obligation to
purchase a minimum quantity of 1,000 OctoNova pumps before
the fifth anniversary of FDA approval. Subsequent minimum
purchase orders will be as mutually agreed.

Under our agreement with MeSys, MeSys agrees to
manufacture and sell to us the OctoNova pump. Under our
agreement with MeSys, we have an obligation to purchase a
minimum annual quantity of OctoNova pumps. This agreement
expires on the third anniversary of our obtaining FDA approval
to use the OctoNova pump to treat AMD. In addition, MeSys may
terminate our agreement in certain circumstances, including:



| |   |                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------
| |  | if we become insolvent or are petitioned into
    bankruptcy;                                                                
|
| |  | if we breach the agreement and do not remedy the
    default within 60 days of MeSys notifying us that we are in
    default;
|
| |  | if Diameds manufacturing agreement with
    MeSys is terminated; or                                                         
|
| |  | if our marketing agreement with Diamed is
    terminated.                                                                    

Sales and Marketing




We currently have limited sales and marketing
capabilities and no distribution capabilities. We will seek to
develop our own sales and marketing infrastructure to
commercialize the RHEO System. We have recruited a chief
operating officer with significant sales, marketing and
distribution experience. We intend to recruit our domestic
ophthalmic sales force in the near future in order to have an
established sales and marketing capability if and when we
receive FDA approval to market the RHEO System in the United
States.




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We expect to focus our sales and marketing
efforts on multi-facility health care service providers,
including hospitals, dialysis clinics and ambulatory surgery
centers, as well as private eye care professionals, including
optometrists and ophthalmologists. Each of these two groups
would be serviced by separate dedicated sales forces, with
knowledge of the particular needs and concerns of each group.




In order to make the RHEO System more attractive
to multi-facility health care service providers and private eye
care professionals, prior to commercialization in the United
States, we will seek to create a training program for nurses,
leveraging existing clinics in Canada and potential partners who
already have experience in apheresis treatments, such as
dialysis clinics, to ensure an adequate supply of trained nurses
for our service provider partners.







If the RHEO System is approved for
commercialization by the FDA, we also intend to increase market
awareness of RHEO Therapy by identifying and developing
relationships with key opinion leaders in each of the eye care
disciplines, including ophthalmologists and optometrists. We
believe that these opinion leaders, some of whom are
investigators in MIRA-1, will help establish credibility for
RHEO Therapy. If and when we obtain FDA approval, we intend to
launch a public relations campaign targeted directly at patients
and advocacy groups to alert them to this new treatment. Members
of our management team were leaders in creating market awareness
of laser vision correction when it was introduced to the North
American market in the 1990s and in doing so they were effective
in creating relationships with a large number of optometrists
and ophthalmologists in the United States.







We currently have an exclusive agreement with
Apheresis Technologies to provide warehousing, order
fulfillment, shipping, billing services and customer service
related to shipping and billing for the RHEO System. Under this
agreement, we pay Apheresis Technologies a basic service fee of
5% of the cost to us of the RHEO System. The agreement expires
10 years subsequent to approval by the FDA of the RHEO System
unless otherwise terminated by us.







In Canada, we are currently marketing and selling
the RHEO System through a small, dedicated Canadian sales force.
In September 2004, we signed an agreement with Rheo Therapeutics
Inc., a private Canadian company, which has agreed to purchase
approximately 8,000 treatment sets and an estimated 20 OctoNova
pumps by the end of 2005, with an option to purchase up to an
additional 2,000 treatment sets, subject to availability. Rheo
Therapeutics pays a first-to-the-market favorable price of
Cdn$1,000 per treatment set. However, we expect our pricing in
the United States to be approximately $1,200 per treatment set.
Under our agreement with Rheo Therapeutics, either party may
terminate the agreement with 90 days written notice
to the other party. However, if Rheo Therapeutics gives notice
to terminate the agreement before all of its orders have been
shipped, Rheo Therapeutics is liable for the remaining balance
of their orders. Dr. Machat, who is an investor in and one
of the directors of Rheo Therapeutics, was a co-founder and
former director of TLC Vision.




Competition




The pharmaceutical, biotechnology and medical
industries are intensely competitive. We specifically target
those afflicted with Dry AMD. While we are aware that a number
of companies have developed or are in the process of developing
treatments for Wet AMD, including Eyetech Pharmaceuticals, Inc./
Pfizer Inc., Genentech, Inc./ Novartis Ophthalmics, Alcon
Laboratories, Inc., Iridex Corporation, QLT Inc. and Gen Vec,
Inc., we are not aware of any companies developing treatments
specifically for Dry AMD. This significantly enhances our
competitive position. However, some of these companies may
develop new treatments for Dry AMD or may develop modifications
to their treatments for Wet AMD that may be effective for Dry
AMD as well. In addition, other companies also may be involved
in competitive activities of which we are not aware.







While there are other suppliers who manufacture a
pump that could be used in the RHEO System, there are no other
suppliers of Asahis Rheofilter and consequently we believe
that a third party could not readily make a system similar to
the RHEO System. Furthermore, if a third party were to be
successful in making a system similar to the RHEO System, it
would be required to have that system approved for marketing in
the United States by the FDA.




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Patents and Proprietary Rights

Our success depends in part on our ability to
develop a competitive intellectual property advantage over
potential competitors for the treatment of Dry AMD. There is
currently no FDA-approved therapy for Dry AMD and, to date, we
are not aware of any other treatment in clinical development in
North America. We own or have licenses to certain patents and we
have exclusive arrangements with certain suppliers that we
believe will help us develop this competitive advantage. We also
rely on know-how, continuing technological innovation and
in-licensing opportunities to further develop our proprietary
position. Our ability and the ability of our licensors to obtain
intellectual property protection for the RHEO System and related
processes, and our ability to operate without infringing the
intellectual property rights of others and to prevent others
from infringing our intellectual property rights will be an
important factor to our success. Our strategy is to seek to
protect our proprietary position by, among other methods, filing
U.S. patent applications related to our technology, inventions
and improvements that are important to the development of our
business.




One aspect of the RHEO System is a treatment
method described in an issued U.S. patent which expires in
2017. This patent, issued under U.S. patent number
6,245,038 and entitled Method of Treatment of
Ophthalmological Diseases, is directed to a process for
treating ocular diseases using apheresis. We license this patent
from the two co-owners of the patent under a separate license
agreement with each owner. Under the license agreements, we have
the exclusive right to use the claimed treatment method in the
U.S. during the term of the patent. As part of those
agreements we are required to make royalty payments in the
aggregate of 2% of the sales for the OctoNova pumps and filters,
subject to minimum required payments in the aggregate amount of
$25,000 during each calendar quarter.




We expect that we will request re-examination of
the patent licensed to us prior to the end of 2004 at the U.S.
Patent and Trademark Office and we believe that a more detailed
claim set will be issued. Subsequent to entering into these
license agreements, we determined that certain prior art
publications written by the inventor related to the claimed
subject matter may not have been considered by the Examiner
during prosecution of this patent and that these references may
affect the validity of certain patent claims as issued. We
therefore intend to request re-examination in order to have the
issued claims in this patent considered in view of these
publications. During the re-examination proceeding, we also
intend to submit additional claims, which are narrower in scope
than the issued claims, and are limited to the use of plasma
filtration processes for treatment of ophthamological diseases.

In addition, we own one issued patent in the
United States, which expires in 2019. This patent, issued under
U.S. patent number 6,551,266 and entitled Rheological
Treatment Methods, is directed to methods of screening and
identifying patient candidates for RHEO Therapy. We also have
three additional pending patent applications in the United
States, Europe and Japan relating to the 6,551,266 patent.

The patent position of companies like ours is
generally uncertain and involves complex legal and factual
questions. Our ability to maintain and solidify a proprietary
position for our technology will depend on our success in
obtaining effective claims and enforcing those claims once
granted. We do not know whether any part of our patent
applications will result in the issuance of any patents. Our
issued patents and those that may issue in the future, or those
licensed to us, may be challenged, invalidated or circumvented,
which could limit our ability to stop competitors from marketing
our related products or the length of term of patent protection
that we may have for our processes. The reexamination of patent
6,245,038 may result in the patent being rejected and no claims
of commercial value being issued or it may result in competitors
acquiring intervening rights. In addition, the rights granted
under any issued patents may not provide us with proprietary
protection or competitive advantages against competitors with
similar technology. Because of the extensive time required for
development, testing and regulatory review of a potential
product, it is possible that, before any of our products can be
commercialized, any related patent may expire or remain in force
for only a short period following commercialization, thereby
reducing any advantage of the patent.

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In addition to patent protection, we have
registered the following U.S. trademarks:



| |   |                           
| | - | --------------------------
| |  | OccuLogix;                
|
| |  | Our Vision is Your Vision;
|
| |  | RheoTherapy; and          
|
| |  | RheoLogix.                

We also have the right to use the following
trademarks from Asahi Medical: Rheofilter, Rheopheresis and
Plasmaflo.

We may rely, in some circumstances, on trade
secrets to protect our technology. However, trade secrets are
difficult to protect. We seek to protect our proprietary
technology and processes, in part, by confidentiality agreements
with our employees, consultants, scientific advisors and other
contractors. These agreements may be breached, and we may not
have adequate remedies for any breach. In addition, our trade
secrets may otherwise become known or be independently
discovered by competitors. To the extent that our employees,
consultants or contractors use intellectual property owned by
others in their work for us, disputes may arise as to the rights
in related or resulting know-how and inventions.

Government Regulation




Government authorities in the United States and
other countries extensively regulate, among other things, the
research, development, testing, manufacture, labeling,
promotion, advertising, distribution and marketing of the RHEO
System, which is a medical device. In the United States, the FDA
regulates medical devices under the Federal Food, Drug, and
Cosmetic Act and implementing regulations. Failure to comply
with the applicable FDA requirements, both before and after
approval, may subject us to administrative and judicial
sanctions, such as a delay in approving or refusal by the FDA to
approve pending applications, warning letters, product recalls,
product seizures, total or partial suspension of production or
distribution, injunctions, and/or criminal prosecution.




Unless exempted by regulation, medical devices
may not be commercially distributed in the United States unless
they have been cleared or approved by the FDA. Medical devices
are classified into one of the three classes, class I, II or
III, on the basis of the controls necessary to reasonably assure
their safety and effectiveness. Class I devices are subject
to general controls, such as labeling, premarket notification,
and adherence to good manufacturing practices. Class II
devices are subject to general and specific controls, such as
performance standards, patient registries and FDA guidelines.
Generally, class III devices are those which must receive
approval of a PMA by the FDA to provide reasonable assurance of
their safety and effectiveness. For example, life-sustaining,
life-supporting, and implantable devices, or new devices which
have not been found substantially equivalent to legally marketed
devices, generally require approval of a PMA by the FDA.

There are two review procedures by which medical
devices can receive clearance or approval. Some products may
qualify for clearance under a Section 510(k) procedure, in which
the manufacturer provides a premarket notification that it
intends to begin marketing the product, and shows that the
product is substantially equivalent to another legally marketed
product, that is that it has the same intended use and is as
safe and effective as a legally marketed device and does not
raise different questions of safety and effectiveness than does
a legally marketed device. In some cases, the submission must
include data from human clinical studies. Marketing may commence
when the FDA issues a clearance letter finding substantial
equivalence.

If the medical device does not qualify for the
510(k) procedure, either because it is not substantially
equivalent to a legally marketed device or because it is a class
III device required to have an approved PMA, then the FDA must
approve a submitted PMA before marketing can begin. A PMA must
demonstrate, among other matters, that the medical device is
safe and effective. A PMA is typically a complex submission,
usually including the results of preclinical and clinical
studies, and preparing an application is a detailed and
time-consuming process. The PMA must be accompanied by the
payment of user fees which currently exceed

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$200,000 for most submissions. When modular
submissions are used, the entire fee is due when the first
module is submitted to the FDA. Once a PMA has been submitted,
the FDAs review may be lengthy and may include requests
for additional data. The FDA usually inspects device
manufacturers before approval of a PMA, and the FDA will not
approve the PMA unless the manufacturers compliance with
the quality systems regulation is satisfactory.





The RHEO System is a class III device and
will require approval of a PMA, which has not yet been submitted
to the FDA. Once submitted, we cannot be sure when the
FDAs review will be complete or that the FDA will approve
a PMA for our product in a timely fashion, or at all. FDA
requests for additional studies during the review period are not
uncommon and can significantly delay approvals. Even if we were
able to obtain approval of a PMA of a product for one
indication, changes to the product, its indication or its
labeling can require additional clearances or approvals.







To obtain approval of a PMA, clinical studies
demonstrating the safety and effectiveness of the medical device
must be conducted. Prior to beginning such studies, an
Investigational Device Exemption, or IDE, for the study must
become effective. The IDE will automatically become effective
30 days after its receipt by the FDA, unless the FDA raises
concerns or questions about the conduct of the study. In that
case, the concerns and questions must be resolved before the
study can begin. Even after an IDE becomes effective, the FDA
may suspend it at any time on various grounds, including a
finding that patients are being exposed to an unacceptable
health risk. The RHEO System is the subject of an effective IDE,
but we cannot be sure that the FDA will not suspend it, which
would prevent us from completing the MIRA-1 and other studies.




Regardless of whether a medical device requires
FDA clearance or approval, a number of other FDA requirements
apply to the device, its manufacturer and those who distribute
it. Device manufacturers must be registered and their products
listed with the FDA, and certain adverse events and product
malfunctions must be reported to the FDA. The FDA also regulates
the product labeling, promotion, and in some cases, advertising,
of medical devices. In addition, manufacturers and their
suppliers must comply with the FDAs quality system
regulation which establishes extensive requirements for quality
and manufacturing procedures. Thus, suppliers, manufacturers and
distributors must continue to spend time, money and effort to
maintain compliance, and failure to comply can lead to
enforcement action. The FDA periodically inspects facilities to
ascertain compliance with these and other requirements.

Employees

As of September, 2004, we had 17 full-time
employees. Of our full-time workforce, seven employees are
engaged in clinical trial activities and ten are engaged in
business development, finance and administration. We also retain
outside consultants. None of our employees are covered by
collective bargaining arrangements, and our management considers
its relationships with our employees to be good. To date, our
strategy has been to limit the size of our full-time workforce
and to outsource several of our key operating functions,
including the management of the MIRA-1 clinical trial. We have
also relied significantly on the resources of two of our major
stockholders, TLC Vision and Diamed, to assist us in the
planning and execution of our business plan to date.

Facilities

We sublease our headquarters in Mississauga from
TLC Vision. The facility consists of 210 square feet of office
space utilized for corporate finance and clinical trial
management personnel and our arrangement is on a month-to-month
sublease. Our current monthly lease obligation for rent for this
facility is Cdn. $460. We believe this lease contains
arms length commercial terms.

We also lease space in a facility in Palm Harbor,
Florida consisting of 5,020 square feet of space used for
warehousing the RHEO System components and housing certain of
our clinical trial personnel and records. Our lease on this
property expires in December 31, 2005. Our current monthly
lease obligation for rent for this facility is approximately
$2,745.

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We believe that if our existing facilities are
not adequate to meet our business requirements for the
near-term, additional space will be available on commercially
reasonable terms.

Legal Proceedings

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

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REORGANIZATION

The information contained in this prospectus
reflects consummation of certain reorganization transactions,
which we refer to collectively as the Reorganization
which principally consists of the following steps:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | the issuance of 4,622,605 shares of common
    stock to be issued upon the automatic conversion of all our
    outstanding shares of series A and series B
    convertible preferred stock upon the closing of this offering;                                                                                                                                                                                                                                                                           
|
|
|
| |  | the issuance of 7,106,454 shares of common
    stock to TLC Vision and Diamed upon conversion of $7,000,000
    aggregate principal amount of convertible debentures to be held
    by them immediately prior to this offering. The conversion price
    is $0.98502 per share; and                                                                                                                                                                                                                     
|
|
|
| |  | the issuance of 19,070,233 shares of common
    stock to TLC Vision in connection with the purchase by us
    of TLC Visions 50% interest in OccuLogix, L.P.
    immediately prior to this offering. This amount includes
    1,569,217 shares of common stock which will be issuable in
    the future upon the exchange of shares of OccuLogix
    ExchangeCo ULC, one of our Canadian subsidiaries, issued
    for tax purposes to TLC Vision in connection with the
    purchase of OccuLogix, L.P.
|

Following the Reorganization,
OccuLogix, L.P.s U.S. business will be carried
on by a Delaware limited liability company that is our
wholly-owned, indirect subsidiary. OccuLogix, L.P.s
Canadian business will be carried on by it.




We believe that our value resides solely in
OccuLogix, L.P., to which we licensed all of the distribution
and marketing rights for the RHEO System for ophthalmic
indications to which we are entitled. Prior to the
Reorganization our only profit stream has come from our share of
OccuLogix, L.P.s earnings. Our acquisition of TLC
Visions 50% ownership interest in OccuLogix, L.P. achieved
through the Reorganization will move the earnings potential for
sales of the RHEO System to us. As a result of the
Reorganization and prior to the completion of this offering, our
number of outstanding shares, on a fully diluted basis, will
double. TLC Vision will increase its beneficial ownership in us
from 27.7% to 65.8%, or from 4,735,014 shares to
23,805,247 shares.




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Our current structure




The chart below shows our corporate structure
immediately prior to the Reorganization:




Corporate Structure Chart






|    |                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | TLC Vision holds its interest in OccuLogix, L.P.
    indirectly through several wholly-owned subsidiaries.                                                                                                                                                                             
|   
|   
|(2) | The other current stockholders that we have
    material relationships with (other than TLC Vision) are Diamed,
    John Cornish and Dr. Richard Davis, which hold a 25.4%,
    6.6% and 8.3% beneficial interest in us, respectively.                                                 
|   
|   
|(3) | The general partner of OccuLogix, L.P. is
    OccuLogix Management, Inc. which has a 0.1% interest in
    OccuLogix, L.P. OccuLogix Holdings, Inc. has a direct 50%
    interest and TLC Vision has an indirect 50% interest in
    OccuLogix Management, Inc., a Delaware corporation.




All of our clinical trials are undertaken by
OccuLogix, Inc., while distribution and marketing of the RHEO
System is undertaken by OccuLogix, L.P. OccuLogix Holdings, Inc.
carries on no business other than holding our 49.95% interest in
OccuLogix, L.P. and our 50% interest in OccuLogix Management,
Inc. OccuLogix Management, Inc.s sole operations are those
that it undertakes as the general partner of OccuLogix, L.P.
OccuLogix, L.P. was created at the time of TLC Visions
initial investment in us to reflect the fact that TLC Vision
would receive a 50% interest in our sales and distribution
efforts as well as an interest in us.




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Our structure immediately following the
Reorganization, but before this offering




The chart below shows our corporate structure
immediately following the Reorganization, but prior to the
completion of this offering:




Corporate Structure Chart






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | TLC Vision holds its interests in OccuLogix
    ExchangeCo ULC and OccuLogix, Inc. directly and indirectly.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|   
|(2) | The other current stockholders that we have
    material relationships with (other than TLC Vision) are Diamed,
    John Cornish and Dr. Richard Davis, which hold a 12.0%, 3.1% and
    3.9% beneficial interest in us, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|   
|   
|(3) | OccuLogix ExchangeCo ULC will be created in order
    for TLC Vision to exchange certain of its interests in
    OccuLogix, L.P. for interests in OccuLogix, Inc. on a tax
    effective basis. OccuLogix, Inc. will own all of the common
    stock of OccuLogix ExchangeCo ULC and will be entitled to
    effectively all of the profits or losses derived from OccuLogix
    ExchangeCo ULC. The exchangeable shares issued to TLC Vision
    will allow TLC Vision, on demand, to receive an equivalent
    number of shares of OccuLogix, Inc. While TLC Vision holds the
    exchangeable shares, it will be entitled to the same economic
    benefits in respect of such shares as it would receive if it
    held shares of our common stock. In conjunction with the
    issuance of the exchangeable shares, OccuLogix, Inc. will be
    provided an overriding right to purchase the OccuLogix
    ExchangeCo ULC exchangeable shares from TLC Vision in exchange
    for OccuLogix, Inc. stock where TLC Vision first exercises its
    exchange right under the terms of the exchangeable shares
    against OccuLogix ExchangeCo ULC.
|   
|   
|(4) | The general partner of OccuLogix, L.P. is
    OccuLogix Management, Inc. which has a 0.1% interest in
    OccuLogix, L.P. OccuLogix Holdings, Inc. and OccuLogix
    ExchangeCo ULC each have a 50% interest in OccuLogix Management,
    Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

Following the Reorganization, OccuLogix, Inc. and
OccuLogix Holdings, Inc. will carry out the same functions that
they do now. OccuLogix, L.P. will undertake all of our Canadian
distribution and marketing activities. OccuLogix U.S. LLC will
undertake all of our U.S. distribution and marketing activities,
if and when we receive FDA approval.

Our structure immediately following the
Reorganization and the completion of this offering




Following the Reorganization and the completion
of this offering, our corporate structure will be the same as
immediately prior to the completion of this offering as
illustrated in the chart under the heading Our structure
immediately following the Reorganization, but before this
offering, except that the investors purchasing shares in
the offering will beneficially own 20.1% of our common stock and
the percentages beneficially owned by TLC Vision, the other
related current stockholders and other current stockholders will
be 52.2%, 15.0% and 12.7%, respectively.




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MANAGEMENT




The following table sets forth information about
our directors and executive officers as of October 31, 2004:




|                         |  |     |    |          |  |                                       
|------------------------ |  | --- | -- | -------- |  | --------------------------------------
|Name                     |  | Age |    | Position
|                         |  |     |    |         
|Elias Vamvakas           |  |     | 45 |          |  | Chairman of the Board, Chief          
|Thornhill, ON            |  |     |    |          |  | Executive Officer and Secretary       
|Thomas P. Reeves         |  |     | 43 |          |  | President and Chief Operating Officer 
|Mississauga, ON          |  |     |    |          |  |                                       
|William G. Dumencu, CA   |  |     | 50 |          |  | Chief Financial Officer and Treasurer 
|Milton, ON               |  |     |    |          |  |                                       
|Irving Siegel, MD        |  |     | 48 |          |  | Vice President, Clinical Affairs      
|Richmond Hill, ON        |  |     |    |          |  |                                       
|David Eldridge, OD, FAAO |  |     | 50 |          |  | Vice President, Science and Technology
|Bixby, OK                |  |     |    |          |  |                                       
|Stephen J. Kilmer        |  |     | 37 |          |  | Vice President, Corporate Affairs     
|Burlington, ON           |  |     |    |          |  |                                       
|Julie A. Fotheringham    |  |     | 34 |          |  | Vice President, Marketing             
|Uxbridge, ON             |  |     |    |          |  |                                       
|Joseph Zawaideh          |  |     | 34 |          |  | Vice President, Sales                 
|San Diego, CA            |  |     |    |          |  |                                       
|Thomas N. Davidson       |  |     | 64 |          |  | Director                              
|Key Largo, FL            |  |     |    |          |  |                                       
|Jay T. Holmes            |  |     | 61 |          |  | Director                              
|Key Largo, FL            |  |     |    |          |  |                                       
|Richard L. Lindstrom, MD |  |     | 56 |          |  | Director                              
|Wayzata, MN              |  |     |    |          |  |                                       
|Georges Noël             |  |     | 57 |          |  | Director                              
|Eupen, Belgium           |  |     |    |          |  |                                       

Elias Vamvakas,
together with Dr. Jeffery J. Machat, co-founded TLC
Vision, where he has been the Chairman since 1994 and was the
Chief Executive Officer from 1994 to July 2004. He has been our
Chairman and Secretary since June 2003 and our Chief Executive
Officer since July 2004. Prior to co-founding TLC Vision in
1993, Mr. Vamvakas was the President of the Creative
Planning Financial Group of Companies, a private provider of
financial planning, benefits and pension plans.
Mr. Vamvakas was named to Canadas Top Forty
Under Forty in 1996. In 1999 he was named Ernst &
Youngs Entrepreneur of the Year for Ontario in the
Emerging Category and Canadian Entrepreneur of the Year for
Innovative Partnering. In 2000, Mr. Vamvakas was recognized
by Profit Magazine for managing one of Canadas fastest
growing companies.

Thomas P. Reeveshas
served as our President and Chief Operating Officer since
September 2004. Mr. Reeves was the President from March
2001 to September 2004 and Chief Executive Officer from January
2003 to September 2004 of Borderfree, an international
e-commerce service provider and of the Canada Post Borderfree
Partnership, a commercial partnership between Canada Post
Corporation and Borderfree, which provides e-commerce services.
From 1998 until 2000, Mr. Reeves was President of Beamscope
Canada Inc., a retail distributor of micro-computer products.
While Mr. Reeves was President of Beamscope, the company
instituted proceedings under the Companies Creditors
Arrangement Act (Canada) and a receiver was appointed after his
departure. From 1994 to 1998, Mr. Reeves was President of
Merisel Canada, a subsidiary of one of the largest distributors
of micro-computer products. From 1992 until 1994,
Mr. Reeves was Managing Director of Merisel Europe where he
was responsible for all strategic, financial and operational

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aspects of subsidiaries in the UK, France,
Germany, Switzerland, Austria and Russia. From 1989 until 1992,
Mr. Reeves was Managing Director of Merisel Ltd. and from
1987 to 1989 he was Vice President of European Business
Development based in Paris, France. From 1985 until 1987,
Mr. Reeves was a consultant with the Boston Consulting
Group in its San Francisco office. Mr. Reeves holds a
Master of Arts in International Relations from the Australian
National University and graduated magna cum laude with a
Bachelor of Arts in Economics from Harvard University.


William G. Dumencu,
CA, has served as our Chief Financial
Officer and Treasurer since September 2003. From January 2003 to
August 2003, Mr. Dumencu was a consultant for us and TLC
Vision and from 1998 until 2002, Mr. Dumencu served in a
variety of financial leadership positions at TLC Vision
including Controller. Mr. Dumencu was employed in various
financial management positions by Hawker Siddeley Canada, Inc.,
a manufacturing conglomerate from 1978 to 1998. Mr. Dumencu
is a Chartered Accountant.

Irving Siegel,
MD, has been our Vice President, Clinical Affairs since
September 2004. He served as our President from August 2003 to
September 2004. From January 2003 until August, 2003,
Dr. Siegel was Medical Director at TLC Visions RHEO
Clinic subsidiary. Dr. Siegel has been a general medicine
practitioner with extensive emergency medicine experience since
1984. Dr. Siegel founded Quest Clinical Trials, a clinical
research company, in 1996 and served as its Director of Clinical
Research from 1996 to 2003. While employed by Quest,
Dr. Siegel conducted over 60 clinical trials in a variety
of therapeutic areas. Dr. Siegel is a member of the
Clinical Research Association of Canada.




David Eldridge, OD,
FAAO, became our Vice President,
Science and Technology in October 2002. Prior to joining
OccuLogix, Dr. Eldridge was the Executive Vice President,
Clinical Affairs of TLC Vision from 1997 to 2002. Prior to
joining TLC Vision, Dr. Eldridge was an optometrist in
private practice from 1978 to 1997. He has served as President
of the Oklahoma Chapter of the American Academy of Optometry,
President of the Oklahoma Association of Optometric Physicians,
the OAOP, a member of the OAOP board of directors, Chairman of
the OAOP Education Committee, Oklahoma Optometrist of the
Year in 1993 and is a charter member of the American
Optometric Association Contact Lens Section. Dr. Eldridge
is a Fellow of the American Academy of Optometry.




Stephen J. Kilmerbecame our Vice President, Corporate
Affairs in July 2004. Mr. Kilmer was Vice President,
Investor Relations of TLC Vision from December 2003 to October
2004. From October 2000 until December 2003, he was Director of
Corporate Communications for TLC Vision and from October 1998
until October 2000, he was Director of Investor Relations for
TLC Vision. From September 1997 until October 1998,
Mr. Kilmer was Manager of Investor Relations for TLC Vision.

Julie A. Fotheringhambecame our Vice President, Marketing
in September 2004. From September 2002 until September 2004,
Ms. Fotheringham was Senior Brand Manager at Cadbury Adams,
a manufacturer of assorted candy. From January 2000 until
September 2002, she was Brand Manager at Adams (a division of
Warner-Lambert and then Pfizer Canada Inc.). From November 1996
until November 1997, she was Client Manager for the Sales &
Merchandising Group. From December 1993 to September 1996,
Ms. Fotheringham was Territory Manager for Warner-Lambert
Canadas Parke-Davis Pharmaceutical Division.
Ms. Fotheringham has a Bachelor of Science degree in
Biology from Queens University in Kingston, Canada.

Joseph Zawaidehbecame our Vice President, Sales in
September 2004. From January 2003 to September 2004,
Mr. Zawaideh was Director of H.E.L.P., the apheresis
business unit of B. Braun Medical, Inc., a health care products
and services provider. From March 2002 to January 2003, he was
Marketing Manager of Innercool Therapies, Inc., a medical device
company providing endovascular therapeutics for cardiology and
neurosurgery. Mr. Zawaideh co-founded and was Vice
President, Business Development of Viewtap, Inc., a provider of
sales and operational monitoring technology, from January 2001
to February 2002. He was Marketing Manager for B. Braun Medical,
Inc. from May 1998 to December 2000. From April 1993 to July
1996, Mr. Zawaideh was a Research and Development Engineer
for River Medical, Inc., a manufacturer of disposable pre-filled
intravenous pumps. Mr. Zawaideh has a Bachelor of Science
degree in Bioengineering from the University of California San
Diego and a Master of Business Administration from the
University of Southern California.

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Thomas N. Davidsonhas been a member of our board since
September 2004 and has been on the board of TLC Vision since
2002. Mr. Davidson has been Chairman of NuTech Precision
Metals Inc. and Chairman of Quarry Hill Group, a private
investment holding company, since 1986. NuTech Precision Metals
Inc. is a manufacturer of high performance metal fabrications
for the health care, aerospace, high technology and chemical
industries. Mr. Davidson is past Chairman of Hanson
Chemical Inc., a supplier of specialty chemical products, and
General Trust PCL Packaging Inc., a supplier of plastic
packaging. Mr. Davidson is the non-executive Chairman of
Azure Dynamics Corporation, a developer of hybrid electrical
vehicle systems for commercial vehicles. He is on the board of
CMA Holdings, Inc. and MDC Partners, Inc. and was recognized by
the Financial Post as the Canadian Entrepreneur of the year in
1979.

Jay T. Holmeshas
been a member of our board since September 2004 and has been
self-employed as an attorney and business consultant since
mid-1996. From 1981 until mid-1996, Mr. Holmes held several
senior management positions at Bausch & Lomb Incorporated,
the most recent being Executive Vice President and Chief
Administrative Officer from 1995 to 1996 and Senior Vice
President and Chief Administrative Officer from 1993 to 1995.
From 1983 to 1993, Mr. Holmes was Senior Vice President,
Corporate Affairs, and from 1981 to 1983 Vice President and
General Counsel at Bausch & Lomb. Mr. Holmes was a
member of the Board of Directors of Bausch & Lomb from 1986
until 1996. Mr. Holmes also serves on the Advisory Board of
Directors of Rochester Energy and on the board of VISX
Incorporated.

Richard L. Lindstrom,
MD, has been a member of our board
since September 2004 and has served as a director of TLC Vision
since May 2002 and, prior to that, as a director of LaserVision
since November 1995. Since 1979, Dr. Lindstrom has been
engaged in the private practice of ophthalmology and has been
the President of Minnesota Eye Consultants P.A., a provider of
eye care services, or its predecessor since 1989. In 1989, Dr.
Lindstrom founded the Phillips Eye Institute Center for Teaching
& Research, an ophthalmic research and surgical skill
education facility, and he currently serves as the Centers
Medical Director. Dr. Lindstrom has served as an Associate
Director of the Minnesota Lions Eye Bank since 1987. He is a
medical advisor for several medical device and pharmaceutical
manufacturers. From 1980 to 1989, he served as a Professor of
Ophthalmology at the University of Minnesota. Dr. Lindstrom
received his Doctor of Medicine, Bachelor of Arts and Bachelor
of Sciences degrees from the University of Minnesota.

Georges Noëlhas been a member of our board since
July 2003. Mr. Noël has been involved in the private
equity and venture capital industry for over 14 years and
between 2002 and 2003, was the Secretary General of the Belgian
Venturing Association. Mr. Noël has recently been
appointed as Director of Research, Public Affairs and
Development of the European Private Equity & Venture Capital
Associations. Mr. Noëls professional experience
in private equity has encompassed a range of roles and
responsibilities at various private equity houses, including:
CAM Private Equity, the Cologne-based fund of funds;
Ostbelgieninvest AG; Eupen; and Fortis Private Equity NV. Prior
to his involvement in private equity, Mr. Noël was
Chief Financial Officer and Member of the Executive Committee of
the industrial group NMC sa in Eupen, a company that develops,
produces and markets synthetic foam products, between 1982 and
1993. He held various positions in corporate banking at
Génerale de Banque, now Fortis Bank, and was Managing
Director of its German subsidiary, Belgische Bank, between 1971
and 1981. Mr. Noël serves on the boards of several
investee or family-owned companies, is past president of the
Belgium Venturing Association and of the IMD Alumni Club of
Belgium. Mr. Noël was a member of the EVCA National
Venture Capital Associations Committee from 2000 to 2003.

Composition of Board of Directors; Election
and Removal of Directors




As of the closing of this offering, we will have
five directors. In accordance with our amended and restated
by-laws, the number of directors comprising our board of
directors will be determined from time to time by our board of
directors. Each director is to hold office until his or her
successor is duly elected and qualified. Directors will be
elected for a term that will expire at the annual meeting of
stockholders immediately succeeding their election.




Directors may be removed from office with or
without cause by the affirmative vote of the holders of at least
a majority of the voting power of all then-outstanding shares of
our capital stock that are entitled to vote

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generally in the election of our directors. Our
amended and restated by-laws provide that in the case of any
vacancies among the directors such vacancy will be filled with a
candidate approved by the vote of a majority of the remaining
directors.


The ability of the remaining directors to fill
vacancies could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from
attempting to acquire, control of us.

At any meeting of our board of directors, a
majority of the total number of directors then in office will
constitute a quorum for all purposes.

Committees of the Board

The standing committees of our board of directors
will consist of an audit committee, a compensation committee and
a corporate governance and nominating committee.
Messrs. Davidson, Holmes and Noël are
independent as defined in the rules of the SEC and
the Nasdaq National Market as such term relates to the relevant
board of directors committees. Further, the board of directors
has determined that Mr. Noël is an audit
committee financial expert as defined by the rules of the
SEC and the Nasdaq National Market.

Audit
Committee

Our audit committee consists of Messrs.
Noël, Holmes and Davidson, each of whom are independent
directors. Mr. Noël is the committees chairman.
The principal duties and responsibilities of our audit committee
will be as follows:



| |   |                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to monitor our financial reporting process and
    internal control system;                                                                                          
|
| |  | to appoint and replace our independent outside
    auditors from time to time, determine their compensation and
    other terms of engagement and oversee their work;
|
| |  | to oversee the performance of our internal audit
    function; and                                                                                                   
|
| |  | to oversee our compliance with legal, ethical and
    regulatory matters.                                                                                            

The audit committee will have the power to
investigate any matter brought to its attention within the scope
of its duties. It will also have the authority to retain counsel
and advisors to fulfill its responsibilities and duties. On
closing, all members of this committee will be directors who are
independent of management.

Compensation
Committee

Our compensation committee consists of Messrs.
Davidson, Holmes and Noël, each of whom are independent
directors. Mr. Davidson is the committees chairman.
The principal duties and responsibilities of the compensation
committee will be as follows:



| |   |                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to provide oversight on the development and
    implementation of the compensation policies, strategies, plans
    and programs for our key employees and outside directors and
    disclosure relating to these matters;
|
| |  | to make recommendations regarding the operation
    of and/or implementation of any employee bonus plans;                                                                                                                
|
| |  | to review and approve the compensation of our
    chief executive officer and the other executive officers of us
    and our subsidiaries and the remuneration of our board of
    directors; and                        
|
| |  | to provide oversight concerning selection of
    officers, management succession planning, performance of
    individual executives and related matters.                                                                 

On closing, all members of this committee will be
directors who are independent of management.

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Corporate
Governance and Nominating Committee

Our corporate governance and nominating committee
consists of Messrs. Holmes, Noël and Davidson, each of whom
are independent directors. Mr. Holmes is the
committees chairman. The principal duties and
responsibilities of the corporate governance and nominating
committee will be as follows:



| |   |                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | to establish criteria for board and committee
    membership and recommend to our board of directors proposed
    nominees for election to the board of directors and for
    membership on committees of the board of directors;
|
| |  | to make recommendations regarding proposals
    submitted by our stockholders; and                                                                                                                                               
|
| |  | to make recommendations to our board of directors
    regarding corporate governance matters and practices.                                                                                                                      

On closing, all members of this committee will be
directors who are independent of management.

Compensation Committee Interlocks and Insider
Participation

No member of our compensation committee has ever
been an officer or employee of ours. None of our executive
officers currently serves, or has served during the last
completed fiscal year, on the compensation committee or board of
directors of any other entity that has one or more executive
officers serving as a member of our board of directors or
compensation committee. Prior to establishing the compensation
committee, our full board of directors made decisions relating
to compensation of our executive officers.

Director Compensation




Directors who are not employees are entitled to
receive an attendance fee of $2,500 in respect of each board
meeting attended in person, $1,000 in respect of each committee
meeting attended in person and $500 in respect of each meeting
attended by phone. Directors also receive an annual fee of
$15,000. Non-employee directors are reimbursed for out-of-pocket
expenses incurred in connection with attending meetings of the
board of directors. In addition, non-employee directors are
entitled to receive options to acquire shares of our common
stock under our stock option plan based on our performance. The
chair of each of the Audit, Compensation and Corporate
Governance Committees also receives an annual fee of $5,000. In
the year ended December 31, 2003, our Chairman (currently
also our Chief Executive Officer) received options to acquire an
aggregate of 500,000 shares of our common stock at an exercise
price of $0.99 per share for his services as Chairman. In
addition, four non-employee directors as of December 31,
2003, including Mr. Noël, who has served as one of our
directors since July 2003, each received options to acquire
25,000 shares of our common stock at an exercise price of $0.99
per share.




Executive Compensation

The following table sets forth information with
respect to the compensation of our chief executive officer and
each of the other four most highly compensated executive
officers earning greater than $100,000 during the fiscal year
ended December 31, 2003.

Summary Compensation Table

|                 |                                                    |      |      |              |  |           |         |              |  |   |        |  |  |   |        |     | 
|---------------- | -------------------------------------------------- | ---- | ---- | ------------ |  | --------- | ------- | ------------ |  | - | ------ |  |  | - | ------ | --- | 
|                 |                                                    |      |      |              |  |          
|                 |                                                    |      |      | Annual       |  |          
|                 |                                                    |      |      | Compensation |  |          
|                 |                                                    |      |      |              |  | All Other
|                 |                                                    | Year |      | Salary       |  | Bonus     |         | Compensation
|                 |                                                    |      |      |              |  |           |         |             
|Richard Davis(1) |                                                    |      | 2003 |              |  | $         | 175,000 | (1)          |  | $ | 25,000 |  |  |   |       |    
|                 | Former Chief Executive Officer                     |      |      |              |  |           |         |              |  |   |        |  |  |   |        |     | 
|William Dumencu  |                                                    |      | 2003 |              |  | $         | 45,825  | (2)          |  |   |       |  |  | $ | 79,182 | (3)
|                 | Chief Financial Officer and Treasurer              |      |      |              |  |           |         |              |  |   |        |  |  |   |        |     | 
|Irving Siegel    |                                                    |      | 2003 |              |  | $         | 44,612  | (2)          |  |   |       |  |  | $ | 22,306 |    
|                 | Former President, Vice President, Clinical Affairs |      |      |              |  |           |         |              |  |   |        |  |  |   |        |     | 

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|    |                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Dr. Davis was Chief Executive Officer from
    January to June, 2003, and Chief Science Officer from July 2003
    to April 2004, earning a salary of $100,000 and $75,000,
    respectively. We did not have a Chief Executive Officer from
    June 2003 until July 2004 when Mr. Vamvakas assumed the
    role.
|   
|(2) | Reflects salary earned from August 1 to
    December 31, 2003.                                                                                                                                                                                                                                                    
|   
|(3) | Reflects compensation earned as a consultant from
    January 1 to July 31, 2003.                                                                                                                                                                                                                                 

Option Grants in Last Fiscal Year

The following table sets forth certain
information concerning option grants to the named executive
officers during the fiscal year ended December 31, 2003.




|                |  |                   |         |                  |  |                            |      |            |  |                             |      |     |  |  |      |  |  |  |           |  |  |  |           | 
|--------------- |  | ----------------- | ------- | ---------------- |  | -------------------------- | ---- | ---------- |  | --------------------------- | ---- | --- |  |  | ---- |  |  |  | --------- |  |  |  | --------- | 
|                |  |                   |         |                  |  |                           
|                |  | Individual Grants |         |                  |  | Potential Realizable Value
|                |  |                   |         |                  |  | at Assumed Annual Rates   
|                |  | Number of         |         | Percent of Total |  |                            |      |            |  | of Stock Price Appreciation
|                |  | Securities        |         | Options          |  |                            |      |            |  | for Option Term            
|                |  | Underlying        |         | Granted to       |  | Exercise                   |      |            |  |                            
|                |  | Options           |         | Employees in     |  | Price                      |      | Expiration |  | 5%                          |      | 10%
|Name            |  | Granted           |         | Fiscal Year(1)   |  | ($/sh)                     |      | Date       |  | ($)                         |      | ($)
|                |  |                   |         |                  |  |                            |      |            |  |                             |      |    
|Richard Davis   |  |                   | 150,000 |                  |  |                            | 22.8 |            |  |                             | 0.99 |     |  |  | 2013 |  |  |  | 2,967,000 |  |  |  | 4,812,000 | 
|William Dumencu |  |                   | 100,000 |                  |  |                            | 15.2 |            |  |                             | 0.99 |     |  |  | 2013 |  |  |  | 1,978,000 |  |  |  | 3,208,000 | 
|Irving Siegel   |  |                   | 300,000 |                  |  |                            | 45.6 |            |  |                             | 0.99 |     |  |  | 2013 |  |  |  | 5,934,000 |  |  |  | 9,624,000 | 









|    |                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Drs. Davis and Siegel and Mr. Dumencu were
    granted an aggregate of 550,000 options in fiscal 2003, which
    represents 38.7% of the 1,420,676 options granted to all
    persons, including employees, directors and consultants.

Aggregated Option Exercises in Last Fiscal
Year and

Fiscal Year-End Option Values





The following table sets forth certain
information with respect to option exercises and the total value
of options held by each named executive officer as of
December 31, 2003. The value realized upon the exercise of
options and the value of the unexercised in-the-money options at
year-end have been calculated based on an assumed initial public
offering price of $9.00 per share, the midpoint of the range set
forth on the cover of this prospectus, less the applicable
exercise price per share, multiplied by the number of shares
underlying such options.




|                |  |             |   |          |  |                           |   |                           |  |  |           |  |  |   |            | 
|--------------- |  | ----------- | - | -------- |  | ------------------------- | - | ------------------------- |  |  | --------- |  |  | - | ---------- | 
|                |  |             |   |          |  | Number of Securities      |   | Value of Unexercised     
|                |  |             |   |          |  | Underlying Unexercised    |   | In-the-Money             
|                |  | Shares      |   | Value    |  | Options                   |   | Options                  
|                |  | Acquired    |   | Realized |  | at Fiscal Year-End        |   | at Fiscal Year-End       
|Name            |  | on Exercise |   | ($)      |  | Exercisable/Unexercisable |   | Exercisable/Unexercisable
|                |  |             |   |          |  |                           |   |                          
|Richard Davis   |  |             |  |          |  |                           |  |                           |  |  | 0/150,000 |  |  | $ | 0/$150,000 | 
|William Dumencu |  |             |  |          |  |                           |  |                           |  |  | 0/100,000 |  |  | $ | 0/$100,000 | 
|Irving Siegel   |  |             |  |          |  |                           |  |                           |  |  | 0/300,000 |  |  | $ | 0/$300,000 | 

The weighted average exercise price of
2,389,961 options outstanding as at December 31, 2003
was $1.45 per share.

Option Grant to Chairman

In 2003, Mr. Vamvakas was granted options
for 500,000 shares in connection with his appointment as
Chairman of the Board. The options have an exercise price of
$0.99 and a term of ten years, vesting annually over three
years, in equal installments.

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Employment Agreements

Elias Vamvakas

We entered into an employment agreement with
Mr. Elias Vamvakas, who is our Chairman and Chief Executive
Officer, on July 30, 2004. Mr. Vamvakas receives an
annual base salary of $350,000. At the discretion of the
Compensation Committee of the board of directors,
Mr. Vamvakas is entitled to an annual bonus of up to 100%
of his annual base salary. Mr. Vamvakas is entitled to
receive stock options pursuant to the 2002 stock option plan.

Mr. Vamvakass employment may be
terminated for cause (as defined in the agreement) or without
cause upon 24 months notice. If Mr. Vamvakas is
terminated for any reason other than cause, he is entitled to a
lump sum payment equal to 24 months of his salary and bonus
provided that the total lump sum payment is no less than
$1,400,000. In addition, in the event that Mr. Vamvakas
voluntarily terminates his employment within six months of a
change of control (as defined in the agreement), Mr. Vamvakas is
entitled to a lump sum payment equal to 12 months of his salary.

