10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007
COMMISSION FILE NUMBER: 0-29302

TLC VISION CORPORATION

(Exact name of registrant as specified in its charter)

NEW BRUNSWICK, CANADA (State or jurisdiction of incorporation or organization)	980151150 (I.R.S. Employer Identification No.)
5280 SOLAR DRIVE, SUITE 300 MISSISSAUGA, ONTARIO (Address of principal executive offices)	L4W 5M8 (Zip Code)

     Registrant’s telephone, including area code: (905) 602-2020

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

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12-b(2) of the Exchange Act.

o Large accelerated filer           þ Accelerated filer           o Non