The agreement also contains non-compete and
confidentiality covenants for our benefit.

Thomas P. Reeves




We entered into an employment agreement with
Mr. Thomas P. Reeves, who is our President and Chief
Operating Officer, in August 2004. Mr. Reeves receives an
annual base salary of $275,000. At the discretion of the
Chairman and/or the Compensation Committee of the board of
directors, Mr. Reeves is entitled to an annual bonus of up
to 50% of his annual base salary. Mr. Reeves is entitled to
receive stock options pursuant to the 2002 stock option plan.
Upon the closing of this offering, Mr. Reeves will be
granted 300,000 stock options at an exercise price equal to the
price of the shares issued in this offering.




Mr. Reevess employment may be
terminated for cause (as defined in the agreement) or without
cause upon 24 months notice. Where Mr. Reeves is
terminated for any reason other than cause, he is entitled to a
lump sum payment equal to 24 months of his salary and a
lump sum allowance of $100,000. In addition, in the event that
Mr. Reeves voluntarily terminates his employment within six
months of a change of control (as defined in the agreement),
Mr. Reeves is entitled to a lump sum payment equal to 12
months of his salary.

The agreement also contains non-compete and
confidentiality covenants for our benefit.

Mr. William G. Dumencu

We entered into an employment agreement with Mr.
William G. Dumencu, who is our Chief Financial Officer and
Treasurer, on August 1, 2003. Mr. Dumencus primary
responsibility is to us, however, he does spend approximately
25% of his work efforts on behalf of OccuLogix, L.P. His base
salary including the services rendered to OccuLogix, L.P. is
Cdn. $154,080. At our discretion, based on specific measurable
objectives, he is entitled to an annual bonus of 20% of his
annual base salary. Mr. Dumencu is entitled to receive stock
options pursuant to the 2002 stock option plan.

Mr. Dumencus employment may be terminated
for cause (as defined in the agreement) or without cause upon
sixty days notice.

The agreement also contains non-compete and
confidentiality covenants for our benefit. If
Mr. Dumencus employment is terminated without cause
(as defined in the agreement) he is entitled to receive
severance equal to twelve months salary, payable in equal
monthly instalments or a lump sum, at Mr. Dumencus
option.

Dr. Irving Siegel

We entered into an employment agreement with Dr.
Irving Siegel, who will be our Vice President, Clinical Affairs,
on August 1, 2003. Dr. Siegel receives an annual base
salary of Cdn. $150,000. At the

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discretion of the board of directors, Dr. Siegel
is entitled to an annual bonus of up to 100% of his annual base
salary. Dr. Siegel is entitled to receive stock options pursuant
to the 2002 stock option plan.


Dr. Siegels employment may be terminated
for cause (as defined in the agreement) or without cause upon
sixty days notice. If Dr. Siegels employment is
terminated without cause (as defined in the agreement), he
is entitled to severance pay equal to 24 months
salary, if termination is prior to August 1, 2005, and no
change of control has occurred in the prior six months;
30 months salary if termination is prior to
August 1, 2005, and a change of control has occurred within
six months preceding termination; 36 months salary if
termination is between July 31, 2005, and August 1,
2008, and 48 months salary if termination occurs
after July 31, 2008, plus a pro rata share, to the
date of termination, of the annual bonus that would otherwise be
payable to Dr. Siegel.

The agreement also contains non-competition and
confidentiality covenants for our benefit.




Dr. David Eldridge







We entered into an employment agreement with
Dr. David Eldridge, who is our Vice President, Science and
Technology, on November 9, 2004. Dr. Eldridge receives
an annual base salary of $195,000. At the discretion of the
Compensation Committee of the board of directors,
Dr. Eldridge is entitled to an annual bonus of up to 25% of
his annual base salary. In addition, Dr. Eldridge is
entitled to a one-time bonus of $15,000 upon the closing of this
offering. Dr. Eldridge is entitled to receive stock options
pursuant to our stock option plan.







Dr. Eldridges employment may be
terminated for cause (as defined in the agreement). If
Dr. Eldridges employment is terminated without cause
(as defined in the agreement), Dr. Eldridge is entitled to
receive a lump sum severance equal to twelve months salary.







The agreement also contains non-compete and
confidentiality covenants for our benefit.




Stephen Kilmer




We entered into an employment agreement with
Mr. Stephen Kilmer, who is our Vice President, Corporate
Affairs, on July 30, 2004. Mr. Kilmer receives an
annual base salary of Cdn. $190,000. At the discretion of
the Compensation Committee of the board of directors,
Mr. Kilmer is entitled to an annual bonus of up to 25% of
his annual base salary. Mr. Kilmer is entitled to receive
stock options pursuant to the 2002 stock option plan. Upon the
closing of this offering, Mr. Kilmer will be granted 80,000
stock options at an exercise price equal to the price of the
shares issued in this offering and will receive a one time bonus
of Cdn. $25,000.




Mr. Kilmers employment may be
terminated for cause (as defined in the agreement). If
Mr. Kilmers employment is terminated without cause
(as defined in the agreement), Mr. Kilmer is entitled to
receive a lump sum severance equal to twelve months salary.

The agreement also contains non-compete and
confidentiality covenants for our benefit.

Julie Fotheringham




We entered into an employment agreement with
Ms. Julie Fotheringham, who is our Vice President,
Marketing, in August, 2004. Ms. Fotheringham receives an
annual base salary of Cdn. $120,000. At the discretion of
the Compensation Committee of the board of directors,
Ms. Fotheringham is entitled to an annual bonus of up to
25% of her annual base salary. Ms. Fotheringham is entitled
to receive stock options pursuant to the 2002 stock option plan.
Upon the closing of this offering, Ms. Fotheringham will be
granted 80,000 stock options at an exercise price equal to the
price of the shares issued in this offering.




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Ms. Fotheringhams employment may be
terminated for cause (as defined in the agreement). If
Ms. Fotheringhams employment is terminated without
cause (as defined in the agreement), Ms. Fotheringham is
entitled to receive a lump sum severance equal to twelve
months salary.

The agreement also contains non-compete and
confidentiality covenants for our benefit.

Joseph Zawaideh




We entered into an employment agreement with
Mr. Joseph Zawaideh, who is our Vice President, Sales, on
September 7, 2004. Mr. Zawaideh receives an annual
base salary of $200,000. At the discretion of the Compensation
Committee of the board of directors, Mr. Zawaideh is
entitled to an annual bonus of up to 50% of his annual base
salary. Mr. Zawaideh is entitled to receive stock options
pursuant to the 2002 stock option plan. Upon the closing of this
offering, Mr. Zawaideh will be granted 100,000 stock
options at an exercise price equal to the price of the shares
issued in this offering.




Mr. Zawaidehs employment may be
terminated for cause (as defined in the agreement). If
Mr. Zawaidehs employment is terminated without cause
(as defined in the agreement), Mr. Zawaideh is entitled to
receive a lump sum severance equal to twelve months salary.

The agreement also contains non-compete and
confidentiality covenants for our benefit.

Employee Benefit Plans



| |                   
| | ------------------
| | Stock Option Plans




We adopted our 2002 stock option plan, or 2002
plan, in June 2002 and our stockholders approved such plan in
June 2002. Prior to the offering, we intend to adopt an
amendment to the 2002 plan to increase the shares of our common
stock reserved for issuance under the plan and to permit share
appreciation rights to be granted with stock options. A share
appreciation right allows the participant to request a cash
payment equal to the difference between the fair market value of
a share and the exercise price. We will have the option of
paying cash or delivering common stock on the exercise of a
share appreciation right. Options under the 2002 plan shall be
granted, if at all, within ten years from June 13,
2002. The 2002 plan provides for the grant of the following:






| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  | incentive stock options, as defined under the
    Internal Revenue Code, which may be granted solely to our
    employees, including officers, and
|
| |  | nonstatutory stock options, which may be granted
    to our directors, consultants or employees, including officers.                              

OccuLogix Corporation, a predecessor company,
adopted a 1997 stock option plan, or 1997 plan. When the 2002
plan was adopted, the 1997 plan was terminated and the number of
shares reserved for issuance under the 2002 plan was reduced by
the number of shares issuable under options granted under the
1997 plan.



| |              
| | -------------
| | Share Reserve




Following amendment of our 2002 stock option
plan, an aggregate of 4,456,000 shares of our common stock will
be reserved for issuance under the 2002 plan and the 1997 plan.







Shares subject to stock options that expire,
terminate, are repurchased, or are forfeited under the 2002 plan
or 1997 plan will again become available for the grant of
options under the 2002 plan. Shares issued under the 2002 plan
may be previously unissued shares or reacquired shares bought on
the market or otherwise or any combination thereof. If any
shares subject to a stock option are not delivered to a
participant because such shares are withheld for the payment of
taxes or the stock option is exercised through a net
exercise, the number of shares that are not delivered to
the participant shall remain available for the grant of options
under the 2002 plan. If the exercise price of any stock option
is satisfied by tendering shares of common stock held by the
participant, the number of shares tendered shall remain
available for the grant of




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options under the 2002 plan. If a share
appreciation right is exercised, the shares subject to the
related stock option shall remain available for the grant of
options under the 2002 plan.




| |               
| | --------------
| | Administration

The 2002 plan will be administered by our
Compensation Committee. Subject to the terms of the 2002 plan,
our Compensation Committee determines recipients, the numbers
and types of stock options to be granted and the terms and
conditions of the stock options, including the period of their
exercisability and vesting. Subject to the limitations set forth
below, our Compensation Committee will also determine the
exercise price of options granted under the 2002 plan and may
reprice such options, which includes reducing the exercise price
of any outstanding option, canceling an option in exchange for
cash or another equity option or any other action that is
treated as a repricing under generally accepted accounting
principles.




Stock options are granted pursuant to stock
option agreements. Generally, the exercise price for an
incentive stock option cannot be less than 100% of the fair
market value of the common stock on the date of grant. The
exercise price for a nonstatutory stock option shall be
determined by our compensation committee and generally cannot be
less than 85% of the fair market value on the date of grant. The
exercise price of a non statutory option granted to any person
who, at the time of grant, owns more than 10% of our total
combined voting power or of any affiliate may not be less than
110% of the fair market value of the stock subject to the option
on the date of grant. Options granted under the 2002 plan vest
at the rate specified in the option agreement.




In general, the term of stock options granted
under the 2002 plan may not exceed ten years and in certain
circumstances may be shorter. Unless the terms of an
optionees stock option agreement provide for earlier or
later termination, if an optionees service relationship
with us, or any affiliate of ours, ceases due to disability or
death, the optionee, or his or her beneficiary, may exercise any
vested options for up to 12 months from cessation of
service or such longer period as the board in its discretion
determines. If an optionees service relationship with us,
or any affiliate of ours, ceases for any reason other than
disability or death, the optionee may exercise any vested
options for up to three months from cessation of service or such
longer period as the board in its discretion determines.

Acceptable consideration for the purchase of
common stock issued under the 2002 plan will be determined by
our board of directors and may include cash, common stock
previously owned by the optionee, the net exercise of the
option, consideration received in a cashless
broker-assisted sale and other legal consideration approved by
our board of directors.

Generally, an optionee may not transfer a stock
option other than by will or the laws of descent and
distribution unless the optionee holds a nonstatutory stock
option that provides otherwise. However, an optionee may
designate a beneficiary who may exercise the option following
the optionees death.

Limitations




Incentive stock options may be granted only to
our employees. The aggregate fair market value, determined at
the time of grant, of shares of our common stock with respect to
incentive stock options that are exercisable for the first time
by an optionee during any calendar year under all of our stock
plans may not exceed $100,000. The options or portions of
options that exceed this limit are treated as nonstatutory stock
options. No incentive stock option may be granted to any person
who, at the time of the grant, owns or is deemed to own stock
possessing more than 10% of our total combined voting power or
of any affiliate unless the following conditions are satisfied:






| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | the option exercise price must be at least 110%
    of the fair market value of the stock subject to the option on
    the date of grant; and
|
| |  | the term of any incentive stock option award must
    not exceed five years from the date of grant.                                          

78



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##### Table of Contents



Corporate
Transactions

In the event of certain corporate transactions,
all outstanding stock options under the 2002 plan may be
assumed, continued or substituted for by any surviving entity.
If the surviving entity elects not to assume, continue or
substitute for such options, such stock options will be
terminated if not exercised prior to the effective date of the
corporate transaction.

Plan
Amendments

Our board of directors will have authority to
amend or terminate the 2002 plan. No amendment or termination of
the 2002 plan shall adversely affect any rights under options
already granted to a participant unless agreed to by the
affected participant or required to comply with applicable law.
To the extent necessary to comply with applicable provisions of
federal securities laws, state corporate and securities laws,
the Internal Revenue Code, the rules of any applicable stock
exchange or national market system, and the rules of any
non-United States jurisdiction applicable to options granted to
residents therein, we shall obtain stockholder approval of any
such amendment to the 2002 plan in such a manner and to such a
degree as required and will obtain stockholder approval to any
increase in the maximum number of shares of common stock
reserved for issuance under the 2002 plan.




Options
Granted Under the 1997 Plan and the 2002 Plan







As of September 30, 2004, there were an
aggregate of 1,599,316 options outstanding under the 1997
plan and the 2002 plan. Upon the closing of this offering, an
additional 828,000 options will be granted to certain of
our officers, employees and directors, which will vest annually
over three years, in equal installments.




Options
Granted Outside the 1997 Plan and the 2002 Plan




In addition to the options referred to above, at
September 30, 2004, there were 344,083 options outstanding
that were granted outside our stock option plans.




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CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS

OccuLogix, L.P.

Prior to the Reorganization,
OccuLogix, L.P., was our primary customer. Prior to this
offering, we and TLC Vision each owned a 50% interest in
OccuLogix, L.P. OccuLogix, L.P.s only customer
to date has been a subsidiary of TLC Vision.

TLC Vision and Diamed

On April 4, 2002, TLC Vision agreed to
invest an initial $1,000,000 in us in the form of a subordinated
convertible promissory note, bearing interest at 10% per annum,
due and payable at the demand of TLC Vision on or after
April 4, 2004. On July 25, 2002, this subordinated
convertible promissory note, together with accrued interest of
$30,684, was converted into 178,227 shares of series B
preferred stock at $5.78 per share. Also on July 25, 2002,
TLC Vision invested an additional $2,000,000 in us in exchange
for 345,843 shares of series B convertible preferred stock.

In January 2004, to assist in the sale of 13,883
shares of series A preferred stock by an independent
stockholder, TLC Vision acquired 10,883 of the available
series A preferred stock from the selling stockholder at
$0.98502 per share subsequent to a second independent
stockholder purchasing the other 3,000 shares of series A
preferred stock at the same price per share.

In December 2003, in connection with the
conversion of a portion of the Asahi Medical note into shares of
common stock and pursuant to the amended and restated
investors rights agreement dated June 25, 2003, the
existing stockholders were allowed to exercise pre-emptive
rights to purchase additional shares of common stock. TLC Vision
and Diamed exercised their pre-emptive rights and purchased
302,118 and 277,489 shares of common stock, respectively, at
$0.98502 per share.

In September 1997, Diamed invested an initial
$1,000,000 in return for 145,909 shares of series A
preferred stock. In August 1998, Diamed invested a further
$500,000 in return for 125,000 shares of common stock.

During 2001, Diamed purchased $227,575 in
series B convertible debentures, convertible at its option
into shares of series B preferred stock at $2.00 per share
and automatically convertible upon an initial public offering of
our securities. In connection with the acquisition of the
series B convertible debentures, Diamed also received
series A preferred stock purchase warrants which were
exercisable over a three year period from the date of issuance
at an exercise price of $2.00.

In 2002, Diamed exercised its option to convert
its series B convertible debentures into 45,584 shares of
series A convertible preferred stock. In July 2004, Diamed
exercised its stock purchase warrants and purchased 32,849
shares of series A preferred stock.




On June 25, 2003, TLC Vision and Diamed
agreed to invest up to an aggregate of $12,000,000 in us, an
aggregate of $7,000,000 of which was to be invested under
debentures convertible into our common stock on an equal basis
in connection with the funding of our MIRA-1 and related
clinical trials. As at September 30, 2004, TLC Vision
and Diamed have advanced $5,100,000 under the convertible
debentures. Prior to this offering, as part of the
Reorganization, TLC Vision and Diamed have agreed to
advance the remaining $1,900,000 available as of
September 30, 2004 and convert the convertible debentures
into an aggregate of 7,106,454 shares of our common stock at a
price of $0.98502 per share. The $5,000,000 portion of the
$12,000,000 commitment which is not convertible into our common
stock will not be advanced and the commitment will be terminated
before this offering is completed.




As part of the Reorganization we will also
acquire TLC Visions interest in OccuLogix, L.P. in
exchange for shares of our common stock. We believe that our
value resides solely in OccuLogix, L.P., which was given all of
the distribution and marketing rights for the RHEO System for
ophthalmic indications to which we are entitled. Prior to the
Reorganization our only profit stream has come from our share of
OccuLogix, L.P.s earnings. Our acquisition of TLC
Visions 50% ownership interest in OccuLogix, L.P. achieved

80



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through the Reorganization will move the earnings
potential for sales of the RHEO System to us. As a result of the
Reorganization, our number of outstanding shares, on a fully
diluted basis, will double. TLC Vision will increase its
beneficial ownership in us from 27.7% to 65.8%, or from
4,735,014 shares to 23,805,247 shares. Upon completion
of this offering, TLC Vision will beneficially own approximately
52.2% of our common stock.








Included in amounts due to stockholders as at
September 30, 2004, is $75,281 owing to TLC Vision for
computer and administrative support, which has been expensed.
The amount owing to TLC Vision was $0 as at
December 31, 2003.







During the nine months ended September 30,
2004 and during the period between November 1, 2003 and
December 31, 2003, we paid $3,647 and $826 to a subsidiary
of TLC Vision for office space for each respective period. These
amounts are expensed in the period incurred and paid monthly.




Elias Vamvakas, the Chairman and former CEO of
TLC Vision, became our Chairman in September 2003 and is
now also our CEO. Two other directors of TLC Vision will
also be our directors.




We purchase the OctoNova pump pursuant to a
marketing and distribution agreement with Diamed, the developer
of the OctoNova pump, and a distribution agreement with MeSys,
the company that manufactures the pump for Diamed. We previously
paid an annual licensing fee of
3,000 to Diamed.
Payments made in the nine months ended September 30, 2004
and the years ended December 31, 2003 and 2002 were $3,787,
$3,262 and $2,705, respectively. The marketing and
distributorship agreement with Diamed provides for a minimum
purchase of 1,000 OctoNova pumps during the period from the
date of the agreement until five years after FDA approval,
representing an aggregate commitment of
16,219,000, or
$20,922,510 based on current exchange rates. The distribution
agreement with MeSys provides for a minimum purchase of 25
OctoNova pumps per year beginning after FDA approval of the RHEO
System, representing an annual commitment of
405,000, or
approximately $522,450 based on current exchange rates. Upon
completion of this offering, Diamed will own approximately 9.0%
of our common stock on a fully diluted basis.







On February 11, 1997, Apheresis Technologies
entered into an agreement with Diamed to pay $1,000,000 for the
purpose of supporting Diameds conduct of research and
gathering of clinical data in Germany. On May 20, 1998, we
agreed to assume the obligation to make this payment. Payments
of $250,000 were made in each of December 1997 and June 1999.
The balance of $500,000 remained unpaid as at September 30,
2004 and December 31, 2003. The balance is unsecured, due
on demand and no interest is payable on the outstanding balance.




Hans Stock

Mr. Stock, who is the controlling
stockholder of Diamed, is also our stockholder and is a party to
two agreements with us:




On February 21, 2002, we 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 RHEO System from Asahi Medical. Mr. Stock agreed to
further assist us in procuring new product lines from Asahi
Medical for marketing and distribution by us. 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 to Mr. Stock in
respect of products supplied to us by Asahi Medical in the nine
months ended September 30, 2004 and the years ended
December 31, 2003 and 2002 were $5,130, $9,234 and $598,
respectively.







On June 25, 2002, we entered into an
agreement with Mr. Stock, which was subsequently amended
and restated on August 6, 2004 and October 25, 2004,
for the purposes of procuring a patent license for the
extracorporeal applications in ophthalmic diseases for that
period of time in which the patent was effective. Mr. Stock
is entitled to 1.5% of total net revenues from our commercial
sales of products sold in reliance and dependence upon the
validity of the patents claims and rights in the United
States. We agreed to make advance payments to Mr. Stock of
$50,000 per year, payable on a quarterly basis, to be credited
against any and all future payments payable in accordance with
this agreement.




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##### Table of Contents



Apheresis
Technologies, Inc.

On May 1, 2002, we entered into an exclusive
distribution services agreement with Apheresis Technologies,
Inc., a company managed by John Cornish, one of our
stockholders, pursuant to which we pay 5% of our cost of
components of the RHEO System. Under this agreement, Apheresis
Technologies is our exclusive provider of warehousing, order
fulfillment, shipping, billing services and customer service
related to shipping and billing.




On July 30, 2004, we amended our
distribution services agreement with Apheresis Technologies such
that we would have the sole discretion as to when the agreement
would terminate. In consideration of this amendment, we agreed
to pay Apheresis Technologies $100,000 on the successful
completion of our initial public offering.







On June 25, 2003, we entered into a
reimbursement agreement with Apheresis Technologies, pursuant to
which employees of Apheresis Technologies provide services to us
and Apheresis Technologies is reimbursed for the applicable
percentage of time the employees spend working for us. These
employees of Apheresis Technologies participate in our bonus
plan. During the nine months ended September 30, 2004 and
during the period between June 25, 2003 and
December 31, 2003, we paid Apheresis Technologies $129,551
and $78,695, respectively. Included in accounts payable as of
September 30, 2004 and December 31, 2003 are $14,255
and $3,961, respectively, due to Apheresis Technologies.




Rheogenx Biosciences Corporation




Rheogenx was created to further develop the use
of the current components of the RHEO System for non-ophthalmic
uses. The initial shareholders of Rheogenx were the same as the
shareholders of Occulogix as of June 24, 2003 and each held
the same number and class of shares of Rheogenx as he, she or it
owned in Occulogix as of June 24, 2003. The significant
shareholders of Rheogenx as of its formation who are also our
affiliates were TLC Vision, Diamed, John Cornish and
Dr. Richard Davis.




Dr. Richard Lindstrom




LaserVision Centers Inc., a subsidiary of
TLC Vision, has a limited partnership agreement with Minnesota
Eye Consultants, P.A. for the operation of one of its
roll-on/roll-off mobile systems. Dr. Richard Lindstrom, one
of our directors, is President of Minnesota Eye Consultants.
LaserVision is the general partner and owns 60% of the
partnership, Refractive Laser Partnership No. 1, L.P.
Minnesota Eye Consultants, P.A. is a limited partner and owns
40% of Refractive Laser. Under the terms of the partnership
agreement, LaserVision receives a revenue-based management fee
from Refractive Laser. Subsequent to its acquisition of
LaserVision, TLC Vision received $48,000 and $21,000 in
management fees from the partnership for the year ended
December 31, 2003 and the transitional period ended
December 31, 2002, respectively. In 2003,
Dr. Lindstrom also received a total of $170,000 in
compensation from TLC Vision in his capacity as medical
director of TLC Vision and LaserVision and as a consultant
to LaserVision and Midwest Surgical Services, a cataract
services provider and wholly owned subsidiary of LaserVision.




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PRINCIPAL AND SELLING STOCKHOLDERS

The following table shows information regarding
the beneficial ownership of our common stock as of the date of
this prospectus, after giving effect to the Reorganization, and
as adjusted to reflect the sale of common stock in this offering:



| |   |                                                                                                 
| | - | ------------------------------------------------------------------------------------------------
| |  | each person who is known by us to own
    beneficially more than 5% of our common stock;        
|
| |  | each selling stockholder participating in this
    offering;                                    
|
|
| |  | each person who is a member of our board of
    directors;                                      
|
|
|
| |  | each person who is one of our named executive
    officers; and                                 
|
|
|
| |  | all persons who are members of our board of
    directors and our executive officers as a group.
|




Beneficial ownership of shares is determined in
accordance with SEC rules and generally includes any shares over
which a person exercises sole or shared voting or investment
power. The information set forth below is based on
5,360,275 shares of common stock outstanding as of
September 30, 2004 and gives effect to the issuance of
30,799,292 shares of common stock pursuant to the
Reorganization. Common stock underlying warrants or stock
options that are presently exercisable or exercisable within
60 days of the date of this prospectus are deemed to be
outstanding and beneficially owned by the person holding the
warrants or stock options for the purpose of computing the
ownership percentage of that person, but are not considered
outstanding for the purpose of computing the percentage
ownership of any other person. With the exception of TLC Vision,
Diamed and Dr. Davis, all share numbers represented in the
table below are stock options that are presently exercisable or
exercisable within 60 days of this prospectus.







Except as indicated in the footnotes to this
table, to our knowledge, each stockholder in the table will have
sole voting and investment power for the shares shown as
beneficially owned by such stockholder subsequent to our initial
public offering. Percentages are based on 36,159,567 shares
outstanding immediately prior to the closing of this offering,
and 41,759,567 shares outstanding after the closing of this
offering, both with and without exercise of the
underwriters overallotment option. Except as otherwise
noted, each stockholders address is c/o OccuLogix,
Inc. 5280 Solar Drive, Suite 100, Mississauga, Ontario
L4W 5M8.







|                                                                       |  |                        |            |                       |  |                        |      |                     |  |        |            |     |  |  |      |  |  |  |            |     |  |  |      | 
|---------------------------------------------------------------------- |  | ---------------------- | ---------- | --------------------- |  | ---------------------- | ---- | ------------------- |  | ------ | ---------- | --- |  |  | ---- |  |  |  | ---------- | --- |  |  | ---- | 
|                                                                       |  |                        |            |                       |  |                        |      |                    
|                                                                       |  |                        |            |                       |  | Shares Beneficially    |      | Shares Beneficially
|                                                                       |  |                        |            | Owned After this      |  | Owned After this      
|                                                                       |  | Shares Beneficially    |            | Offering Assuming No  |  | Offering Assuming Full
|                                                                       |  | Owned Immediately      |            | Exercise of the Over- |  | Exercise of the Over- 
|                                                                       |  | Prior to this Offering |            | allotment Option      |  | allotment Option      
|                                                                       |  |                        |            |                       |  |                       
|Name of Beneficial Owner                                               |  | Number                 |            | %                     |  | Number                 |      | %                   |  | Number |            | %  
|                                                                       |  |                        |            |                       |  |                        |      |                     |  |        |            |    
|Directors, Officers and 5%
    Stockholders                            |  |                        |            |                       |  |                        |      |                     |  |        |            |     |  |  |      |  |  |  |            |     |  |  |      | 
|TLC Vision Corporation                                                 |  |                        | 23,805,247 | (1)                   |  |                        | 65.8 |                     |  |        | 21,802,602 | (2) |  |  | 52.2 |  |  |  | 20,900,800 | (3) |  |  | 50.1 | 
|Diamed Medizintechnik GmbH(7)                                          |  |                        | 4,332,234  |                       |  |                        | 12.0 |                     |  |        | 3,967,596  |     |  |  | 9.5  |  |  |  | 3,802,897  |     |  |  | 9.1  | 
|Elias Vamvakas                                                         |  |                        | 504,583    |                       |  |                        | 1.4  |                     |  |        | 504,583    |     |  |  | 1.4  |  |  |  | 504,583    |     |  |  | 1.4  | 
|Richard Davis, MD(4)                                                   |  |                        | 1,646,392  | (5)                   |  |                        | 4.6  |                     |  |        | 1,507,903  |     |  |  | 3.6  |  |  |  | 1,445,583  |     |  |  | 3.5  | 
|William G. Dumencu, CA                                                 |  |                        | 100,000    |                       |  |                        | *    |                     |  |        | 100,000    |     |  |  | *    |  |  |  | 100,000    |     |  |  | *    | 
|Irving Siegel, MD                                                      |  |                        | 300,000    |                       |  |                        | *    |                     |  |        | 300,000    |     |  |  | *    |  |  |  | 300,000    |     |  |  | *    | 
|Thomas N. Davidson                                                     |  |                        | 0          |                       |  |                        | *    |                     |  |        | 0          |     |  |  | *    |  |  |  | 0          |     |  |  | *    | 
|Jay T. Holmes                                                          |  |                        | 0          |                       |  |                        | *    |                     |  |        | 0          |     |  |  | *    |  |  |  | 0          |     |  |  | *    | 
|Richard L. Lindstrom, MD                                               |  |                        | 0          |                       |  |                        | *    |                     |  |        | 0          |     |  |  | *    |  |  |  | 0          |     |  |  | *    | 
|Georges Noël                                                           |  |                        | 25,000     |                       |  |                        | *    |                     |  |        | 25,000     |     |  |  | *    |  |  |  | 25,000     |     |  |  | *    | 
|All directors and executive officers as a group
    (13 persons)(4)(6) |  |                        | 2,692,899  |                       |  |                        | 7.2  |                     |  |        | 2,554,410  |     |  |  | 5.9  |  |  |  | 2,492,090  |     |  |  | 5.8  | 
|Other Selling Stockholders                                             |  |                        |            |                       |  |                        |      |                     |  |        |            |     |  |  |      |  |  |  |            |     |  |  |      | 
|Michael Abdoney                                                        |  |                        | 9,247      |                       |  |                        | *    |                     |  |        | 8,470      |     |  |  | *    |  |  |  | 8,120      |     |  |  | *    | 
|Wanda Batts                                                            |  |                        | 537        |                       |  |                        | *    |                     |  |        | 492        |     |  |  | *    |  |  |  | 472        |     |  |  | *    | 
|William Bennett, M.D.                                                  |  |                        | 6,250      |                       |  |                        | *    |                     |  |        | 5,725      |     |  |  | *    |  |  |  | 5,488      |     |  |  | *    | 




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|                                  |  |                        |         |                       |  |                        |     |                     |  |        |         |   |  |  |     |  |  |  |         |  |  |  |     | 
|--------------------------------- |  | ---------------------- | ------- | --------------------- |  | ---------------------- | --- | ------------------- |  | ------ | ------- | - |  |  | --- |  |  |  | ------- |  |  |  | --- | 
|                                  |  |                        |         |                       |  |                        |     |                    
|                                  |  |                        |         |                       |  | Shares Beneficially    |     | Shares Beneficially
|                                  |  |                        |         | Owned After this      |  | Owned After this      
|                                  |  | Shares Beneficially    |         | Offering Assuming No  |  | Offering Assuming Full
|                                  |  | Owned Immediately      |         | Exercise of the Over- |  | Exercise of the Over- 
|                                  |  | Prior to this Offering |         | allotment Option      |  | allotment Option      
|                                  |  |                        |         |                       |  |                       
|Name of Beneficial Owner          |  | Number                 |         | %                     |  | Number                 |     | %                   |  | Number |         | %
|                                  |  |                        |         |                       |  |                        |     |                     |  |        |         |  
|Bermuda Bay, Ltd.                 |  |                        | 16,309  |                       |  |                        | *   |                     |  |        | 14,938  |   |  |  | *   |  |  |  | 14,320  |  |  |  | *   | 
|Daniel Bertoch, D.D.S.            |  |                        | 6,122   |                       |  |                        | *   |                     |  |        | 5,608   |   |  |  | *   |  |  |  | 5,376   |  |  |  | *   | 
|Tom Brandt                        |  |                        | 24,488  |                       |  |                        | *   |                     |  |        | 22,429  |   |  |  | *   |  |  |  | 21,502  |  |  |  | *   | 
|Sandra Bruch                      |  |                        | 6,122   |                       |  |                        | *   |                     |  |        | 6,022   |   |  |  | *   |  |  |  | 6,022   |  |  |  | *   | 
|John Cornish                      |  |                        | 333,589 |                       |  |                        | *   |                     |  |        | 305,529 |   |  |  | *   |  |  |  | 292,902 |  |  |  | *   | 
|Margaret Cornish                  |  |                        | 9,247   |                       |  |                        | *   |                     |  |        | 8,470   |   |  |  | *   |  |  |  | 8,120   |  |  |  | *   | 
|Ramia Cornish                     |  |                        | 206,250 |                       |  |                        | *   |                     |  |        | 188,901 |   |  |  | *   |  |  |  | 181,094 |  |  |  | *   | 
|Margaret Cornish QDOT Trust       |  |                        | 676,676 |                       |  |                        | 1.9 |                     |  |        | 619,757 |   |  |  | 1.5 |  |  |  | 594,143 |  |  |  | 1.4 | 
|Dana Deupree                      |  |                        | 15,000  |                       |  |                        | *   |                     |  |        | 13,739  |   |  |  | *   |  |  |  | 13,171  |  |  |  | *   | 
|Larry Dewberry                    |  |                        | 14,743  |                       |  |                        | *   |                     |  |        | 13,503  |   |  |  | *   |  |  |  | 12,945  |  |  |  | *   | 
|David Dieters                     |  |                        | 4,897   |                       |  |                        | *   |                     |  |        | 4,486   |   |  |  | *   |  |  |  | 4,300   |  |  |  | *   | 
|Burt Dubow                        |  |                        | 28,837  |                       |  |                        | *   |                     |  |        | 26,412  |   |  |  | *   |  |  |  | 25,320  |  |  |  | *   | 
|Alexander Eaton, M.D. (VSF)       |  |                        | 73,722  |                       |  |                        | *   |                     |  |        | 67,521  |   |  |  | *   |  |  |  | 64,731  |  |  |  | *   | 
|Richard Fielder                   |  |                        | 75,700  |                       |  |                        | *   |                     |  |        | 69,333  |   |  |  | *   |  |  |  | 66,467  |  |  |  | *   | 
|Richard & Brigitte Fielder        |  |                        | 12,243  |                       |  |                        | *   |                     |  |        | 11,214  |   |  |  | *   |  |  |  | 10,750  |  |  |  | *   | 
|Patrick Flaherty, M.D. (VSF)      |  |                        | 13,795  |                       |  |                        | *   |                     |  |        | 12,635  |   |  |  | *   |  |  |  | 12,113  |  |  |  | *   | 
|David Geller, M.D.                |  |                        | 9,872   |                       |  |                        | *   |                     |  |        | 9,042   |   |  |  | *   |  |  |  | 8,668   |  |  |  | *   | 
|James Gills, M.D.                 |  |                        | 98,365  |                       |  |                        | *   |                     |  |        | 90,091  |   |  |  | *   |  |  |  | 86,368  |  |  |  | *   | 
|James P. Gills Flint Trust        |  |                        | 258,363 |                       |  |                        | *   |                     |  |        | 236,631 |   |  |  | *   |  |  |  | 226,851 |  |  |  | *   | 
|Ray Gonzalez                      |  |                        | 231,433 |                       |  |                        | *   |                     |  |        | 211,966 |   |  |  | *   |  |  |  | 203,206 |  |  |  | *   | 
|Alan & Debra Green                |  |                        | 9,247   |                       |  |                        | *   |                     |  |        | 8,470   |   |  |  | *   |  |  |  | 8,120   |  |  |  | *   | 
|Richard Hairston                  |  |                        | 6,849   |                       |  |                        | *   |                     |  |        | 6,273   |   |  |  | *   |  |  |  | 6,014   |  |  |  | *   | 
|Thomas Hooker                     |  |                        | 6,122   |                       |  |                        | *   |                     |  |        | 5,608   |   |  |  | *   |  |  |  | 5,376   |  |  |  | *   | 
|Susan B. Howard                   |  |                        | 2,500   |                       |  |                        | *   |                     |  |        | 2,290   |   |  |  | *   |  |  |  | 2,196   |  |  |  | *   | 
|David Israel                      |  |                        | 11,377  |                       |  |                        | *   |                     |  |        | 10,421  |   |  |  | *   |  |  |  | 9,990   |  |  |  | *   | 
|Charles Jenkins                   |  |                        | 4,623   |                       |  |                        | *   |                     |  |        | 4,235   |   |  |  | *   |  |  |  | 4,060   |  |  |  | *   | 
|Carol Jones                       |  |                        | 5,000   |                       |  |                        | *   |                     |  |        | 4,580   |   |  |  | *   |  |  |  | 4,391   |  |  |  | *   | 
|Charles L. Jones (VSF)            |  |                        | 36,861  |                       |  |                        | *   |                     |  |        | 33,761  |   |  |  | *   |  |  |  | 33,561  |  |  |  | *   | 
|W. Andrew Krusen                  |  |                        | 50,000  |                       |  |                        | *   |                     |  |        | 45,795  |   |  |  | *   |  |  |  | 43,902  |  |  |  | *   | 
|Merit Partners (Schoenbaum Trust) |  |                        | 12,243  |                       |  |                        | *   |                     |  |        | 11,214  |   |  |  | *   |  |  |  | 10.750  |  |  |  | *   | 
|Angela Metelski                   |  |                        | 1,250   |                       |  |                        | *   |                     |  |        | 1,145   |   |  |  | *   |  |  |  | 1,098   |  |  |  | *   | 
|Julie & Matt Mores                |  |                        | 5,808   |                       |  |                        | *   |                     |  |        | 5,320   |   |  |  | *   |  |  |  | 5,100   |  |  |  | *   | 
|Julie Mores                       |  |                        | 6,122   |                       |  |                        | *   |                     |  |        | 5,608   |   |  |  | *   |  |  |  | 5,376   |  |  |  | *   | 
|Matt Mores                        |  |                        | 9,833   |                       |  |                        | *   |                     |  |        | 9,006   |   |  |  | *   |  |  |  | 8,634   |  |  |  | *   | 
|Robin Morrison                    |  |                        | 2,075   |                       |  |                        | *   |                     |  |        | 1,901   |   |  |  | *   |  |  |  | 1,822   |  |  |  | *   | 
|Donna M. Muller (Brewer)          |  |                        | 375     |                       |  |                        | *   |                     |  |        | 344     |   |  |  | *   |  |  |  | 330     |  |  |  | *   | 
|Michael Murray                    |  |                        | 4,039   |                       |  |                        | *   |                     |  |        | 3,700   |   |  |  | *   |  |  |  | 3,547   |  |  |  | *   | 
|Sandara Murray                    |  |                        | 6,122   |                       |  |                        | *   |                     |  |        | 5,608   |   |  |  | *   |  |  |  | 5,376   |  |  |  | *   | 
|Northlea Partners                 |  |                        | 42,659  |                       |  |                        | *   |                     |  |        | 39,071  |   |  |  | *   |  |  |  | 37,456  |  |  |  | *   | 
|Rula Peindado                     |  |                        | 2,500   |                       |  |                        | *   |                     |  |        | 2,290   |   |  |  | *   |  |  |  | 2,196   |  |  |  | *   | 
|Nancie Reichle                    |  |                        | 7,950   |                       |  |                        | *   |                     |  |        | 7,282   |   |  |  | *   |  |  |  | 6,981   |  |  |  | *   | 
|Kris Richards, Jr., M.D.          |  |                        | 6,410   |                       |  |                        | *   |                     |  |        | 5,871   |   |  |  | *   |  |  |  | 5,629   |  |  |  | *   | 
|A.H. Rodriguez                    |  |                        | 7,445   |                       |  |                        | *   |                     |  |        | 6,819   |   |  |  | *   |  |  |  | 6,537   |  |  |  | *   | 
|Christopher Rodriguez             |  |                        | 6,122   |                       |  |                        | *   |                     |  |        | 5,608   |   |  |  | *   |  |  |  | 5,376   |  |  |  | *   | 
|Donna Rodriguez                   |  |                        | 10,331  |                       |  |                        | *   |                     |  |        | 9,462   |   |  |  | *   |  |  |  | 9,071   |  |  |  | *   | 
|Jennifer Rodriguez                |  |                        | 6,122   |                       |  |                        | *   |                     |  |        | 5,608   |   |  |  | *   |  |  |  | 5,376   |  |  |  | *   | 
|Rodriguez Family Trust, A.H.      |  |                        | 134,679 |                       |  |                        | *   |                     |  |        | 123,351 |   |  |  | *   |  |  |  | 118,253 |  |  |  | *   | 
|Donna Rodriguez Family Trust      |  |                        | 67,342  |                       |  |                        | *   |                     |  |        | 61,678  |   |  |  | *   |  |  |  | 59,129  |  |  |  | *   | 
|Safe Harbor Fund, L.P.            |  |                        | 15,925  |                       |  |                        | *   |                     |  |        | 14,586  |   |  |  | *   |  |  |  | 13,983  |  |  |  | *   | 




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|                                            |  |                        |         |                       |  |                        |     |                     |  |        |         |   |  |  |   |  |  |  |         |  |  |  |   | 
|------------------------------------------- |  | ---------------------- | ------- | --------------------- |  | ---------------------- | --- | ------------------- |  | ------ | ------- | - |  |  | - |  |  |  | ------- |  |  |  | - | 
|                                            |  |                        |         |                       |  |                        |     |                    
|                                            |  |                        |         |                       |  | Shares Beneficially    |     | Shares Beneficially
|                                            |  |                        |         | Owned After this      |  | Owned After this      
|                                            |  | Shares Beneficially    |         | Offering Assuming No  |  | Offering Assuming Full
|                                            |  | Owned Immediately      |         | Exercise of the Over- |  | Exercise of the Over- 
|                                            |  | Prior to this Offering |         | allotment Option      |  | allotment Option      
|                                            |  |                        |         |                       |  |                       
|Name of Beneficial Owner                    |  | Number                 |         | %                     |  | Number                 |     | %                   |  | Number |         | %
|                                            |  |                        |         |                       |  |                        |     |                     |  |        |         |  
|Safe Harbor Managed
    Account 101-A, Ltd. |  |                        | 59,565  |                       |  |                        | *   |                     |  |        | 54,555  |   |  |  | * |  |  |  | 52,300  |  |  |  | * | 
|Paul Scharfer                               |  |                        | 11,442  |                       |  |                        | *   |                     |  |        | 10,480  |   |  |  | * |  |  |  | 10,047  |  |  |  | * | 
|Jeffrey Schwartz                            |  |                        | 4,807   |                       |  |                        | *   |                     |  |        | 4,403   |   |  |  | * |  |  |  | 4,221   |  |  |  | * | 
|Jane Cornish Smith                          |  |                        | 230,586 |                       |  |                        | *   |                     |  |        | 211,190 |   |  |  | * |  |  |  | 202,462 |  |  |  | * | 
|Mark Stern                                  |  |                        | 80,548  |                       |  |                        | *   |                     |  |        | 73,773  |   |  |  | * |  |  |  | 70,724  |  |  |  | * | 
|Mark Stern & Ellen Kaplan                   |  |                        | 24,488  |                       |  |                        | *   |                     |  |        | 22,429  |   |  |  | * |  |  |  | 21,502  |  |  |  | * | 
|Hans Stock(7)                               |  |                        | 397,928 |                       |  |                        | 1.1 |                     |  |        | 364,456 |   |  |  | * |  |  |  | 349,394 |  |  |  | * | 
|Don Strickland                              |  |                        | 10,000  |                       |  |                        | *   |                     |  |        | 9,159   |   |  |  | * |  |  |  | 8,781   |  |  |  | * | 
|S.M. Weinstock                              |  |                        | 10,273  |                       |  |                        | *   |                     |  |        | 9,409   |   |  |  | * |  |  |  | 9,021   |  |  |  | * | 
|Leslie Wells                                |  |                        | 1,681   |                       |  |                        | *   |                     |  |        | 1,540   |   |  |  | * |  |  |  | 1,476   |  |  |  | * | 
|Barbara White                               |  |                        | 7,372   |                       |  |                        | *   |                     |  |        | 6,752   |   |  |  | * |  |  |  | 6,473   |  |  |  | * | 
|Elizabeth White                             |  |                        | 1,201   |                       |  |                        | *   |                     |  |        | 1,100   |   |  |  | * |  |  |  | 1,055   |  |  |  | * | 
|David Wise (VSF)                            |  |                        | 43,567  |                       |  |                        | *   |                     |  |        | 39,903  |   |  |  | * |  |  |  | 38,254  |  |  |  | * | 






---



|  |              
|- | -------------
|* | Less than 1%.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | Of such shares, 1,569,217 are owned directly by
    TLC Vision and 22,236,030 will be owned by TLC Vision (USA)
    Corporation, a wholly-owned subsidiary of TLC Vision. Includes
    1,569,217 shares issuable in exchange for shares of
    OccuLogix ExchangeCo ULC owned by TLC Vision. OccuLogix
    ExchangeCo ULC will be a newly formed subsidiary to allow for
    the tax efficient transfer of TLC Visions interest in
    OccuLogix, L.P. to us.
|   
|   
|   
|(2) | Of such shares, 0 will be owned directly by TLC
    Vision and 21,802,602 shares will be owned by TLC Vision
    (USA) Corporation, a wholly-owned subsidiary of TLC Vision.                                                                                                                                                                                                                                                                                  
|   
|   
|   
|(3) | Of such shares, 0 will be owned directly by TLC
    Vision and 20,900,800 shares will be owned by TLC Vision
    (USA) Corporation, a wholly-owned subsidiary of TLC Vision.                                                                                                                                                                                                                                                                                  
|   
|   
|(4) | Dr. Davis was Chief Executive Officer from
    January to June 2003 and Chief Science Officer from
    July 2003 to April 2004.                                                                                                                                                                                                                                                                                                                               
|   
|   
|(5) | This includes 221,875 shares of common stock
    related to stock options.                                                                                                                                                                                                                                                                                                                                                                                    
|   
|   
|   
|(6) | This includes 1,268,382 shares of common stock
    related to stock options currently outstanding and does not
    include 630,000 shares of common stock related to stock
    options which will be issued upon the closing of this offering
    and have not yet vested.                                                                                                                                                                                    
|   
|   
|(7) | Diamed is controlled by Mr. Hans Stock.                                                                                                                                                                                                                                                                                                                                                                                                                       

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##### Table of Contents






DESCRIPTION OF CAPITAL STOCK

General




Our authorized capital stock consists of
25 million shares of common stock, par value $0.001 per
share, and 6 million shares of preferred stock, of which
2.5 million are designated as series A convertible
preferred stock, par value $0.001 per share and 2 million
are designated as series B convertible preferred stock, par
value $0.001 per share. Prior to the closing of this offering we
will amend our certificate of incorporation to increase the
number of authorized shares of common stock from 25 million
to 75 million and to add a class of blank check
preferred stock, consisting of 10 million authorized
shares, par value $0.001 per share. As of September 30,
2004, there were 101 holders of series A preferred stock,
24 holders of series B preferred stock and 89 holders of
common stock.




Common Stock




Outstanding Shares.Upon completion of this offering,
there will be 41,759,567 shares of common stock outstanding
assuming completion of the Reorganization and assuming no
exercise of options or warrants outstanding as of
September 30, 2004 to purchase an aggregate of
1,980,899 shares of our common stock.




Voting Rights.The holders of our common stock
are entitled to one vote per share on all matters submitted to a
vote of stockholders, including the election of directors. Under
our amended and restated certificate of incorporation, our
stockholders will not have cumulative voting rights, and thus,
the holders of a majority of the shares of common stock entitled
to vote in any election of directors can elect all of the
directors standing for election.




Rights to Dividends and on Liquidation,
Dissolution or Winding Up.The
holders of our common stock will be entitled to receive
dividends as they may be lawfully declared from time to time by
our board of directors, subject to any preferential rights of
holders of any outstanding shares of preferred stock. In the
event of any liquidation, dissolution or winding up of our
company, common stockholders will be entitled to share in our
assets available for distribution to the stockholders, subject
to the prior rights of holders of any outstanding preferred
stock.




Additional Issuances of Common Stock.Additional shares of our
authorized common stock will be issued, as determined by our
board of directors from time to time, without approval of
holders of our common stock, except as may be required by
applicable law or the rules of any stock exchange or automated
quotation system on which our securities may be listed or traded.

Preferred Stock




Pursuant to our amended and restated certificate
of incorporation, our board of directors will be authorized to
issue blank check preferred stock, which may be
issued from time to time in one or more series upon
authorization by our board of directors. The board of directors,
without further approval of the stockholders, will be authorized
to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights and terms, liquidation preferences and
any other rights, preferences, privileges and restrictions
applicable to each series of the preferred stock. The issuance
of preferred stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes, could,
among other things, adversely affect the voting power of the
holders of our common stock and, under certain circumstances,
make it more difficult for a third party to gain control of us,
discourage bids for our common stock at a premium or otherwise
adversely affect the market price of our common stock.







As of September 30, 2004, we had issued and
outstanding 2,147,024 shares of series A convertible
preferred stock and 620,112 shares of series B
convertible preferred stock. Immediately prior to the closing of
this offering, all such shares of preferred stock will be
converted into shares of common stock and the series A
convertible preferred stock and series B convertible
preferred stock will be deleted from our certificate of
incorporation.




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##### Table of Contents



Investor Rights Agreement




In connection with TLC Visions original
investment in us, we entered into an investor rights agreement
dated July 25, 2002, amended and restated on June 25,
2003 and amended and restated again on November 1, 2004, or
the IRA, which gives certain of our stockholders, among other
things, piggy-back registration rights that would be applicable
in connection with the offering.







Under the IRA, we must give holders of
series A convertible preferred stock and series B
convertible preferred stock notice in writing not less than
30 days prior to filing a registration statement. Each
holder must within 20 days of receiving such written
notice, notify us of the amount of stock it wishes to include in
the registration statement. The IRA contains procedures for the
underwriters to reduce the number of securities in the offering.




The IRA contains typical requirements, requiring
the selling securityholders be a party to the underwriting
agreement, sign lock-up agreements (in the case of the offering,
for up to 180 days) and various contribution and indemnity
procedures.

In addition, expenses of the offering (excluding
underwriting commissions for the selling stockholders) are to be
borne by us, including reasonable fees and disbursements for one
counsel for all of the selling stockholders.




On November 1, 2004, we amended and restated
the IRA to provide that the parties to the IRA will only have
piggy-back registration rights which would be applicable in
connection with future offerings.




Options and Warrants

Stock Option
Plan

During the year ended December 31, 2003, we
issued stock options on a date that, on such date, we expected
would be within twelve months of the filing of the registration
statement to which this prospectus relates. Accordingly, we
estimated the fair value of these stock options based on the
estimated offering price of our common stock in this offering,
which we are expensing over the vesting period of these options.
These options will become fully vested upon the closing of this
offering. Therefore, we will record the remaining unamortized
stock compensation expense immediately during the period in
which this offering occurs.




Our 2002 stock option plan was established
effective as of the date of the merger and reincorporation of
Vascular Sciences Corporation, our predecessor. The stock option
plan was adopted to replace the previous stock option plan for
employees, directors and consultants. In the event of any stock
dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in our capital
structure, appropriate adjustments shall be made in the number
and class of shares subject to the stock option plan and to any
outstanding options.







Options granted under the stock option plan may
be either incentive stock options or non statutory stock
options. Under the terms of the stock option plan, the exercise
price per share for an incentive stock option shall not be less
than the fair market value of a share of common stock on the
effective date of grant of the option and for a non statutory
stock option the exercise price per share shall not be less than
85% of the fair market value of a share of common stock on the
effective date of grant of the option. No option granted to a
10% owner optionee shall have an exercise price per share of
less than 110% of the fair market value of a share of common
stock on the effective date of grant of the option.







Options shall not be exercisable after the
expiration of 10 years after the effective date of grant of
such option, provided that (i) no incentive stock option
granted to a 10% owner optionee shall be exercisable after the
expiration of five years after the effective date of grant of
such option, (ii) no option granted to a prospective
employee, prospective consultant or prospective director may
become exercisable prior to the date on which such person
commences service, and (iii) with the exception of an
option granted to an officer, director or a consultant, no
option shall become exercisable at a rate less than 20% per year
over a period of five years from the effective date of grant of
such option unless otherwise approved by the board
of directors.




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##### Table of Contents



We also issued options outside of the plan. These
options were issued before the establishment of the stock option
plan or when the authorized limit of the stock option plan was
exceeded. In addition, options issued to companies for purposes
of settling amounts owing were issued outside of the stock
option plan, as the stock option plan prohibits the granting of
options to companies. The issuance of such options were approved
by the board of directors and were on terms and conditions
similar to those options issued within the stock option plan.

Included in the total options outstanding as of
December 31, 2003 of 2,389,961, are 1,352,500 options
issued to employees, directors and certain executives which were
issued into a voting trust. Our board of directors controls the
voting privileges associated with the common stock underlying
these options. Upon the completion of this initial public
offering, the voting trust is to be dissolved with all options
returning to each respective individual.




As of September 30, 2004, we had
1,943,399 options outstanding with a weighted average
exercise price of $1.46, of which 1,599,316 were issued under
our stock option plans. Upon the closing of this offering,
828,000 options to purchase shares of common stock will be
granted under our 2002 stock option plan to certain of our
officers, employees and directors. The shares will have an
exercise price equal to the price of the shares issued in this
offering.







Upon the closing of this offering, the 2002 stock
option plan will be amended to provide that 4,456,000 shares of
common stock will be reserved for issuance under the plan.







In addition, upon the closing of this offering,
the 2002 stock option plan will be amended to permit us to
grant stock appreciation rights in connection with the grants of
options. A stock appreciation right permits the holder to
receive a cash payment equal to the difference between the
exercise price of an option and the fair market value of a share.




Summary of
Outstanding Stock Options

The following table sets forth the number of
options to purchase shares of our common stock as of
September 30, 2004:

|                                             |  |                     |           |                |  |             |               |  |  |  |                        | 
|-------------------------------------------- |  | ------------------- | --------- | -------------- |  | ----------- | ------------- |  |  |  | ---------------------- | 
|                                             |  | Number of Shares of |           |                |  |            
|                                             |  | Common Stock        |           |                |  |            
|Class of Optionee                            |  | under Option        |           | Exercise Price |  | Expiry Date
|                                             |  |                     |           |                |  |            
|Executive officers and directors (5 persons) |  |                     | 1,046,507 |                |  |             | $0.99  $1.30 |  |  |  | Aug. 2012 to Aug. 2013 | 
|Other employees (8 persons)                  |  |                     | 570,841   |                |  |             | $0.80  $4.00 |  |  |  | Mar. 2009 to Nov. 2013 | 
|Consultants (18 persons)                     |  |                     | 301,051   |                |  |             | $0.04  $4.00 |  |  |  | Jan. 2008 to Jul. 2013 | 
|Other (2 persons)(1)                         |  |                     | 25,000    |                |  |             | $4.00         |  |  |  | Nov. 2008              | 









|    |                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As part of the terms agreed to when James P.
    Gills, MD and Lew Friedland invested $750,000 in us, they
    received 12,500 options each at an exercise price
    of $4.00 per share.




Warrants




Purchasers of series A convertible preferred
stock received warrants to purchase shares of voting common
stock at $1.00 per share. The warrants were exercisable for the
purchase of one share of voting common stock for each share of
series A convertible preferred stock owned. In February
1998, an additional warrant was granted to each holder of
series A convertible preferred stock to purchase an equal
number of shares of voting common stock at $2.00 per share.
Additionally, warrants to purchase 50,000 shares of voting
common stock at $1.00 per share were granted to an officer, and
certain directors and stockholders, in exchange for providing
certain private credit guarantees.







All warrants to purchase shares of common stock
and series A convertible preferred stock at exercise prices
between $1.20 per share and $7.83 per share expired on
July 17, 2004, other than warrants to purchase
379,284 shares of series A convertible preferred stock
and warrants to purchase 77,370 shares of common stock
which were exercised prior to expiration and warrants to
purchase 37,500 shares of common stock at an exercise price of
$4.00 per share which expire on November 10, 2008.




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Stockholder Action




Our amended and restated certificate of
incorporation will provide that stockholders may act by written
consent, without a meeting, without notice and without a vote.
This provision enables stockholders to act on matters subject to
a stockholder vote without waiting until the next annual or
special meeting of stockholders.




Special Meetings of Stockholders




Our amended and restated by-laws will provide
that special meetings of the stockholders may be called by the
chairman of the board of directors or by a majority of the board
of directors or the holders of at least two-thirds of our
outstanding voting stock.




Delaware Anti-Takeover Statute

Our amended and restated certificate of
incorporation will provide that we have opted out of the
provisions of Section 203 of the Delaware General
Corporation Law, or the DGCL. Section 203 of the DGCL
prohibits a publicly held Delaware corporation from engaging in
a business combination with an interested
stockholder for a period of three years after the time the
person became an interested stockholder, unless the business
combination, or the transaction in which the stockholder became
an interested stockholder, is approved in a prescribed manner.
Since we will have opted out in the manner permitted under the
DGCL, these restrictions will not apply to us.

Other Anti-Takeover Provisions of Our Amended
and Restated Certificate of Incorporation and Amended and
Restated By-laws

Our amended and restated certificate of
incorporation and amended and restated by-laws will contain
several provisions, in addition to those pertaining to the
issuance of additional shares of our authorized common stock and
preferred stock without the approval of the holders of our
common stock, that could delay or make more difficult the
acquisition of our company through a hostile tender offer, open
market purchases, proxy contest, merger or other takeover
attempt that a stockholder might consider to be in such
holders best interest, including those attempts that might
result in a premium over the market price of our common stock.

Amendment of our Amended and Restated
Certificate of Incorporation

Our amended and restated certificate of
incorporation will provide that the affirmative vote of the
holders of at least a majority of the voting power of all
then-outstanding shares of our capital stock that are entitled
to vote generally in the election of our directors, voting
together as a single class, is required to amend, alter, change
or repeal its provisions.

Amendment of our Amended and Restated
By-laws

Our amended and restated certificate of
incorporation will provide that our amended and restated by-laws
can be amended only by either our board of directors or the
affirmative vote of the holders of at least a majority of the
voting power of all then-outstanding shares of our capital stock
that are entitled to vote generally in the election of our
directors, voting together as a single class.

Limitation of Liability and
Indemnification

Our amended and restated certificate of
incorporation will provide that, to the fullest extent from time
to time permitted by law, no directors shall be personally
liable for monetary damages for breach of any duty as a
director. As required under current Delaware law, our amended
and restated certificate of incorporation will provide that this
waiver may not apply to liability:



| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | for any breach of the directors duty of
    loyalty to us or our stockholders;                                  
|
| |  | for acts or omissions not in good faith or that
    involve intentional misconduct or a knowing violation of law;

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| |   |                                                                                       
| | - | --------------------------------------------------------------------------------------
| |  | under Section 174 of the DGCL (governing
    distributions to stockholders); or       
|
| |  | for any transaction from which the director
    derived any improper personal benefit.

However, in the event the DGCL is amended to
authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of our
directors will be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended. Neither the amendment or
repeal of this provision of our amended and restated certificate
of incorporation, nor the adoption of any provision of our
amended and restated certificate of incorporation which is
inconsistent with this provision, shall eliminate or reduce the
protection afforded by this provision with respect to any matter
which occurred, or any suit or claim which, but for this
provision would have accrued or arisen, prior to such amendment,
repeal or adoption.




Our amended and restated certificate of
incorporation will also provide that we shall, to the fullest
extent from time to time permitted by law, indemnify our
directors and officers against all liabilities and expenses in
any suit or proceeding, arising out of their status as an
officer or director or their activities in these capacities. We
shall also indemnify any person who, at our request, is or was
serving as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise.







The right to be indemnified shall include the
right of an officer or a director to be paid expenses in advance
of the final disposition of any proceeding, provided that, if
the DGCL requires, such advance payment will be made only if we
receive an undertaking to repay such amount if it shall be
determined that he or she is not entitled to be indemnified.







Our board of directors may take such action as it
deems necessary to carry out these indemnification provisions,
including adopting procedures for determining and enforcing
indemnification rights and purchasing insurance policies. Our
board of directors may also adopt by-laws, resolutions or
contracts implementing indemnification arrangements as may be
permitted by law. Neither the amendment or repeal of these
indemnification provisions, nor the adoption of any provision of
our amended and restated certificate of incorporation
inconsistent with these indemnification provisions, shall
eliminate or reduce any rights to indemnification relating to
the indemnified partys status or any activities prior to
such amendment, repeal or adoption.




We believe these provisions will assist in
attracting and retaining qualified individuals to serve as
directors.

Listing

We have applied to have our common stock included
for quotation on the Nasdaq National Market under the symbol
RHEO.

Transfer Agent and Registrar

Mellon Investor Services LLC is the transfer
agent and registrar for our common stock.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public
market for our common stock. We cannot predict the effect, if
any, that sales of common stock or the availability of common
stock for sale will have on the market price of our common stock
prevailing from time to time. As we describe below, only a
limited number of shares will be available for sale shortly
after this offering due to contractual and legal restrictions on
resale. Nevertheless, after such restrictions lapse, the market
price of our common stock could decline because of the sale of a
large number of shares of our common stock or the perception
that such sales could occur. These factors could also make it
more difficult to raise funds through future offerings of common
stock.




Upon the completion of this offering, we will
have 41,759,567 shares of our common stock outstanding. Of
these shares, the 8,400,000 shares of our common stock sold
in this offering will be freely tradable without restriction
under the Securities Act, except that any shares of our common
stock purchased by our affiliates, as that term is defined in
Rule 144 under the Securities Act, may generally only be
sold in compliance with the limitations of Rule 144
described below.







The remaining 33,359,567 shares of our
common stock outstanding upon completion of this offering are
deemed restricted shares under Rule 144 under
the Securities Act. Restricted shares may be sold in the public
market only if registered or if they are exempt from the
registration requirements under the rules of the Securities Act,
which rules are summarized below. Subject to the lock-up
agreements described below and the provisions of Rule 144,
such shares will be available for sale in the public market as
follows:






| |   |                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | 1,234,151 shares will be eligible for immediate
    sale upon the completion of this offering;                                                                                                                                                                                                                                                                           
|
|
|
| |  | 27,375 restricted shares, including shares issued
    upon the exercise of options or warrants, to officers, directors
    and consultants under any employee benefit plan will be eligible
    for future sale 90 days after the date of this offering and
    could as a result of Rule 701 be sold, subject to any
    lock-up and not otherwise immediately saleable;
|
|
|
| |  | 31,533,576 restricted shares will be eligible for
    sale upon expiration of lock-up agreements 180 days after
    the date of the underwriting agreement relating to this
    offering; and                                                                                                                                                                            
|
|
| |  | the remainder of the restricted shares will be
    eligible for sale from time to time thereafter upon expiration
    of their respective one-year holding periods, but could be sold
    earlier if the holders exercise any available registration
    rights.                                                                                                         

Rule 144.In general, under Rule 144
under the Securities Act, a person, or persons whose shares are
aggregated, who owns shares that were acquired from us or an
affiliate at least one year ago would be entitled to sell within
any three-month period a number of shares that does not exceed
the greater of:



| |   |                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | one percent of the number of shares of common
    stock then outstanding, which will equal approximately
    417,595 shares immediately after this offering; or                                              
|
|
| |  | the average weekly trading volume of our common
    stock on the Nasdaq National Market during the four calendar
    weeks preceding the date of filing of a notice on Form 144
    with respect to the sale.

Sales under Rule 144 are also generally
subject to certain manner of sale provisions and notice
requirements and to the availability of current public
information about us.

Rule 144(k).Under Rule 144(k) under the
Securities Act, a person, or persons whose shares are
aggregated, who is not deemed to have been one of our affiliates
at any time during the 90 days preceding a sale and who
owns shares that were acquired from us or an affiliate at least
two years ago is entitled to sell the shares without complying
with the manner of sale, public information, volume limitation
or notice of sale provisions of Rule 144. Therefore, unless
subject to a lockup agreement or otherwise restricted, shares
eligible for sale under Rule 144(k) may be sold immediately
upon the completion of this offering.

Rule 701.Rule 701 under the Securities
Act generally allows a stockholder who purchased shares of our
common stock pursuant to a written compensatory plan or contract
and who is not deemed to have been

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an affiliate of our company to sell these shares
in reliance upon Rule 144, but without being required to
comply with the public information, holding period, volume
limitation or notice provisions of Rule 144. Rule 701
also permits our affiliates to sell their Rule 701 shares under
Rule 144 without complying with the holding period
requirements of Rule 144. As a result, most of our
employees, officers, directors or consultants who purchased
shares under a written compensatory plan or contract may be
entitled to rely on the resale provisions of Rule 701, but
all holders of Rule 701 shares are required to wait until
90 days after the date of this prospectus before selling
their shares pursuant to the Rule.


Lock-Up Agreements.We, along with all of our
directors and officers and each of the selling stockholders
listed under the heading Principal and Selling
Stockholders, have agreed with the underwriters that for a
period of 180 days following the date of the underwriting
agreement relating to this offering, we or they will not offer,
sell, assign, transfer, pledge, contract to sell or otherwise
dispose of or hedge any shares of our common stock or any
securities convertible into or exchangeable for shares of our
common stock. Citigroup Global Markets Inc. may, in its sole
discretion, at any time without prior notice, release all or any
portion of the shares from the restrictions in any such
agreement. There are no agreements among Citigroup Global
Markets Inc. and any parties to lock-up agreements releasing
them from these lock-up agreements prior to the expiration of
the 180-day period.




Piggyback Registration Rights.Following this offering, under
specified circumstances and subject to customary conditions,
holders of approximately 33.5 million shares of our common
stock will be entitled to rights with respect to the
registration of their shares under the Securities Act. Sales of
these shares pursuant to such registration would result in the
shares becoming freely tradable without restriction under the
Securities Act, except for shares purchased by affiliates. Any
sales of securities by these stockholders could have a material
adverse effect on the trading price of our common stock. See
Description of Capital Stock  Investor Rights
Agreement.







Stock Options.Following this offering, we intend
to file with the Securities and Exchange Commission registration
statements under the Securities Act covering the shares of
common stock reserved for issuance under our stock option plans.
The registration statements are expected to become effective as
soon as practicable after the closing of this offering.
Accordingly, shares registered under these registration
statements, subject to Rule 144 volume limitations
applicable to affiliates and the lock-up agreements described
above, will be available for sale in the open market.




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UNDERWRITING

Citigroup Global Markets Inc., is acting as sole
book-runner of the offering, and together with SG Cowen &
Co., LLC and ThinkEquity Partners LLC, are acting as
representatives of the underwriters named below. Subject to the
terms and conditions stated in the underwriting agreement dated
the date of this prospectus, each underwriter named below has
agreed to purchase, and we and the selling stockholders have
agreed to sell to that underwriter, the number of shares set
forth opposite the underwriters name.

|                                     |  |           |  | 
|------------------------------------ |  | --------- |  | 
|                                     |  | Number   
|Underwriter                          |  | of shares
|                                     |  |          
|Citigroup Global Markets Inc.        |  |           |  | 
|SG Cowen & Co., LLC                  |  |           |  | 
|ThinkEquity Partners LLC             |  |           |  | 
|Orion Securities (USA) Inc.          |  |           |  | 
|DeMatteo Monness LLC                 |  |           |  | 
|Citigroup Global Markets Canada Inc. |  |           |  | 
|Clarus Securities Inc.               |  |           |  | 
|Orion Securities Inc.                |  |           |  | 
|Octagon Capital Corporation          |  |           |  | 
|                                     |  |           |  | 
|Total                                |  |           |  | 
|                                     |  |           |  | 

The offering is being made concurrently in the
United States and in each of the provinces of Canada. The shares
will be offered in the United States through those underwriters
who are registered to offer the shares for sale in the United
States and such other registered dealers as may be designated by
the underwriters. The shares will be offered in each of the
provinces of Canada through those underwriters or their Canadian
affiliates who are registered to offer the shares for sale in
such provinces and such other registered dealers as may be
designated by the underwriters.

The underwriting agreement provides that the
obligations of the underwriters to purchase the shares included
in this offering are subject to approval of legal matters by
counsel and to other conditions. The underwriters are obligated
to purchase all the shares (other than those covered by the
over-allotment option described below) if they purchase any of
the shares.

The underwriters propose to offer some of the
shares directly to the public at the public offering price set
forth on the cover page of this prospectus and some of the
shares to dealers at the public offering price less a concession
not to exceed
$                    per
share. The underwriters may allow, and dealers may re-allow, a
concession not to exceed
$                    per
share on sales to other dealers. If all of the shares are not
sold at the initial offering price, the representatives may
change the public offering price and the other selling terms.
The representatives have advised us and the selling stockholders
that the underwriters do not intend to sell any shares of our
common stock to discretionary accounts.




The selling stockholders have granted to the
underwriters an option, exercisable for 30 days from the
date of this prospectus, to purchase up to
1,260,000 additional shares of common stock at the public
offering price less the underwriting discount. The underwriters
may exercise the option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To
the extent the option is exercised, each underwriter must
purchase a number of additional shares approximately
proportionate to that underwriters initial purchase
commitment.




We, our officers and directors and the selling
stockholders have agreed that, for a period of 180 days
from the date of the underwriting agreement relating to this
offering, we and they will not, without the prior written
consent of Citigroup, dispose of or hedge any of our common
stock or any securities convertible or exchangeable for our
common stock. Citigroup, in its sole discretion, may release any
of the securities subject to these lock-up agreements at any
time without notice.




We expect to deliver the common stock against
payment for the shares on or about the date specified in the
last paragraph of the cover page of this prospectus, which will
be the sixth business day following the




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date of the pricing of the common stock. Under
Rule 15c6-1 of the Exchange Act, trades in the secondary
market generally are required to settle in three business days,
unless the parties to a trade expressly agree otherwise.
Accordingly, purchasers who wish to trade common stock on the
date of pricing or the next succeeding two business days will be
required, by virtue of the fact that the common stock initially
will settle
on                     ,
2004, to specify alternative settlement arrangements to prevent
a failed settlement.





Each underwriter has represented, warranted and
agreed that:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | it has not offered or sold and, prior to the
    expiry of a period of six months from the closing date, will not
    offer or sell any shares included in this offering to persons in
    the United Kingdom except to persons whose common activities
    involve them in acquiring, holding, managing or disposing of
    investments (as principal or agent) for the purposes of their
    businesses or otherwise in circumstances which have not resulted
    and will not result in an offer to the public in the United
    Kingdom within the meaning of the Public Offers of Securities
    Regulations 1995;
|
| |  | it has only communicated and caused to be
    communicated and will only communicate or cause to be
    communicated any invitation or inducement to engage in
    investment activity (within the meaning of section 21 of the
    Financial Services and Markets Act 2000, or FSMA) received by it
    in connection with the issue or sale of any shares included in
    this offering in circumstances in which section 21(1) of the
    FSMA does not apply to us;                                                                                                                                                
|
| |  | it has complied and will comply with all
    applicable provisions of the FSMA with respect to anything done
    by it in relation to the shares included in this offering in,
    from or otherwise involving the United Kingdom; and                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | the offer in The Netherlands of the shares
    included in this offering is exclusively limited to persons who
    trade or invest in securities in the conduct of a profession or
    business (which include banks, stockbrokers, insurance
    companies, pension funds, other institutional investors and
    finance companies and treasury departments of large enterprises).                                                                                                                                                                                                                                    

Prior to this offering, there has been no public
market for our common stock. Consequently, the initial public
offering price for the shares was determined by negotiations
among us, the selling stockholders and the representatives.
Among the factors considered in determining the initial public
offering price were our record of operations, our current
financial condition, our future prospects, our markets, the
economic conditions in and future prospects for the industry in
which we compete, our management, and currently prevailing
general conditions in the equity securities markets, including
current market valuations of publicly traded companies
considered comparable to our company. We cannot assure you,
however, that the prices at which the shares will sell in the
public market after this offering will not be lower than the
initial public offering price or that an active trading market
in our common stock will develop and continue after this
offering.

We have applied to have our common stock included
for quotation on the Nasdaq National Market under the symbol
RHEO.

The following table shows the underwriting
discounts and commissions that we and the selling stockholders
are to pay to the underwriters in connection with this offering.
These amounts are shown assuming both no exercise and full
exercise of the underwriters option to purchase additional
shares of common stock.




|          |  |                   |  |                              |  |             |  |               |  |   |  |  |  |   |  | 
|--------- |  | ----------------- |  | ---------------------------- |  | ----------- |  | ------------- |  | - |  |  |  | - |  | 
|          |  |                   |  |                             
|          |  | Paid by OccuLogix |  | Paid by selling stockholders
|          |  |                   |  |                             
|          |  | No Exercise       |  | Full Exercise                |  | No Exercise |  | Full Exercise
|          |  |                   |  |                              |  |             |  |              
|Per share |  | $                 |  |                              |  | $           |  |               |  | $ |  |  |  | $ |  | 
|Total     |  | $                 |  |                              |  | $           |  |               |  | $ |  |  |  | $ |  | 




In connection with the offering, Citigroup on
behalf of the underwriters may purchase and sell shares of
common stock in the open market. These transactions may include
short sales, syndicate covering transactions and stabilizing
transactions. Short sales involve syndicate sales of common
stock in excess of the number of shares to be purchased by the
underwriters in the offering, which creates a syndicate short
position.

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Covered short sales are sales of
shares made in an amount up to the number of shares represented
by the underwriters over-allotment option. In determining
the source of shares to close out the covered syndicate short
position, the underwriters will consider, among other things,
the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through
the over-allotment option. Transactions to close out the covered
syndicate short involve either purchases of the common stock in
the open market after the distribution has been completed or the
exercise of the over-allotment option. The underwriters may also
make naked short sales of shares in excess of the
over-allotment option. The underwriters must close out any naked
short position by purchasing shares of common stock in the open
market. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the shares in the open market after
pricing that could adversely affect investors who purchase in
the offering. Stabilizing transactions consist of bids for or
purchases of shares in the open market while the offering is in
progress.


The underwriters also may impose a penalty bid.
Penalty bids permit the underwriters to reclaim a selling
concession from a syndicate member when Citigroup repurchases
shares originally sold by that syndicate member in order to
cover syndicate short positions or make stabilizing purchases.

Any of these activities may have the effect of
preventing or retarding a decline in the market price of the
common stock. They may also cause the price of the common stock
to be higher than the price that would otherwise exist in the
open market in the absence of these transactions. The
underwriters may conduct these transactions on the Nasdaq
National Market or in the over-the-counter market, or otherwise.
If the underwriters commence any of these transactions, they may
discontinue them at any time.

We estimate that our portion of the total
expenses of this offering will be $2,100,000.




At our request, the underwriters have reserved up
to 5.0% of the shares of common stock for sale at the initial
public offering price to persons who are directors, officers or
employees, or who are otherwise associated with us through a
directed share program. Individuals who purchase these shares
will be subject to a 25-day lock-up period, except our directors
and officers who are otherwise subject to the 180-day lock-up
described above. The number of shares of common stock available
for sale to the general public will be reduced by the number of
directed shares purchased by participants in the program. Any
directed shares not purchased will be offered by the
underwriters to the general public on the same basis as all
other shares of common stock offered. We have agreed to
indemnify the underwriters against certain liabilities and
expenses, including liabilities under the Securities Act in
connection with the sales of the directed shares.




Other than in connection with this offering, the
underwriters have not performed investment banking or advisory
services for us.

A prospectus in electronic format may be made
available on the websites maintained by one or more of the
underwriters. The representatives may agree to allocate a number
of shares to underwriters for sale to their online brokerage
account holders. The representatives will allocate shares to
underwriters that may make Internet distributions on the same
basis as other allocations. In addition, shares may be sold by
the underwriters to securities dealers who resell shares to
online brokerage account holders.

We and the selling stockholders have agreed to
indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, or to contribute
to payments the underwriters may be required to make because of
any of those liabilities.




LEGAL MATTERS

The validity of the issuance of the shares of
common stock offered by this prospectus and other legal matters
will be passed upon for us by Torys LLP, New York, New York.
Certain legal matters relating to this offering will be passed
upon for the underwriters by Piper Rudnick LLP, New York, New
York.

Piper Rudnick LLP and Gray Cary Ware &
Freidenrich LLP have recently announced that they are planning
to merge as of January 1, 2005. Gray Cary currently owns
12,500 shares of our common stock and options to purchase
an additional 12,500 shares of common stock for an exercise
price of $0.80.

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EXPERTS

Our consolidated financial statements as of
December 31, 2002 and 2003 and for each of the three years
in the period ended December 31, 2003 included in this
prospectus have been audited by Ernst & Young LLP,
an independent registered public accounting firm, as stated in
their report appearing herein and have been so included in
reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.

OccuLogix, L.P.s financial statements as of
December 31, 2002 and 2003 and for the period from
July 25, 2002 to December 31, 2002 and the year ended
December 31, 2003 included in this prospectus have been
audited by Ernst & Young LLP, an independent
registered public accounting firm, as stated in their report
appearing herein and have been so included in reliance upon the
report of such firm given upon their authority as experts in
accounting and auditing.



WHERE YOU CAN FIND MORE INFORMATION




We have filed a registration statement on
Form S-1 with the SEC regarding this offering. This
prospectus, which is part of the registration statement, does
not contain all of the information included in the registration
statement, and you should refer to the registration statement
and its exhibits to read that information. Statements contained
in this prospectus regarding the contents of any contract or
other documents are only summaries. With respect to any contract
of other document filed as an exhibit to the registration
statement, you should refer to the exhibit for a copy of the
contract or document, and each statement in this prospectus
regarding that contract or document is qualified by reference to
the exhibit. Upon completion of this offering, we will be
subject to the informational reporting requirements of the
Exchange Act and, under that Act, we will file reports, proxy
statements and other information with the Commission. You may
read and copy the registration statement, the related exhibits
and the reports, proxy statements and other information we file
with the SEC at the SECs public reference facilities
maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You can also request copies of
those documents, at prescribed rates, by writing to the SEC.
Please call the SEC at 1-800-SEC-0330 for further information on
the operation of the public reference rooms. The SEC also
maintains an Internet site that contains reports, proxy and
information statements and other information regarding issuers
that file with the SEC. The sites Internet address is
www.sec.gov.




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OccuLogix, Inc. (formerly Vascular
Sciences Corporation)



INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS





|                                                                                                                                                                                                             |  |  |      | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  |  | ---- | 
|OccuLogix, Inc.s (formerly Vascular
    Sciences Corporation) Consolidated Financial
    Statements                                                                                                         |  |  |      | 
|Report of Independent Registered Public
    Accounting Firm                                                                                                                                                  |  |  | F-2  | 
|Consolidated Balance Sheets as of
    December 31, 2002 and 2003 (audited) and
    September 30, 2004 (unaudited)                                                                                            |  |  | F-3  | 
|Consolidated Statements of Operations for the
    years ended December 31, 2001, 2002 and 2003 (audited) and
    the nine months ended September 30, 2003 and 2004
    (unaudited)                           |  |  | F-4  | 
|Consolidated Statements of Changes in
    Stockholders Deficiency for the years ended
    December 31, 2001, 2002 and 2003 (audited) and the
    nine months ended September 30, 2004 (unaudited)           |  |  | F-5  | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2001, 2002 and 2003 (audited) and
    the nine months ended September 30, 2003 and 2004
    (unaudited)                           |  |  | F-6  | 
|Notes to Consolidated Financial Statements                                                                                                                                                                   |  |  | F-7  | 
|OccuLogix, L.P.s Financial
    Statements From Inception to December 31, 2003                                                                                                                               |  |  |      | 
|Report of Independent Registered Public
    Accounting Firm                                                                                                                                                  |  |  | F-42 | 
|Balance Sheets as of December 31, 2002 and
    2003 (audited) and September 30, 2004 (unaudited)                                                                                                             |  |  | F-43 | 
|Statements of Operations for the period from
    July 25, 2002 to December 31, 2002 and the year ended
    December 31, 2003 (audited) and the nine months ended
    September 30, 2003 and 2004 (unaudited) |  |  | F-44 | 
|Statement of Partners Deficiency for the
    period from July 25, 2002 to December 31, 2002 and the
    year ended December 31, 2003 (audited) and the nine months
    ended September 30, 2004 (unaudited) |  |  | F-45 | 
|Statements of Cash Flows for the period from
    July 25, 2002 to December 31, 2002 and the year ended
    December 31, 2003 (audited) and the nine months ended
    September 30, 2003 and 2004 (unaudited) |  |  | F-46 | 
|Notes to Financial Statements                                                                                                                                                                                |  |  | F-47 | 
|OccuLogix, Inc.s Pro Forma Consolidated
    Financial Statements (unaudited)                                                                                                                                |  |  |      | 
|Pro Forma Consolidated Balance Sheet as at
    September 30, 2004 (unaudited)                                                                                                                                |  |  | F-54 | 
|Pro Forma Consolidated Statements of Operations
    for the nine months ended September 30, 2004 (unaudited)
    and the year ended December 31, 2003 (unaudited)                                            |  |  | F-55 | 
|Notes to Pro Forma Consolidated Financial
    Statements                                                                                                                                                     |  |  | F-57 | 




F-1



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Board of Directors

OCCULOGIX, INC. (formerly Vascular Sciences
Corporation)


We have audited the accompanying consolidated
balance sheets of OccuLogix, Inc. (formerly Vascular
Sciences Corporation) as of December 31, 2003 and 2002 and
the related consolidated statements of operations, changes in
stockholders deficiency and cash flows for each of the
three years in the period ended December 31, 2003. These
financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform an audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the consolidated financial position of OccuLogix, Inc.
(formerly Vascular Sciences Corporation) at December 31,
2003 and 2002 and the consolidated results of its operations,
changes in stockholders deficiency and its cash flows for
each of the three years in the period ended December 31,
2003, in conformity with U.S. generally accepted accounting
principles.

The accompanying consolidated financial
statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has sustained
substantial losses for each of the years ended December 31,
2003, 2002, and 2001, has a working capital deficiency at
December 31, 2003 and lacks long-term financing, which
raises substantial doubt about the Companys ability to
continue as a going concern. Managements plans in regard
to these matters are also described in Note 1 to the
accompanying consolidated financial statements. The consolidated
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

/s/ Ernst & Young LLP

Chartered Accountants


Toronto, Canada,

August 13, 2004


F-2



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)

CONSOLIDATED BALANCE SHEETS

(Going Concern Uncertainty  See
Note 1)


(expressed in U.S. dollars)




|                                                        |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |            |  | 
|------------------------------------------------------- | ------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ----------- |  | ---- | ----------- | ---------- |  | - | ----------- | ---------- |  | 
|                                                        |                                      |                                                                                                                                                                                                |             |            
|                                                        |                                      | September 30,                                                                                                                                                                                  |             | December 31
|                                                        |                                      |                                                                                                                                                                                                |             |            
|                                                        |                                      | 2004                                                                                                                                                                                           |             | 2003        |  | 2002
|                                                        |                                      |                                                                                                                                                                                                |             |             |  |     
|                                                        |                                      | (unaudited)                                                                                                                                                                                    |             |             |  |     
|ASSETS                                                  |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|Current                                                 |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|Cash                                                    |                                      | $                                                                                                                                                                                              | 766,936     |             |  | $    | 1,237,168   |            |  | $ | 602,457     |           
|Due from related parties [note 8]                       |                                      |                                                                                                                                                                                                | 210,194     |             |  |      | 14,074      |            |  |   | 66,107      |           
|Amount receivable                                       |                                      |                                                                                                                                                                                                | 62,547      |             |  |      |            |            |  |   | 39,748      |           
|Inventory                                               |                                      |                                                                                                                                                                                                | 837,926     |             |  |      | 188,071     |            |  |   | 146,170     |           
|Prepaid expenses                                        |                                      |                                                                                                                                                                                                | 161,478     |             |  |      | 156,460     |            |  |   | 25,942      |           
|                                                        |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|Total current assets                                    |                                      |                                                                                                                                                                                                | 2,039,081   |             |  |      | 1,595,773   |            |  |   | 880,424     |           
|                                                        |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|Fixed assets, net [note 3]                              |                                      |                                                                                                                                                                                                | 331,998     |             |  |      | 191,231     |            |  |   | 87,639      |           
|Patents and trademarks, net [note 4]                    |                                      |                                                                                                                                                                                                | 81,403      |             |  |      | 81,144      |            |  |   | 69,967      |           
|Deferred share issue costs                              |                                      |                                                                                                                                                                                                | 1,500,000   |             |  |      |            |            |  |   |            |           
|                                                        |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|                                                        |                                      | $                                                                                                                                                                                              | 3,952,482   |             |  | $    | 1,868,148   |            |  | $ | 1,038,030   |           
|                                                        |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|LIABILITIES AND STOCKHOLDERS
    DEFICIENCY            |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|Current                                                 |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|Accounts payable                                        |                                      | $                                                                                                                                                                                              | 590,570     |             |  | $    | 194,428     |            |  | $ | 1,082,679   |           
|Accrued liabilities [note 11]                           |                                      |                                                                                                                                                                                                | 1,493,034   |             |  |      | 245,581     |            |  |   | 70,877      |           
|Due to stockholders [note 6]                            |                                      |                                                                                                                                                                                                | 1,109,469   |             |  |      | 1,043,865   |            |  |   | 1,507,083   |           
|Convertible debentures due to stockholders
    [note 7] |                                      |                                                                                                                                                                                                | 5,100,000   |             |  |      | 2,650,000   |            |  |   |            |           
|                                                        |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|Total current liabilities                               |                                      |                                                                                                                                                                                                | 8,293,073   |             |  |      | 4,133,874   |            |  |   | 2,660,639   |           
|                                                        |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|Long-term convertible debentures
    [note 7]           |                                      |                                                                                                                                                                                                |            |             |  |      |            |            |  |   | 32,190      |           
|                                                        |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|Total liabilities                                       |                                      |                                                                                                                                                                                                | 8,293,073   |             |  |      | 4,133,874   |            |  |   | 2,692,829   |           
|                                                        |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|Commitments and contingencies [notes 1, 8
    and 12]   |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|Stockholders deficiency                                |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|Capital stock [note 13]                                 |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|                                                        | Common stock                         |                                                                                                                                                                                                |             | 5,360       |  |      |             | 5,033      |  |   |             | 3,895      | 
|                                                        |                                      | Par value of $0.001 per share;
    Authorized: 25,000,000; Issued and outstanding:
    September 30, 2004  5,360,275; December 31,
    2003  5,032,905; December 31, 2002 
    3,894,634    |             |             |  |      |             |            |  |   |             |            |  | 
|                                                        | Series A convertible preferred stock |                                                                                                                                                                                                |             | 2,147       |  |      |             | 1,768      |  |   |             | 1,768      | 
|                                                        |                                      | Non-cumulative, convertible par value of $0.001
    per share
    Authorized: 2,500,000; Issued and outstanding September 30,
    2004  2,147,024; December 31, 2003 and
    2002  1,767,740 |             |             |  |      |             |            |  |   |             |            |  | 
|                                                        | Series B convertible preferred stock |                                                                                                                                                                                                |             | 620         |  |      |             | 620        |  |   |             | 620        | 
|                                                        |                                      | Non-cumulative, convertible par value of $0.001
    per share
    Authorized: 2,000,000; Issued and outstanding September 30,
    2004, December 31, 2003 and 2002  620,112                   |             |             |  |      |             |            |  |   |             |            |  | 
|                                                        | Additional paid-in capital           |                                                                                                                                                                                                |             | 29,734,685  |  |      |             | 23,915,099 |  |   |             | 22,057,276 | 
|Accumulated deficit                                     |                                      |                                                                                                                                                                                                | (34,083,403 | )           |  |      | (26,188,246 | )          |  |   | (23,718,358 | )         
|                                                        |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|Total stockholders deficiency                          |                                      |                                                                                                                                                                                                | (4,340,591  | )           |  |      | (2,265,726  | )          |  |   | (1,654,799  | )         
|                                                        |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           
|                                                        |                                      | $                                                                                                                                                                                              | 3,952,482   |             |  | $    | 1,868,148   |            |  | $ | 1,038,030   |           
|                                                        |                                      |                                                                                                                                                                                                |             |             |  |      |             |            |  |   |             |           




See accompanying notes

F-3



---



##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)

CONSOLIDATED STATEMENTS OF
OPERATIONS

(expressed in U.S. dollars)




|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |            |  
|------------------------------------------------------------------ | ------------------------------------------- | ----------------- | ---------- | ------------ | - | ---- | ---------- | --------- | - | ---- | ---------- | --------- | - | - | ---------- | ---------- | - | - | ---------- | ---------- | -
|                                                                   |                                             |                   |            |             
|                                                                   |                                             | Nine months ended |            | Years ended 
|                                                                   |                                             | September 30,     |            | December 31,
|                                                                   |                                             |                   |            |             
|                                                                   |                                             | 2004              |            | 2003         |   | 2003 |            | 2002      |   | 2001
|                                                                   |                                             |                   |            |              |   |      |            |           |   |     
|                                                                   |                                             |                   |            |              |   |      |            |          
|                                                                   |                                             | (unaudited)       |            |              |   |      |            |          
|Revenues from related party                                        |                                             | $                 | 189,373    |              |   | $    | 360,239    |           |   | $    | 390,479    |           |   | $ | 94,100     |            |   | $ |           |           
|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|Cost of goods sold to related party                                |                                             |                   | 184,309    |              |   |      | 349,891    |           |   |      | 373,546    |           |   |   | 80,391     |            |   |   |           |           
|Royalty costs                                                      |                                             |                   | 80,130     |              |   |      | 84,234     |           |   |      | 109,234    |           |   |   | 78,303     |            |   |   |           |           
|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|                                                                   |                                             |                   | 264,439    |              |   |      | 434,125    |           |   |      | 482,780    |           |   |   | 158,694    |            |   |   |           |           
|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|Gross margin (loss)                                                |                                             |                   | (75,066    | )            |   |      | (73,886    | )         |   |      | (92,301    | )         |   |   | (64,594    | )          |   |   |           |           
|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|Operating expenses                                                 |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|General and administrative                                         |                                             |                   | 5,676,639  |              |   |      | 680,585    |           |   |      | 1,564,362  |           |   |   | 448,856    |            |   |   | 911,100    |           
|Clinical and regulatory                                            |                                             |                   | 2,092,466  |              |   |      | 319,882    |           |   |      | 731,166    |           |   |   | 1,446,662  |            |   |   | 1,873,223  |           
|Sales and marketing                                                |                                             |                   | 22,454     |              |   |      |           |           |   |      |           |           |   |   |           |            |   |   |           |           
|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|                                                                   |                                             |                   | 7,791,559  |              |   |      | 1,000,467  |           |   |      | 2,295,528  |           |   |   | 1,895,518  |            |   |   | 2,784,323  |           
|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|Loss from operations                                               |                                             |                   | (7,866,625 | )            |   |      | (1,074,353 | )         |   |      | (2,387,829 | )         |   |   | (1,960,112 | )          |   |   | (2,784,323 | )         
|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|Other (expenses) income                                            |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|                                                                   | Interest expense, (net)                     |                   |            | (12,130      | ) |      |            | (56,371   | ) |      |            | (67,997   | ) |   |            | (1,022,627 | ) |   |            | (1,342,303 | )
|                                                                   | Equity earnings of Partnership
    [note 5] |                   |            |             |   |      |            | 15,569    |   |      |            |          |   |   |            |           |   |   |            |           |  
|                                                                   | Other                                       |                   |            | (16,402      | ) |      |            | 5,416     |   |      |            | (14,062   | ) |   |            | 101,142    |   |   |            |           |  
|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|                                                                   |                                             |                   | (28,532    | )            |   |      | (35,386    | )         |   |      | (82,059    | )         |   |   | (921,485   | )          |   |   | (1,342,303 | )         
|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|Loss from continuing operations before
    discontinued operations |                                             |                   | (7,895,157 | )            |   |      | (1,109,739 | )         |   |      | (2,469,888 | )         |   |   | (2,881,597 | )          |   |   | (4,126,626 | )         
|Earnings from discontinued operations
    [note 10]                |                                             |                   |           |              |   |      |           |           |   |      |           |           |   |   |           |            |   |   | 67,705     |           
|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|Net loss for the period                                            |                                             | $                 | (7,895,157 | )            |   | $    | (1,109,739 | )         |   | $    | (2,469,888 | )         |   | $ | (2,881,597 | )          |   | $ | (4,058,921 | )         
|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|Weighted average number of shares outstanding                      |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|                                                                   |  basic and diluted                         |                   |            | 5,143,408    |   |      |            | 3,905,209 |   |      |            | 3,976,921 |   |   |            | 3,735,062  |   |   |            | 3,603,361  |  
|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|Loss per share  basic and diluted                                 |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|Loss per share from continuing operations                          |                                             | $                 | (1.54      | )            |   | $    | (0.28      | )         |   | $    | (0.62      | )         |   | $ | (0.77      | )          |   | $ | (1.15      | )         
|Earnings per share from discontinued operations                    |                                             |                   |           |              |   |      |           |           |   |      |           |           |   |   |           |            |   |   | 0.02       |           
|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           
|Net loss per share                                                 |                                             | $                 | (1.54      | )            |   | $    | (0.28      | )         |   | $    | (0.62      | )         |   | $ | (0.77      | )          |   | $ | (1.13      | )         
|                                                                   |                                             |                   |            |              |   |      |            |           |   |      |            |           |   |   |            |            |   |   |            |           




See accompanying notes

F-4



---



##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)

CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS DEFICIENCY

(expressed in U.S. dollars)




|                                                                                                                     |  |               |           |              |  |                      |       |                      |  |               |          |       |  |               |      |       |  |  |           |  |  |  |       |  |  |  |         |  |  |  |     | 
|-------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- | ------------ |  | -------------------- | ----- | -------------------- |  | ------------- | -------- | ----- |  | ------------- | ---- | ----- |  |  | --------- |  |  |  | ----- |  |  |  | ------- |  |  |  | --- | 
|                                                                                                                     |  |               |           |              |  |                      |       |                     
|                                                                                                                     |  | Voting        |           | Non-voting   |  | Series A convertible |       | Series B convertible
|                                                                                                                     |  | common stock  |           | common stock |  | preferred stock      |       | preferred stock     
|                                                                                                                     |  | at par value  |           | at par value |  | at par value         |       | at par value        
|                                                                                                                     |  |               |           |              |  |                      |       |                     
|                                                                                                                     |  | Number of     |           |              |  | Number of            |       |                      |  | Number of     |          |       |  | Number of     |      |      
|                                                                                                                     |  | shares issued |           | Value        |  | shares issued        |       | Value                |  | shares issued |          | Value |  | shares issued |      | Value
|                                                                                                                     |  | #             |           | $            |  | #                    |       | $                    |  | #             |          | $     |  | #             |      | $    
|                                                                                                                     |  |               |           |              |  |                      |       |                      |  |               |          |       |  |               |      |      
|Balance, December 31, 2000
    [note 13(b)]                                                                          |  |               | 3,603,361 |              |  |                      | 3,604 |                      |  |               | 207,058  |       |  |               | 207  |       |  |  | 581,325   |  |  |  | 582   |  |  |  |        |  |  |  |    | 
|Adjustment to deficit under continuity of
    interest method [note 10]                                              |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Value ascribed to Series B warrants
    [note 7(i)]                                                                  |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Stock based compensation [note 2]                                                                                    |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Stock issued pursuant to exercise of options                                                                         |  |               |          |              |  |                      |      |                      |  |               | 81,882   |       |  |               | 82   |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Contribution of inventory from related party
    [note 8]                                                            |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Net loss for the period                                                                                              |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|                                                                                                                     |  |               |           |              |  |                      |       |                      |  |               |          |       |  |               |      |       |  |  |           |  |  |  |       |  |  |  |         |  |  |  |     | 
|Balance, December 31, 2001                                                                                           |  |               | 3,603,361 |              |  |                      | 3,604 |                      |  |               | 288,940  |       |  |               | 289  |       |  |  | 581,325   |  |  |  | 582   |  |  |  |        |  |  |  |    | 
|Discontinued operations                                                                                              |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Stock issued in lieu of consulting fees                                                                              |  |               | 2,333     |              |  |                      | 2     |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Stock based compensation [note 2]                                                                                    |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Conversion of non-voting common stock to voting
    common stock upon merger of companies [note 13(b)]               |  |               | 288,940   |              |  |                      | 289   |                      |  |               | (288,940 | )     |  |               | (289 | )     |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Conversion of Series A convertible
    debentures into Series A convertible preferred stock
    [note 7(i)]          |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  | 1,089,172 |  |  |  | 1,089 |  |  |  |        |  |  |  |    | 
|Shares issued pursuant to anti-dilution
    provisions [note 13(d)(i)]                                               |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  | 97,243    |  |  |  | 97    |  |  |  |        |  |  |  |    | 
|Shares issued pursuant to private offering
    memorandum, net of share issue cost [note 13(d)(ii)]                  |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  | 345,843 |  |  |  | 346 | 
|Conversion of Series B convertible
    debentures into Series B convertible preferred stock
    [note 13(d)(ii)]     |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  | 178,227 |  |  |  | 178 | 
|Conversion of subordinated convertible debentures
    into Series B convertible preferred stock [note
    13(d)(ii)] |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  | 96,042  |  |  |  | 96  | 
|Contribution of inventory from related party
    [note 8]                                                            |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Value ascribed to warrants issued
    [note 13(g)]                                                                   |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Net loss for the period                                                                                              |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|                                                                                                                     |  |               |           |              |  |                      |       |                      |  |               |          |       |  |               |      |       |  |  |           |  |  |  |       |  |  |  |         |  |  |  |     | 
|Balance, December 31, 2002                                                                                           |  |               | 3,894,634 |              |  |                      | 3,895 |                      |  |               |         |       |  |               |     |       |  |  | 1,767,740 |  |  |  | 1,768 |  |  |  | 620,112 |  |  |  | 620 | 
|Conversion of debt into common stock
    [notes 6 and 13(c)]                                                         |  |               | 507,604   |              |  |                      | 508   |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Stock issued in lieu of consulting fees
    [note 13[e]]                                                             |  |               | 17,375    |              |  |                      | 17    |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Stock issued pursuant to private offering
    memorandum [note 13(e)]                                                |  |               | 613,292   |              |  |                      | 613   |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Contribution of inventory from related party
    [note 8]                                                            |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Stock based compensation [note 2]                                                                                    |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Net loss for the period                                                                                              |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|                                                                                                                     |  |               |           |              |  |                      |       |                      |  |               |          |       |  |               |      |       |  |  |           |  |  |  |       |  |  |  |         |  |  |  |     | 
|Balance, December 31, 2003                                                                                           |  |               | 5,032,905 |              |  |                      | 5,033 |                      |  |               |         |       |  |               |     |       |  |  | 1,767,740 |  |  |  | 1,768 |  |  |  | 620,112 |  |  |  | 620 | 
|Stock based compensation [note 2][unaudited]                                                                         |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Stock issued on exercise of options
    [note 13(f)][unaudited]                                                      |  |               | 250,000   |              |  |                      | 250   |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Stock issued on exercise of warrants
    [note 13(g)][unaudited]                                                     |  |               | 77,370    |              |  |                      | 77    |                      |  |               |         |       |  |               |     |       |  |  | 379,284   |  |  |  | 379   |  |  |  |        |  |  |  |    | 
|Subscription receivable [note 13(g)][unaudited]                                                                      |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Contribution of inventory from related party
    [note 8][unaudited]                                                 |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|Net loss for the period [unaudited]                                                                                  |  |               |          |              |  |                      |      |                      |  |               |         |       |  |               |     |       |  |  |          |  |  |  |      |  |  |  |        |  |  |  |    | 
|                                                                                                                     |  |               |           |              |  |                      |       |                      |  |               |          |       |  |               |      |       |  |  |           |  |  |  |       |  |  |  |         |  |  |  |     | 
|Balance, September 30, 2004[unaudited]                                                                               |  |               | 5,360,275 |              |  |                      | 5,360 |                      |  |               |         |       |  |               |     |       |  |  | 2,147,024 |  |  |  | 2,147 |  |  |  | 620,112 |  |  |  | 620 | 
|                                                                                                                     |  |               |           |              |  |                      |       |                      |  |               |          |       |  |               |      |       |  |  |           |  |  |  |       |  |  |  |         |  |  |  |     | 

[Additional columns below]




[Continued from above table, first column(s) repeated]




|                                                                                                                     |  |            |            |             |  |               |             |   |  |  |            |  
|-------------------------------------------------------------------------------------------------------------------- |  | ---------- | ---------- | ----------- |  | ------------- | ----------- | - |  |  | ---------- | -
|                                                                                                                     |  | Additional |            |             |  | Net          
|                                                                                                                     |  | paid-in    |            | Accumulated |  | stockholders
|                                                                                                                     |  | capital    |            | deficit     |  | deficit      
|                                                                                                                     |  | $          |            | $           |  | $            
|                                                                                                                     |  |            |            |             |  |              
|Balance, December 31, 2000
    [note 13(b)]                                                                          |  |            | 11,415,427 |             |  |               | (16,605,857 | ) |  |  | (5,186,037 | )
|Adjustment to deficit under continuity of
    interest method [note 10]                                              |  |            |           |             |  |               | 62,455      |   |  |  | 62,455     |  
|Value ascribed to Series B warrants
    [note 7(i)]                                                                  |  |            | 223,058    |             |  |               |            |   |  |  | 223,058    |  
|Stock based compensation [note 2]                                                                                    |  |            | 190,351    |             |  |               |            |   |  |  | 190,351    |  
|Stock issued pursuant to exercise of options                                                                         |  |            | 8,829      |             |  |               |            |   |  |  | 8,911      |  
|Contribution of inventory from related party
    [note 8]                                                            |  |            | 1,530      |             |  |               |            |   |  |  | 1,530      |  
|Net loss for the period                                                                                              |  |            |           |             |  |               | (4,058,921  | ) |  |  | (4,058,921 | )
|                                                                                                                     |  |            |            |             |  |               |             |   |  |  |            |  
|Balance, December 31, 2001                                                                                           |  |            | 11,839,195 |             |  |               | (20,602,323 | ) |  |  | (8,758,653 | )
|Discontinued operations                                                                                              |  |            | (66,000    | )           |  |               | (234,438    | ) |  |  | (300,438   | )
|Stock issued in lieu of consulting fees                                                                              |  |            | 2,798      |             |  |               |            |   |  |  | 2,800      |  
|Stock based compensation [note 2]                                                                                    |  |            | 134,948    |             |  |               |            |   |  |  | 134,948    |  
|Conversion of non-voting common stock to voting
    common stock upon merger of companies [note 13(b)]               |  |            |           |             |  |               |            |   |  |  |           |  
|Conversion of Series A convertible
    debentures into Series A convertible preferred stock
    [note 7(i)]          |  |            | 7,118,022  |             |  |               |            |   |  |  | 7,119,111  |  
|Shares issued pursuant to anti-dilution
    provisions [note 13(d)(i)]                                               |  |            | (97        | )           |  |               |            |   |  |  |           |  
|Shares issued pursuant to private offering
    memorandum, net of share issue cost [note 13(d)(ii)]                  |  |            | 1,273,800  |             |  |               |            |   |  |  | 1,274,146  |  
|Conversion of Series B convertible
    debentures into Series B convertible preferred stock
    [note 13(d)(ii)]     |  |            | 1,030,506  |             |  |               |            |   |  |  | 1,030,684  |  
|Conversion of subordinated convertible debentures
    into Series B convertible preferred stock [note
    13(d)(ii)] |  |            | 499,825    |             |  |               |            |   |  |  | 499,921    |  
|Contribution of inventory from related party
    [note 8]                                                            |  |            | 155,141    |             |  |               |            |   |  |  | 155,141    |  
|Value ascribed to warrants issued
    [note 13(g)]                                                                   |  |            | 69,138     |             |  |               |            |   |  |  | 69,138     |  
|Net loss for the period                                                                                              |  |            |           |             |  |               | (2,881,597  | ) |  |  | (2,881,597 | )
|                                                                                                                     |  |            |            |             |  |               |             |   |  |  |            |  
|Balance, December 31, 2002                                                                                           |  |            | 22,057,276 |             |  |               | (23,718,358 | ) |  |  | (1,654,799 | )
|Conversion of debt into common stock
    [notes 6 and 13(c)]                                                         |  |            | 480,507    |             |  |               |            |   |  |  | 481,015    |  
|Stock issued in lieu of consulting fees
    [note 13[e]]                                                             |  |            | 22,571     |             |  |               |            |   |  |  | 22,588     |  
|Stock issued pursuant to private offering
    memorandum [note 13(e)]                                                |  |            | 578,683    |             |  |               |            |   |  |  | 579,296    |  
|Contribution of inventory from related party
    [note 8]                                                            |  |            | 66,300     |             |  |               |            |   |  |  | 66,300     |  
|Stock based compensation [note 2]                                                                                    |  |            | 709,762    |             |  |               |            |   |  |  | 709,762    |  
|Net loss for the period                                                                                              |  |            |           |             |  |               | (2,469,888  | ) |  |  | (2,469,888 | )
|                                                                                                                     |  |            |            |             |  |               |             |   |  |  |            |  
|Balance, December 31, 2003                                                                                           |  |            | 23,915,099 |             |  |               | (26,188,246 | ) |  |  | (2,265,726 | )
|Stock based compensation [note 2][unaudited]                                                                         |  |            | 4,654,261  |             |  |               |            |   |  |  | 4,654,261  |  
|Stock issued on exercise of options
    [note 13(f)][unaudited]                                                      |  |            | 107,192    |             |  |               |            |   |  |  | 107,442    |  
|Stock issued on exercise of warrants
    [note 13(g)][unaudited]                                                     |  |            | 1,415,865  |             |  |               |            |   |  |  | 1,416,321  |  
|Subscription receivable [note 13(g)][unaudited]                                                                      |  |            | (517,602   | )           |  |               |             |   |  |  | (517,602   | )
|Contribution of inventory from related party
    [note 8][unaudited]                                                 |  |            | 159,870    |             |  |               |            |   |  |  | 159,870    |  
|Net loss for the period [unaudited]                                                                                  |  |            |           |             |  |               | (7,895,157  | ) |  |  | (7,895,157 | )
|                                                                                                                     |  |            |            |             |  |               |             |   |  |  |            |  
|Balance, September 30, 2004[unaudited]                                                                               |  |            | 29,734,685 |             |  |               | (34,083,403 | ) |  |  | (4,340,591 | )
|                                                                                                                     |  |            |            |             |  |               |             |   |  |  |            |  




See accompanying notes

F-5



---



##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(expressed in U.S. dollars)




|                                                                                         |                                                  |                                 |            |                         |   |      |            |         |   |      |            |         |   |   |            |         |  |   |            |           | 
|---------------------------------------------------------------------------------------- | ------------------------------------------------ | ------------------------------- | ---------- | ----------------------- | - | ---- | ---------- | ------- | - | ---- | ---------- | ------- | - | - | ---------- | ------- |  | - | ---------- | --------- | 
|                                                                                         |                                                  |                                 |            |                        
|                                                                                         |                                                  | Nine months ended September 30, |            | Year ended December 31,
|                                                                                         |                                                  |                                 |            |                        
|                                                                                         |                                                  | 2004                            |            | 2003                    |   | 2003 |            | 2002    |   | 2001
|                                                                                         |                                                  |                                 |            |                         |   |      |            |         |   |     
|                                                                                         |                                                  |                                 |            |                         |   |      |            |        
|                                                                                         |                                                  | (unaudited)                     |            |                         |   |      |            |        
|OPERATING ACTIVITIES                                                                     |                                                  |                                 |            |                         |   |      |            |         |   |      |            |         |   |   |            |         |  |   |            |          
|Net loss for the period from continuing operations                                       |                                                  | $                               | (7,895,157 | )                       |   | $    | (1,109,739 | )       |   | $    | (2,469,888 | )       |   | $ | (2,881,597 | )       |  | $ | (4,126,626 | )        
|Adjustments to reconcile net loss to cash flows
    used in operating activities:        |                                                  |                                 |            |                         |   |      |            |         |   |      |            |         |   |   |            |         |  |   |            |          
|                                                                                         | Stock based compensation [notes 2 and
    13(f)] |                                 |            | 4,654,261               |   |      |            | 150,994 |   |      |            | 709,761 |   |   |            | 134,948 |  |   |            | 190,351   | 
|                                                                                         | Equity earnings of Partnership                   |                                 |            |                        |   |      |            | (15,569 | ) |      |            |        |   |   |            |        |  |   |            |          | 
|                                                                                         | Shares issued for services performed             |                                 |            |                        |   |      |            | 22,588  |   |      |            | 22,588  |   |   |            | 2,800   |  |   |            |          | 
|                                                                                         | Non-cash interest expense on long-term debt      |                                 |            |                        |   |      |            |        |   |      |            |        |   |   |            | 938,427 |  |   |            | 1,278,552 | 
|                                                                                         | Gain on settlement of debt                       |                                 |            |                        |   |      |            | (7,190  | ) |      |            | (7,190  | ) |   |            |        |  |   |            |          | 
|                                                                                         | Non-cash warrant value                           |                                 |            |                        |   |      |            |        |   |      |            |        |   |   |            | 69,138  |  |   |            |          | 
|                                                                                         | Amortization of fixed assets                     |                                 |            | 29,762                  |   |      |            | 5,369   |   |      |            | 12,742  |   |   |            | 79,395  |  |   |            | 89,325    | 
|                                                                                         | Amortization of patents and trademarks           |                                 |            | 4,094                   |   |      |            | 2,548   |   |      |            | 3,887   |   |   |            | 841     |  |   |            | 399       | 
|                                                                                         | Loss (gain) on sale of fixed assets              |                                 |            | (6,000                  | ) |      |            | (1,746  | ) |      |            | (1,746  | ) |   |            | 2,380   |  |   |            | 7,016     | 
|                                                                                         | Impairment of fixed assets                       |                                 |            |                        |   |      |            |        |   |      |            | 46,128  |   |   |            | 131,240 |  |   |            |          | 
|Net change in non-cash working capital balances
    related to operations [note 14]      |                                                  |                                 | 141,395    |                         |   |      | (814,892   | )       |   |      | (691,104   | )       |   |   | (603,105   | )       |  |   | 1,099,544  |          
|                                                                                         |                                                  |                                 |            |                         |   |      |            |         |   |      |            |         |   |   |            |         |  |   |            |          
|Cash used in operating activities                                                        |                                                  |                                 | (3,071,645 | )                       |   |      | (1,767,637 | )       |   |      | (2,374,822 | )       |   |   | (2,125,533 | )       |  |   | (1,461,439 | )        
|                                                                                         |                                                  |                                 |            |                         |   |      |            |         |   |      |            |         |   |   |            |         |  |   |            |          
|INVESTING ACTIVITIES                                                                     |                                                  |                                 |            |                         |   |      |            |         |   |      |            |         |   |   |            |         |  |   |            |          
|Proceeds on sales of fixed assets                                                        |                                                  |                                 | 6,000      |                         |   |      | 4,000      |         |   |      | 4,000      |         |   |   |           |         |  |   | 14,483     |          
|Additions to fixed assets                                                                |                                                  |                                 | (170,528   | )                       |   |      | (151,144   | )       |   |      | (164,716   | )       |   |   | (24,151    | )       |  |   | (39,430    | )        
|Additions to patents and trademarks                                                      |                                                  |                                 | (4,353     | )                       |   |      | (14,436    | )       |   |      | (15,064    | )       |   |   | (6,894     | )       |  |   | (44,642    | )        
|                                                                                         |                                                  |                                 |            |                         |   |      |            |         |   |      |            |         |   |   |            |         |  |   |            |          
|Cash used in investing activities                                                        |                                                  |                                 | (168,881   | )                       |   |      | (161,580   | )       |   |      | (175,780   | )       |   |   | (31,045    | )       |  |   | (69,589    | )        
|                                                                                         |                                                  |                                 |            |                         |   |      |            |         |   |      |            |         |   |   |            |         |  |   |            |          
|FINANCING ACTIVITIES                                                                     |                                                  |                                 |            |                         |   |      |            |         |   |      |            |         |   |   |            |         |  |   |            |          
|Increase in long-term convertible debenture
    [note 7[iii]]                            |                                                  |                                 | 2,450,000  |                         |   |      | 1,950,000  |         |   |      | 2,650,000  |         |   |   |           |         |  |   |           |          
|Increase in convertible debenture due to
    stockholders                                |                                                  |                                 |           |                         |   |      |           |         |   |      |           |         |   |   | 1,492,500  |         |  |   | 1,510,475  |          
|Repayment of long-term debt                                                              |                                                  |                                 |           |                         |   |      | (25,000    | )       |   |      | (25,000    | )       |   |   |           |         |  |   |           |          
|Share issuance costs                                                                     |                                                  |                                 |           |                         |   |      |           |         |   |      | (18,985    | )       |   |   | (725,941   | )       |  |   |           |          
|Debt issuance costs                                                                      |                                                  |                                 |           |                         |   |      | (24,796    | )       |   |      | (24,796    | )       |   |   |           |         |  |   |           |          
|Deferred share issue costs                                                               |                                                  |                                 | (685,867   | )                       |   |      |           |         |   |      |           |         |   |   |           |         |  |   |           |          
|Proceeds from exercise of common stock options
    and warrants [note 13(f) and (g)]     |                                                  |                                 | 241,922    |                         |   |      |           |         |   |      | 604,092    |         |   |   |           |         |  |   | 8,911      |          
|Proceeds from exercise of Series A
    convertible preferred stock warrants [note 13(g)] |                                                  |                                 | 764,239    |                         |   |      |           |         |   |      |           |         |   |   |           |         |  |   |           |          
|Proceeds from sale of Series B convertible
    preferred stock [note 13(d)]              |                                                  |                                 |           |                         |   |      |           |         |   |      |           |         |   |   | 2,000,000  |         |  |   |           |          
|                                                                                         |                                                  |                                 |            |                         |   |      |            |         |   |      |            |         |   |   |            |         |  |   |            |          
|Cash provided by financing
    activities                                                |                                                  |                                 | 2,770,294  |                         |   |      | 1,900,204  |         |   |      | 3,185,311  |         |   |   | 2,766,559  |         |  |   | 1,519,386  |          
|                                                                                         |                                                  |                                 |            |                         |   |      |            |         |   |      |            |         |   |   |            |         |  |   |            |          
|Net cash flow from discontinued operations                                               |                                                  |                                 |           |                         |   |      |           |         |   |      |           |         |   |   |           |         |  |   | (79,064    | )        
|Net increase (decrease) in cash during the
    period                                    |                                                  |                                 | (470,232   | )                       |   |      | (29,013    | )       |   |      | 634,711    |         |   |   | 609,981    |         |  |   | (90,706    | )        
|Cash, beginning of period                                                                |                                                  |                                 | 1,237,168  |                         |   |      | 602,457    |         |   |      | 602,457    |         |   |   | (7,524     | )       |  |   | 83,182     |          
|                                                                                         |                                                  |                                 |            |                         |   |      |            |         |   |      |            |         |   |   |            |         |  |   |            |          
|Cash, end of period                                                                      |                                                  | $                               | 766,936    |                         |   | $    | 573,444    |         |   | $    | 1,237,168  |         |   | $ | 602,457    |         |  | $ | (7,524     | )        
|                                                                                         |                                                  |                                 |            |                         |   |      |            |         |   |      |            |         |   |   |            |         |  |   |            |          




See accompanying notes

F-6



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002

1.   Nature of Operations,
Basis of Presentation and Going Concern Uncertainty

Nature of operations




OccuLogix, Inc. (the Company),
formerly Vascular Sciences Corporation [note 18[d]],is an ophthalmic therapeutic company founded to
commercialize innovative treatments for eye diseases, including
age-related macular degeneration, or AMD. The RHEO System
contains a pump that circulates blood through two filters and is
used to perform Rheopheresis, a form of apheresis, which the
Company refers to under the trade name RHEO Therapy, which is
designed to treat Dry AMD. The RHEO System is designed to
improve microcirculation in the eye by filtering high molecular
weight proteins and other macromolecules from the patients
plasma.




The Company owns and/or has licensed certain
patents relating to the RHEO System and has the exclusive right
to develop and sell the equipment which comprises the RHEO
System in the North American markets. The Company has licensed
its right to develop and sell the RHEO System to OccuLogix, L.P.
(the Partnership) in exchange for a 50% interest in
the Partnership [note 5]. The other 50% interest in
the Partnership is owned by TLC Vision Corporation
(TLC Vision), who is a significant stockholder of
the Company.




The Company began limited commercialization of
the RHEO System at two clinics in Canada in 2003. The
Company is currently conducting a pivotal clinical trial, called
MIRA-1, which, if successful, is expected to support its
application with the U.S. Food and Drug Administration
(FDA), to obtain approval to market the RHEO System
in the United States.




Basis of presentation

On July 18, 2002, OccuLogix Corporation
(Old OccuLogix) merged into the Company, which was
then a wholly-owned subsidiary of Old OccuLogix. Pursuant to the
merger, the Company effected a reverse split of its capital
stock on a one-for-four basis and made a corresponding
adjustment to its other equity securities [note 13[b]].

The consolidated financial statements include the
results of Old OccuLogix and the Company on a continuity of
interest basis for all periods presented whereby, the Company is
considered the parent company.

Share and share related data for all periods
prior to July 18, 2002 are presented giving effect to the
reverse stock split of the capital stock and the merger
[note 13[b]].

Going concern uncertainty

The consolidated financial statements have been
prepared on the basis that the Company will continue as a going
concern. The Company has sustained substantial losses for each
of the years ended December 31, 2003, 2002 and 2001. The
Companys cash position at its current level of operating
activity is insufficient to cover operating costs for the
foreseeable future. The Companys working capital
deficiency at December 31, 2003 was approximately
$2,500,000, which increased from the working capital deficiency
at December 31, 2002. Historically, the Company has
obtained financing from certain of its significant stockholders.
As a result, there is substantial doubt about its ability to
continue as a going concern.




Management believes that the receipt of the
remaining $1,900,000 as at September 30, 2004 of the
aggregate $7,000,000 available for borrowing under the
Convertible Debentures and the exercise of




F-7



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



1.   Nature of Operations,
Basis of Presentation and Going Concern Uncertainty
(continued)


outstanding options and warrants will generate
sufficient funds to pay for its operations and other demands and
commitments for the foreseeable future.

The consolidated financial statements do not
include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the
Company be unable to continue in existence.

2.   Significant Accounting
Policies

The consolidated financial statements have been
prepared by management in conformity with accounting principles
generally accepted in the United States of America
(U.S. GAAP), which conforms in all material
respects with Canadian generally accepted accounting principles
(Canadian GAAP), except as disclosed in note 17.

Basis of consolidation

The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary,
OccuLogix Holdings, Inc. (OHI). All significant
intercompany transactions and balances have been eliminated on
consolidation.

Use of estimates

The preparation of consolidated financial
statements in conformity with U.S. GAAP requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses
during the reporting periods. Actual results could differ from
those estimates.

Revenue recognition

The Company recognizes revenue from the sale of
products to the Partnership (the Companys sole customer, a
related party) as a result of a signed legally binding agreement
which stipulates pricing and also obligations of the Company and
the Partnership. The Partnership provides a signed purchase
order and is responsible for marketing and servicing the product
while the Company provides products to the Partnership at its
estimated cost which includes royalty fees, freight and
calibration. The Company recognizes revenue upon shipment, (ie.
FOB shipping), as the Company does not retain any further
obligation with respect to the products sold. The Partnership
provides the Company with forecasts and projections, of which
the first three months become fixed orders.

The Partnership has the obligation to train, if
required, and calibrate the OctoNova pumps delivered to its
customers. Only upon the completion of these services does the
Partnership recognize revenue for the pumps. The Partnership is
also responsible for providing the warranties on the pumps and
the estimated cost of providing this service is accrued at the
time revenue is recognized. To date, the Partnerships
primary customer has been a subsidiary of TLC Vision.

F-8



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



2.   Significant Accounting
Policies (continued)


Cost of sales

Cost of goods sold consists primarily of costs
for the purchase of the Companys products, including
direct costs incurred for the purchase of component parts from
its suppliers, applicable freight and shipping costs and fees
related to warehousing. In addition to these direct costs,
included in the cost of sales that are only recoverable based on
sufficient volume are the minimum royalty payments due to
Mr. Hans Stock and Dr. Richard Brunner and licensing
costs associated with distributing the RHEO System in Canada.

Cash

Cash includes cash on hand and bank balances.

Inventory

Inventory is recorded at the lower of cost and
net realizable value and consists of finished goods. Cost is
accounted for on a first-in, first-out basis.

Fair value of financial instruments

Fair value of a financial instrument is defined
as the amount at which the instrument could be exchanged in a
current transaction between willing parties. The estimated fair
values of cash, due from related parties, amount receivable,
accounts payable, accrued liabilities, due to stockholders and
convertible debentures due to stockholders approximate their
carrying values due to the short-term maturities of these
instruments.

Fixed assets

Fixed assets are reported at cost less
accumulated amortization. Amortization is calculated using the
straight-line method, commencing when the assets become
available for productive use, based on the following estimated
useful lives:

|                               |  |  |          | 
|------------------------------ |  |  | -------- | 
|Furniture and office equipment |  |  | 7  years | 
|Computer equipment             |  |  | 3  years | 
|Medical equipment              |  |  | 5  years | 

Impairment of long-lived assets

The Company reviews its long-lived assets for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset might not be recoverable.
When such an event occurs, management estimates the future
undiscounted cash flows expected to result from the use of the
asset and its eventual disposition. In the event the
undiscounted cash flows are less than the carrying amount of the
asset, an impairment loss equal to the excess of the carrying
amount over the fair value is charged to income.

Investments

Investments are accounted for using the equity
method if the Company has significant influence, but not
control, over an investee. Accordingly, the Company, through its
wholly-owned subsidiary OHI which owns a

F-9



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)

(Information as at September 30, 2004 and
for the nine months ended


September 30, 2004 and 2003 is
unaudited)


December 31, 2003 and 2002

2.   Significant Accounting
Policies (continued)

50% interest in the Partnership, records its
share of earnings (loss) from the Partnership using the equity
method.

Patents and trademarks

Patents and trademarks have been recorded at
historical cost and are amortized using the straight-line method
over their estimated lives, not to exceed 15 years.

Foreign currency translation

The Companys functional and reporting
currency is the U.S. dollar. The assets and liabilities of
the Companys Canadian operations are maintained in
U.S. dollars. Monetary assets and liabilities denominated
in foreign currencies are translated at exchange rates in effect
at the balance sheet date and non-monetary assets and
liabilities denominated in foreign currencies are translated at
exchange rates in effect on the date of the transaction. Revenue
and expenses are translated into U.S. dollars at average
exchange rates prevailing during the period. Resulting exchange
gains and losses are included in net loss for the period and are
not material in any of the periods presented.

Clinical and regulatory costs

Clinical and regulatory costs attributable to the
performance of contract services are recognized as the services
are performed. Non-refundable, up-front fees paid in connection
with these contracted services are deferred and recognized as an
expense on a straight-line basis over the estimated term of the
related contract.

Income taxes

The Company uses the asset and liability method
of accounting for income taxes. Deferred tax assets and
liabilities are recorded based on the difference between the
income tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes at the applicable
enacted statutory tax rates. Deferred tax assets are reduced by
a valuation allowance if, based on the weight of available
evidence, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.

Stock-based compensation




The Company follows Statement of Financial
Accounting Standard (SFAS) No. 123
Accounting for Stock-Based Compensation, (SFAS
No. 123). The provisions of SFAS No. 123 allow
companies to either expense the estimated fair value of employee
stock options or to continue to follow the intrinsic value
method set forth in Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to
Employees (APB 25) but disclose the pro
forma effects on net income (loss) had the fair value of the
options been expensed. The Company has elected to apply
APB 25 in accounting for employee stock option incentive
plans [note 13]. Expense is amortized over the
vesting period.




F-10



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)

(Information as at September 30, 2004 and
for the nine months ended


September 30, 2004 and 2003 is
unaudited)


December 31, 2003 and 2002

2.   Significant Accounting
Policies (continued)

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:




|                         |                                              |                   |            |              |   |      |            |         |   |      |            |          |   |   |            |         |   |   |            |         |  
|------------------------ | -------------------------------------------- | ----------------- | ---------- | ------------ | - | ---- | ---------- | ------- | - | ---- | ---------- | -------- | - | - | ---------- | ------- | - | - | ---------- | ------- | -
|                         |                                              |                   |            |             
|                         |                                              | Nine months ended |            | Year ended  
|                         |                                              | September 30,     |            | December 31,
|                         |                                              |                   |            |             
|                         |                                              | 2004              |            | 2003         |   | 2003 |            | 2002    |   | 2001
|                         |                                              |                   |            |              |   |      |            |         |   |     
|Net loss, as reported    |                                              | $                 | (7,895,157 | )            |   | $    | (1,109,739 | )       |   | $    | (2,469,888 | )        |   | $ | (2,881,597 | )       |   | $ | (4,058,921 | )      
|                         | Adjustment for APB No. 25
    [(note 13(f))] |                   |            | 4,617,693    |   |      |            |        |   |      |            | 513,077  |   |   |            |        |   |   |            |        |  
|                         | Adjustment for SFAS No. 123                  |                   |            | (4,684,912   | ) |      |            | (16,618 | ) |      |            | (539,012 | ) |   |            | (96,412 | ) |   |            | (69,060 | )
|                         |                                              |                   |            |              |   |      |            |         |   |      |            |          |   |   |            |         |   |   |            |        
|Pro forma net loss       |                                              | $                 | (7,962,376 | )            |   | $    | (1,126,357 | )       |   | $    | (2,495,823 | )        |   | $ | (2,978,009 | )       |   | $ | (4,127,981 | )      
|                         |                                              |                   |            |              |   |      |            |         |   |      |            |          |   |   |            |         |   |   |            |        
|Pro forma loss per share |                                              |                   |            |              |   |      |            |         |   |      |            |          |   |   |            |         |   |   |            |        
| basic and diluted      |                                              | $                 | (1.55      | )            |   | $    | (0.29      | )       |   | $    | (0.63      | )        |   | $ | (0.80      | )       |   | $ | (1.15      | )      
|                         |                                              |                   |            |              |   |      |            |         |   |      |            |          |   |   |            |         |   |   |            |        




Pursuant to SFAS No. 123, the
weighted-average fair values of employee stock options granted
during the years ended December 31, 2003, 2002 and 2001
were $11.91, $0.77 and $0.17, respectively. The estimated fair
value was determined using the following assumptions:

|                        |  |              |         |      |  |      |         |  |  |  |          | 
|----------------------- |  | ------------ | ------- | ---- |  | ---- | ------- |  |  |  | -------- | 
|                        |  |             
|                        |  | Year ended  
|                        |  | December 31,
|                        |  |             
|                        |  | 2003         |         | 2002 |  | 2001
|                        |  |              |         |      |  |     
|Volatility              |  |              | 75%     |      |  |      | 83%     |  |  |  | 83%      | 
|Expected life of option |  |              | 4.1 yrs |      |  |      | 8.9 yrs |  |  |  | 10.0 yrs | 
|Risk-free interest rate |  |              | 2.15%   |      |  |      | 4.95%   |  |  |  | 4.88%    | 

Dividend yield for all periods presented is nil.




Compensation expense associated with non-employee
stock options was $36,568 and $150,994 for the nine months ended
September 30, 2004 and 2003, respectively and $196,685,
$134,948 and $190,351 for the years ended December 31,
2003, 2002 and 2001, respectively. The fair value of these
options was determined using the Black-Scholes fair value
options model using the same assumptions described above and is
included in general and administrative expenses within the
consolidated statements of operations.




Loss per share

The Company follows SFAS No. 128,
Earnings Per Share (SFAS 128). In
accordance with SFAS 128, companies that are publicly held
or have complex capital structures are required to present basic
and diluted earnings per share (EPS) on the face of
the income statement. Basic EPS excludes dilution and is
computed by dividing income (loss) available to common
stockholders by the weighted average number of shares of common
stock outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted and
the resulting additional shares are dilutive because their
inclusion decreases the amount of EPS.

F-11



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



2.   Significant Accounting
Policies (continued)


The following table presents the potentially
dilutive effects of outstanding securities:




|                                                          |                             |                   |            |              |  |      |           |           |  |      |            |           |  |  |           |           |  |  |           |           | 
|--------------------------------------------------------- | --------------------------- | ----------------- | ---------- | ------------ |  | ---- | --------- | --------- |  | ---- | ---------- | --------- |  |  | --------- | --------- |  |  | --------- | --------- | 
|                                                          |                             |                   |            |             
|                                                          |                             | Nine months ended |            | Year ended  
|                                                          |                             | September 30,     |            | December 31,
|                                                          |                             |                   |            |             
|                                                          |                             | 2004              |            | 2003         |  | 2003 |           | 2002      |  | 2001
|                                                          |                             |                   |            |              |  |      |           |           |  |     
|Weighted average number of shares
    outstanding  basic |                             |                   | 5,143,225  |              |  |      | 3,905,209 |           |  |      | 3,976,921  |           |  |  | 3,735,062 |           |  |  | 3,603,361 |          
|Effect of dilutive securities:                            |                             |                   |            |              |  |      |           |           |  |      |            |           |  |  |           |           |  |  |           |          
|                                                          | Convertible debentures      |                   |            | 3,770,586    |  |      |           | 387,861   |  |      |            | 1,179,310 |  |  |           | 874,385   |  |  |           | 856,354   | 
|                                                          | Convertible preferred stock |                   |            | 4,160,986    |  |      |           | 3,986,106 |  |      |            | 3,986,106 |  |  |           | 1,613,575 |  |  |           | 1,138,848 | 
|                                                          | Warrants                    |                   |            | 706,671      |  |      |           | 960,145   |  |      |            | 960,145   |  |  |           | 674,359   |  |  |           | 841,027   | 
|                                                          | Stock options               |                   |            | 875,701      |  |      |           |          |  |      |            | 910,920   |  |  |           |          |  |  |           |          | 
|                                                          |                             |                   |            |              |  |      |           |           |  |      |            |           |  |  |           |           |  |  |           |          
|Weighted average number of shares 
    diluted           |                             |                   | 14,657,169 |              |  |      | 9,239,321 |           |  |      | 11,013,402 |           |  |  | 6,897,381 |           |  |  | 6,439,590 |          
|                                                          |                             |                   |            |              |  |      |           |           |  |      |            |           |  |  |           |           |  |  |           |          




Potentially dilutive shares have not been used in
the calculation of earnings per share as they are anti-dilutive.

Recent accounting pronouncements




In November 2002, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation
(FIN) No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN
No. 45). FIN No. 45 clarifies and expands on
existing disclosure requirements for a guarantor regarding its
obligations under certain guarantees it has issued. FIN No. 45
also requires that the guarantor must recognize a liability for
the fair value of its obligations under certain guarantees. The
provisions of FIN No. 45 are effective for guarantees entered
into after December 31, 2002. At December 31, 2003 and
September 30, 2004, the Company had no outstanding
guarantees.




In January 2003 (as amended in
December 2003), the FASB issued FIN No. 46,
Consolidation of Variable Interest Entities
(FIN No. 46). FIN No. 46 requires consolidation
of a variable interest entity (VIE) by the primary
beneficiary of the entitys expected results of operations.
FIN No. 46 also requires certain disclosures by all holders
of a significant variable interest in a VIE that are not the
primary beneficiary. FIN No. 46 is effective immediately for
VIEs created or acquired after January 31, 2003. For VIEs
created or acquired prior to February 1, 2003, FIN No. 46
is effective in the first reporting period ending after
December 31, 2003 for those VIEs that are considered to be
special purpose entities, and after March 15, 2004 for
those VIEs that are not considered to be special purpose
entities. The adoption of FIN No. 46 had no effect on the
Companys financial position or results of operations.

In March 2003, the FASB reached a consensus on
EITF Issue No. 00-21, Accounting for Revenue
Arrangements with Multiple Deliverables
(Issue 00-21). Issue 00-21 sets out
criteria for whether revenue can be recognized separately from
other deliverables in a multiple deliverable arrangement. The
criteria consider whether the delivered item has stand-alone
value to the customer, whether the fair value of the delivered
item can be reliably determined and the rights of return for the
delivered item. Adoption of Issue 00-21 is required for
fiscal years beginning after June 15, 2003 and has not had
an effect on the Companys financial position or results of
operations.

In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity (SFAS
No. 150) which establishes rules for the accounting

F-12



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



2.   Significant Accounting
Policies (continued)





for certain financial instruments with
characteristics of liabilities, equity or both. These types of
financial instruments have been reported as liabilities, as part
of equity, or within the mezzanine section of the consolidated
balance sheets and include mandatorily redeemable instruments,
certain instruments with an obligation to repurchase an
issuers own equity shares and instruments with obligations
for an issuer to settle in a variable number of its own equity
shares. The FASB intends to provide further accounting guidance
on conditional redeemable instruments at a later date. On
August 27, 2003, the FASB issued a deferral of SFAS
No. 150 for mandatorily redeemable shares of non-public
companies and non-public companies will not be required to apply
the provisions of SFAS No. 150 to mandatorily
redeemable financial instruments until periods beginning after
December 15, 2004. Based on securities outstanding as at
September 30, 2004, the adoption of this standard is not
expected to have an effect on the Companys financial
position or results of operations.




3.   Fixed Assets

Fixed assets consist of the following:




|                               |  |                    |         |              |  |   |         | 
|------------------------------ |  | ------------------ | ------- | ------------ |  | - | ------- | 
|                               |  |                   
|                               |  | September 30, 2004
|                               |  |                   
|                               |  |                    |         | Accumulated 
|                               |  | Cost               |         | Amortization
|                               |  |                    |         |             
|Furniture and office equipment |  | $                  | 28,229  |              |  | $ | 18,228  | 
|Computer equipment             |  |                    | 37,261  |              |  |   | 18,088  | 
|Medical equipment              |  |                    | 723,188 |              |  |   | 420,374 | 
|                               |  |                    |         |              |  |   |         | 
|                               |  |                    | 788,688 |              |  | $ | 456,690 | 
|                               |  |                    |         |              |  |   |         | 
|Less accumulated amortization  |  |                    | 456,690 |              |  |   |         | 
|                               |  |                    |         |              |  |   |         | 
|                               |  | $                  | 331,998 |              |  |   |         | 
|                               |  |                    |         |              |  |   |         | 




|                               |  |                   |         |                   |  |      |         |              |  |   |         |  |  |   |         | 
|------------------------------ |  | ----------------- | ------- | ----------------- |  | ---- | ------- | ------------ |  | - | ------- |  |  | - | ------- | 
|                               |  |                   |         |                  
|                               |  | December 31, 2003 |         | December 31, 2002
|                               |  |                   |         |                  
|                               |  |                   |         | Accumulated       |  |      |         | Accumulated 
|                               |  | Cost              |         | Amortization      |  | Cost |         | Amortization
|                               |  |                   |         |                   |  |      |         |             
|Furniture and office equipment |  | $                 | 28,229  |                   |  | $    | 15,597  |              |  | $ | 28,229  |  |  | $ | 10,917  | 
|Computer equipment             |  |                   | 27,864  |                   |  |      | 13,930  |              |  |   | 22,183  |  |  |   | 10,451  | 
|Medical equipment              |  |                   | 590,080 |                   |  |      | 425,415 |              |  |   | 435,384 |  |  |   | 376,789 | 
|                               |  |                   |         |                   |  |      |         |              |  |   |         |  |  |   |         | 
|                               |  |                   | 646,173 |                   |  | $    | 454,942 |              |  |   | 485,796 |  |  | $ | 398,157 | 
|                               |  |                   |         |                   |  |      |         |              |  |   |         |  |  |   |         | 
|Less accumulated amortization  |  |                   | 454,942 |                   |  |      |         |              |  |   | 398,157 |  |  |   |         | 
|                               |  |                   |         |                   |  |      |         |              |  |   |         |  |  |   |         | 
|                               |  | $                 | 191,231 |                   |  |      |         |              |  | $ | 87,639  |  |  |   |         | 
|                               |  |                   |         |                   |  |      |         |              |  |   |         |  |  |   |         | 

The Company has recorded a reduction of the
carrying value of fixed assets for the year ended
December 31, 2003 of $46,128 [2002  $131,240;
2001  nil], of this amount, $26,840 [2002 
$131,240; 2001  nil] reflects a write down of certain
of the Companys medical equipment to a value at
December 31, 2003 of nil each. The assets written down do
not represent the most current technology

F-13



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



3.   Fixed Assets
(continued)


available and are no longer being used in the
MIRA-1 clinical trials and the Company has made the decision to
write down these assets to their fair value and intends to
evaluate the best disposal option. In addition to the write down
of medical equipment, the carrying values of certain furniture
and office equipment were reduced in 2003 to current value. This
was in addition to a reduction in the carrying values of these
same assets in prior years.

4.   Patents and
Trademarks

Patents and trademarks consist of the following:




|                              |  |                    |        |              |  |   |       | 
|----------------------------- |  | ------------------ | ------ | ------------ |  | - | ----- | 
|                              |  |                   
|                              |  | September 30, 2004
|                              |  |                   
|                              |  |                    |        | Accumulated 
|                              |  | Cost               |        | Amortization
|                              |  |                    |        |             
|Patents                       |  | $                  | 64,991 |              |  | $ | 5,760 | 
|Trademarks                    |  |                    | 25,839 |              |  |   | 3,667 | 
|                              |  |                    |        |              |  |   |       | 
|                              |  |                    | 90,830 |              |  | $ | 9,427 | 
|                              |  |                    |        |              |  |   |       | 
|Less accumulated amortization |  |                    | 9,427  |              |  |   |       | 
|                              |  |                    |        |              |  |   |       | 
|                              |  | $                  | 81,403 |              |  |   |       | 
|                              |  |                    |        |              |  |   |       | 




|                              |  |                   |        |                   |  |      |       |              |  |   |        |  |  |   |       | 
|----------------------------- |  | ----------------- | ------ | ----------------- |  | ---- | ----- | ------------ |  | - | ------ |  |  | - | ----- | 
|                              |  |                   |        |                  
|                              |  | December 31, 2003 |        | December 31, 2002
|                              |  |                   |        |                  
|                              |  |                   |        | Accumulated       |  |      |       | Accumulated 
|                              |  | Cost              |        | Amortization      |  | Cost |       | Amortization
|                              |  |                   |        |                   |  |      |       |             
|Patents                       |  | $                 | 60,991 |                   |  | $    | 2,711 |              |  | $ | 54,484 |  |  | $ |      | 
|Trademarks                    |  |                   | 25,486 |                   |  |      | 2,622 |              |  |   | 16,929 |  |  |   | 1,446 | 
|                              |  |                   |        |                   |  |      |       |              |  |   |        |  |  |   |       | 
|                              |  |                   | 86,477 |                   |  | $    | 5,333 |              |  |   | 71,413 |  |  | $ | 1,446 | 
|                              |  |                   |        |                   |  |      |       |              |  |   |        |  |  |   |       | 
|Less accumulated amortization |  |                   | 5,333  |                   |  |      |       |              |  |   | 1,446  |  |  |   |       | 
|                              |  |                   |        |                   |  |      |       |              |  |   |        |  |  |   |       | 
|                              |  | $                 | 81,144 |                   |  |      |       |              |  | $ | 69,967 |  |  |   |       | 
|                              |  |                   |        |                   |  |      |       |              |  |   |        |  |  |   |       | 

Estimated amortization expense for patents and
trademarks for each of the next five years are as follows:

|     |  |                      |        |            |  |       |       |  |  |   |        | 
|---- |  | -------------------- | ------ | ---------- |  | ----- | ----- |  |  | - | ------ | 
|     |  |                     
|     |  | Amortization Expense
|     |  |                     
|Year |  | Patents              |        | Trademarks |  | Total
|     |  |                      |        |            |  |      
|2004 |  | $                    | 4,066  |            |  | $     | 1,414 |  |  | $ | 5,480  | 
|2005 |  |                      | 4,066  |            |  |       | 1,476 |  |  |   | 5,542  | 
|2006 |  |                      | 4,066  |            |  |       | 1,476 |  |  |   | 5,542  | 
|2007 |  |                      | 4,066  |            |  |       | 1,476 |  |  |   | 5,542  | 
|2008 |  |                      | 4,066  |            |  |       | 1,476 |  |  |   | 5,542  | 
|     |  |                      |        |            |  |       |       |  |  |   |        | 
|     |  | $                    | 20,330 |            |  | $     | 7,318 |  |  | $ | 27,648 | 
|     |  |                      |        |            |  |       |       |  |  |   |        | 

F-14



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002

5.   Investment in Limited
Partnership

On July 25, 2002, the Partnership was formed
by an agreement between OHI, TLC Apheresis, L.P.
(Apheresis L.P.), a wholly-owned subsidiary of
TLC Vision, and OccuLogix Management, Inc. (General
Partner) for the purpose of pursuing commercial
applications of technologies owned or licensed by the Company
applicable to the evaluation, diagnosis, monitoring and
treatment of Dry AMD. The Company has an agreement with the
Partnership appointing the Partnership the sole distributor of
the RHEO System and its component parts in North America, the
Caribbean and Israel. Pricing is reviewed quarterly and adjusted
as required for future sales. Each of OHI and
Apheresis L.P. directly or indirectly own a 50% interest in
the Partnership and the General Partner, in exchange for the 50%
interest each of the partners contributed certain assets which
were recorded at fair value which were nominal.

The Company did not consolidate the Partnership
as TLC Visions effective interest in the Partnership is
greater than 50% due to its direct ownership and indirect
ownership through the Company. Accordingly, the Partnership is
consolidated by TLC Vision. In addition, the Partnerships
management was primarily comprised of TLC Visions
representatives and TLC Vision to date has disproportionately
funded the activity of the Partnership.

The amount reported represents the Companys
proportionate share of the Partnerships cumulative
earnings to date on an equity basis.




The Company did not recognize in its consolidated
statements of operations its 50% interest in the net loss of the
Partnership for the nine-month period ended September 30,
2004 and the years ended December 31, 2003 and 2002 as the
net loss of the Partnership exceeded the net investment of the
Company. The Company recognized its equity interest in the
Partnership for the nine-month period ended September 30,
2003. For all other periods presented, the Company did not
recognize its equity interest because the Companys
proportionate net cumulative loss exceeded the carrying value of
its investment in the Partnership.







The Partnerships primary customer is RHEO
Clinic Inc., a subsidiary of TLC Vision, for which the
Partnership has reported revenues of $343,564, $409,685,
$459,730 and $0 for the nine months ended September 30,
2004 and 2003 and the years ended December 31, 2003 and
2002, respectively. RHEO Clinic uses the RHEO System to treat
patients, for which it charges its customers (the patients) a
per-treatment fee.




The following tables present summary financial
information for the Partnership:




|                                         |  |                   |         |              |  |               |         |      |  |   |         |   |  |   |        |  
|---------------------------------------- |  | ----------------- | ------- | ------------ |  | ------------- | ------- | ---- |  | - | ------- | - |  | - | ------ | -
|                                         |  |                   |         |              |  | Period from  
|                                         |  | Nine Months Ended |         |              |  | July 25, 2002
|                                         |  | September 30,     |         | Year Ended   |  | to           
|                                         |  |                   |         | December 31, |  | December 31, 
|                                         |  | 2004              |         | 2003         |  | 2003          |         | 2002
|                                         |  |                   |         |              |  |               |         |     
|Statements of Operations                 |  |                   |         |              |  |               |         |      |  |   |         |   |  |   |        |  
|Revenue from related party  Rheo Clinic |  | $                 | 343,564 |              |  | $             | 409,685 |      |  | $ | 459,730 |   |  | $ | 0      |  
|Revenue from third parties               |  | $                 | 109,600 |              |  | $             | 4,500   |      |  | $ | 26,664  |   |  | $ | 0      |  
|Net (loss) income for the period         |  | $                 | 16,845  |              |  | $             | 36,137  |      |  | $ | (20,308 | ) |  | $ | (5,068 | )




F-15



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



5.   Investment in Limited
Partnership (continued)





|                  |  |               |         |              |  |      |         |  |  |   |        | 
|----------------- |  | ------------- | ------- | ------------ |  | ---- | ------- |  |  | - | ------ | 
|                  |  |               |         |             
|                  |  |               |         | December 31,
|                  |  | September 30, |         |             
|                  |  | 2004          |         | 2003         |  | 2002
|                  |  |               |         |              |  |     
|Balance Sheets    |  |               |         |              |  |      |         |  |  |   |        | 
|Total assets      |  | $             | 314,007 |              |  | $    | 255,679 |  |  | $ | 45,253 | 
|Total liabilities |  | $             | 322,438 |              |  | $    | 280,955 |  |  | $ | 50,221 | 




6.   Due to
Stockholders




The Companys sole customer is the
Partnership. During the nine months ended September 30,
2004 and the years ended December 31, 2003 and 2002, the
Company sold components of the RHEO System to the Partnership.
The Company also provides management assistance to the
Partnership for which the Company bills on a monthly basis.







|        |                                               |               |           |              |  |      |           |         |  |   |           |           | 
|------- | --------------------------------------------- | ------------- | --------- | ------------ |  | ---- | --------- | ------- |  | - | --------- | --------- | 
|        |                                               |               |           |             
|        |                                               |               |           | December 31,
|        |                                               | September 30, |           |             
|        |                                               | 2004          |           | 2003         |  | 2002
|        |                                               |               |           |              |  |     
|Due to: |                                               |               |           |              |  |      |           |         |  |   |           |          
|        | Asahi Medical Co., Ltd. (Asahi
    Medical) |               | $         | 520,833      |  |      | $         | 502,083 |  |   | $         | 1,007,083 | 
|        | Hans K. Stock, stockholder (note 8)           |               |           | 500,000      |  |      |           | 500,000 |  |   |           | 500,000   | 
|        | TLC Vision Corporation (note 8)               |               |           | 75,281       |  |      |           |        |  |   |           |          | 
|        | Other stockholders (note 8)                   |               |           | 13,355       |  |      |           | 41,782  |  |   |           |          | 
|        |                                               |               |           |              |  |      |           |         |  |   |           |          
|        |                                               | $             | 1,109,469 |              |  | $    | 1,043,865 |         |  | $ | 1,507,083 |          
|        |                                               |               |           |              |  |      |           |         |  |   |           |          




On February 28, 2001, the Company issued a
secured promissory note to Asahi Medical in the principal amount
of $1,000,000 (the Asahi Medical Note). The Asahi
Medical Note bears interest at 8.5%. The Asahi Medical Note was
originally due on November 30, 2001. The terms of the Asahi
Medical Note were amended twice in each of the subsequent years
to extend the maturity date to November 30, 2003 and 2002,
respectively. On November 30, 2003 the Company and Asahi
Medical agreed to convert $500,000 of the principal of the Asahi
Medical Note to 507,604 shares of common stock at a price
of $0.98502 per share [note 13[c]]. All accrued
interest was paid. The remaining $500,000 matures on
November 30, 2004 and bears interest at 5.0% per
annum, which is payable in arrears on maturity; provided that if
any principal or interest is not be paid when due, interest
shall be payable on demand on all such overdue amounts at a rate
of 10.5% per annum. The balance includes accrued interest.




On February 11, 1997, Apheresis
Technologies, Inc. (Old ATI) entered into an
agreement with an entity controlled by a stockholder to pay that
entity $1,000,000 for the purposes of supporting the conduct of
research and gathering of clinical data in Germany by that
entity. This amount has been expensed in previous years. On
May 20, 1998, the Company agreed to assume the obligation
to make this payment. Payments of $250,000 were made in each of
December 1997 and June 1999. The balance of $500,000 remained
unpaid as at September 30, 2004 and December 31, 2003.
The balance is unsecured, due on demand and no interest is
payable on the outstanding balance.




F-16



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



6.   Due to Stockholders
(continued)





The balance owing to TLC Vision of $75,281 is
included in general and administrative expenses and is related
to computer and administrative support provided by TLC Vision,
all of which is accrued at September 30, 2004 and which has
been expensed.




7.   Convertible
Debentures

[i]     Series B
convertible debentures



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In 2001, 2000 and 1999, the Company issued
    $510,475, $3,303,104 and $2,200,000 (totalling $6,013,579) in
    Series B convertible debentures, respectively. The
    Series B convertible debentures were convertible into
    shares of Series B preferred stock at $2.00 per share at
    any time at the holders option and automatically
    convertible upon an initial public offering of the
    Companys securities. The Series B convertible
    debentures had a five-year term from the date of issuance with
    an interest rate of 10%, which was payable quarterly in cash or
    through the issuance of additional Series B convertible
    debentures at the Companys option.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | In connection with the issuance of Series B
    convertible debentures, the Company also issued 204,190,
    1,421,242 and 880,000 Series A preferred stock purchase
    warrants in 2001, 2000 and 1999, respectively. In 2000, the
    Company also issued an additional 20,000 warrants in exchange
    for Series B convertible debentures in the principal amount
    of $50,000, which were issued in exchange for cash and then
    subsequently acquired by another investor. These warrants were
    exercisable over a period of three years from the date of
    issuance at an exercise price of $2.00. The exercise price for
    1,916,000 of the Series A preferred stock purchase warrants
    was subsequently amended to $7.83, after giving effect to
    anti-dilution provisions and the reverse stock split as
    described in note 13(b). The exercise price for the
    remaining 609,432 Series A preferred stock purchase
    warrants was subsequently amended to $5.55, after giving effect
    to anti-dilution provisions. Of the proceeds received from the
    issuance of the Series B convertible debentures, $1,676,286
    was allocated to the Series A preferred stock purchase
    warrants based on their estimated fair value, as determined
    using the Black-Scholes fair valuation option-pricing model,
    using the following weighted average assumptions: volatility of
    83%, a risk-free interest rate of approximately 5.0%, expected
    remaining contractual life of three years and an expected
    dividend yield of nil.
|
| | The Series B convertible debentures were
    recorded at $4,185,568 representing a discount to maturity value
    of $223,058, $1,452,241 and $152,712 for the years ended
    December 31, 2001, 2000 and 1999, respectively. The
    discount was as a result of the value ascribed to the
    Series A preferred stock purchase warrants. This resulted
    in additional interest accretion expense of nil, $451,018 and
    $609,308 for the years ended December 31, 2003, 2002 and
    2001, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | In 2002, the holders of the Series B
    convertible debentures exercised their option to convert their
    Series B convertible debentures, with a carrying value of
    $7,119,111 comprised of principal and interest, into 1,089,172
    shares of Series A convertible preferred stock, before
    giving effect to anti-dilution provision
    [note 13[d](i)]. As at December 31, 2002,
    Series B convertible debentures and accrued interest of
    $32,190 had not been converted but were settled in full during
    2003 through the issuance of stock [note 13(d)(i)].                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

F-17



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



7.   Convertible Debentures
(continued)


[ii]    Subordinated
convertible promissory note



| |                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On April 4, 2002, the Company issued a
    $1,000,000 subordinated convertible promissory note, bearing
    interest at 10% per annum, due and payable at the demand of the
    holder on or after April 4, 2004.          
|
| | On July 25, 2002, this subordinated
    convertible promissory note, together with accrued interest, was
    converted into 178,227 shares of Series B convertible
    preferred stock at $5.78 per share [note 13[d](ii)].

[iii]    Series B
convertible debentures



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In May 2002, the Company authorized the issuance
    of $10,000,000 Series B convertible debentures and reserved
    for issuance upon the conversion of the Series B
    convertible debentures up to 5,000,000 shares of Series B
    convertible preferred stock, which were convertible into
    5,000,000 shares of the Companys common stock. The Company
    issued Series B convertible debentures in the aggregate
    principal amount of $492,500. The principal amount of the
    Series B convertible debentures and accrued interest was
    converted into 96,042 shares of Series B convertible
    preferred stock at $5.20 per share on July 25, 2002
    [note 13(d)(ii)].

[iv]    Related party
secured convertible grid debentures



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 is convertible into shares of common
    stock of the Company at a price of $0.98502 per share, and
    $5,000,000 of the aggregate principal amount is non-convertible.                                                                                                                                                                                                                                                                                                                                   
|
| | Advances, which are at the option of TLC Vision
    and Diamed, under the convertible portion of the grid debentures
    are non-interest bearing and are due six months following demand
    notice by the debenture holder.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | Advances under the non-convertible portion of the
    grid debentures bear interest at 10% per annum, with interest
    payments due monthly in arrears. Advances under the
    non-convertible portion of the grid debentures are due at the
    earlier of: [a] six months following demand notice by the
    debenture holder; [b] 60 days following the date the
    Company has received FDA approval of the technology described in
    note 1; and [c] two business days following the date of
    closing of any debt financing of at least $5,000,000. No
    advances under the non-convertible portion of the grid
    debentures will be made until the maximum amount of advances
    under the convertible portion of grid debentures has been
    received.
|
|
| | During the nine months ended September 30,
    2004 and the year ended December 31, 2003, the Company
    issued an aggregate of $2,450,000 and $2,650,000, respectively,
    under the convertible portion of the grid debentures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|

F-18



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002

8.   Related Party
Transactions

The following are the Companys related
party transactions in addition to those disclosed in notes 1, 5,
6, 7 and 12.




|               |                            |               |         |              |   |      |        |        |   |   |        |        | 
|-------------- | -------------------------- | ------------- | ------- | ------------ | - | ---- | ------ | ------ | - | - | ------ | ------ | 
|               |                            |               |         |             
|               |                            |               |         | December 31,
|               |                            | September 30, |         |             
|               |                            | 2004          |         | 2003         |   | 2002
|               |                            |               |         |              |   |     
|Due (to) from: |                            |               |         |              |   |      |        |        |   |   |        |       
|               | OccuLogix, L.P.            |               | $       | 214,766      |   |      | $      | 15,028 |   |   | $      | 44,811 | 
|               | Diamed Medizintechnik GmbH |               |         |             |   |      |        | 2,433  |   |   |        |       | 
|               | Asahi Medical              |               |         |             |   |      |        |       |   |   |        | 15,238 | 
|               | Dr. Richard C. Davis       |               |         |             |   |      |        |       |   |   |        | 6,058  | 
|               | RHEO Clinic Inc.           |               |         | (4,572       | ) |      |        | (3,387 | ) |   |        |       | 
|               |                            |               |         |              |   |      |        |        |   |   |        |       
|               |                            | $             | 210,194 |              |   | $    | 14,074 |        |   | $ | 66,107 |       
|               |                            |               |         |              |   |      |        |        |   |   |        |       







The Partnerships primary customer is RHEO
Clinic Inc., a subsidiary of TLC Vision, for which the
Partnership has reported revenues of $343,564, $409,685,
$459,730 and $0 for the nine months ended
September 30, 2004 and 2003 and the years ended
December 31, 2003 and 2002, respectively. RHEO Clinic uses
the RHEO System to treat patients, for which it charges its
customers (the patients) a per-treatment fee.




TLC Vision
and Diamed

As discussed in note 7[iv], on June 25,
2003, TLC Vision and Diamed agreed to invest a total of
$12,000,000 in the Company on an equal basis in connection with
the funding of the Companys MIRA-1 and related clinical
trials. Collectively, the two companies control at least a
combined 50.1% of the equity interest in the Company on a fully
diluted basis which assumes the full draw down of the
convertible component of the secured convertible grid debentures.




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







As discussed in note 6, on February 11,
1997, Old ATI entered into an agreement with Diamed to pay
$1,000,000 for the purpose of supporting Diameds conduct
of research and gathering of clinical data in Germany. On
May 20, 1998, we agreed to assume the obligation to make
this payment. Payments of $250,000 were made in each of December
1997 and June 1999. The balance of $500,000 remained unpaid as
at September 30, 2004 and December 31, 2003. The
balance is unsecured, due on demand and no interest is payable
on the outstanding balance.







The balance owing to TLC Vision of $75,281 is
included in general and administrative expenses and is related
to computer and administrative support provided by
TLC Vision, all of which is accrued at September 30,
2004 and which has been expensed.




Asahi Medical
(see note 6)

The Company is party to a distributorship
agreement with Asahi Medical pursuant to which Asahi Medical
supplies the filter products used in the RHEO System.

F-19



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



8.   Related Party Transactions
(continued)


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 RHEO System. In the event the Company is not
able to obtain regulatory approval for the RHEO System from the
FDA and other necessary approvals in the territories for which
the Company has distribution rights by the end of December 2006,
Asahi Medical can terminate the distributorship agreement.

On February 28, 2001, the Company issued to
Asahi Medical the Asahi Medical Note in the amount of $1,000,000
[note 6].




The Company receives free inventory from Asahi
Medical for purpose 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 to the Partnership. The value of the free
inventory received was $159,870 and $66,300 for the nine months
ended September 30, 2004 and 2003, respectively, and
$66,300, $155,141 and $1,530 for the years ended
December 31, 2003, 2002 and 2001, respectively.




Apheresis
Technologies, Inc. and other related party
acquisitions

On September 11, 2000, Vasculogix
Corporation, Nephrologix Corporation, CytoLogix Corporation, and
Rheologix, LLC were merged into the Company. Each of these
entities was under common control, and accordingly, the merger
has been recorded at the historical cost of each of the entities.

On September 13, 2000, the Company acquired
100% of the issued and outstanding shares of Old ATI for
consideration of $100 cash. Old ATI was a distributor of
Plasmaflo filters and related products in North America. Prior
to and at the time of the acquisition, the Company and Old ATI
were related parties as a result of the significant influence
exercisable by officers and directors common to both companies.
Accordingly, the acquisition has been recorded at the historical
cost of Old ATI, under the continuity of interest basis of
accounting. Subsequent to the acquisition, the Company and Old
ATI merged. In 2002, the Company reorganized its assets, such
that the net assets of Old ATI were spun-out into a new separate
corporation, Apheresis Technologies, Inc. (New ATI).

Mr. Hans
Stock (see note 6)

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 RHEO 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.

On June 25, 2002, the Company entered into a
consulting agreement with Mr. Stock for the purposes of
procuring a patent license for the extracorporeal applications
in ophthalmic diseases for that period of time in which the
patent was effective. Mr. Stock is entitled to 1.0% of
total net revenues from the Companys commercial sales of
products sold in reliance and dependence upon the validity of
the patents claims and rights in the United States. The
Company agreed to make advance consulting payments to
Mr. Stock of $50,000 per year, payable on a quarterly
basis, to be credited against any and all future consulting
payments

F-20



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



8.   Related Party Transactions
(continued)


payable in accordance with this agreement. Due to
the uncertainty of future royalty payment requirements, all
required payments to date have been expensed.




On August 6, 2004, the Company entered into
a patent license and royalty agreement with Mr. Stock to obtain
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 replaces the
June 25, 2002 consulting agreement with Mr. Stock, which
provided for a royalty payment of 1% of product sales
[note 12].




New Apheresis
Technologies, Inc.

On May 1, 2002, the Company entered into an
exclusive distribution services agreement with New ATI, a
company controlled by certain stockholders of the Company
pursuant to which the Company pays New ATI 5% of the
Companys cost of components of the RHEO System. Under this
agreement, New ATI is the exclusive provider of warehousing,
order fulfillment, shipping, billing services and customer
service related to shipping and billing to the Company.




On July 30, 2004, the Company amended its
distribution services agreement with New ATI such that the
Company would have the sole discretion as to when the agreement
would terminate. In consideration of this amendment, the Company
agreed to pay New ATI $100,000 on the successful completion of
its initial public offering.




OccuLogix, L.P.

As discussed in notes 1 and 5, the
Companys only customer is the Partnership.

Other




On June 25, 2003, the Company entered into a
reimbursement agreement with New ATI, pursuant to which
employees of New ATI provide services to the Company and New ATI
is reimbursed for the applicable percentage of time the
employees spend working for the Company. These employees of New
ATI participate in the Companys bonus plan. During the
nine months ended September 30, 2004 and during the period
between June 25, 2003 and December 31, 2003, the
Company paid New ATI $129,551 and $78,695, respectively.
Included in accounts payable as of September 30, 2004 and
December 31, 2003 are $14,255 and $3,961, respectively, due
to New ATI.







During the nine months ended September 30,
2004 and during the period between November 1, 2003 and
December 31, 2003, the Company paid $3,647 and $826 to a
subsidiary of TLC Vision for office space for each respective
period. These amounts are expensed in the period incurred and
paid monthly.







Effective January 1, 2004, the Company
entered into a rental agreement with a related party whereby the
Company will lease space from New ATI at $2,745 per month. The
term of the lease extends to December 31, 2005
[note 12]. In the nine months ended
September 30, 2004 and the four months ended
December 31, 2003, the Company paid the related party
$24,705 and $5,580, respectively. Amounts are paid monthly.




F-21



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



8.   Related Party Transactions
(continued)





Effective June 25, 2003, Elias Vamvakas, the
Chairman of TLC Vision, became the Chairman and Secretary of
both the Company and 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 an
initial public offering, the options vest immediately, therefore
any unvested compensation expense will be expensed immediately.
The impact of this stock compensation expense for the nine
months ended September 30, 2004 and year ended
December 31, 2003 was $1,707,097 and $189,677 respectively.







During the nine months ended September 30,
2004 and the period from August 1, 2003 to
December 31, 2003, the Company charged $22,405 and $9,897,
respectively, to the Partnership for clinical and management
services. Included in due from related parties as at
September 30, 2004 and December 31, 2003 are $32,302
and $9,897, respectively, due from the Partnership.







In addition, the Company entered into a
consultancy and non-competition agreement on July 1, 2003
with a related party, which requires the Company to pay a fee of
$5,000 per month. This resulted in a consulting expense for the
nine months ended September 30, 2004 and the year ended
December 31, 2003 of $45,000 and $30,000, respectively. In
the year ended December 31, 2003, the related party agreed
to forego the payment of $75,250 due to him in exchange for
options to purchase 20,926 shares of common stock of the Company
at an exercise price of $0.13. The related party also agreed to
the repayment of $150,500 due to him at $7,500 per month.
Included in accounts payable as at September 30, 2004 and
December 31, 2003 are $38,000 and $105,500, respectively,
due to the related party.







In October 2004, the Partnership, the
Companys sole customer, received a total of $557,400 from
Rheo Therapeutics Inc. (an Ontario, Canada corporation) for the
purchase of 660 treatment sets and 2 pumps. This was in
accordance with the product purchase agreement between Rheo
Therapeutics, Inc. and the Partnership. On September 29,
2004, the Partnership signed a product purchase agreement with
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. Subject to availability, the purchaser may
order up to an additional 2,000 treatment sets. Dr. Machat,
who is an investor in and one of the directors of Rheo
Therapeutics Inc. was a co-founder and former director of TLC
Vision [note 18[b]].




F-22



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002

9.   Income Taxes

Significant components of the Companys
deferred tax assets and liabilities are as follows:




|                                          |                                  |               |            |              |   |              |            |           |   |   |            |           |  
|----------------------------------------- | -------------------------------- | ------------- | ---------- | ------------ | - | ------------ | ---------- | --------- | - | - | ---------- | --------- | -
|                                          |                                  | September 30, |            | December 31, |   | December 31,
|                                          |                                  | 2004          |            | 2003         |   | 2002        
|                                          |                                  |               |            |              |   |             
|Deferred income tax assets (liabilities): |                                  |               |            |              |   |              |            |           |   |   |            |          
|                                          | Inventory costs and other        |               | $          | (80,520      | ) |              | $          | (37,883   | ) |   | $          | (27,015   | )
|                                          | Net operating loss carryforwards |               |            | 10,003,597   |   |              |            | 8,806,832 |   |   |            | 8,112,896 |  
|                                          |                                  |               |            |              |   |              |            |           |   |   |            |          
|                                          |                                  |               | 9,923,067  |              |   |              | 8,768,949  |           |   |   | 8,139,911  |          
|Valuation allowance                       |                                  |               | (9,923,067 | )            |   |              | (8,768,949 | )         |   |   | (8,139,911 | )        
|                                          |                                  |               |            |              |   |              |            |           |   |   |            |          
|Net deferred tax asset                    |                                  | $             |           |              |   | $            |           |           |   | $ |           |          
|                                          |                                  |               |            |              |   |              |            |           |   |   |            |          




The following is a reconciliation of the recovery
of income taxes between those that are expected, based on
substantively enacted tax rates and laws, to those currently
reported:




|                                        |  |                   |            |              |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|--------------------------------------- |  | ----------------- | ---------- | ------------ |  | ---- | ---------- | ---- |  | ---- | ---------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                        |  |                   |            |             
|                                        |  | Nine months ended |            | Year ended  
|                                        |  | September 30,     |            | December 31,
|                                        |  |                   |            |             
|                                        |  | 2004              |            | 2003         |  | 2003 |            | 2002 |  | 2001
|                                        |  |                   |            |              |  |      |            |      |  |     
|Net loss for the period                 |  | $                 | (7,895,157 | )            |  | $    | (1,109,739 | )    |  | $    | (2,469,888 | ) |  | $ | (2,881,597 | ) |  | $ | (4,058,921 | )
|                                        |  |                   |            |              |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Expected recovery of income taxes (37%) |  |                   | (2,921,207 | )            |  |      | (410,603   | )    |  |      | (913,859   | ) |  |   | (1,066,191 | ) |  |   | (1,501,801 | )
|Write down and disposal of fixed assets |  |                   | (2,220     | )            |  |      | (646       | )    |  |      | 16,421     |   |  |   | 49,439     |   |  |   | 2,596      |  
|Stock-based compensation                |  |                   | 1,708,546  |              |  |      |           |      |  |      | 189,838    |   |  |   |           |   |  |   |           |  
|Inventory costs for accounting purposes |  |                   | 60,763     |              |  |      | 24,531     |      |  |      | 24,532     |   |  |   | 57,402     |   |  |   | 566        |  
|Non-deductible expenses                 |  |                   |           |              |  |      |           |      |  |      |           |   |  |   | 1,984      |   |  |   | 108,394    |  
|Change in valuation allowance           |  |                   | 1,154,118  |              |  |      | 386,718    |      |  |      | 683,068    |   |  |   | 957,366    |   |  |   | 1,390,245  |  
|                                        |  |                   |            |              |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|                                        |  | $                 |           |              |  | $    |           |      |  | $    |           |   |  | $ |           |   |  | $ |           |  
|                                        |  |                   |            |              |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  




The Company and its subsidiary have current and
prior year losses available to reduce taxable income and taxes
payable in future years, and, if not utilized, will expire as
follows:

|     |  |   |           | 
|---- |  | - | --------- | 
|     |  | $
|     |  |  
|2012 |  |   | 3,466,900 | 
|2018 |  |   | 4,500,400 | 
|2019 |  |   | 1,893,700 | 
|2020 |  |   | 5,153,800 | 
|2021 |  |   | 4,045,900 | 
|2022 |  |   | 2,865,900 | 
|2023 |  |   | 1,875,500 | 

F-23



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002

10. Discontinued Operations

On January 1, 2002, the Company transferred
the net assets relating to the distribution of Plasmaflo
filters, previously acquired on September 13, 2000
[note 8], into a newly incorporated subsidiary, New
ATI. Concurrent with the transfer of the assets to the
subsidiary, the share capital of the subsidiary was reorganized
such that the stockholders of the Company became the direct
stockholders of New ATI. The spin-off of these net assets was
recorded at the carrying amounts and accordingly, no gain or
loss was recognized on disposal.

The amount of net assets spun-out to existing
stockholders has been recorded as a distribution to the
Companys stockholders deficiency.

The revenue and net income for the periods that
were previously included in the determination of net income for
the Company are as follows:

|           |  |              |           | 
|---------- |  | ------------ | --------- | 
|           |  | Year ended  
|           |  | December 31,
|           |  | 2001        
|           |  |             
|Revenue    |  | $            | 1,105,235 | 
|Net income |  | $            | 67,705    | 

11. Accrued Liabilities

Accrued liabilities consist of the following:




|                                         |  |               |           |              |  |              |         |  |  |   |        | 
|---------------------------------------- |  | ------------- | --------- | ------------ |  | ------------ | ------- |  |  | - | ------ | 
|                                         |  | September 30, |           | December 31, |  | December 31,
|                                         |  | 2004          |           | 2003         |  | 2002        
|                                         |  |               |           |              |  |             
|Due to professionals                     |  | $             | 100,214   |              |  | $            | 120,000 |  |  | $ | 6,514  | 
|Due to MIRA-1 clinical trial sites       |  |               | 227,709   |              |  |              | 47,172  |  |  |   |       | 
|Due to MIRA-1 clinical trial specialists |  |               | 128,884   |              |  |              |        |  |  |   |       | 
|Other                                    |  |               | 1,036,227 |              |  |              | 78,409  |  |  |   | 64,363 | 
|                                         |  |               |           |              |  |              |         |  |  |   |        | 
|                                         |  | $             | 1,493,034 |              |  | $            | 245,581 |  |  | $ | 70,877 | 
|                                         |  |               |           |              |  |              |         |  |  |   |        | 




12. Commitments and
Contingencies

Commitments

The Company leases office space from a related
party [note 8] under a lease agreement expiring
December 31, 2005. The Company may terminate the lease with
three months notice and may also renew the lease for
one additional year. Future minimum obligations under the lease
are $32,940 for each of 2004 and 2005.




Rent paid amounted to $24,705 and $0 for the
nine months ended September 30, 2004 and
September 30, 2003, respectively. Rent paid amounted to
$5,580, $0, $0 for the years ended December 31, 2003, 2002
and 2001 respectively.




In May and June 2002, the Company entered into
two separate agreements with Dr. Richard Brunner
(Brunner) and Mr. Stock to obtain the exclusive
license to U.S. Patent No. 6,245,038. The Company is

F-24



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)

(Information as at September 30, 2004 and
for the nine months ended


September 30, 2004 and 2003 is
unaudited)


December 31, 2003 and 2002

12. Commitments and Contingencies
(continued)

required to make royalty payments totaling
1.5% of product sales. The Company is required to make minimum
advance quarterly royalty payments of $25,000 and amounts
credited against future royalty payments to be made in
accordance with the agreements. These agreements may be
terminated by the Company upon the first of:



| |    |                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all patents of the patent rights expire, which is
    June 2017;                                                                                  
|
| | b) | all patents claims of the patent rights are
    invalidated; or                                                                                   
|
| | c) | the introduction of a similar competing
    technology deployed in the United States which could not be
    deterred by enforcement of the patent.




On August 6, 2004, the Company entered into
a patent license and royalty agreement with Mr. Stock to obtain
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 replaces the
June 25, 2002 consulting agreement with Mr. Stock, which
provided for a royalty payment of 1% of product sales. This
agreement effectively increases the total royalty payments
required to be made in respect of U.S. Patent No. 6,245,038 to
2% of product sales [note 8].




Future minimum royalty payments under the
agreements as at December 31, 2003 are as approximately
follows:

|                    |  |   |           | 
|------------------- |  | - | --------- | 
|                    |  | $
|                    |  |  
|2004                |  |   | 100,000   | 
|2005                |  |   | 100,000   | 
|2006                |  |   | 100,000   | 
|2007                |  |   | 100,000   | 
|2008 and thereafter |  |   | 950,000   | 
|                    |  |   |           | 
|                    |  |   | 1,350,000 | 
|                    |  |   |           | 

In addition, the Company entered into a
consultancy and non-competition agreement on July 1, 2003
with a related party [note 8], which requires the
Company to pay a monthly fee of $5,000 per month. The agreement
expires on December 31, 2005. The monthly fee is fixed
regardless of actual time incurred by the consultant in
performance of the services rendered to the Company. The
agreement allows either party to convert the payment arrangement
to a daily fee of $2,500 per day. In the event of such
conversion, the consultant shall provide services on a daily
basis as required by the Company, and will invoice the Company
for the total number of days of services provided in that month.

Future minimum obligations under the consultancy
and non-competition agreement for each of 2004 and 2005 are
$60,000 respectively.

On July 22, 2004, the Company placed a
purchase order with Asahi Medical for 9,600 Rheofilters
representing a total commitment of $1,920,000.

F-25



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



12. Commitments and Contingencies
(continued)


Contingencies

During the ordinary course of business
activities, the Company may be contingently liable for
litigation and a party to claims. Management believes that
adequate provisions have been made in the accounts where
required. Although it is not possible to estimate the extent of
potential costs and losses, if any, management believes that the
ultimate resolution of any such contingencies will not have a
material adverse effect on the financial position, results of
operations and cash flows of the Company.

Pursuant to the terms of the distribution
agreement with Mesys GmbH, dated January 1, 2002, the
Company undertook a commitment to purchase a minimum of
25 OctoNova pumps per year beginning after FDA approval of
the RHEO System, representing an annual commitment after FDA
approval of $538,000.

In July 2004, the Company placed a purchase order
with Asahi Medical for 9,600 Rheofilters, representing a total
commitment of $1,920,000.

Pursuant to the terms of the distribution
agreement with Asahi Medical, dated January 1, 2002, the
Company undertook a commitment to purchase a minimum of 9,000,
15,000, and 22,500 each of Plasmaflo and Rheofilters in
years 1, 2 and 3 respectively beginning six months
after FDA approval of the RHEO System. Minimum purchase orders
for the fourth year shall be determined immediately after the
term of the first year by mutual consent but shall not be less
than that of the previous year. This same method shall be used
in subsequent years to determine future minimum purchase
quantities such that minimum purchase quantities are always
fixed for three years. Future minimum annual commitments after
FDA approval are approximately as follows:




|       |  |   |           | 
|------ |  | - | --------- | 
|Year 1 |  | $ | 2,565,000 | 
|Year 2 |  | $ | 4,275,000 | 
|Year 3 |  | $ | 6,412,500 | 




13. Capital Stock

[a]   Authorized share
capital

The total number of authorized shares of common
stock is 25,000,000. Each share of common stock has a par value
of $0.001 per share. The total number of authorized shares of
preferred stock is 6,000,000, of which 2,500,000 are designated
as Series A preferred stock, 2,000,000 are designated as
Series B preferred stock and 1,500,000 are undesignated
preferred stock. Each share of preferred stock has a par value
of $0.001 per share.

[b]   Reorganization and
reverse stock split

On July 18, 2002, Old OccuLogix merged with
the Company, which was then a wholly owned subsidiary of Old
OccuLogix. Pursuant to the merger the Company effected a one for
four stock split of its common and preferred stock pursuant to
which each share of Old OccuLogix common stock outstanding
immediately prior to the merger was converted into one-fourth
[ 1/4] of one fully paid and non-assessable share of
Company common stock. Each outstanding share of Old OccuLogix
Series A preferred stock was

F-26



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



13. Capital Stock (continued)


converted into one-fourth [ 1/4] of one
fully paid and non-assessable share of Company Series A
convertible preferred stock.

At the effective time of the merger, each
outstanding warrant and option to purchase common stock of Old
OccuLogix was assumed by the Company and converted into a
warrant or option to purchase common stock of the Company, with
appropriate adjustments to the exercise price and number of
shares for which such warrants or options were exercisable.

[c]   Share
conversion

On November 30, 2003, $500,000 of principal
amount of the Asahi Medical Note (less issuance cost of $18,985)
was converted into 507,604 shares of common stock at a
conversion price of $0.98502 per share [note 6].

[d]   Convertible Preferred
stock

Convertible preferred stockholders are entitled
to one vote per share, on an as-converted to common stock basis.
Each share of Series A and Series B convertible
preferred stock is entitled to receive a non-cumulative dividend
of $0.411216 and $0.34698 respectively, prior to the payment of
any dividend on common stock. Each share of Series A and
Series B convertible preferred stock is entitled to a
liquidation preference of $4.836 and $3.5183, respectively, plus
any declared but unpaid dividend before any payment may be made
to holders of common stock.

After giving effect to the anti-dilution
adjustment resulting from the issuance of the June 25, 2003
related party secured grid debenture [note 7(iv)],
each share of Series A and B convertible preferred stock is
convertible into 1.678323 and 1.643683 shares of common stock,
respectively, at the option of the holder. Each share of
Series A and B convertible preferred stock shall
automatically convert into shares of common stock at the
conversion rate previously described if the Company obtains a
firm underwriting commitment for an initial public offering. The
conversion rate will be adjusted for stock dividends, stock
splits and other dilutive events. Shares of Series A and B
convertible preferred stock automatically convert in the event
of sale of all or substantially all of the assets or capital
stock of the Company.

(i)  Series A
convertible preferred stock



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On July 19, 2002, the Company and the
    holders of its Series B convertible debentures, with a
    carrying value of $7,119,111 [note 7], agreed to
    convert such Series B convertible debentures into 1,089,172
    shares of Series A convertible preferred stock immediately
    following the consummation of the merger as described in
    note 13[b]. As a result of this conversion an additional
    97,243 shares of Series A convertible preferred stock were
    issued to the holders of the Series A convertible preferred
    stock in conjunction with anti-dilution provisions included in
    the terms of the respective debentures.

(ii) Series B
convertible preferred stock



| |                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On July 25, 2002, the Company issued 345,843
    shares of Series B convertible preferred stock for gross
    cash proceeds of $2,000,000 (less issuance costs of $725,854).

F-27



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##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



13. Capital Stock (continued)




| |                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Simultaneously Series B convertible
    debentures [note 7(ii)] and accrued interest with a
    carrying value of $1,030,684 were converted into 178,227 shares
    of Series B convertible preferred stock.

In addition, a previously issued subordinated
convertible promissory note [note 7(iii)] and
accrued interest with a carrying value of $499,921 was converted
into 96,042 shares of Series B convertible preferred stock.

[e]   Common Stock

On April 17, 2003, the Company issued 17,375
shares of common stock to two consultants in exchange for
services valued at $22,588. The common stock was issued at what
management believed to be the fair value of the services
received.

In connection with conversion of a portion of the
Asahi Medical Note described in note 6 and pursuant to the
June 25, 2003 Amended and Restated Investors Rights
Agreement, the existing common stockholders were allowed to
exercise pre-emptive rights to purchase additional common stock.
In connection therewith, on December 31, 2003, the Company
issued 613,292 shares of common stock at $0.98502 per share for
gross cash proceeds of $604,092.




As at December 31, 2003 and
September 30, 2004, the number of shares common stock of
the Company reserved for issuance as follows:







|                                                                                  |  |       |               |             |  |              |                         |               |  |  |            |  |  |  |            | 
|--------------------------------------------------------------------------------- |  | ----- | ------------- | ----------- |  | ------------ | ----------------------- | ------------- |  |  | ---------- |  |  |  | ---------- | 
|                                                                                  |  |       |               |             |  | December 31, |                         | September 30,
|                                                                                  |  | Price |               | Expiry Date |  | 2003         |                         | 2004         
|                                                                                  |  |       |               |             |  |              |                         |              
|Series A convertible preferred stock
    (convertible at 1:1.678323)              |  |       |              |             |  |              | N/A                     |               |  |  | 2,966,839  |  |  |  | 3,603,350  | 
|                                                                                  |  |       |               |             |  |              |                         |               |  |  |            |  |  |  |            | 
|Series A convertible preferred stock
    warrants (convertible at 1:1.678323) [i] |  |       | $6.79         |             |  |              | N/A                     |               |  |  | 810,146    |  |  |  |           | 
|                                                                                  |  |       |               |             |  |              |                         |               |  |  |            |  |  |  |            | 
|Series B convertible preferred stock
    (convertible at 1:1.643683)              |  |       |              |             |  |              | N/A                     |               |  |  | 1,019,255  |  |  |  | 1,019,255  | 
|                                                                                  |  |       |               |             |  |              |                         |               |  |  |            |  |  |  |            | 
|Convertible grid debentures                                                       |  |       | $0.98502      |             |  |              | N/A                     |               |  |  | 2,690,301  |  |  |  | 5,177,560  | 
|                                                                                  |  |       |               |             |  |              |                         |               |  |  |            |  |  |  |            | 
|Stock options                                                                     |  |       | $0.04         |             |  |              | January  December 2007 |               |  |  | 104,124    |  |  |  |           | 
|                                                                                  |  |       | $0.04  $4.00 |             |  |              | January  December 2008 |               |  |  | 141,500    |  |  |  | 75,000     | 
|                                                                                  |  |       | $0.04  $4.00 |             |  |              | January  December 2009 |               |  |  | 336,563    |  |  |  | 217,625    | 
|                                                                                  |  |       | $2.00  $4.00 |             |  |              | January  December 2010 |               |  |  | 174,875    |  |  |  | 119,375    | 
|                                                                                  |  |       | $0.04         |             |  |              | January  December 2011 |               |  |  | 64,250     |  |  |  |           | 
|                                                                                  |  |       | $0.80  $2.00 |             |  |              | January  December 2012 |               |  |  | 147,973    |  |  |  | 147,973    | 
|                                                                                  |  |       | $0.13  $1.30 |             |  |              | January  December 2013 |               |  |  | 1,420,676  |  |  |  | 1,383,426  | 
|                                                                                  |  |       |               |             |  |              |                         |               |  |  |            |  |  |  |            | 
|                                                                                  |  |       |               |             |  |              |                         |               |  |  | 2,389,961  |  |  |  | 1,943,399  | 
|                                                                                  |  |       |               |             |  |              |                         |               |  |  |            |  |  |  |            | 
|Common stock warrants                                                             |  |       | $4.00         |             |  |              | July 2004               |               |  |  | 50,000     |  |  |  |           | 
|                                                                                  |  |       | $4.00         |             |  |              | November 2008           |               |  |  | 37,500     |  |  |  | 37,500     | 
|                                                                                  |  |       | $1.20         |             |  |              | July 2004               |               |  |  | 62,500     |  |  |  |           | 
|                                                                                  |  |       |               |             |  |              |                         |               |  |  |            |  |  |  |            | 
|                                                                                  |  |       |               |             |  |              |                         |               |  |  | 150,000    |  |  |  | 37,500     | 
|                                                                                  |  |       |               |             |  |              |                         |               |  |  |            |  |  |  |            | 
|                                                                                  |  |       |               |             |  |              |                         |               |  |  | 10,026,514 |  |  |  | 11,781,127 | 
|                                                                                  |  |       |               |             |  |              |                         |               |  |  |            |  |  |  |            | 









|    |                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|[i] | These warrants have been adjusted to reflect the
    anti-dilutive effect of the June 25, 2003 related party
    secured convertible grid debenture [note 7[iv]].

F-28



---



##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)

(Information as at September 30, 2004 and
for the nine months ended


September 30, 2004 and 2003 is
unaudited)


December 31, 2003 and 2002

13. Capital Stock (continued)

[f]   Stock option
plan

Under the 2002 Stock Option Plan (the Stock
Option Plan) up to 2,678,997 options are available for
grants to employees, directors and consultants.




Options granted under the Stock Option Plan may
be either incentive stock options or non statutory stock
options. Under the terms of the Stock Option Plan, the exercise
price per share for an incentive stock option shall not be less
than the fair market value of a share of stock on the effective
date of grant and the exercise price per share for non statutory
stock options shall not be less than 85% of the fair market
value of a share of stock on the date of grant. No option
granted to a holder of more than 10% of the Companys
common stock shall have an exercise price per share less than
110% of the fair market value of a share of stock on the
effective date of grant.







Generally, options expire 10 years after the
grant. No incentive stock options granted to a 10% owner
optionee shall be exercisable after the expiration of five years
after the effective date of grant of such option, no option
granted to a prospective employee, prospective consultant or
prospective director may become exercisable prior to the date on
which such person commences service, and with the exception of
an option granted to an officer, director or a consultant, no
option shall become exercisable at a rate less than 20% per year
over a period of five years from the effective date of grant of
such option unless otherwise approved by the board
of directors.







The Company has also issued options outside of
the Stock Option Plan. These options were issued before the
establishment of the Stock Option Plan or when the authorized
limit of the Stock Option Plan was exceeded. In addition,
options issued to companies for purpose of settling amounts
owing were issued outside of the Stock Option Plan, as the Stock
Option Plan prohibited the granting of options to companies. The
issuance of such options were approved by the board of directors
and were granted on terms and conditions similar to those
options issued under the Stock Option Plan.




F-29



---



##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



13. Capital Stock (continued)





A summary of the options issued under the Stock
Option Plan and outside of the Stock Option Plan outstanding at
September 30, 2004 and the changes since December 31,
2000 is as follows:







|                                                           |  |        |           |                |  |  |      | 
|---------------------------------------------------------- |  | ------ | --------- | -------------- |  |  | ---- | 
|                                                           |  |        |           | Weighted      
|                                                           |  |        |           | average       
|                                                           |  |        |           | exercise price
|                                                           |  | Number |           | ($)           
|                                                           |  |        |           |               
|Outstanding, December 31, 2000                             |  |        | 406,963   |                |  |  | 3.15 | 
|Granted                                                    |  |        | 135,000   |                |  |  | 0.80 | 
|Exercised                                                  |  |        | (81,884   | )              |  |  | 0.12 | 
|Forfeited                                                  |  |        | (10,579   | )              |  |  | 1.16 | 
|                                                           |  |        |           |                |  |  |      | 
|Outstanding, December 31, 2001                             |  |        | 449,500   |                |  |  | 3.04 | 
|Granted                                                    |  |        | 204,224   |                |  |  | 1.13 | 
|Conversion of non-voting options to voting
    options [i] |  |        | 476,729   |                |  |  | 1.24 | 
|                                                           |  |        |           |                |  |  |      | 
|Outstanding, December 31, 2002                             |  |        | 1,130,453 |                |  |  | 1.95 | 
|Granted                                                    |  |        | 1,420,676 |                |  |  | 0.96 | 
|Forfeited                                                  |  |        | (161,168  | )              |  |  | 0.82 | 
|                                                           |  |        |           |                |  |  |      | 
|Outstanding, December 31, 2003                             |  |        | 2,389,961 |                |  |  | 1.45 | 
|                                                           |  |        |           |                |  |  |      | 
|Exercised                                                  |  |        | (250,000  | )              |  |  | 0.43 | 
|Forfeited                                                  |  |        | (196,562  | )              |  |  | 2.48 | 
|                                                           |  |        |           |                |  |  |      | 
|Outstanding, September 30, 2004                            |  |        | 1,943,399 |                |  |  | 1.46 | 
|                                                           |  |        |           |                |  |  |      | 









|    |                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------
|[i] | During the year ended December 31, 2002, the
    Company converted 476,729 non-voting common stock options into
    voting common stock options.




Included in the total options outstanding as at
September 30, 2004 and December 31, 2003 are 344,083
and 433,083 options issued outside of the Stock Option Plan,
respectively.







Included in the total options outstanding as at
September 30, 2004 of 1,943,399 and December 31, 2003
of 2,389,961 are 1,352,500 options at September 30,
2004 and December 31, 2003, issued to employees, directors
and certain executives which were issued into a voting trust.
Upon the exercise of these options, the board of directors
controls the voting privileges associated with the common stock
underlying these options. Upon the completion of an initial
public offering, the voting trust is to be dissolved with all
options returning to each respective individual.







The Company estimated the intrinsic value of
stock options granted in December 2003 to be $15,905,400 of
which $513,077 and $4,617,693 has been expensed for the year
ended December 31, 2003 and the nine month period ended
September 30, 2004, respectively. Management estimated the
fair value of these options retrospectively based on a range of
then expected offering prices of the Companys initial
public offering [note 18[d]].




F-30



---



##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



13. Capital Stock (continued)





The following table summarizes information
relating to stock options outstanding at September 30, 2004:







|                          |  |                     |           |                     |  |          |      |             |  |          |      |  |  |  |           |  |  |  |      | 
|------------------------- |  | ------------------- | --------- | ------------------- |  | -------- | ---- | ----------- |  | -------- | ---- |  |  |  | --------- |  |  |  | ---- | 
|                          |  |                     |           |                     |  |         
|                          |  | Options outstanding |           |                    
|                          |  |                     |           | Options exercisable
|                          |  |                     |           | Weighted            |  |          |      |            
|                          |  |                     |           | average             |  | Weighted |      |             |  | Weighted
|                          |  |                     |           | remaining           |  | average  |      |             |  | average 
|                          |  |                     |           | contractual         |  | exercise |      |             |  | exercise
|                          |  |                     |           | life                |  | price    |      |             |  | price   
|Range of exercise price $ |  | Outstanding         |           | (years)             |  | ($)      |      | Exercisable |  | ($)     
|                          |  |                     |           |                     |  |          |      |             |  |         
|0.04                      |  |                     | 50,000    |                     |  |          | 3.25 |             |  |          | 0.04 |  |  |  | 50,000    |  |  |  | 0.04 | 
|0.13                      |  |                     | 20,926    |                     |  |          | 8.50 |             |  |          | 0.13 |  |  |  | 20,926    |  |  |  | 0.13 | 
|0.80  0.99               |  |                     | 1,387,083 |                     |  |          | 8.74 |             |  |          | 0.99 |  |  |  | 569,727   |  |  |  | 0.98 | 
|1.30                      |  |                     | 110,890   |                     |  |          | 7.95 |             |  |          | 1.30 |  |  |  | 74,524    |  |  |  | 1.30 | 
|2.00                      |  |                     | 87,500    |                     |  |          | 5.07 |             |  |          | 2.00 |  |  |  | 87,500    |  |  |  | 2.00 | 
|4.00                      |  |                     | 287,000   |                     |  |          | 5.17 |             |  |          | 4.00 |  |  |  | 273,542   |  |  |  | 4.00 | 
|                          |  |                     |           |                     |  |          |      |             |  |          |      |  |  |  |           |  |  |  |      | 
|                          |  |                     | 1,943,399 |                     |  |          | 7.86 |             |  |          | 1.46 |  |  |  | 1,076,219 |  |  |  | 1.79 | 
|                          |  |                     |           |                     |  |          |      |             |  |          |      |  |  |  |           |  |  |  |      | 




The following table summarizes information
relating to stock options outstanding at December 31, 2003:

|                          |  |                     |           |                     |  |          |      |             |  |          |      |  |  |  |           |  |  |  |      | 
|------------------------- |  | ------------------- | --------- | ------------------- |  | -------- | ---- | ----------- |  | -------- | ---- |  |  |  | --------- |  |  |  | ---- | 
|                          |  |                     |           |                     |  |         
|                          |  | Options outstanding |           |                    
|                          |  |                     |           | Options exercisable
|                          |  |                     |           | Weighted            |  |          |      |            
|                          |  |                     |           | average             |  | Weighted |      |             |  | Weighted
|                          |  |                     |           | remaining           |  | average  |      |             |  | average 
|                          |  |                     |           | contractual         |  | exercise |      |             |  | exercise
|                          |  |                     |           | life                |  | price    |      |             |  | price   
|Range of exercise price $ |  | Outstanding         |           | (years)             |  | ($)      |      | Exercisable |  | ($)     
|                          |  |                     |           |                     |  |          |      |             |  |         
|0.04                      |  |                     | 204,125   |                     |  |          | 4.15 |             |  |          | 0.04 |  |  |  | 204,125   |  |  |  | 0.04 | 
|0.13                      |  |                     | 58,176    |                     |  |          | 9.27 |             |  |          | 0.13 |  |  |  | 58,176    |  |  |  | 0.13 | 
|0.80  0.99               |  |                     | 1,438,833 |                     |  |          | 9.15 |             |  |          | 0.99 |  |  |  | 281,715   |  |  |  | 0.99 | 
|1.30                      |  |                     | 110,890   |                     |  |          | 8.70 |             |  |          | 1.30 |  |  |  | 63,622    |  |  |  | 1.30 | 
|2.00                      |  |                     | 222,937   |                     |  |          | 5.49 |             |  |          | 2.00 |  |  |  | 222,937   |  |  |  | 2.00 | 
|4.00                      |  |                     | 355,000   |                     |  |          | 6.03 |             |  |          | 4.00 |  |  |  | 331,943   |  |  |  | 4.00 | 
|                          |  |                     |           |                     |  |          |      |             |  |          |      |  |  |  |           |  |  |  |      | 
|                          |  |                     | 2,389,961 |                     |  |          | 8.07 |             |  |          | 1.45 |  |  |  | 1,162,517 |  |  |  | 1.88 | 
|                          |  |                     |           |                     |  |          |      |             |  |          |      |  |  |  |           |  |  |  |      | 

[g]   Warrants

Purchasers of Series A convertible preferred
stock received warrants to purchase shares of common stock at an
exercise price of $1.00 per share. The warrants are exercisable
for the purchase of one share of common stock for each share of
Series A convertible preferred stock owned. In February
1998, an additional voluntary warrant was granted to
each Series A convertible preferred stockholder to purchase
an equal number of voting common stock at an exercise price of
$2.00 per share. Additionally, warrants to purchase 50,000
shares of voting common stock at an exercise price of $1.00 per
share were granted to an officer and certain directors and
stockholders of the Company in exchange for providing certain
private credit guarantees.

F-31



---



##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)

(Information as at September 30, 2004 and
for the nine months ended


September 30, 2004 and 2003 is
unaudited)


December 31, 2003 and 2002

13. Capital Stock (continued)




|                                            |  |        |         |                |  |  |      | 
|------------------------------------------- |  | ------ | ------- | -------------- |  |  | ---- | 
|                                            |  |        |         | Weighted      
|                                            |  |        |         | average       
|                                            |  |        |         | exercise price
|Common stock warrants                       |  | Number |         | ($)           
|                                            |  |        |         |               
|Outstanding, December 31, 2000 and
    2001 |  |        | 87,500  |                |  |  | 4.00 | 
|Granted                                     |  |        | 62,500  |                |  |  | 1.20 | 
|                                            |  |        |         |                |  |  |      | 
|Outstanding, December 31, 2002 and 2003[i]  |  |        | 150,000 |                |  |  | 2.83 | 
|Exercised                                   |  |        | (77,370 | )              |  |  | 1.74 | 
|Expired                                     |  |        | (35,130 | )              |  |  | 4.00 | 
|                                            |  |        |         |                |  |  |      | 
|Outstanding, September 30, 2004             |  |        | 37,500  |                |  |  | 4.00 | 
|                                            |  |        |         |                |  |  |      | 







|                                                                 |  |        |          |                |  |  |      | 
|---------------------------------------------------------------- |  | ------ | -------- | -------------- |  |  | ---- | 
|                                                                 |  |        |          | Weighted      
|                                                                 |  |        |          | average       
|                                                                 |  |        |          | exercise price
|Series A convertible preferred stock warrants                    |  | Number |          | ($)           
|                                                                 |  |        |          |               
|Outstanding, December 31, 2000                                   |  |        | 57,385   |                |  |  | 5.55 | 
|Issued                                                           |  |        | 33,395   |                |  |  | 5.55 | 
|                                                                 |  |        |          |                |  |  |      | 
|Outstanding, December 31, 2001                                   |  |        | 90,780   |                |  |  | 5.55 | 
|Granted on adjustment for anti-dilution provision                |  |        | 40,026   |                |  |  |     | 
|Converted from Series B convertible
    preferred stock warrants |  |        | 157,631  |                |  |  | 7.83 | 
|                                                                 |  |        |          |                |  |  |      | 
|Outstanding, December 31, 2002                                   |  |        | 288,437  |                |  |  | 6.80 | 
|Granted on adjustment for anti-dilution provision                |  |        | 195,097  |                |  |  |     | 
|Cancelled                                                        |  |        | (824     | )              |  |  | 7.83 | 
|                                                                 |  |        |          |                |  |  |      | 
|Outstanding, December 31, 2003[i]                                |  |        | 482,710  |                |  |  | 6.80 | 
|Exercised [ii]                                                   |  |        | (379,284 | )              |  |  | 6.73 | 
|Expired                                                          |  |        | (103,426 | )              |  |  | 7.04 | 
|                                                                 |  |        |          |                |  |  |      | 
|Outstanding, September 30, 2004                                  |  |        |         |                |  |  |      | 
|                                                                 |  |        |          |                |  |  |      | 









|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[i] | As a result of the issuance of Series B
    convertible preferred stock on July 25, 2002 at a price
    lower than the exercise price of the Series A convertible
    preferred stock warrants, anti-dilution adjustments were applied
    to reduce the exercise price of the Series A convertible
    preferred stock warrants and to increase the number of shares
    issuable upon the exercise of the Series A convertible
    preferred stock warrants.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As a result of the TLC Vision and Diamed
    convertible grid note debenture agreements entered into on
    June 25, 2003 at a conversion price lower than the exercise
    price of the Series A convertible preferred stock warrants,
    further anti-dilution adjustments were applied to reduce the
    exercise price of the Series A convertible preferred stock
    warrants and to increase the number of shares issuable upon the
    exercise of the Series A convertible preferred stock
    warrants.






|     |                                                                                                                                                                                                                                                                                                                                                                                                                  
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|[ii] | Of the 379,284 warrants exercised to purchase
    shares of Series A convertible preferred stock, 165,189
    shares of Series A convertible preferred stock were issued
    on a cashless basis [note 14]. The remaining
    214,095 shares of Series A convertible preferred stock
    were issued for total cash proceeds of $1,281,841 of which
    $517,602 has yet to be received as at September 30, 2004.




F-32



---



##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



13. Capital Stock (continued)





|                                                                   |  |        |          |                |  |  |      | 
|------------------------------------------------------------------ |  | ------ | -------- | -------------- |  |  | ---- | 
|                                                                   |  |        |          | Weighted      
|                                                                   |  |        |          | average       
|                                                                   |  |        |          | exercise price
|Series B convertible preferred stock warrants                      |  | Number |          | ($)           
|                                                                   |  |        |          |               
|Outstanding, December 31, 2000 and
    2001                        |  |        | 479,000  |                |  |  | 8.00 | 
|Granted on adjustment for anti-dilution provision                  |  |        | 5,556    |                |  |  | 7.83 | 
|Converted from Series A convertible
    preferred stock warrants   |  |        | (264,556 | )              |  |  | 7.83 | 
|Expired                                                            |  |        | (220,000 | )              |  |  | 8.00 | 
|                                                                   |  |        |          |                |  |  |      | 
|Outstanding, December 31, 2002 and 2003
    and September 30, 2004 |  |        |         |                |  |  |     | 
|                                                                   |  |        |          |                |  |  |      | 







All warrants to purchase shares of common stock
and Series A convertible preferred stock at exercise prices
between $1.20 per share and $7.83 per share expired on
July 17, 2004, other than warrants to purchase
379,284 shares of Series A convertible preferred stock
and 77,370 warrants to purchase shares of common stock
which were exercised prior to expiration and warrants to
purchase 37,500 shares of common stock at an exercise price of
$4.00 per share which expire on November 10, 2008.




14. Consolidated Statement of Cash
Flows

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




|                                         |  |                   |          |              |  |      |          |      |  |      |          |   |  |   |          |   |  |   |           | 
|---------------------------------------- |  | ----------------- | -------- | ------------ |  | ---- | -------- | ---- |  | ---- | -------- | - |  | - | -------- | - |  | - | --------- | 
|                                         |  |                   |          |             
|                                         |  | Nine months ended |          | Years ended 
|                                         |  | September 30,     |          | December 31,
|                                         |  |                   |          |             
|                                         |  | 2004              |          | 2003         |  | 2003 |          | 2002 |  | 2001
|                                         |  |                   |          |              |  |      |          |      |  |     
|Due from related parties                 |  | $                 | (196,120 | )            |  | $    | 41,762   |      |  | $    | 52,034   |   |  | $ | (52,142  | ) |  | $ | 102,896   | 
|Amount receivable                        |  |                   | (62,547  | )            |  |      | 36,714   |      |  |      | 39,746   |   |  |   | 12,254   |   |  |   | 292,885   | 
|Inventory                                |  |                   | (489,986 | )            |  |      | 12,782   |      |  |      | 24,399   |   |  |   | 8,971    |   |  |   | 106,455   | 
|Prepaid expenses                         |  |                   | (5,018   | )            |  |      | (96,653  | )    |  |      | (134,844 | ) |  |   | (21,616  | ) |  |   | 25,741    | 
|Deposits                                 |  |                   |         |              |  |      | 4,326    |      |  |      | 4,326    |   |  |   | (4,326   | ) |  |   | 98,555    | 
|Accounts payable and accrued liabilities |  |                   | 829,461  |              |  |      | (892,374 | )    |  |      | (681,183 | ) |  |   | (548,638 | ) |  |   | 403,595   | 
|Due to stockholders                      |  |                   | 65,605   |              |  |      | 78,551   |      |  |      | 4,418    |   |  |   | 2,392    |   |  |   | 69,417    | 
|                                         |  |                   |          |              |  |      |          |      |  |      |          |   |  |   |          |   |  |   |           | 
|                                         |  | $                 | 141,395  |              |  | $    | (814,892 | )    |  | $    | (691,104 | ) |  | $ | (603,105 | ) |  | $ | 1,099,544 | 
|                                         |  |                   |          |              |  |      |          |      |  |      |          |   |  |   |          |   |  |   |           | 




F-33



---



##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)

(Information as at September 30, 2004 and
for the nine months ended


September 30, 2004 and 2003 is
unaudited)


December 31, 2003 and 2002

14. Consolidated Statement of Cash Flows
(continued)

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




|                                            |                                                                                              |                   |  |              |  |      |  |        |  |      |  |         |   |  |  |           |   |  |  |       | 
|------------------------------------------- | -------------------------------------------------------------------------------------------- | ----------------- |  | ------------ |  | ---- |  | ------ |  | ---- |  | ------- | - |  |  | --------- | - |  |  | ----- | 
|                                            |                                                                                              |                   |  |             
|                                            |                                                                                              | Nine months ended |  | Year ended  
|                                            |                                                                                              | September 30,     |  | December 31,
|                                            |                                                                                              |                   |  |             
|                                            |                                                                                              | 2004              |  | 2003         |  | 2003 |  | 2002   |  | 2001
|                                            |                                                                                              |                   |  |              |  |      |  |        |  |     
|                                            |                                                                                              | $                 |  | $            |  | $    |  | $      |  | $   
|Non-cash investing and financing activities |                                                                                              |                   |  |              |  |      |  |        |  |      |  |         |   |  |  |           |   |  |  |      
|                                            | Convertible preferred stock issued to reduce
    borrowings from stockholder                 |                   |  |             |  |      |  |       |  |      |  | 500,000 |   |  |  |          |   |  |  |      | 
|                                            | Common stock issued to pay consulting fees                                                   |                   |  |             |  |      |  | 22,588 |  |      |  | 22,588  |   |  |  | 2,800     |   |  |  |      | 
|                                            | Bridge notes issued for services                                                             |                   |  |             |  |      |  |       |  |      |  |        |   |  |  | 22,500    |   |  |  |      | 
|                                            | Conversion of debentures                                                                     |                   |  |             |  |      |  |       |  |      |  |        |   |  |  | 8,649,716 |   |  |  |      | 
|                                            | Conversion of debt                                                                           |                   |  |             |  |      |  |       |  |      |  | 481,015 |   |  |  |          |   |  |  |      | 
|                                            | Cashless exercise of warrants to purchase shares
    of Series A convertible preferred stock |                   |  | 1,269,845    |  |      |  |       |  |      |  |        |   |  |  |          |   |  |  |      | 
|                                            | Free inventory                                                                               |                   |  | 159,870      |  |      |  | 66,300 |  |      |  | 66,300  |   |  |  | 155,141   |   |  |  | 1,530 | 
|Additional cash flow information            |                                                                                              |                   |  |              |  |      |  |        |  |      |  |         |   |  |  |           |   |  |  |      
|                                            | Interest paid                                                                                |                   |  |             |  |      |  |       |  |      |  | (85,000 | ) |  |  | (152,375  | ) |  |  |      | 




15. Financial Instruments

Fair values

Fair value of a financial instrument is defined
as the amount at which the instrument could be exchanged in a
current transaction between willing parties. The estimated fair
values of cash, due from related parties, amount receivable,
accounts payable, accrued liabilities, due to stockholders and
convertible debentures due to stockholders approximate their
carrying values due to the short-term maturities of these
instruments.

Currency risk

The Companys activities which result in
exposure to fluctuations in foreign currency exchange rates
consist of the purchase of equipment from suppliers billing in
foreign currencies. The Company does not use derivative
financial instruments to reduce its currency risk.

Credit risk

The Companys financial instruments that are
exposed to concentration of credit risk consist primarily of
cash and cash equivalents and amount receivable. The Company
maintains its accounts for cash with large low credit risk
financial institutions in United States and Canada in order to
reduce its exposure.

The Company derives all of its revenues from one
customer, the Partnership, and the Partnership primarily derives
its revenues from a subsidiary of TLC Vision.

16. Segment Information

The Company operates in a single reportable
segment, the ophthalmic therapeutic industry, focused on the
treatments of eye diseases, including Dry AMD.

For all periods presented, the Companys
revenues were earned in Canada.

F-34



---



##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



16. Segment Information
(continued)


Although the Company has generated all of its
revenue in Canada, the Companys fixed assets and patents
and trademarks are primarily located in the United States.

17. Reconciliation to Accounting
Principles Generally Accepted in Canada

These consolidated financial statements have been
prepared in accordance with U.S. GAAP, which differ in some
respects to Canadian GAAP.

The following table presents net loss for the
period that would have been reported had the Companys
consolidated financial statements been prepared on the basis of
Canadian GAAP:




|                                                          |  |                   |             |              |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|--------------------------------------------------------- |  | ----------------- | ----------- | ------------ |  | ---- | ---------- | ---- |  | ---- | ---------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                          |  |                   |             |             
|                                                          |  | Nine months ended |             | Year ended  
|                                                          |  | September 30,     |             | December 31,
|                                                          |  |                   |             |             
|                                                          |  | 2004              |             | 2003         |  | 2003 |            | 2002 |  | 2001
|                                                          |  |                   |             |              |  |      |            |      |  |     
|Net loss for the period, U.S. GAAP                        |  | $                 | (7,895,157  | )            |  | $    | (1,109,739 | )    |  | $    | (2,469,888 | ) |  | $ | (2,881,597 | ) |  | $ | (4,058,921 | )
|Equity earnings of Partnership [a]                        |  |                   |            |              |  |      | (15,569    | )    |  |      |           |   |  |   |           |   |  |   |           |  
|Revenue [a]                                               |  |                   | 226,582     |              |  |      | 207,093    |      |  |      | 243,197    |   |  |   |           |   |  |   |           |  
|Cost of goods sold [a]                                    |  |                   | (119,717    | )            |  |      | (110,306   | )    |  |      | (130,202   | ) |  |   |           |   |  |   |           |  
|Expenses [a]                                              |  |                   | (98,443     | )            |  |      | (78,718    | )    |  |      | (123,149   | ) |  |   | (2,534     | ) |  |   |           |  
|Stock based compensation  intrinsic
    value method [b] |  |                   | 4,617,693   |              |  |      |           |      |  |      | 513,077    |   |  |   |           |   |  |   |           |  
|Stock based compensation  fair
    value method [b]      |  |                   | (4,684,912  | )            |  |      |           |      |  |      |           |   |  |   |           |   |  |   |           |  
|Interest accretion on convertible
    debentures [c]      |  |                   | (2,320,590  | )            |  |      | (654,915   | )    |  |      | (1,883,892 | ) |  |   | (2,676,657 | ) |  |   | (1,045,998 | )
|                                                          |  |                   |             |              |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Net loss for the period, Canadian GAAP                    |  | $                 | (10,274,544 | )            |  | $    | (1,762,154 | )    |  | $    | (3,850,857 | ) |  | $ | (5,560,788 | ) |  | $ | (5,104,919 | )
|                                                          |  |                   |             |              |  |      |            |      |  |      |            |   |  |   |            |   |  |   |            |  
|Basic and diluted loss per share                          |  | $                 | (2.00       | )            |  | $    | (0.45      | )    |  | $    | (0.97      | ) |  | $ | (1.49      | ) |  | $ | (1.42      | )




F-35



---



##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



17. Reconciliation to Accounting
Principles Generally Accepted in Canada (continued)


The following tables present the differences
between the consolidated balance sheets of the Company had the
Companys financial information been prepared on the basis
of Canadian GAAP:




|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  
|----------------------------------------------------------------------------------- |  | ---- | ----------- | -------- |  | ---------- | ----------- | - |  | - | ---------- | -
|                                                                                    |  | U.S. |             | Canadian |  |           
|                                                                                    |  | GAAP |             | GAAP     |  | Difference
|                                                                                    |  |      |             |          |  |           
|As at September 30, 2004                                                            |  |      |             |          |  |            |             |   |  |   |            |  
|Assets                                                                              |  |      |             |          |  |            |             |   |  |   |            |  
|Cash [a]                                                                            |  | $    | 766,936     |          |  | $          | 780,040     |   |  | $ | 13,104     |  
|Due from related parties                                                            |  |      | 210,194     |          |  |            | 210,194     |   |  |   |           |  
|Amount receivable [a]                                                               |  |      | 62,547      |          |  |            | 126,150     |   |  |   | 63,603     |  
|Inventory [a]                                                                       |  |      | 837,926     |          |  |            | 896,814     |   |  |   | 58,888     |  
|Prepaid expenses [a]                                                                |  |      | 161,478     |          |  |            | 161,520     |   |  |   | 42         |  
|Fixed assets, net [a]                                                               |  |      | 331,998     |          |  |            | 353,365     |   |  |   | 21,367     |  
|Patents and trademarks                                                              |  |      | 81,403      |          |  |            | 81,403      |   |  |   |           |  
|Deferred share issue costs                                                          |  |      | 1,500,000   |          |  |            | 1,500,000   |   |  |   |           |  
|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  
|                                                                                    |  | $    | 3,952,482   |          |  | $          | 4,109,486   |   |  | $ | 157,004    |  
|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  
|Liabilities and Stockholders
    Equity                                            |  |      |             |          |  |            |             |   |  |   |            |  
|Accounts payable                                                                    |  | $    | 590,570     |          |  | $          | 590,570     |   |  | $ |           |  
|Accrued liabilities [a]                                                             |  |      | 1,493,034   |          |  |            | 1,507,632   |   |  |   | 14,598     |  
|Due to related parties [a]                                                          |  |      |            |          |  |            | 146,621     |   |  |   | 146,621    |  
|Due to stockholders                                                                 |  |      | 1,109,469   |          |  |            | 1,109,469   |   |  |   |           |  
|Convertible notes due to stockholders                                               |  |      | 5,100,000   |          |  |            | 4,283,333   |   |  |   | (816,667   | )
|Capital stock (common stock, Series A and
    Series B convertible preferred stock) |  |      | 8,127       |          |  |            | 8,127       |   |  |   |           |  
|Additional paid-in capital/ Contributed
    surplus [b, c]                          |  |      | 29,734,685  |          |  |            | 40,087,267  |   |  |   | 10,352,582 |  
|Deficit [a, b, c]                                                                   |  |      | (34,083,403 | )        |  |            | (48,623,533 | ) |  |   | (9,540,130 | )
|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  
|                                                                                    |  | $    | 3,952,482   |          |  | $          | 4,309,486   |   |  | $ | 157,004    |  
|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  




F-36



---



##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



17. Reconciliation to Accounting
Principles Generally Accepted in Canada (continued)


|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  
|----------------------------------------------------------------------------------- |  | ---- | ----------- | -------- |  | ---------- | ----------- | - |  | - | ---------- | -
|                                                                                    |  | U.S. |             | Canadian |  |           
|                                                                                    |  | GAAP |             | GAAP     |  | Difference
|                                                                                    |  |      |             |          |  |           
|As at December 31, 2003                                                             |  |      |             |          |  |            |             |   |  |   |            |  
|Assets                                                                              |  |      |             |          |  |            |             |   |  |   |            |  
|Cash [a]                                                                            |  | $    | 1,237,168   |          |  | $          | 1,239,046   |   |  | $ | 1,878      |  
|Due from related parties                                                            |  |      | 14,074      |          |  |            | 14,074      |   |  |   |           |  
|Amount receivable [a]                                                               |  |      |            |          |  |            | 17,328      |   |  |   | 17,328     |  
|Inventory [a]                                                                       |  |      | 188,071     |          |  |            | 282,767     |   |  |   | 94,696     |  
|Prepaid expense [a]                                                                 |  |      | 156,460     |          |  |            | 156,502     |   |  |   | 42         |  
|Fixed assets, net [a]                                                               |  |      | 191,231     |          |  |            | 205,125     |   |  |   | 13,894     |  
|Patents and trademarks                                                              |  |      | 81,144      |          |  |            | 81,144      |   |  |   |           |  
|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  
|                                                                                    |  | $    | 1,868,148   |          |  | $          | 1,995,986   |   |  | $ | 127,838    |  
|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  
|Liabilities and Stockholders
    Equity                                            |  |      |             |          |  |            |             |   |  |   |            |  
|Accounts payable                                                                    |  | $    | 194,428     |          |  | $          | 194,428     |   |  | $ |           |  
|Accrued liabilities [a]                                                             |  |      | 245,581     |          |  |            | 250,381     |   |  |   | 4,800      |  
|Due to related parties [a]                                                          |  |      |            |          |  |            | 135,678     |   |  |   | 135,678    |  
|Due to stockholders                                                                 |  |      | 1,043,865   |          |  |            | 1,043,865   |   |  |   |           |  
|Convertible notes due to stockholders                                               |  |      | 2,650,000   |          |  |            | 1,962,743   |   |  |   | (687,257   | )
|Capital stock (common stock, Series A and
    Series B convertible preferred stock) |  |      | 7,421       |          |  |            | 7,421       |   |  |   |           |  
|Additional paid-in capital/ Contributed surplus
    [c]                             |  |      | 23,915,099  |          |  |            | 30,546,933  |   |  |   | 6,631,833  |  
|Deficit [a, c]                                                                      |  |      | (26,188,246 | )        |  |            | (32,145,463 | ) |  |   | (5,957,217 | )
|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  
|                                                                                    |  | $    | 1,868,148   |          |  | $          | 1,995,986   |   |  | $ | 127,838    |  
|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  

|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  
|----------------------------------------------------------------------------------- |  | ---- | ----------- | -------- |  | ---------- | ----------- | - |  | - | ---------- | -
|                                                                                    |  | U.S. |             | Canadian |  |           
|                                                                                    |  | GAAP |             | GAAP     |  | Difference
|                                                                                    |  |      |             |          |  |           
|As at December 31, 2002                                                             |  |      |             |          |  |            |             |   |  |   |            |  
|Assets                                                                              |  |      |             |          |  |            |             |   |  |   |            |  
|Cash [a]                                                                            |  | $    | 602,457     |          |  | $          | 602,507     |   |  | $ | 50         |  
|Due from related parties                                                            |  |      | 66,107      |          |  |            | 66,107      |   |  |   |           |  
|Amount receivable [a]                                                               |  |      | 39,748      |          |  |            | 39,919      |   |  |   | 171        |  
|Inventory [a]                                                                       |  |      | 146,170     |          |  |            | 168,576     |   |  |   | 22,406     |  
|Prepaid expenses [a]                                                                |  |      | 25,942      |          |  |            | 25,942      |   |  |   |           |  
|Fixed assets, net [a]                                                               |  |      | 87,639      |          |  |            | 87,639      |   |  |   |           |  
|Patents and trademarks, net                                                         |  |      | 69,967      |          |  |            | 69,967      |   |  |   |           |  
|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  
|                                                                                    |  | $    | 1,038,030   |          |  | $          | 1,060,657   |   |  | $ | 22,627     |  
|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  
|Liabilities and Stockholders
    Equity                                            |  |      |             |          |  |            |             |   |  |   |            |  
|Accounts payable                                                                    |  | $    | 1,082,679   |          |  | $          | 1,082,680   |   |  | $ |           |  
|Accrued liabilities [a]                                                             |  |      | 70,877      |          |  |            | 38,514      |   |  |   |           |  
|Due to related parties [a]                                                          |  |      |            |          |  |            | 25,111      |   |  |   | 25,111     |  
|Due to stockholders                                                                 |  |      | 1,507,083   |          |  |            | 1,539,446   |   |  |   |           |  
|Long term convertible notes                                                         |  |      | 32,190      |          |  |            | 32,190      |   |  |   |           |  
|Capital stock (common stock, Series A and
    Series B convertible preferred stock) |  |      | 6,283       |          |  |            | 6,283       |   |  |   |           |  
|Additional paid-in capital/Contributed surplus                                      |  |      | 22,057,276  |          |  |            | 26,631,039  |   |  |   | 4,573,763  |  
|Deficit                                                                             |  |      | (23,718,358 | )        |  |            | (28,294,606 | ) |  |   | (4,576,247 | )
|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  
|                                                                                    |  | $    | 1,038,030   |          |  | $          | 1,060,657   |   |  | $ | 22,627     |  
|                                                                                    |  |      |             |          |  |            |             |   |  |   |            |  

F-37



---



##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



17. Reconciliation to Accounting
Principles Generally Accepted in Canada (continued)


[a]   Investment in Partnership

During the year ended December 31, 2002, the
Company invested in OccuLogix, L.P., the Partnership, which
is considered to be a joint venture. The Company, through its
subsidiaries, controls 50% of this Partnership
[note 5].

For U.S. GAAP purposes, the Company has
accounted for this investment in accordance with Accounting
Principles Bulletin No. 18, The Equity Method of Accounting
for Investments in Common Stock (APB 18).
APB 18 requires companies to account for investments
applying the equity method of accounting for investments where
they lack the ability to control but have the ability to
exercise significant influence in the investees operating,
financing and investing activities.

For Canadian GAAP purposes, investments that are
considered to be a joint venture are accounted for in accordance
with Canadian Institute of Chartered Accountants
(CICA) Handbook Section 3055, Interest in Joint
Ventures (CICA 3055). CICA 3055 requires
companies to account for their interest in joint ventures using
the proportionate consolidation method.

Proportionate consolidation is a method of
accounting and reporting whereby a venturers pro rata
share of each of the assets, liabilities, revenues and expenses
that are subject to joint control is combined on a line-by-line
basis with similar items in the venturers financial
statements. This method of accounting differs from full
consolidation in that only the venturers portion of all
assets, liabilities, revenues and expenses is taken up rather
than the full amount, offset by non-controlling interests.




For U.S. GAAP purposes, the Company did not
recognize in its consolidated statements of operation its 50%
interest in the net loss of the Partnership for the years ended
December 31, 2003 and 2002 as the net loss of the
Partnership exceeded the net investment of the Company. As a
result the Company recognized its equity interest in the
Partnership commencing with the nine-month period ended
September 30, 2003. For all other periods, for purposes of
U.S. GAAP, the Company did not recognize its equity
interest because the Companys proportionate net cumulative
loss exceeded the carrying value of its investment in the
Partnership.




For Canadian GAAP purposes, the Company
consolidated its 50% proportionate interest on a line by line
basis for both the consolidated balance sheet and statement of
operations.

[b]   Accounting for stock options

As previously discussed in note 13[f], the
Company has an option plan whereby options are granted to
employees, directors and consultants.

For U.S. GAAP purposes, the Company has
adopted the disclosure requirements of SFAS No. 123 and as
permitted under SFAS No. 123, applies APB 25 and
related interpretations in accounting for its stock option
plans. SFAS No. 123 requires disclosure of pro forma
amounts to reflect the impact if the Company had elected to
adopt the optional recognition provisions of
SFAS No. 123 for its stock option plans and employee
stock purchase plans.

For Canadian GAAP purposes, the Company accounts
for its stock options in accordance with the provisions of CICA
Section 3870, Stock-Based Compensation and Other
Stock-Based Payments, (CICA 3870).
CICA 3870, issued in December 2001, established standards
for the recognition,

F-38



---



##### Table of Contents



OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



17. Reconciliation to Accounting
Principles Generally Accepted in Canada (continued)


measurement and disclosure of stock-based
compensation, and other stock-based payments. Under the
provisions of CICA 3870, prior to January 1, 2004,
companies could either measure the compensation cost of equity
instruments issued under employee compensation plans using a
fair value-based method or could recognize compensation cost
using another method, such as the intrinsic value-based method.
However, if another method was applied, pro forma disclosure of
net income or loss and earnings or loss per share was required
in the financial statements as if the fair value-based method
had been applied. Effective January 1, 2004, CICA 3870
requires that all stock-based compensation be measured and
expensed using a fair value-based methodology.

Prior to January 1, 2004, the Company
recognized employee stock-based compensation under the intrinsic
value-based method and provided pro forma disclosure of net
income or loss and earnings or loss per share as if the fair
value-based method had been applied. Effective January 1,
2004, the Company adopted the fair value based method for
recognizing employee stock-based compensation on a retroactive
basis to January 1, 1996, without restatement of prior
periods for purposes of Canadian GAAP. At January 1, 2004,
the cumulative effect of the change in accounting policy on
prior periods resulted in a charge to accumulated deficit of
$1,203,528 which represents the sum of the previously disclosed
pro forma fair value adjustments with a corresponding increase
to contributed surplus.




For the nine months ended September 30,
2004, the Company did not record any stock-based compensation as
no options were granted since January 1, 2004, the date of
transition. No compensation expense for stock options granted to
employees at fair market value was included in the determination
of net income for the nine months ended September 30, 2003.
For the nine months ended September 30, 2003, the following
table presents the Companys pro forma net income and
earnings per share as if the fair value-based method of
CICA 3870 had been applied for all stock options granted:







|                                                                                              |  |               |            |  
|--------------------------------------------------------------------------------------------- |  | ------------- | ---------- | -
|                                                                                              |  | Nine months  
|                                                                                              |  | ended        
|                                                                                              |  | September 30,
|                                                                                              |  | 2003         
|                                                                                              |  |              
|Net loss for the period (Canadian
    GAAP)                                                   |  | $             | (1,762,154 | )
|Total pro forma stock-based compensation expense
    determined under fair value-based method |  |               | 16,618     |  
|                                                                                              |  |               |            |  
|Pro forma net loss                                                                            |  | $             | (1,778,772 | )
|                                                                                              |  |               |            |  
|Basic and diluted loss per share                                                              |  |               |            |  
|As reported                                                                                   |  | $             | (0.45      | )
|Pro forma                                                                                     |  | $             | (0.46      | )




[c]   Convertible debt

For all periods presented, the Company had
convertible debt which is described in note 7.

For U.S. GAAP purposes, all of the proceeds
received from the issuance of convertible debt generally would
be recorded as a liability on the balance sheet and no portion
of the proceeds from the issuance of the convertible debt
instruments would be attributed to the conversion feature. In
addition, APB 14 requires that a portion of the proceeds of
debt securities issued with detachable stock purchase warrants
which is allocable to the warrants should be accounted for as
additional paid-in capital. The allocation should be based on the

F-39



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OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



17. Reconciliation to Accounting
Principles Generally Accepted in Canada (continued)


relative fair values of the underlying securities
at the time of issuance. Any resulting discount or premium on
the debt securities should be recorded as an adjustment to the
carrying value of the debt.

For Canadian GAAP purposes, financial instruments
are accounted for in accordance with CICA 3860
Section 3860, Financial Instrument  Presentation
and Disclosure (CICA 3860). CICA 3860
requires financial instruments that consist of both elements of
debt and equity be accounted for in accordance with the
substance of the contractual arrangement on initial recognition.
Therefore, as a result of the conversion feature of the
debentures, for purpose of Canadian GAAP, the net proceeds
received in connection with the Companys convertible
debentures instruments have been bifurcated between debt and
equity based on the relative fair value of each component. The
difference between the estimated fair value of the convertible
debenture and the face amount is then amortized as interest
expense over the life of the debenture. This accreted interest
expense was $1,883,892 for the year ended December 31, 2003
(2002  $2,676,657).

18. Subsequent Events




[a]   Subsequent to the year ended
December 31, 2003, the Company received a total of
$2,800,000 during the period from January 1, 2004 to
October 31, 2004 (October 2004  $350,000)
pursuant to the grid convertible debentures discussed in
note 7[iv]. As a result of this additional funding, as at
October 31, 2004, the Company had drawn down $5,450,000 of
the total $12,000,000 available under the grid debentures,
$7,000,000 of which are convertible into common stock.







Subsequent Event Notes [b], [c], [d] and [e]
are Unaudited







[b]   In October 2004, the
Partnership, the Companys sole customer, received a total
of $557,400 from Rheo Therapeutics Inc. (an Ontario, Canada
corporation) for the purchase of 660 treatment sets and 2 pumps.
This was in accordance with the product purchase agreement
between Rheo Therapeutics, Inc. and the Partnership. On
September 29, 2004, the Partnership signed a product
purchase agreement with 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. Subject to availability,
the purchaser may order up to an additional 2,000 treatment
sets. Dr. Machat, who is an investor in and one of the
directors of Rheo Therapeutics Inc. was a co-founder and former
director of TLC Vision.







[c]   On October 25, 2004,
the Company amended the patent licenses and royalty agreements
previously amended on August 6, 2004 with Mr. Hans
Stock and executed with Dr. Richard Brunner on May 6,
2002. The amendment to these agreements adjusted the basis of
calculation of the royalty fees for filter sets sold from the
sales value to the cost basis for these filter sets. Moreover,
the amendments provided a clarification of the exclusive
sub-license rights to end users by medical clinics and
practitioners. Also amended was the inclusion of the ability to
sub-license to unaffiliated parties, who were not end users, the
ability to reproduce the components of the RHEO System. The
amended agreements provide for the payment by the Company of a
sub-license fee of 12.5% to each of Mr. Stock or
Dr. Brunner of any amounts received by the Company for the
provision of the sub-license to unaffiliated parties who are not
end users.







[d]   On October 25, 2004,
the Company entered into a new marketing and distribution
agreement with Diamed which provides for a minimum purchase of
1,000 OctoNova pumps during the period from the date




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OccuLogix, Inc. (formerly Vascular Sciences
Corporation)


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)




(Information as at September 30, 2004 and
for the nine months ended








September 30, 2004 and 2003 is
unaudited)





December 31, 2003 and 2002



18. Subsequent Events
(continued)





of the agreement until five years after the
date of FDA approval. Minimum purchase quantities from the sixth
year on shall annually be mutually agreed by both parties.







[e]   On November 15, 2004,
the Company filed a third amended registration statement on
Form S-1 with the Securities and Exchange Commission with
the intent of pursuing an initial public offering of its common
stock. Amended registration statements were previously filed on
October 7, 2004 and November 1, 2004 and the original
registration statement was filed on August 13, 2004.




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REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Partners of

OCCULOGIX, L.P.


We have audited the accompanying balance sheets
of OccuLogix, L.P. as of December 31, 2003 and
2002 and the related statements of operations, partners
deficiency and cash flows for the year ended December 31,
2003 and for the period from July 25, 2002 to
December 31, 2002. These financial statements are the
responsibility of the Partnerships management. Our
responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with the
Standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial
position of the Partnership as at December 31, 2003 and
2002 and the results of its operations, partners
deficiency and its cash flows for each of the year ended
December 31, 2003 and the period from July 25, 2002 to
December 31, 2002, in conformity with U.S. generally
accepted accounting principles.

The accompanying financial statements have been
prepared assuming that the Partnership will continue as a going
concern. As discussed in Note 1 to the financial
statements, the Partnership has sustained losses for the year
ended December 31, 2003 and period from July 25, 2002
to December 31, 2002, has a working capital deficiency at
December 31, 2003 and lacks long-term financing, which
raises substantial doubt about the Partnerships ability to
continue as a going concern. Managements plans in regard
to these matters are also described in Note 1 to the
accompanying financial statements. The financial statements do
not include any adjustments that might result from the outcome
of this uncertainty.

/s/ Ernst & Young LLP

Chartered Accountants


Toronto, Canada,

August 13, 2004


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OCCULOGIX, L.P.

BALANCE SHEETS

(Going Concern Uncertainty  See
Note 1)

[expressed in U.S. dollars]





|                                                 |  |               |         |              |  |      |         |   |  |   |        |  
|------------------------------------------------ |  | ------------- | ------- | ------------ |  | ---- | ------- | - |  | - | ------ | -
|                                                 |  |               |         |             
|                                                 |  |               |         | December 31,
|                                                 |  | September 30, |         |             
|                                                 |  | 2004          |         | 2003         |  | 2002
|                                                 |  |               |         |              |  |     
|                                                 |  | [unaudited]   |         |              |  |     
|Current assets                                   |  |               |         |              |  |      |         |   |  |   |        |  
|Cash                                             |  | $             | 26,209  |              |  | $    | 3,757   |   |  | $ | 100    |  
|Accounts receivable                              |  |               | 127,206 |              |  |      | 34,657  |   |  |   | 342    |  
|Inventory                                        |  |               | 117,774 |              |  |      | 189,393 |   |  |   | 44,811 |  
|Prepaid expenses                                 |  |               | 84      |              |  |      | 84      |   |  |   |       |  
|                                                 |  |               |         |              |  |      |         |   |  |   |        |  
|Total current assets                             |  |               | 271,273 |              |  |      | 227,891 |   |  |   | 45,253 |  
|                                                 |  |               |         |              |  |      |         |   |  |   |        |  
|Fixed assets, net [note 3]                       |  |               | 42,734  |              |  |      | 27,788  |   |  |   |       |  
|                                                 |  |               |         |              |  |      |         |   |  |   |        |  
|                                                 |  | $             | 314,007 |              |  | $    | 255,679 |   |  | $ | 45,253 |  
|                                                 |  |               |         |              |  |      |         |   |  |   |        |  
|Current Liabilities and Partners
    Deficiency |  |               |         |              |  |      |         |   |  |   |        |  
|Accrued liabilities [note 5]                     |  | $             | 29,195  |              |  | $    | 9,600   |   |  | $ |       |  
|Due to related parties [note 4]                  |  |               | 293,243 |              |  |      | 271,355 |   |  |   | 50,221 |  
|                                                 |  |               |         |              |  |      |         |   |  |   |        |  
|Total current liabilities                        |  |               | 322,438 |              |  |      | 280,955 |   |  |   | 50,221 |  
|                                                 |  |               |         |              |  |      |         |   |  |   |        |  
|Partners deficiency                             |  |               |         |              |  |      |         |   |  |   |        |  
|Partners capital                                |  |               | 100     |              |  |      | 100     |   |  |   | 100    |  
|Partners deficit                                |  |               | (8,531  | )            |  |      | (25,376 | ) |  |   | (5,068 | )
|                                                 |  |               |         |              |  |      |         |   |  |   |        |  
|                                                 |  |               | (8,431  | )            |  |      | (25,276 | ) |  |   | (4,968 | )
|                                                 |  |               |         |              |  |      |         |   |  |   |        |  
|Total liabilities and partners
    deficiency   |  | $             | 314,007 |              |  | $    | 255,679 |   |  | $ | 45,253 |  
|                                                 |  |               |         |              |  |      |         |   |  |   |        |  




See accompanying notes

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##### Table of Contents



OCCULOGIX, L.P.

STATEMENTS OF OPERATIONS

[expressed in U.S. dollars]




|                                  |                                           |                   |         |              |  |                  |         |             |  |   |         |         |  |   |        |   | 
|--------------------------------- | ----------------------------------------- | ----------------- | ------- | ------------ |  | ---------------- | ------- | ----------- |  | - | ------- | ------- |  | - | ------ | - | 
|                                  |                                           |                   |         |              |  | Year             |         | Period from
|                                  |                                           |                   |         | ended        |  | July 25, 2002 to
|                                  |                                           | Nine months ended |         |             
|                                  |                                           | September 30,     |         | December 31,
|                                  |                                           |                   |         |             
|                                  |                                           | 2004              |         | 2003         |  | 2003             |         | 2002       
|                                  |                                           |                   |         |              |  |                  |         |            
|                                  |                                           |                   |         |              |  |                 
|                                  |                                           | [unaudited]       |         |              |  |                 
|Revenues                          |                                           |                   |         |              |  |                  |         |             |  |   |         |         |  |   |        |  
|                                  | Sales to related party (RHEO Clinic Inc.) |                   | $       | 343,564      |  |                  | $       | 409,685     |  |   | $       | 459,730 |  |   | $      |  | 
|                                  | Sales to unrelated third party            |                   |         | 109,600      |  |                  |         | 4,500       |  |   |         | 26,664  |  |   |        |  | 
|                                  |                                           |                   |         |              |  |                  |         |             |  |   |         |         |  |   |        |  
|Total revenues                    |                                           |                   | 453,164 |              |  |                  | 414,185 |             |  |   | 486,394 |         |  |   |       |  
|                                  |                                           |                   |         |              |  |                  |         |             |  |   |         |         |  |   |        |  
|Cost of sales                     |                                           |                   |         |              |  |                  |         |             |  |   |         |         |  |   |        |  
|                                  | From sales to related party               |                   |         | 165,875      |  |                  |         | 190,528     |  |   |         | 212,216 |  |   |        |  | 
|                                  | From sales to unrelated third party       |                   |         | 66,160       |  |                  |         | 2,100       |  |   |         | 11,550  |  |   |        |  | 
|                                  | Other cost of sales                       |                   |         | 7,399        |  |                  |         | 27,984      |  |   |         | 36,640  |  |   |        |   | 
|                                  |                                           |                   |         |              |  |                  |         |             |  |   |         |         |  |   |        |  
|                                  |                                           |                   | 239,434 |              |  |                  | 220,612 |             |  |   | 260,406 |         |  |   |       |  
|                                  |                                           |                   |         |              |  |                  |         |             |  |   |         |         |  |   |        |  
|Gross margin                      |                                           |                   | 213,730 |              |  |                  | 193,573 |             |  |   | 225,988 |         |  |   |       |  
|                                  |                                           |                   |         |              |  |                  |         |             |  |   |         |         |  |   |        |  
|Expenses                          |                                           |                   |         |              |  |                  |         |             |  |   |         |         |  |   |        |  
|Operating                         |                                           |                   | 172,162 |              |  |                  | 148,754 |             |  |   | 177,501 |         |  |   | 1,265  |  
|Marketing                         |                                           |                   | 25,997  |              |  |                  | 8,682   |             |  |   | 68,795  |         |  |   | 3,803  |  
|                                  |                                           |                   |         |              |  |                  |         |             |  |   |         |         |  |   |        |  
|                                  |                                           |                   | 198,159 |              |  |                  | 157,436 |             |  |   | 246,296 |         |  |   | 5,068  |  
|                                  |                                           |                   |         |              |  |                  |         |             |  |   |         |         |  |   |        |  
|Net income (loss) from operations |                                           | $                 | 15,571  |              |  | $                | 36,137  |             |  | $ | (20,308 | )       |  | $ | (5,068 | )
|                                  |                                           |                   |         |              |  |                  |         |             |  |   |         |         |  |   |        |  
|Other (expenses)/income           |                                           |                   | 1,274   |              |  |                  |        |             |  |   |        |         |  |   |       |  
|                                  |                                           |                   |         |              |  |                  |         |             |  |   |         |         |  |   |        |  
|Net income (loss) for the period  |                                           | $                 | 16,845  |              |  | $                | 36,137  |             |  | $ | (20,308 | )       |  | $ | (5,068 | )
|                                  |                                           |                   |         |              |  |                  |         |             |  |   |         |         |  |   |        |  




See accompanying notes

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##### Table of Contents



OCCULOGIX, L.P.

STATEMENT OF PARTNERS
DEFICIENCY

[expressed in U.S. dollars]




|                                                                    |  |             |      |           |  |            |         |       |  |   |         |   |  |   |         |  
|------------------------------------------------------------------- |  | ----------- | ---- | --------- |  | ---------- | ------- | ----- |  | - | ------- | - |  | - | ------- | -
|                                                                    |  | OccuLogix   |      | OccuLogix |  | TLC        |         |      
|                                                                    |  | Management, |      | Holdings, |  | Apheresis, |         |      
|                                                                    |  | Inc.        |      | Inc       |  | L.P.       |         | Total
|                                                                    |  |             |      |           |  |            |         |      
|Percentage ownership                                                |  |             | 0.10 | %         |  |            | 49.95   | %     |  |   | 49.95   | % |  |   | 100.00  | %
|Capital contributions                                               |  | $           | 0.10 |           |  | $          | 50      |       |  | $ | 50      |   |  | $ | 100     |  
|Net loss for the period from July 25, 2002
    to December 31, 2002 |  |             | (6   | )         |  |            | (2,531  | )     |  |   | (2,531  | ) |  |   | (5,068  | )
|                                                                    |  |             |      |           |  |            |         |       |  |   |         |   |  |   |         |  
|Balance, December 31, 2002                                          |  |             | (6   | )         |  |            | (2,481  | )     |  |   | (2,481  | ) |  |   | (4,968  | )
|Net loss for the year                                               |  |             | (20  | )         |  |            | (10,144 | )     |  |   | (10,144 | ) |  |   | (20,308 | )
|                                                                    |  |             |      |           |  |            |         |       |  |   |         |   |  |   |         |  
|Balance, December 31, 2003                                          |  |             | (26  | )         |  |            | (12,625 | )     |  |   | (12,625 | ) |  |   | (25,276 | )
|Net income for the period                                           |  |             | 17   |           |  |            | 8,414   |       |  |   | 8,414   |   |  |   | 16,845  |  
|                                                                    |  |             |      |           |  |            |         |       |  |   |         |   |  |   |         |  
|Balance, September 30, 2004                                         |  | $           | (9   | )         |  | $          | (4,211  | )     |  | $ | (4,211  | ) |  | $ | (8,431  | )
|                                                                    |  |             |      |           |  |            |         |       |  |   |         |   |  |   |         |  







See accompanying notes




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OCCULOGIX, L.P.

STATEMENTS OF CASH FLOWS

[expressed in U.S. dollars]




|                                                                                           |                                                                     |                   |         |              |   |         |          |          |   |   |          |          |   |   |         |         |  
|------------------------------------------------------------------------------------------ | ------------------------------------------------------------------- | ----------------- | ------- | ------------ | - | ------- | -------- | -------- | - | - | -------- | -------- | - | - | ------- | ------- | -
|                                                                                           |                                                                     |                   |         |              |   |         |          | Period  
|                                                                                           |                                                                     |                   |         |              |   |         |          | from    
|                                                                                           |                                                                     |                   |         |              |   | Year    |          | July 25,
|                                                                                           |                                                                     |                   |         | ended        |   | 2002 to
|                                                                                           |                                                                     | Nine months ended |         |             
|                                                                                           |                                                                     | September 30,     |         | December 31,
|                                                                                           |                                                                     |                   |         |             
|                                                                                           |                                                                     | 2004              |         | 2003         |   | 2003    |          | 2002    
|                                                                                           |                                                                     |                   |         |              |   |         |          |         
|                                                                                           |                                                                     |                   |         |              |   |        
|                                                                                           |                                                                     | [unaudited]       |         |              |   |        
|OPERATING ACTIVITIES                                                                       |                                                                     |                   |         |              |   |         |          |          |   |   |          |          |   |   |         |        
|Net income (loss)                                                                          |                                                                     | $                 | 16,845  |              |   | $       | 36,137   |          |   | $ | (20,308  | )        |   | $ | (5,068  | )      
|Adjustments to reconcile net income (loss) to
    cash flows used in operating activities: |                                                                     |                   |         |              |   |         |          |          |   |   |          |          |   |   |         |        
|                                                                                           | Depreciation of fixed assets                                        |                   |         | 7,154        |   |         |          | 3,955    |   |   |          | 5,654    |   |   |         |        |  
|                                                                                           | (Increase) in accounts receivable                                   |                   |         | (92,549      | ) |         |          | (13,577  | ) |   |          | (34,315  | ) |   |         | (342    | )
|                                                                                           | (Increase) in inventory                                             |                   |         | 71,619       |   |         |          | (141,089 | ) |   |          | (144,582 | ) |   |         | (44,811 | )
|                                                                                           | (Increase) in prepaid expenses                                      |                   |         |             |   |         |          | (55,849  | ) |   |          | (84      | ) |   |         |        |  
|                                                                                           | (Decrease) increase in accounts payable and
    accrued liabilities |                   |         | 19,595       |   |         |          | 5,000    |   |   |          | 9,600    |   |   |         |        |  
|                                                                                           |                                                                     |                   |         |              |   |         |          |          |   |   |          |          |   |   |         |        
|Cash provided by (used in) operating
    activities                                        |                                                                     |                   | 22,664  |              |   |         | (165,423 | )        |   |   | (184,035 | )        |   |   | (50,221 | )      
|                                                                                           |                                                                     |                   |         |              |   |         |          |          |   |   |          |          |   |   |         |        
|INVESTING ACTIVITIES                                                                       |                                                                     |                   |         |              |   |         |          |          |   |   |          |          |   |   |         |        
|Purchase of fixed assets                                                                   |                                                                     |                   | (22,100 | )            |   |         | (33,442  | )        |   |   | (33,442  | )        |   |   |        |        
|                                                                                           |                                                                     |                   |         |              |   |         |          |          |   |   |          |          |   |   |         |        
|Cash used in investing activities                                                          |                                                                     |                   | (22,100 | )            |   |         | (33,442  | )        |   |   | (33,442  | )        |   |   |        |        
|                                                                                           |                                                                     |                   |         |              |   |         |          |          |   |   |          |          |   |   |         |        
|FINANCING ACTIVITIES                                                                       |                                                                     |                   |         |              |   |         |          |          |   |   |          |          |   |   |         |        
|Contribution from partners                                                                 |                                                                     |                   |        |              |   |         |         |          |   |   |         |          |   |   | 100     |        
|Increase in amounts due to related parties                                                 |                                                                     |                   | 21,888  |              |   |         | 198,865  |          |   |   | 221,134  |          |   |   | 50,221  |        
|                                                                                           |                                                                     |                   |         |              |   |         |          |          |   |   |          |          |   |   |         |        
|Cash provided by financing
    activities                                                  |                                                                     |                   | 21,888  |              |   |         | 198,865  |          |   |   | 221,134  |          |   |   | 50,321  |        
|                                                                                           |                                                                     |                   |         |              |   |         |          |          |   |   |          |          |   |   |         |        
|Net increase in cash and cash equivalents
    during the period                            |                                                                     |                   | 22,452  |              |   |         |         |          |   |   | 3,657    |          |   |   | 100     |        
|Cash, beginning of period                                                                  |                                                                     |                   | 3,757   |              |   |         | 100      |          |   |   | 100      |          |   |   |        |        
|                                                                                           |                                                                     |                   |         |              |   |         |          |          |   |   |          |          |   |   |         |        
|Cash, end of period                                                                        |                                                                     | $                 | 26,209  |              |   | $       | 100      |          |   | $ | 3,757    |          |   | $ | 100     |        
|                                                                                           |                                                                     |                   |         |              |   |         |          |          |   |   |          |          |   |   |         |        




See accompanying notes

F-46



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##### Table of Contents



OCCULOGIX, L.P.

NOTES TO FINANCIAL STATEMENTS




(Information as at September 30, 2004 and
for the nine months ended







September 30, 2004 and 2003 is
unaudited)





(expressed in U.S. dollars)


December 31, 2003 and 2002


1.   Nature of Operations and
Going Concern Uncertainty

Nature of operations




OccuLogix, L.P. (the Partnership) is
a limited partnership formed on July 25, 2002 under the
laws of the State of Delaware, among OccuLogix Holdings, Inc.
(Holdings) a Delaware corporation, TLC Apheresis,
L.P., a Delaware limited partnership and OccuLogix Management,
Inc., a Delaware corporation (the General Partner).
Pursuant to a sales and distribution agreement between the
Partnership and OccuLogix, Inc. (OccuLogix), the
parent of Holdings, which in turn has a 50% interest in the
General Partner, the Partnership serves as OccuLogixs
exclusive sales representative for the RHEO System. The RHEO
System contains a pump that circulates blood through two filters
and is used to perform Rheopheresis, a form of apheresis, which
is designed to treat dry age-related macular degeneration. To
facilitate the sale and distribution agreement, the Partnership
and OccuLogix entered into a license agreement and a software
agreement, whereby OccuLogix licenses patent, know-how,
trademark rights and software to the Partnership. TLC Vision
Corporation (TLC Vision), the parent of TLC
Apheresis L.P. is a party to a license agreement with the
Partnership pursuant to which TLC Vision licenses certain
software to the Partnership.




Going concern uncertainty

The accompanying financial statements have been
prepared on the basis the Partnership will continue as a going
concern. The Partnership has sustained losses for all of the
periods since its formation. The Partnerships cash
position at the current rate of operating activity is
insufficient to cover operating costs for the foreseeable
future. The Partnerships working capital deficiency at
December 31, 2003 was approximately $53,000 which has
worsened since December 31, 2002. Historically, the
Partnership has sought financing from its major stockholders and
its principal customer. As a result, there is substantial doubt
about its ability to continue as going concern. Management
believes that the initial public offering of OccuLogix,
subsequent to a reorganization, in which the Partnership will be
wound up into OccuLogix, currently a 50% joint venture partner,
will provide sufficient funds to pursue OccuLogixs
commercial activities in Canada and implement of
commercialization of the RHEO System in the United States,
pending FDA approval, to the end of 2006.

The financial statements do not include any
adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of
liabilities that might be necessary should the company be unable
to continue in existence.

2.   Significant Accounting
Policies

The financial statements have been prepared by
management in conformity with accounting principles generally
accepted in the United States (U.S. GAAP),
which conforms in all material respects with Canadian generally
accepted accounting principles.

Use of estimates

The preparation of these financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting periods. By their
nature, these estimates are subject to measurement uncertainty
and are reviewed periodically and adjustments, if necessary, are
made in the period in which they are identified. Actual results
may differ from these estimates.

F-47



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OCCULOGIX, L.P.


NOTES TO FINANCIAL STATEMENTS




(Information as at September 30, 2004 and
for the nine months ended







September 30, 2004 and 2003 is
unaudited)





(expressed in U.S. dollars)


December 31, 2003 and 2002




2.   Significant Accounting
Policies (continued)


Revenue recognition

Revenue consists of the sale of the RHEO System
which is comprised of OctoNova pumps and the related disposable
treatment sets. The Partnership receives a signed binding
purchase from its customers (RHEO Clinic Inc., a TLC Vision
subsidiary and related party, and unrelated third party
clinics). The pricing is a negotiated amount between the
Partnership and its customers. The amount charged to Rheo Clinic
Inc. (a related party) is consistent with those amounts charged
to unrelated third parties.

Other than shipping the products, the Partnership
has the obligation to calibrate the OctoNova pumps, which is
considered to be a significant service. The Partnerships
policy of recognizing revenue is upon the completion of this
calibration process. Other potential activities which may result
from the sale of an OctoNova pump includes initial training and
a one year warranty period supplementary to that offered by the
manufacturer. The Partnership provides training prior to
recognizing revenue, if required. With respect to warranty, the
Partnership accrues the estimated cost in providing this one
year warranty service at the time revenue is recognized. The
filters do not require any additional servicing. All related
costs of revenue are accrued for by the Partnership.

Inventory

Inventory is recorded at the lower of cost and
net realizable value. Cost is determined on a first-in,
first-out basis.

Fixed assets

Fixed assets are reported at cost, less
accumulated depreciation. Depreciation is computed using the
straight-line method based on the following estimated useful
lives:

|                  |  |        
|----------------- |  | -------
|Medical equipment |  | 5 years

Foreign currency translation

The Partnerships functional and reporting
currency is the United States dollar. The assets and liabilities
of the Partnerships Canadian operations are maintained in
U.S. dollars. Monetary assets and liabilities denominated
in foreign currency are translated at exchange rates in effect
at the balance sheet date and non-monetary assets and
liabilities denominated in foreign currency are translated at
exchange rates in effect on the date of the transaction. Revenue
and expenses are translated into U.S. dollars at average
exchange rates prevailing during the period and include
amortization. Resulting exchange gains and losses are included
in net income (loss) for the period and are not material in any
of the periods presented.

Income taxes

The Partnerships net income constitutes
income of the individual partners and is subject to income taxes
in their hands. Accordingly, no income taxes have been provided
in the accompanying financial statements.

F-48



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OCCULOGIX, L.P.


NOTES TO FINANCIAL STATEMENTS




(Information as at September 30, 2004 and
for the nine months ended







September 30, 2004 and 2003 is
unaudited)





(expressed in U.S. dollars)


December 31, 2003 and 2002




2.   Significant Accounting
Policies (continued)


Recent accounting pronouncements




In November 2002, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation
(FIN) No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (FIN
No. 45). FIN No. 45 clarifies and expands on
existing disclosure requirements for a guarantor regarding its
obligations under certain guarantees it has issued. FIN
No. 45 also requires that the guarantor must recognize a
liability for the fair value of its obligations under certain
guarantees. The provisions of FIN No. 45 are effective for
guarantees entered into after December 31, 2002. At
December 31, 2003 and September 30, 2004, the
Partnership had no outstanding guarantees.




In January 2003 (as amended in December 2003),
the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities (FIN No. 46). FIN
No. 46 requires consolidation of a variable interest entity
(VIE) by the primary beneficiary of the
entitys expected results of operations. FIN No. 46
also requires certain disclosures by all holders of a
significant variable interest in a VIE that are not the primary
beneficiary. FIN No. 46 is effective immediately for VIEs
created or acquired after January 31, 2003. For VIEs
created or acquired prior to February 1, 2003, FIN
No. 46 is effective in the first reporting period ending
after December 31, 2003 for those VIEs that are considered
to be special purpose entities, and after March 15, 2004
for those VIEs that are not considered to be special purpose
entities. The FIN No. 46 had no effect on the
Partnerships financial position or results of operations.

In March 2003, the FASB reached a consensus on
EITF Issue No. 00-21, Accounting for Revenue
Arrangements with Multiple Deliverables
(Issue 00-21). Issue 00-21 sets out criteria
for whether revenue can be recognized separately from other
deliverables in a multiple deliverable arrangement. The criteria
consider whether the delivered item has stand-alone value to the
customer, whether the fair value of the delivered item can be
reliably determined and the rights of return for the delivered
item. Adoption of Issue 00-21 is required for fiscal years
beginning after June 15, 2003 and has not had an effect on
the Partnerships financial position or results of
operations.

In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity (SFAS
No. 150) which establishes rules for the accounting
for certain financial instruments with characteristics of
liabilities, equity or both. These types of financial
instruments have been reported as liabilities, as part of
equity, or within the mezzanine section of the consolidated
balance sheets and include mandatorily redeemable instruments,
certain instruments with an obligation to repurchase an
issuers own equity shares and instruments with obligations
for an issuer to settle in a variable number of its own equity
shares. The FASB intends to provide further accounting guidance
on conditional redeemable instruments at a later date. On
August 27, 2003, the FASB issued a deferral of SFAS
No. 150 for mandatorily redeemable shares of non-public
companies and non-public companies will not be required to apply
the provisions of SFAS 150 to mandatorily redeemable
financial instruments until periods beginning after
December 15, 2004. Based on securities outstanding as at
March 31, 2004, the adoption of this standard is not
expected to have an effect on the Partnerships financial
position or results of operations.

F-49



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OCCULOGIX, L.P.


NOTES TO FINANCIAL STATEMENTS




(Information as at September 30, 2004 and
for the nine months ended







September 30, 2004 and 2003 is
unaudited)





(expressed in U.S. dollars)


December 31, 2003 and 2002


3.   Fixed Assets

Fixed assets consist of the following:




|                              |  |                    |        |              |  |   |        | 
|----------------------------- |  | ------------------ | ------ | ------------ |  | - | ------ | 
|                              |  |                   
|                              |  | September 30, 2004
|                              |  |                   
|                              |  |                    |        | Accumulated 
|                              |  | Cost               |        | depreciation
|                              |  |                    |        |             
|Medical equipment             |  | $                  | 55,542 |              |  | $ | 12,808 | 
|                              |  |                    |        |              |  |   |        | 
|Less accumulated depreciation |  |                    | 12,808 |              |  |   |        | 
|                              |  |                    |        |              |  |   |        | 
|Net book value                |  | $                  | 42,734 |              |  |   |        | 
|                              |  |                    |        |              |  |   |        | 




|                              |  |                   |        |              |  |   |       | 
|----------------------------- |  | ----------------- | ------ | ------------ |  | - | ----- | 
|                              |  |                  
|                              |  | December 31, 2003
|                              |  |                  
|                              |  |                   |        | Accumulated 
|                              |  | Cost              |        | depreciation
|                              |  |                   |        |             
|Medical equipment             |  | $                 | 33,442 |              |  | $ | 5,654 | 
|                              |  |                   |        |              |  |   |       | 
|Less accumulated depreciation |  |                   | 5,654  |              |  |   |       | 
|                              |  |                   |        |              |  |   |       | 
|Net book value                |  | $                 | 27,788 |              |  |   |       | 
|                              |  |                   |        |              |  |   |       | 

The Partnership did not have any fixed assets as
at December 31, 2002.

4.   Related Party
Transactions

The Partnership is economically dependent on
Asahi Medical Co., Ltd. (Asahi Medical) and Diamed
Medizintechnik GmbH (Diamed) to continuously provide
filter products and pumps used in the RHEO System which are sold
to the Partnership through OccuLogix [note 1]. The
Partnership believes the filter products and pumps produced by
Asahi Medical and Diamed are a critical component in the RHEO
System.

The Partnership purchases all products from
OccuLogix at OccuLogixs cost pursuant to the sales
agreement. The term of the agreement commenced July 25,
2002 and is effective as long as the Distribution Agreement
between OccuLogix and Asahi Medical, dated December 31,
2001, is in effect.

From time to time, the Partnership obtained
non-interest cash advances from Rheo to finance the day-to-day
working capital requirements. These advances are settled through
the purchases of product by Rheo from the Partnership which are
then netted against amounts outstanding.

The due to related parties balance is comprised
of the following:




|                 |  |               |         |              |  |              |         |  |  |   |        | 
|---------------- |  | ------------- | ------- | ------------ |  | ------------ | ------- |  |  | - | ------ | 
|                 |  | September 30, |         | December 31, |  | December 31,
|                 |  | 2004          |         | 2003         |  | 2002        
|                 |  |               |         |              |  |             
|RHEO Clinic Inc. |  | $             | 78,477  |              |  | $            | 256,327 |  |  | $ | 5,410  | 
|OccuLogix, Inc.  |  |               | 214,766 |              |  |              | 15,028  |  |  |   | 44,811 | 
|                 |  |               |         |              |  |              |         |  |  |   |        | 
|                 |  | $             | 293,243 |              |  | $            | 271,355 |  |  | $ | 50,221 | 
|                 |  |               |         |              |  |              |         |  |  |   |        | 







The Partnerships primary customer is RHEO
Clinic Inc., a subsidiary of TLC Vision, for which the
Partnership has reported revenues of $343,564, $409,685,
$459,730 and $0 for the nine months ended




F-50



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OCCULOGIX, L.P.


NOTES TO FINANCIAL STATEMENTS




(Information as at September 30, 2004 and
for the nine months ended







September 30, 2004 and 2003 is
unaudited)





(expressed in U.S. dollars)


December 31, 2003 and 2002




4.   Related Party Transactions
(continued)





September 30, 2004 and 2003 and the years
ended December 31, 2003 and 2002, respectively. RHEO Clinic
uses the RHEO System to treat patients for which it charges its
customers (the patients) a per-treatment fee.




5.   Accrued
Liabilities

Accrued liabilities consist of the following:




|                      |  |               |        |              |  |      |       |  |  |   |   | 
|--------------------- |  | ------------- | ------ | ------------ |  | ---- | ----- |  |  | - | - | 
|                      |  |               |        |             
|                      |  |               |        | December 31,
|                      |  | September 30, |        |             
|                      |  | 2004          |        | 2003         |  | 2002
|                      |  |               |        |              |  |     
|Professional services |  | $             | 14,500 |              |  | $    | 9,000 |  |  | $ |  | 
|Other                 |  |               | 14,695 |              |  |      | 600   |  |  |   |  | 
|                      |  |               |        |              |  |      |       |  |  |   |   | 
|                      |  | $             | 29,195 |              |  | $    | 9,600 |  |  |   |  | 
|                      |  |               |        |              |  |      |       |  |  |   |   | 




6.   Subsequent Event
(Unaudited)




In October 2004, the Partnership received a total
of $557,400 from Rheo Therapeutics, Inc. (an Ontario, Canada
corporation) for the purchase of 660 treatment sets and
2 pumps. This was in accordance with the product purchase
agreement between Rheo Therapeutics, Inc. and the Partnership.
On September 29, 2004, the Partnership signed a product
purchase agreement with 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. Subject to availability, the purchaser may
order up to an additional 2,000 treatment sets. Dr. Machat,
who is an investor in and one of the directors of Rheo
Therapeutics Inc. was a co-founder and former director of TLC
Vision.




F-51



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OCCULOGIX, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS




The following unaudited pro forma consolidated
financial statements have been prepared to give effect to the
proposed reorganization transactions. The unaudited pro forma
consolidated balance sheet of OccuLogix, Inc.
(OccuLogix) as at September 30, 2004 has been
prepared as if the proposed reorganization transactions
described below had been completed as of September 30,
2004. The unaudited pro forma consolidated statements of
operations for the nine month period ended September 30,
2004 and for the year ended December 31, 2003 have been
prepared as if the proposed reorganization transactions
described below had been completed as of January 1, 2003.




The underlying assumptions for the pro forma
consolidated financial statements provide a reasonable basis for
presenting the significant financial effects directly
attributable to such transactions; however, the unaudited pro
forma consolidated financial statements may not be indicative of
the financial position and results of operations that would have
occurred if the transactions had been completed on the dates
indicated or of the financial position and results of operations
that may be obtained in the future. In the opinion of the
management of OccuLogix, these unaudited pro forma consolidated
financial statements include all adjustments necessary for fair
presentation.




The accompanying pro forma consolidated financial
statements give effect to the proposed reorganization
transactions described below.




Pro Forma Transactions

The unaudited pro forma consolidated financial
statements of OccuLogix have been prepared to reflect the
following reorganization transactions:






| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | The acquisition by OccuLogix of TLC Vision
    Corporations (TLC Vision) 50% interest in
    OccuLogix, L.P. (the L.P.) in exchange for the
    issuance to TLC Vision of 19,070,233 shares of common
    stock. OccuLogix expects to account for the acquisition of TLC
    Visions interest in the L.P. by allocating the total
    purchase price to the tangible and intangible assets and
    liabilities of the L.P. based upon valuations provided by an
    independent appraiser and other studies by management. The
    excess of the purchase price over the fair value of the net
    assets acquired, comprising of tangible and intangible assets
    and liabilities, has been accounted for as goodwill. The actual
    allocation of purchase price and the related useful life of the
    assets acquired and the resulting effect on income from
    operations may differ significantly from the pro forma amounts
    included herein;









| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | OccuLogix will borrow the remaining $1,900,000
    aggregate amount, as of September 30, 2004, available for
    borrowing under two convertible debentures that were issued to
    TLC Vision and another one of its stockholders, Diamed
    Medizintechnik GmbH (the Convertible Debentures).
    The total principal amount of $7,000,000 due under the
    Convertible Debenture will then be converted into
    7,106,454 shares of common stock at a conversion price of
    $0.98502 per share;









| |    |                                                                                                                                                                                                                                                                                                            
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) | All shares of Series A convertible preferred
    stock will be converted into shares of common stock of OccuLogix
    at the conversion rate of 1.678323 shares of common stock
    for each share of Series A convertible preferred stock, or
    an aggregate amount of 3,603,350 shares of common stock;









| |    |                                                                                                                                                                                                                                                                                                            
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | d) | All shares of Series B convertible preferred
    stock will be converted into shares of common stock of OccuLogix
    at the conversion rate of 1.643683 shares of common stock
    for each share of Series B convertible preferred stock, or
    an aggregate amount of 1,019,255 shares of common stock;









| |    |                                                                                             
| | -- | --------------------------------------------------------------------------------------------
| | e) | The L.P. will undertake all Canadian distribution
    and marketing activities of OccuLogix;




F-52



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| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | f) | Although the following pro forma financial
    statements do not reflect the proceeds from the initial public
    offering, the remaining unamortized intrinsic value of certain
    stock options granted by OccuLogix to certain employees,
    officers and directors in December 2003 with an estimated
    intrinsic value of $15,905,400 will be expensed in the pro forma
    financial statements for the year ended December 31, 2003
    as they vest upon an initial public offering.  
|
|
|
| | g) | The Company has an exclusive distribution service
    agreement with Apheresis Technologies, Inc. The Company has the
    sole discretion to terminate this agreement for $100,000 upon
    the successful completion of its initial public offering.
    Although the following pro forma financial statements do not
    reflect the proceeds from the initial public offering, this
    amount will be expensed in the pro forma financial statements
    for the year ended December 31, 2003.
|

F-53



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OCCULOGIX, INC.

PRO FORMA CONSOLIDATED BALANCE SHEET

(expressed in U.S. dollars)




As at September 30, 2004





(Unaudited)





|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 |             |        |   |  |     |   |  |   |             |   | 
|-------------------------------------------------------------------- | ------------------------ | --------------- | ----------- | --------------- |  | ----------- | ------- | ------ |  | --------------- | ----------- | ------ | - |  | --- | - |  | - | ----------- | - | 
|                                                                     |                          | OccuLogix, Inc. |             | OccuLogix, L.P. |  | Pro Forma   |         |        |  | OccuLogix, Inc.
|                                                                     |                          | Historical      |             | Historical      |  | Adjustments |         | Note 2 |  | Pro Forma      
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                
|ASSETS                                                               |                          |                 |             |                 |  |             |         |        |  |                 |             |        |   |  |     |   |  |   |             |  
|Cash                                                                 |                          | $               | 766,936     |                 |  | $           | 26,209  |        |  | $               | 1,650,000   |        |   |  | a,b |   |  | $ | 2,443,145   |  
|Due from related parties                                             |                          |                 | 210,194     |                 |  |             |        |        |  |                 | (214,766    | )      |   |  | g   |   |  |   |             |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 | 4,572       |        |   |  |     |   |  |   |            |  
|Amount/ account receivable                                           |                          |                 | 62,547      |                 |  |             | 127,206 |        |  |                 |            |        |   |  |     |   |  |   | 189,753     |  
|Inventory                                                            |                          |                 | 837,926     |                 |  |             | 117,774 |        |  |                 |            |        |   |  |     |   |  |   | 955,700     |  
|Prepaid expenses                                                     |                          |                 | 161,478     |                 |  |             | 84      |        |  |                 |            |        |   |  |     |   |  |   | 161,562     |  
|Deposits                                                             |                          |                 |            |                 |  |             |        |        |  |                 |            |        |   |  |     |   |  |   |            |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 |             |        |   |  |     |   |  |   |             |  
|Total Current Assets                                                 |                          | $               | 2,039,081   |                 |  | $           | 271,273 |        |  | $               | 1,439,806   |        |   |  |     |   |  | $ | 3,750,160   |  
|Fixed assets, net                                                    |                          |                 | 331,998     |                 |  |             | 42,734  |        |  |                 |            |        |   |  |     |   |  |   | 374,732     |  
|Patents and trademarks, net                                          |                          |                 | 81,403      |                 |  |             |        |        |  |                 |            |        |   |  |     |   |  |   | 81,403      |  
|Intangible assets, net                                               |                          |                 |            |                 |  |             |        |        |  |                 | 25,750,000  |        |   |  | a   |   |  |   | 25,750,000  |  
|Investment in limited partnership                                    |                          |                 |            |                 |  |             |        |        |  |                 |            |        |   |  |     |   |  |   |            |  
|Deferred share issue costs                                           |                          |                 | 1,500,000   |                 |  |             |        |        |  |                 |            |        |   |  |     |   |  |   | 1,500,000   |  
|Goodwill                                                             |                          |                 |            |                 |  |             |        |        |  |                 | 146,136,313 |        |   |  | a   |   |  |   | 146,136,313 |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 |             |        |   |  |     |   |  |   |             |  
|                                                                     |                          | $               | 3,952,482   |                 |  | $           | 314,007 |        |  | $               | 173,326,119 |        |   |  |     |   |  | $ | 177,592,608 |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 |             |        |   |  |     |   |  |   |             |  
|LIABILITIES AND STOCKHOLDERS/ PARTNERS
    EQUITY (DEFICIENCY)      |                          |                 |             |                 |  |             |         |        |  |                 |             |        |   |  |     |  
|Current                                                              |                          |                 |             |                 |  |             |         |        |  |                 |             |        |   |  |     |   |  |   |             |  
|Accounts payable                                                     |                          | $               | 590,570     |                 |  | $           |        |        |  | $               |            |        |   |  |     |   |  | $ | 590,570     |  
|Accrued liabilities                                                  |                          |                 | 1,493,034   |                 |  |             | 29,195  |        |  |                 |            |        |   |  |     |   |  |   | 1,522,229   |  
|Related party liabilities                                            |                          |                 |            |                 |  |             | 293,243 |        |  |                 | (214,766    | )      |   |  | g   |   |  |   |             |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 | 4,572       |        |   |  |     |   |  |   |             |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 | 100,000     |        |   |  | f   |   |  |   | 183,049     |  
|Due to stockholders                                                  |                          |                 | 1,109,469   |                 |  |             |        |        |  |                 |            |        |   |  |     |   |  |   | 1,109,469   |  
|Convertible notes due to stockholders                                |                          |                 | 5,100,000   |                 |  |             |        |        |  |                 | 1,900,000   |        |   |  | b   |   |  |   |             |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 | (7,000,000  | )      |   |  | b   |   |  |   |            |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 |             |        |   |  |     |   |  |   |             |  
|Total Current Liabilities                                            |                          | $               | 8,293,073   |                 |  | $           | 322,438 |        |  | $               | (5,210,194  | )      |   |  |     |   |  |   | 3,405,314   |  
|Long-term Convertible Notes                                          |                          |                 |            |                 |  |             |        |        |  |                 |            |        |   |  |     |   |  |   |            |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 |             |        |   |  |     |   |  |   |             |  
|TOTAL LIABILITIES                                                    |                          | $               | 8,293,073   |                 |  | $           | 322,438 |        |  | $               | (5,210,194  | )      |   |  |     |   |  | $ | 3,405,317   |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 |             |        |   |  |     |   |  |   |             |  
|Stockholders/Partners equity
    (deficiency)                       |                          |                 |             |                 |  |             |         |        |  |                 |             |        |   |  |     |   |  |   |             |  
|                                                                     | Common Stock             |                 | $           | 5,360           |  |             |         |       |  |                 | $           | 19,070 |   |  |     | a |  |   | $           |   | 
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 | 7,106       |        |   |  | b   |   |  |   |             |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 | 3,603       |        |   |  | c   |   |  |   |             |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 | 1,019       |        |   |  | d   |   |  | $ | 36,158      |  
|                                                                     | Series A preferred Stock |                 |             | 2,147           |  |             |         |       |  |                 |             | (2,147 | ) |  |     | c |  |   |             |  | 
|                                                                     | Series B preferred Stock |                 |             | 620             |  |             |         |       |  |                 |             | (620   | ) |  |     | d |  |   |             |  | 
|Additional paid-in Capital                                           |                          |                 | 29,734,685  |                 |  |             |        |        |  |                 | 171,613,027 |        |   |  | a   |   |  |   |             |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 | 6,992,894   |        |   |  | b   |   |  |   |             |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 | (1,456      | )      |   |  | c   |   |  |   |             |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 | (399        | )      |   |  | d   |   |  |   |             |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 | 10,774,630  |        |   |  | e   |   |  |   | 219,113,381 |  
|Deficit/Partners deficit                                            |                          |                 | (34,083,403 | )               |  |             | (8,431  | )      |  |                 | 4,216       |        |   |  | a   |   |  |   |             |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 | (10,774,630 | )      |   |  | e   |   |  |   |             |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 | (100,000    | )      |   |  | f   |   |  |   | (44,962,248 | )
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 |             |        |   |  |     |   |  |   |             |  
|Total Stockholders/Partners equity
    (deficiency)                 |                          |                 | (4,340,591  | )               |  |             | (8,431  | )      |  |                 | 178,536,313 |        |   |  |     |   |  |   | 174,187,291 |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 |             |        |   |  |     |   |  |   |             |  
|TOTAL LIABILITIES AND
    STOCKHOLDERS/PARTNERS EQUITY (DEFICIENCY) |                          | $               | 3,952,482   |                 |  | $           | 314,007 |        |  | $               | 173,326,119 |        |   |  |     |   |  | $ | 177,592,608 |  
|                                                                     |                          |                 |             |                 |  |             |         |        |  |                 |             |        |   |  |     |   |  |   |             |  




F-54



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##### Table of Contents






OCCULOGIX, INC.







PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS







(expressed in U.S. dollars)







For the nine month period ended
September 30, 2004








(Unaudited)








|                                                         |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |         |  
|-------------------------------------------------------- | --------------------- | --------------- | ---------- | --------------- | - | ----------- | ------- | ------ |  | --------------- | ---------- | - |  |  | - |  |  | - | ---------- | ------- | -
|                                                         |                       |                 |            |                 |   |             |         |        |  | OccuLogix, Inc.
|                                                         |                       | OccuLogix, Inc. |            | OccuLogix, L.P. |   | Pro Forma   |         |        |  | Pro Forma      
|                                                         |                       | Historical      |            | Historical      |   | Adjustments |         | Note 3 |  | Consolidated   
|                                                         |                       |                 |            |                 |   |             |         |        |  |                
|Revenues                                                 |                       | $               | 189,373    |                 |   | $           | 453,164 |        |  | $               | (189,373   | ) |  |  | a |  |  | $ | 453,164    |        
|                                                         |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        
|Cost of sales                                            |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        
|Cost of goods sold                                       |                       |                 | 184,309    |                 |   |             | 239,434 |        |  |                 | (193,662   | ) |  |  | b |  |  |   | 230,081    |        
|Royalty costs                                            |                       |                 | 80,130     |                 |   |             |        |        |  |                 |           |   |  |  |   |  |  |   | 80,130     |        
|                                                         |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        
|                                                         |                       |                 | 264,439    |                 |   |             | 239,434 |        |  |                 | (193,662   | ) |  |  |   |  |  |   | 310,211    |        
|                                                         |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        
|Gross margin                                             |                       |                 | (75,066    | )               |   |             | 213,730 |        |  |                 | 4,289      |   |  |  |   |  |  |   | 142,953    |        
|                                                         |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        
|Operating Expenses                                       |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        
|General & administrative                                 |                       |                 | 5,676,639  |                 |   |             | 172,162 |        |  |                 | (4,617,693 | ) |  |  | d |  |  |   | 1,231,108  |        
|Clinical & regulatory                                    |                       |                 | 2,092,466  |                 |   |             |        |        |  |                 |           |   |  |  |   |  |  |   | 2,092,466  |        
|Sales & marketing                                        |                       |                 | 22,454     |                 |   |             | 25,997  |        |  |                 |           |   |  |  |   |  |  |   | 48,451     |        
|Amortization of intangibles                              |                       |                 |           |                 |   |             |        |        |  |                 | 1,287,500  |   |  |  | c |  |  |   | 1,287,500  |        
|                                                         |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        
|                                                         |                       |                 | 7,791,559  |                 |   |             | 198,159 |        |  |                 | (3,330,193 | ) |  |  |   |  |  |   | 4,659,525  |        
|                                                         |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        
|Loss from operations                                     |                       |                 | (7,866,625 | )               |   |             | 15,571  |        |  |                 | 3,334,482  |   |  |  |   |  |  |   | (4,516,572 | )      
|                                                         |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        
|Other income (expense)                                   |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        
|                                                         | Interest expense, net |                 |            | (12,130         | ) |             |         |       |  |                 |            |  |  |  |   |  |  |   |            | (12,130 | )
|                                                         | Other                 |                 |            | (16,402         | ) |             |         | 1,274  |  |                 |            |  |  |  |   |  |  |   |            | (15,128 | )
|                                                         |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        
|                                                         |                       |                 | (28,532    | )               |   |             | 1,274   |        |  |                 |           |   |  |  |   |  |  |   | (27,258    | )      
|                                                         |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        
|Net profit/(loss) for the period                         |                       | $               | (7,895,157 | )               |   | $           | 16,845  |        |  | $               | 3,334,482  |   |  |  |   |  |  | $ | (4,543,830 | )      
|                                                         |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        
|Weighted average number of common shares
    outstanding |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   | 35,942,765 |        
|                                                         |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        
|Net loss per share  Basic and diluted                   |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  | $ | (0.13      | )      
|                                                         |                       |                 |            |                 |   |             |         |        |  |                 |            |   |  |  |   |  |  |   |            |        




F-55



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##### Table of Contents



OCCULOGIX, INC.

PRO FORMA CONSOLIDATED STATEMENTS OF
OPERATIONS

(expressed in U.S. dollars)

For the year ended December 31,
2003





(Unaudited)








|                                                         |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |         |  
|-------------------------------------------------------- | ---------------- | --------------- | ---------- | --------------- | - | ----------- | ------- | ------ |  | --------------- | ----------- | - |  |  | - |  |  | - | ----------- | ------- | -
|                                                         |                  |                 |            |                 |   |             |         |        |  | OccuLogix, Inc.
|                                                         |                  | OccuLogix, Inc. |            | OccuLogix, L.P. |   | Pro Forma   |         |        |  | Pro Forma      
|                                                         |                  | Historical      |            | Historical      |   | Adjustments |         | Note 3 |  | Consolidated   
|                                                         |                  |                 |            |                 |   |             |         |        |  |                
|Revenues                                                 |                  | $               | 390,479    |                 |   | $           | 486,394 |        |  | $               | (390,479    | ) |  |  | a |  |  | $ | 486,394     |        
|                                                         |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        
|Cost of sales                                            |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        
|Cost of goods sold                                       |                  |                 | 373,546    |                 |   |             | 260,406 |        |  |                 | (386,189    | ) |  |  | b |  |  |   | 247,763     |        
|Royalty costs                                            |                  |                 | 109,234    |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   | 109,234     |        
|                                                         |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        
|                                                         |                  |                 | 482,780    |                 |   |             | 260,406 |        |  |                 | (386,189    | ) |  |  |   |  |  |   | 356,997     |        
|                                                         |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        
|Gross margin                                             |                  |                 | (92,301    | )               |   |             | 225,988 |        |  |                 | (4,290      | ) |  |  |   |  |  |   | 129,397     |        
|                                                         |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        
|Operating Expenses                                       |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        
|General and administrative                               |                  |                 | 1,564,362  |                 |   |             | 177,501 |        |  |                 | 15,392,323  |   |  |  | d |  |  |   |             |        
|                                                         |                  |                 |            |                 |   |             |        |        |  |                 | 100,000     |   |  |  | e |  |  |   | 17,234,186  |        
|Clinical and regulatory                                  |                  |                 | 731,166    |                 |   |             |        |        |  |                 |            |   |  |  |   |  |  |   | 731,166     |        
|Marketing                                                |                  |                 |           |                 |   |             | 68,795  |        |  |                 |            |   |  |  |   |  |  |   | 68,795      |        
|Amortization of intangibles                              |                  |                 |           |                 |   |             |        |        |  |                 | 1,716,667   |   |  |  | c |  |  |   | 1,716,667   |        
|                                                         |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        
|                                                         |                  |                 | 2,295,528  |                 |   |             | 246,296 |        |  |                 | 17,208,990  |   |  |  |   |  |  |   | 19,750,814  |        
|                                                         |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        
|Loss from operations                                     |                  |                 | (2,387,829 | )               |   |             | (20,308 | )      |  |                 | (17,213,280 | ) |  |  |   |  |  |   | (19,621,417 | )      
|                                                         |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        
|Other expense                                            |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        
|                                                         | Interest expense |                 |            | (67,997         | ) |             |         |       |  |                 |             |  |  |  |   |  |  |   |             | (67,997 | )
|                                                         | Other            |                 |            | (14,062         | ) |             |         |       |  |                 |             |  |  |  |   |  |  |   |             | (14,062 | )
|                                                         |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        
|                                                         |                  |                 | (82,059    | )               |   |             |        |        |  |                 |            |   |  |  |   |  |  |   | (82,059     | )      
|                                                         |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        
|Net loss                                                 |                  | $               | (2,469,888 | )               |   | $           | (20,308 | )      |  | $               | (17,213,280 | ) |  |  |   |  |  | $ | (19,703,476 | )      
|                                                         |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        
|Weighted average number of common shares
    outstanding |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   | 34,776,278  |        
|                                                         |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        
|Net loss per share  Basic and diluted                   |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  | $ | (0.57       | )      
|                                                         |                  |                 |            |                 |   |             |         |        |  |                 |             |   |  |  |   |  |  |   |             |        




F-56



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##### Table of Contents



OCCULOGIX, INC.

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)

(Unaudited)


1.   Basis of Pro Forma
Presentation

OccuLogix, Inc. (formerly Vascular Sciences
Corporation) (OccuLogix) is an ophthalmic
therapeutic company founded to commercialize innovative
treatments for eye diseases, including age-related macular
degeneration (AMD). The RHEO System contains a pump
that circulates blood through two filters and is used to perform
Rheopheresis, which OccuLogix refers to under the trade name
RHEO Therapy, which is designed to treat Dry AMD.
OccuLogixs goal is to establish RHEO Therapy as the
leading treatment for Dry AMD.

The accompanying unaudited pro forma consolidated
balance sheet and the unaudited pro forma consolidated
statements of operations of OccuLogix have been prepared by the
management of OccuLogix in accordance with United States
generally accepted accounting principles.




The unaudited pro forma consolidated balance
sheet of OccuLogix as at September 30, 2004 has been
prepared using the unaudited consolidated balance sheet of
OccuLogix as at September 30, 2004 and the unaudited
balance sheet of OccuLogix, L.P. (the L.P.) as at
September 30, 2004, together with the adjustments and
assumptions outlined below. The pro forma unaudited consolidated
statements of operations have been prepared using the results of
operations of OccuLogix for the nine months ended
September 30, 2004 and the unaudited results of operations
of the L.P. for the nine months ended September 30,
2004, the audited consolidated statements of operations of
OccuLogix for the year ended December 31, 2003, the audited
statements of operations of the L.P. for the year ended
December 31, 2003 and the adjustments and assumptions
outlined below.




2.   Pro Forma Consolidated
Balance Sheet of OccuLogix




Pro forma adjustments relating to the
pro forma consolidated balance sheet of OccuLogix as at
September 30, 2004 include the following:









| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | The acquisition by OccuLogix of TLC Visions
    50% interest in the L.P. in exchange for the issuance to TLC
    Vision of 19,070,233 shares of its common stock. The pro
    forma intangible asset of $25,750,000 from OccuLogixs
    proposed acquisition of TLC Visions 50% interest in the
    L.P. is based on valuations provided by a third party valuator
    and other studies by management. The purchase price consists of
    19,070,233 shares of common stock of OccuLogix, valued at
    $171,632,097 based on a share price of $9.00 which represents
    the mid point of the range of expected prices for the initial
    public offering plus estimated acquisition costs of $250,000 for
    total acquisition cost of $171,882,097. The purchase price has
    been allocated as follows:







|                    |  |   |             |  
|------------------- |  | - | ----------- | -
|Net tangible assets |  | $ | (4,216      | )
|Intangible assets   |  |   | 25,750,000  |  
|                    |  |   |             |  
|                    |  |   | 25,745,784  |  
|Goodwill            |  |   | 146,136,313 |  
|                    |  |   |             |  
|                    |  | $ | 171,882,092 |  
|                    |  |   |             |  







Goodwill represents the excess of the purchase
price over the fair value of the net tangible and intangible
assets acquired. In accordance with Statement of Financial
Accounting Standards No. 142, Goodwill and Other
Intangible Asset, goodwill will not be amortized and will
be tested for impairment at least annually or more frequently if
impairment indicators arise.




F-57



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##### Table of Contents



OCCULOGIX, INC.


NOTES TO PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)

(Unaudited)




2.   Pro Forma Consolidated
Balance Sheet of OccuLogix (continued)





The estimated purchase price allocation was
determined using assistance from an independent appraiser. The
intangible asset is comprised of the exclusive distribution
agreements OccuLogix has with Asahi Medical Co. Ltd.,
manufacturer of the Rheofilter and Plasmaflo filter, and Diamed
Medizintechnik Gmbh and MeSys Gmbh, the designer and
manufacturer, respectively, of the OctoNova pump. The
distribution intangible asset is valued at $25,750,000 with an
estimated useful life of 15 years and was valued using the
cost approach methodology.






| |                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | The cost approach is based on the premise that a
    prudent investor would pay no more for an asset than its
    replacement or reproduction cost. The cost to replace the asset
    would include the cost of constructing a similar asset of
    equivalent utility at prices applicable at the time of the
    appraisal.
|
|
|
| | To arrive at an estimate of fair value using the
    cost approach, the replacement cost new is determined and
    reduced for depreciation of the asset. In this context,
    depreciation has three components:                                                                                                            
|



| |       |                             
| | ----- | ----------------------------
|
| | (i)   | physical deterioration,     
|
|
|
| | (ii)  | functional obsolescence, and
|
|
|
| | (iii) | economic obsolescence.      
|






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Physical deterioration is an impairment to the
    condition of the asset brought about by the wear and
    tear, disintegration, use in service, and/or the action of
    the elements. Functional obsolescence is the impairment in the
    efficiency of the asset brought about by such factors as over
    capacity, inadequacy, or change in technology that affect the
    asset. Economic obsolescence is the impairment in the
    desirability of the asset arising from external forces,
    legislative enactment, or changes in supply and demand
    relationships.







The actual allocation of purchase price and the
related useful life of the assets acquired and the resulting
effect on income from operations may differ significantly from
the pro forma amounts.






| |    |                                                                                                                                                                                                                                                                                                                                                                                                     
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) | OccuLogix will borrow the remainder of the
    aggregate $7,000,000 available for borrowing under the
    Convertible Debentures agreement. The total principal amount of
    $7,000,000 due under the Convertible Debenture will then be
    converted into shares of common stock at a conversion price of
    $0.98502 per share, or an aggregate amount of
    7,106,454 shares of common stock;
|
|
|
| | c) | All shares of Series A convertible preferred
    stock will be converted into shares of common stock of OccuLogix
    at the conversion rate of 1.678323 shares of common stock for
    each share of Series A convertible preferred stock, or an
    aggregate amount of 3,603,350 shares of common stock;                                                                                         
|
|
|
| | d) | All shares of Series B convertible preferred
    stock will be converted into shares of common stock of OccuLogix
    at the conversion rate of 1.643683 shares of common stock for
    each share of Series B convertible preferred stock, or an
    aggregate amount of 1,019,255 shares of common stock;                                                                                         
|
|
|
| | e) | Although the pro forma financial consolidated
    balance sheet does not reflect the proceeds from the initial
    public offering, the balance of the amortized intrinsic value of
    certain stock options granted by OccuLogix to certain employees,
    officers and directors in December 2003 of $10,774,630 will be
    added to additional paid- in capital;                               
|

F-58



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##### Table of Contents



OCCULOGIX, INC.


NOTES TO PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)

(Unaudited)




2.   Pro Forma Consolidated
Balance Sheet of OccuLogix (continued)




| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | f) | OccuLogix has an exclusive distribution service
    agreement with Apheresis Technologies, Inc. (ATI)
    which was amended such that OccuLogix would have the sole
    discretion as to when to terminate the agreement. In
    consideration of this amendment, OccuLogix agreed to pay ATI
    $100,000 upon the successful completion of its initial public
    offering. Although the following pro forma financial
    statements do not reflect the proceeds from the initial public
    offering, this amount has been added to deficit; and
|
|
|
| | g) | In the preparation of the pro forma
    consolidated balance sheet of OccuLogix, the elimination of all
    intercompany balances between OccuLogix and the L.P. has been
    reflected.                                                                                                                                                                                                                                                                                                                                                              
|



|   |                                                                 
|-- | ----------------------------------------------------------------
|3. | Pro Forma Consolidated Statements of
    Operations of OccuLogix




Pro forma adjustments relating to the
consolidated statements of operations of OccuLogix for the nine
months ended September 30, 2004 and the year ended
December 31, 2003 include the following:









| |    |                                                                                                                                                                                                                                                                       
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | Elimination of revenue in the amount of $189,373
    and $390,479 for the nine months ended September 30, 2004
    and for the year ended December 31, 2003, respectively,
    relating to the sale of OctoNova pumps and treatment sets by
    OccuLogix to the L.P.;






| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) | Elimination of cost of goods sold in the amount
    of $193,662 and $386,189 for the nine months ended
    September 30, 2004 and for the year ended December 31,
    2003, respectively, relating to inventory still being held by
    the L.P. and cost of goods sold by the L.P. to third parties
    which is already included in the cost of goods sold by OccuLogix
    to the L.P.;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
|
|
| | c) | Included in the amortization of intangibles
    expense in the pro forma statement of operations is an
    amortization expense of $1,287,500 for the nine months ended
    September 30, 2004 and $1,716,667 for the year ended
    December 31, 2003 of the intangible assets acquired on the
    acquisition of TLC Visions 50% interest in the L.P. The
    estimated amounts reflect minimum values estimated by management
    and vary as the final purchase allocation and related useful
    life of the assets acquired are subject to completion of the
    valuation. and;                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
|
|
| | d) | The Company has been recording stock-based
    compensation charges over the vesting period of the options. All
    of these options will become fully vested upon successful
    completion of this offering. The remaining $15,392,323 of
    stock-based charges as of December 31, 2003 will be
    recorded during the period in which this offering occurs and is
    therefore reflected in the pro forma statement of
    operations of OccuLogix for the year ended December 31,
    2003. Although the pro forma consolidated statement of
    operations does not reflect the proceeds from the initial public
    offering, the pro forma consolidated statements of operations
    for the nine months ended September 30, 2004 and the year
    ended December 31, 2003 have been prepared as if the
    transactions described above had been completed as of
    January 1, 2003, accordingly the stock-based compensation
    charged for the nine months ended September 30, 2004 of
    $4,617,693 has been reversed.
|
|
|
| | e) | The Company has an exclusive distribution service
    agreement with ATI. The Company has the sole discretion to
    terminate this agreement for $100,000 upon the successful
    completion of its initial public offering. Although the
    following pro forma financial statements do not reflect the
    proceeds from the initial public offering, this amount has been
    expensed in the pro forma financial statements for the year
    ended December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|

F-59



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##### Table of Contents



OCCULOGIX, INC.


NOTES TO PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)

(Unaudited)




|   |                                                                         
|-- | ------------------------------------------------------------------------
|4. | Reconciliation to Accounting Principles
    Generally Accepted in Canada




These pro forma consolidated financial
statements have been prepared in accordance with U.S. GAAP,
which differ in certain respects to Canadian GAAP. This
reconciliation between Canadian and U.S. GAAP should be
read in conjunction with the pro forma consolidated financial
statements at September 30, 2004 and for the nine months
ended September 30, 2004 and for the year ended
December 31, 2003 and related managements discussion
and analysis prepared in accordance with U.S. GAAP included
in this prospectus.




The following table presents the pro forma net
loss for the period that would have been reported had
OccuLogixs pro forma consolidated financial statements
been prepared on the basis of Canadian GAAP:




|                                                     |  |                   |           |              |  |   |            | 
|---------------------------------------------------- |  | ----------------- | --------- | ------------ |  | - | ---------- | 
|                                                     |  | Nine months ended |           | Year ended  
|                                                     |  | September 30,     |           | December 31,
|                                                     |  | 2004              |           | 2003        
|                                                     |  |                   |           |             
|Pro forma net loss for the period. U.S. GAAP         |  | $                 | 4,543,830 |              |  | $ | 19,603,476 | 
|Stock based compensation fair value
    method [a]   |  |                   | 67,219    |              |  |   |           | 
|Pro forma net loss for the period.
    Canadian GAAP |  | $                 | 4,611,049 |              |  | $ | 19,603,476 | 
|                                                     |  |                   |           |              |  |   |            | 




The following tables present the differences
between the pro forma as adjusted consolidated balance sheets of
OccuLogix had OccuLogixs pro forma financial information
been prepared on the basis of Canadian GAAP:




|                                                        |  |           |             |               |  |  |             |  
|------------------------------------------------------- |  | --------- | ----------- | ------------- |  |  | ----------- | -
|                                                        |  | U.S. GAAP |             | Canadian GAAP
|                                                        |  |           |             |              
|As at September 30, 2004                                |  |           |             |               |  |  |             |  
|Assets                                                  |  |           |             |               |  |  |             |  
|Cash                                                    |  |           | 2,693,145   |               |  |  | 2,693,145   |  
|Due from related parties                                |  |           |            |               |  |  |            |  
|Amount/ Account receivable                              |  |           | 189,753     |               |  |  | 189,753     |  
|Inventory                                               |  |           | 955,700     |               |  |  | 955,700     |  
|Prepaid expenses                                        |  |           | 161,562     |               |  |  | 161,562     |  
|Fixed Assets                                            |  |           | 374,732     |               |  |  | 374,732     |  
|Patents and trademarks                                  |  |           | 81,403      |               |  |  | 81,403      |  
|Intangible assets                                       |  |           | 22,745,833  |               |  |  | 22,745,822  |  
|Goodwill                                                |  |           | 144,392,630 |               |  |  | 144,392,630 |  
|                                                        |  |           |             |               |  |  |             |  
|                                                        |  |           | 173,094,758 |               |  |  | 173,094,758 |  
|                                                        |  |           |             |               |  |  |             |  
|Liabilities and Stockholders/ Partners
    deficiency  |  |           |             |               |  |  |             |  
|Accounts payable                                        |  |           | 590,570     |               |  |  | 590,570     |  
|Accrued liabilities                                     |  |           | 1,522,229   |               |  |  | 1,522,229   |  
|Related party liabilities                               |  |           | 83,049      |               |  |  | 83,049      |  
|Due to stockholders                                     |  |           | 1,109,469   |               |  |  | 1,109,469   |  
|Convertible notes due to Stockholders                   |  |           |            |               |  |  |            |  
|Capital stock common stock/partners capital             |  |           | 36,158      |               |  |  | 36,158      |  
|Additional paid in capital/ Contributed surplus
    [a] |  |           | 217,619,699 |               |  |  | 217,686,918 |  
|Deficit/ Partners deficit [a]                          |  |           | (47,866,416 | )             |  |  | (47,933,635 | )
|                                                        |  |           |             |               |  |  |             |  
|                                                        |  |           | 173,094,758 |               |  |  | 173,094,758 |  
|                                                        |  |           |             |               |  |  |             |  




F-60



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##### Table of Contents



OCCULOGIX, INC.


NOTES TO PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS

(expressed in U.S. dollars)

(Unaudited)




|   |                                                                                     
|-- | ------------------------------------------------------------------------------------
|4. | Reconciliation to Accounting Principles
    Generally Accepted in Canada (continued)

[a]   Accounting
for stock options

OccuLogix has an option plan whereby options are
granted to employees, directors and consultants.

For U.S. GAAP purposes, OccuLogix has
adopted the disclosure requirements of SFAS No. 123 and as
permitted under SFAS 123, applies APB 25 and related
interpretations in accounting for its stock option plans.
SFAS 123 requires disclosure of pro forma amounts to
reflect the impact if OccuLogix had elected to adopt the
optional recognition provisions of SFAS 123 for its stock
option plans and employee stock purchase plans.

For Canadian GAAP purposes, OccuLogix accounts
for its stock options in accordance with the provisions of CICA
Section 3870, Stock-Based Compensation and Other
Stock-Based Payments, (CICA 3870). CICA 3870,
issued in December 2001, established standards for the
recognition, measurement and disclosure of stock-based
compensation, and other stock-based payments. Under the
provisions of CICA 3870, prior to January 1, 2004,
companies could either measure the compensation cost of equity
instruments issued under employee compensation plans using a
fair value-based method or could recognize compensation cost
using another method, such as the intrinsic value-based method.
However, if another method was applied, pro forma disclosure of
net income or loss and earnings or loss per share was required
in the financial statements as if the fair value-based method
had been applied. Effective January 1, 2004, CICA 3870
requires that all stock-based compensation be measured and
expensed using a fair value-based methodology. Prior to
January 1, 2004, OccuLogix recognized employee stock-based
compensation under the intrinsic value-based method.




For Canadian GAAP purposes, $67,219, which
represents the difference between the intrinsic value method and
the fair-value based method, has been adjusted for.




[b]   Convertible
debentures

OccuLogix had convertible debentures which were
convertible into shares of common stock of the Company. Some of
these debentures were also issued with warrants. Since these
debentures have been presented as converted in these pro forma
financial statements, no adjustment to Canadian GAAP is required.

F-61



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##### Table of Contents












8,400,000 Shares




OccuLogix, Inc.


Common Stock


(OccuLogix Logo)



---

PROSPECTUS

,
2004



---

Citigroup

SG Cowen & Co.


ThinkEquity Partners LLC






---






---



##### Table of Contents



PART II

Item 13.     Other
Expenses of Issuance and Distribution

The following table sets forth the costs and
expenses, other than underwriting discounts and commissions,
payable by us in connection with the offer and sale of the
securities being registered. All amounts are estimates except
the SEC registration fee and NASD filing fee.




|                                   |  |   |           | 
|---------------------------------- |  | - | --------- | 
|SEC registration fee               |  | $ | 12,670    | 
|NASD filing fee                    |  | $ | 10,500    | 
|NASDAQ National Market listing fee |  | $ | 15,000    | 
|Printing and engraving expenses    |  | $ | 500,000   | 
|Legal fees and expenses            |  | $ | 1,050,000 | 
|Accounting fees and expenses       |  | $ | 300,000   | 
|Transfer agent and registrars fee |  | $ | 50,000    | 
|Miscellaneous                      |  | $ | 161,830   | 
|                                   |  |   |           | 
|Total                              |  | $ | 2,100,000 | 
|                                   |  |   |           | 







Item
14.     Indemnification of Directors
and Officers




The General Corporation Law of the State of
Delaware (DGCL) authorizes corporations to limit or
eliminate the personal liability of directors to corporations
and their stockholders for monetary damages for breaches of
directors fiduciary duties. Our amended and restated
certificate of incorporation will include a provision that
eliminates the personal liability of directors for monetary
damages for actions taken as a director, except for liability
for breach of the duty of loyalty; for acts or omissions not in
good faith or involving intentional misconduct or knowing
violation of law; under Section 174 of the DGCL (unlawful
dividends and stock repurchases); or for transactions from which
the director derived improper personal benefit.




Our amended and restated certificate of
incorporation will also provide that the registrant must
indemnify our directors and officers to the fullest extent
authorized by the DGCL and must also pay expenses incurred in
defending any such proceeding in advance of the final
disposition of any proceeding, provided that, if the DGCL
requires, such advance payment will be made only if we receive
an undertaking to repay all amounts so advanced if it should
ultimately be determined that such director or officer is not
entitled to be so indemnified.




The indemnification rights set forth above shall
not be exclusive of any other right which an indemnified person
may have or hereafter acquire under any statute, provision of
our amended and restated certificate of incorporation, our
amended and restated by-laws, agreement, vote of stockholders or
disinterested directors or otherwise.

Item 15.     Recent
Sales of Unregistered Securities

Set forth below is information regarding shares
of common stock and preferred stock issued, and options and
warrants granted, by us, within the past three years. Also
included is the consideration, if any, received by us for such
shares, options and warrants and information relating to the
section of the Securities Act or rule of the Securities Exchange
Commission, under which exemption from registration was claimed.

Stock based awards that were granted to
non-employees were valued at the estimated fair market value of
the stock for the applicable period and based on negotiated
agreements with each non-employee. In some instances where we
owed a non-employee a fixed dollar amount based on previously
negotiated agreements and services had been rendered, a further
negotiation resulted in which the non-employee received the
stock based award at a price significantly below fair market
value in exchange for forgiveness of the dollar amount that we
owed. In these cases, the stock based award was recorded at the
value of the dollar amount forgiven by the non-employee.

II-1



---



##### Table of Contents





| |     |                          
| | --- | -------------------------
| | (a) | Issuance of Capital Stock

On July 17, 2002, we issued an aggregate of
2,333 shares of common stock to Magnum Group at a price per
share of $0.30 in consideration of consulting services provided.

On July 19, 2002, we issued an aggregate of
783,364 shares of Series A convertible preferred stock
to Akers, Brown, Eaton, Feldman, Flaherty, Jacobson, Jones,
Kahn, Katz, Levin, Martin, Mikolon, Mincey, Retzlaff, Sanders,
Santaromita, Sher and Wise at a price per share of $7.83 in
consideration of conversion of debt.

On July 19, 2002 we issued an aggregate of
305,808 shares of Series A convertible preferred stock
to Bermuda Bay Ltd., Capital Paradigms, Inc., David Israel,
Richard Davis, Jr., Diamed Medizintechnik GmbH, Dominion
Financial Group Management, Inc. Burt Dubow, Dave Fancher, First
Oneida (1995) L.P., Jerre Freeman, M.D., Wayne
Fritzsche, James Gills, M.D., JTB VisionQuest, Northlea
Partners, R.D. Irrevocable Trust, A.H. Rodriquez, Safe
Harbor Fund I, L.P., Safe Harbor Managed
Account 101-A, Ltd., Sanders Childrens Trust, Paul
Scharfer, Lacy Shaw and TLC Vision Corporation, at a price per
share of $5.50 in consideration of the conversion of debt.

On July 19, 2002, we issued an aggregate of
97,243 shares of Series A convertible preferred stock
to existing Series A convertible preferred stockholders
pursuant to the anti-dilution provisions included in the terms
of debentures converted into Series A preferred stock.

On July 25, 2002 we issued an aggregate of
524,070 shares of Series B convertible preferred stock
to TLC Vision Corporation at a purchase price per share of $5.78
in consideration for cash and the conversion of debt.

On July 25, 2002 we issued an aggregate of
96,042 shares of Series B convertible preferred stock
to Bridge Note holders at a purchase price per share of $5.20 in
consideration for the conversion of debt.

On July 25, 2002, we issued an aggregate of
288,950 shares of voting common stock upon conversion of
non-voting common shares due to our reincorporation in Delaware
through a parent subsidiary merger of companies.

On April 17, 2003 we issued an aggregate of
17,375 shares of common stock to Bruce Riddell and Bob
Schulz at a purchase price per share of $1.30 in consideration
for consulting services provided.

On November 30, 2003 we issued an aggregate
of 507,604 shares of common stock to Asahi Medical
Co. Ltd. at a purchase price per share of $0.98502 in
consideration for conversion of debt.

On December 31, 2003 we issued an aggregate
of 613,292 shares of common stock to Diamed Medizintechnik
GmbH, Rapheal Drehsen, Dan Drone, Richard Hairston, Howard
Howell, Dan Johnson Revocable Trust, Harvey Kahn, Mikolon,
Santaromita, David Shapiro, Patrick Sheppard, Hans Stock,
Elizabeth Strapp, Alan Szucs, TLC Vision Corporation and S.M.
Weinstock at a purchase price per share of $0.98502 in
consideration for cash.

On January 27, 2004 we issued an aggregate
of 25,000 shares of common stock to John Abeles at a
purchase price per share of $0.80 in consideration for cash.

On March 22, 2004 we issued an aggregate of
24,750 shares of common stock to Shirley McGarvey at a
purchase price per share of $0.13 in consideration for cash.

On July 17, 2004 we issued an aggregate of
77,370 shares of common stock to Carolina Eye Associates,
Gale Martin and the children of Rick Davis at a purchase price
per share of $1.20, $1.20 and $4.00, respectively, in
consideration for cash.




On July 17, 2004 we issued an aggregate of
40,871 shares of Series A convertible preferred stock
to Eaton, Feldman, Jacobsen, Jones, Kahn, Katz, Levin, Mikolon,
Mincey, Santaromita and Sher at a purchase price per share of
$7.83 in consideration for cash.




II-2



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##### Table of Contents






On July 17, 2004 we issued an aggregate of
173,224 shares of Series A convertible preferred stock
to Capital Paradigms, Inc., David Israel, Richard
Davis, Jr., Diamed Medizintechnik GmbH, Dominion Financial
Group Management, Inc., Burt Dubow, Jerre Freeman, M.D.,
James Gills, M.D., JTB VisionQuest, Northlea Partners,
A.H. Rodriquez, Safe Harbor Fund I, L.P., Safe Harbor
Managed Account 101-A, Ltd., and Paul Scharfer at a
purchase price per share of $5.55 in consideration for cash.




On July 17, 2004 we issued an aggregate of
165,189 shares of Series A convertible preferred stock
to Akers, Martin, Retzlaff, Sanders, Sanders Childrens
Trust and Wise in exchange for the cashless exercise of warrants.

On July 28, 2004 we issued an aggregate of
152,500 shares of common stock to Deupree, Gills, JTB
VisionQuest, Krusen and Rodriguez at a purchase price per share
of $0.04 in consideration for cash.

On July 28, 2004 we issued an aggregate of
12,500 shares of common stock to Gray Cary at a purchase
price per share of $0.13 in consideration for cash.

On July 28, 2004 we issued an aggregate of
32,250 shares of common stock to Dubow, Minero and
Rodriquez at a purchase price per share of $2.00 in
consideration for cash.

On July 28, 2004 we issued an aggregate of
3,000 shares of common stock to Dubow, at a purchase price
per share of $4.00 in consideration for cash.

The foregoing sales of securities were made in
reliance upon the exemption from the registration requirements
of the Securities Act, as set forth in Section 4(2) under
the Securities Act and Rule 506 of Regulation D
promulgated thereunder relative to the sales by an issuer not
involving any public offering, to the extent an exemption from
registration was required.



| |     |                     
| | --- | --------------------
| | (b) | Options and Warrants




As of September 30, 2004, we have issued to
employees, directors and consultants 1,943,399 shares of
common stock upon the exercise of stock options at a weighted
average exercise price of $1.46 per share, of which, options to
purchase 1,599,316 shares of common stock were outstanding under
our stock option plans. All of these grants were made to our
employees, officers, directors or consultants under written
compensatory benefit plans within the limits on the amount of
securities that can be issued under Rule 701. Accordingly,
these grants and sales were made in reliance on Rule 701 of
the Securities Act.




Item 16.     Exhibits
and Financial Statement Schedules



| |     |                                                                                       
| | --- | --------------------------------------------------------------------------------------
| | (a) | Exhibits. The following exhibits are filed as
    part of this Registration Statement:




|        |       |                        |  |                                                                                                                                                                                                                                                
|------- | ----- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                       
|Number  |       | Description of Exhibit
|        |       |                       
|        | 1.1   |                        |  | Form of Underwriting Agreement                                                                                                                                                                                                                 
|        | 2.1   |                        |  | Form of Plan of Reorganization                                                                                                                                                                                                                 
|        | 3.1*  | *                      |  | Amended and Restated Certificate of Incorporation
    of OccuLogix, Inc., as currently in effect                                                                                                                                               
|        | 3.2*  | *                      |  | Amended and Restated By-laws of OccuLogix, Inc.,
    as currently in effect                                                                                                                                                                    
|        | 3.3   |                        |  | Form of Amended and Restated Certificate of
    Incorporation of OccuLogix, Inc. to be effective upon completion
    of this offering                                                                                                          
|        | 3.4   |                        |  | Form of Amended and Restated By-Laws of OccuLogix
    to be effective upon the completion of this offering                                                                                                                                     
|        | 4.1   |                        |  | Second Amended and Restated Investors Rights
    Agreement                                                                                                                                                                                     
|        | 5.1   |                        |  | Opinion of Torys LLP                                                                                                                                                                                                                           
|        | 10.1* | *                      |  | Assignment and Distribution Agreement dated
    March 22, 2000 by and among RheoLogix, LLC, Apheresis
    Technologies, Inc. and CytoLogix Corporation                                                                                         
|        | 10.2* | *                      |  | Memorandum dated December 31, 2001 by and
    between Asahi Medical Co., Ltd., OccuLogix Corporation and
    Apheresis Technologies, Inc. re: terminating various agreements
    and agreeing to enter into new separate distributor agreements




II-3



---



##### Table of Contents






|        |       |                        |  |                                                                                                                                                     
|------- | ----- | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                       
|Number  |       | Description of Exhibit
|        |       |                       
|        | 10.3* | *                      |  | Distributorship Agreement dated December 31,
    2001 between Asahi Medical Co., Ltd. and OccuLogix
    Corporation                                 
|        |       |                        |  | 2003 Memorandum dated October 30, 2003,
    between Asahi Medical Co. Ltd. and Vascular Sciences
    Corporation                                    
|        |       |                        |  | 2004 Memorandum dated July 28, 2004, by and
    between Asahi Medical Co., Ltd. and Vascular Sciences
    Corporation                               
|        | 10.4* | *                      |  | Distributorship Agreement dated January 1,
    2002 between MeSys GmbH and OccuLogix Corporation                                                    
|        |       |                        |  | Addendum to Distribution Agreement from
    January 1, 2002 between MeSys GmbH and OccuLogix
    Corporation, dated April 7, 2003                   
|        |       |                        |  | Second Addendum to Distribution Agreement from
    January 1, 2002, between MeSys GmbH and OccuLogix
    Corporation, dated September 22, 2003      
|        |       |                        |  | Third Addendum to Distribution Agreement between
    MeSys GmbH and OccuLogix Corporation, dated August 9, 2004                                     
|        | 10.5* | *                      |  | Asset Purchase Agreement dated January 1,
    2002 between Apheresis Technologies, Inc. and OccuLogix                                               
|        | 10.6* | *                      |  | Amended and Restated Marketing and Distribution
    Agreement dated October 25, 2004 between Diamed
    Medizintechnik GmbH and OccuLogix, Inc.     
|        | 10.7* | *                      |  | 2002 OccuLogix/ Stock Agreement dated
    February 21, 2002 between Hans K. Stock and OccuLogix
    Corporation re: royalty payments                
|        | 10.8* | *                      |  | Amended and Restated Patent License and Royalty
    Agreement dated October 25, 2004 between OccuLogix
    Corporation and Prof. Dr. Richard Brunner
|        | 10.9* | *                      |  | Distribution Services Agreement dated May 1,
    2002 between Apheresis Technologies, Inc. and OccuLogix
    Corporation                            
|        |       |                        |  | Amendment dated July 30, 2004 between
    Apheresis Technologies, Inc. and OccuLogix Corporation                                                    
|        | 10.10 | **                     |  | Consulting Agreement dated June 25, 2002
    between OccuLogix Corporation and Hans K. Stock                                                        
|        | 10.11 | **                     |  | 2002 Stock Option Plan                                                                                                                              
|        | 10.12 | **                     |  | Amended and Restated Patent License and Royalty
    Agreement between OccuLogix, Inc. and Mr. Hans Stock dated
    October 25, 2004.                
|        | 10.13 | **                     |  | Employment Agreement between OccuLogix, Inc. and
    Elias Vamvakas dated September 1, 2004.                                                        
|        | 10.14 | **                     |  | Employment Agreement between OccuLogix, Inc. and
    Thomas P. Reeves dated August 1, 2004.                                                         
|        | 10.15 | **                     |  | Employment Agreement between OccuLogix, Inc. and
    William G. Dumencu dated August 1, 2003.                                                       
|        | 10.16 | **                     |  | Employment Agreement between OccuLogix, Inc. and
    Dr. Irving Siegel dated August 1, 2003.                                                        
|        | 10.17 | **                     |  | Employment Agreement between OccuLogix, Inc. and
    Stephen Kilmer dated July 30, 2004.                                                            
|        | 10.18 | **                     |  | Employment Agreement between OccuLogix, Inc. and
    Julie Fotheringham dated September 1, 2004.                                                    
|        | 10.19 | **                     |  | Employment Agreement between OccuLogix, Inc. and
    Joseph Zawaideh dated September 7, 2004.                                                       
|        | 10.20 | **                     |  | Product Purchase Agreement between OccuLogix,
    L.P. and Rheo Therapeutics Inc. dated September 29,
    2004.                                     
|        | 10.21 | **                     |  | Service Agreement between OccuLogix and Promedica
    International dated August 13, 2003.                                                          
|        | 10.22 |                        |  | Amended and Restated Stock Option Plan                                                                                                              
|        | 10.23 |                        |  | Employment Agreement between OccuLogix, Inc.
    and Dr. David Eldridge dated November 9, 2004                                                      
|        | 21.1* | *                      |  | Subsidiaries of Registrant                                                                                                                          
|        | 23.1  |                        |  | Consent of Ernst & Young LLP                                                                                                                        
|        | 23.2  |                        |  | Consent of Torys LLP (included in
    Exhibit 5.1)                                                                                                  
|        | 24**  |                        |  | Power of Attorney (included on the signature page
    to the Form S-1)                                                                              












|   |                  
|-- | -----------------
|** | Previously filed.




II-4



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##### Table of Contents



Item
17.     Undertakings



| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | The undersigned registrant hereby undertakes to
    provide to the underwriters at the closing specified in the
    underwriting agreement, certificates in such denominations and
    registered in such names as required by the underwriters to
    permit prompt delivery to each purchaser.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | 2. | Insofar as indemnification for liabilities
    arising under the Securities Act of 1933 may be permitted
    to directors, officers, and controlling persons of the
    registrant pursuant to the foregoing provisions, or otherwise,
    the registrant has been advised that in the opinion of the SEC
    such indemnification is against public policy as expressed in
    the Securities Act of 1933 and is therefore unenforceable. In
    the event that a claim for indemnification by the registrant
    against such liabilities, other than the payment by the
    registrant of expenses incurred or paid by a director, officer
    or controlling person of the registrant in the successful
    defense of any action, suit or proceeding, is asserted by such
    director, officer or controlling person in connection with the
    securities being registered, the registrant will, unless in the
    opinion of its counsel the matter has been settled by
    controlling precedent, submit to a court of appropriate
    jurisdiction the question whether such indemnification by it is
    against public policy as expressed in the Act and will be
    governed by the final adjudication of such issue.



| |    |                                                   
| | -- | --------------------------------------------------
| | 3. | The undersigned registrant hereby undertakes that:



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | For purposes of determining any liability under
    the Securities Act of 1933, the information omitted from the
    form of prospectus filed as part of this registration statement
    in reliance upon Rule 430A and contained in a form of
    prospectus filed by the registrant pursuant to
    Rule 424(b)(1) or (4) or 497(h) under the Securities
    Act of 1933 shall be deemed to be part of this registration
    statement as of the time it was declared effective.
|
| | (2) | For the purpose of determining any liability
    under the Securities Act of 1933, each post-effective amendment
    that contains a form of prospectus shall be deemed to be a new
    registration statement relating to the securities offered
    therein, and the offering of such securities at that time shall
    be deemed to be the initial bona fide offering thereof.                                                                                                 

II-5



---



##### Table of Contents



SIGNATURE




Pursuant to the requirements of the Securities
Act of 1933, as amended, the registrants have duly caused this
amendment to the registration statement to be signed on their
behalf by the undersigned, thereunto duly authorized in the City
of Mississauga, Province of Ontario, on November 15, 2004.






| |                
| | ---------------
| | OCCULOGIX, INC.



| |     |                   
| | --- | ------------------
| | By: | /s/ Elias Vamvakas

| |                               
| | ------------------------------
| |                               
| | Name:  Elias Vamvakas         
| | Title: Chief Executive Officer




Pursuant to the requirements of the Securities
Act of 1933, as amended, this Amendment to the Registration
Statement has been signed below by the following persons in the
capacities indicated on the 15th day of November, 2004.




|                                                         |  |                                                                            |  | 
|-------------------------------------------------------- |  | -------------------------------------------------------------------------- |  | 
|                                                         |  |                                                                           
|Signature                                                |  | Title                                                                     
|                                                         |  |                                                                           
|                                                        
|/s/ Elias VamvakasElias Vamvakas                         |  | Chief Executive Officer (Principal Executive
    Officer)
    and Director
|                                                        
|/s/ William DumencuWilliam Dumencu                       |  | Chief Financial Officer
    (Principal Financial and Accounting Officer)  
|                                                        
|*Richard Lindstrom                                       |  | Director                                                                  
|                                                        
|*Jay T. Holmes                                           |  | Director                                                                  
|                                                        
|*Thomas Davidson                                         |  | Director                                                                  
|                                                        
|*Georges Noël                                            |  | Director                                                                  
|                                                        
|*By:  /s/ Elias VamvakasElias Vamvakas, Attorney-in-Fact |  |                                                                           



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##### Table of Contents



EXHIBIT INDEX




|        |       |                        |  |                                                                                                                                                                                                                                                
|------- | ----- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                       
|Number  |       | Description of Exhibit
|        |       |                       
|        | 1.1   |                        |  | Form of Underwriting Agreement                                                                                                                                                                                                                 
|        | 2.1   |                        |  | Form of Plan of Reorganization                                                                                                                                                                                                                 
|        | 3.1*  | *                      |  | Amended and Restated Certificate of Incorporation
    of OccuLogix, Inc., as currently in effect                                                                                                                                               
|        | 3.2*  | *                      |  | Amended and Restated By-laws of OccuLogix, Inc.,
    as currently in effect                                                                                                                                                                    
|        | 3.3   |                        |  | Form of Amended and Restated Certificate of
    Incorporation of OccuLogix, Inc. to be effective upon completion
    of this offering                                                                                                          
|        | 3.4   |                        |  | Form of Amended and Restated By-Laws of OccuLogix
    to be effective upon the completion of this offering                                                                                                                                     
|        | 4.1   |                        |  | Second Amended and Restated Investors Rights
    Agreement                                                                                                                                                                                     
|        | 5.1   |                        |  | Opinion of Torys LLP                                                                                                                                                                                                                           
|        | 10.1* | *                      |  | Assignment and Distribution Agreement dated
    March 22, 2000 by and among RheoLogix, LLC, Apheresis
    Technologies, Inc. and CytoLogix Corporation                                                                                         
|        | 10.2* | *                      |  | Memorandum dated December 31, 2001 by and
    between Asahi Medical Co., Ltd., OccuLogix Corporation and
    Apheresis Technologies, Inc. re: terminating various agreements
    and agreeing to enter into new separate distributor agreements
|        | 10.3* | *                      |  | Distributorship Agreement dated December 31,
    2001 between Asahi Medical Co., Ltd. and OccuLogix
    Corporation                                                                                                                            
|        |       |                        |  | 2003 Memorandum dated October 30, 2003,
    between Asahi Medical Co. Ltd. and Vascular Sciences
    Corporation                                                                                                                               
|        |       |                        |  | 2004 Memorandum dated July 28, 2004, by and
    between Asahi Medical Co., Ltd. and Vascular Sciences
    Corporation                                                                                                                          
|        | 10.4* | *                      |  | Distributorship Agreement dated January 1,
    2002 between MeSys GmbH and OccuLogix Corporation                                                                                                                                               
|        |       |                        |  | Addendum to Distribution Agreement from
    January 1, 2002 between MeSys GmbH and OccuLogix
    Corporation, dated April 7, 2003                                                                                                              
|        |       |                        |  | Second Addendum to Distribution Agreement from
    January 1, 2002, between MeSys GmbH and OccuLogix
    Corporation, dated September 22, 2003                                                                                                 
|        |       |                        |  | Third Addendum to Distribution Agreement between
    MeSys GmbH and OccuLogix Corporation, dated August 9, 2004                                                                                                                                
|        | 10.5* | *                      |  | Asset Purchase Agreement dated January 1,
    2002 between Apheresis Technologies, Inc. and OccuLogix                                                                                                                                          
|        | 10.6* | *                      |  | Amended and Restated Marketing and Distribution
    Agreement dated October 25, 2004 between Diamed
    Medizintechnik GmbH and OccuLogix, Inc.                                                                                                
|        | 10.7* | *                      |  | 2002 OccuLogix/ Stock Agreement dated
    February 21, 2002 between Hans K. Stock and OccuLogix
    Corporation re: royalty payments                                                                                                           
|        | 10.8* | *                      |  | Amended and Restated Patent License and Royalty
    Agreement dated October 25, 2004 between OccuLogix
    Corporation and Prof. Dr. Richard Brunner                                                                                           
|        | 10.9* | *                      |  | Distribution Services Agreement dated May 1,
    2002 between Apheresis Technologies, Inc. and OccuLogix
    Corporation Amendment, dated July 30, 2004 between
    Apheresis Technologies, Inc. and OccuLogix Corporation                     
|        | 10.10 | **                     |  | Consulting Agreement dated June 25, 2002
    between OccuLogix Corporation and Hans K. Stock                                                                                                                                                   
|        | 10.11 | **                     |  | 2002 Stock Option Plan                                                                                                                                                                                                                         
|        | 10.12 | **                     |  | Amended and Restated Patent License and Royalty
    Agreement between OccuLogix, Inc. and Mr. Hans Stock dated
    October 25, 2004.                                                                                                           
|        | 10.13 | **                     |  | Employment Agreement between OccuLogix, Inc. and
    Elias Vamvakas dated September 1, 2004.                                                                                                                                                   
|        | 10.14 | **                     |  | Employment Agreement between OccuLogix, Inc. and
    Thomas P. Reeves dated August 1, 2004.                                                                                                                                                    






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##### Table of Contents






|        |       |                        |  |                                                                                                            
|------- | ----- | ---------------------- |  | -----------------------------------------------------------------------------------------------------------
|Exhibit |       |                       
|Number  |       | Description of Exhibit
|        |       |                       
|        | 10.15 | **                     |  | Employment Agreement between OccuLogix, Inc. and
    William G. Dumencu dated August 1, 2003.              
|        | 10.16 | **                     |  | Employment Agreement between OccuLogix, Inc. and
    Dr. Irving Siegel dated August 1, 2003.               
|        | 10.17 | **                     |  | Employment Agreement between OccuLogix, Inc. and
    Stephen Kilmer dated July 30, 2004.                   
|        | 10.18 | **                     |  | Employment Agreement between OccuLogix, Inc. and
    Julie Fotheringham dated September 1, 2004.           
|        | 10.19 | **                     |  | Employment Agreement between OccuLogix, Inc. and
    Joseph Zawaideh dated September 7, 2004.              
|        | 10.20 | **                     |  | Product Purchase Agreement between OccuLogix,
    L.P. and Rheo Therapeutics Inc. dated September 29, 2004.
|        | 10.21 | **                     |  | Service Agreement between OccuLogix and Promedica
    International dated August 13, 2003.                 
|        | 10.22 |                        |  | Amended and Restated Stock Option Plan                                                                     
|        | 10.23 |                        |  | Employment Agreement between OccuLogix, Inc.
    and Dr. David Eldridge dated November 9, 2004             
|        | 21.1* | *                      |  | Subsidiaries of Registrant                                                                                 
|        | 23.1  |                        |  | Consent of Ernst & Young LLP                                                                               
|        | 23.2  |                        |  | Consent of Torys LLP (included in
    Exhibit 5.1)                                                         
|        | 24**  |                        |  | Power of Attorney (included on the signature page
    to the Form S-1)                                     












|   |                  
|-- | -----------------
|** | Previously filed.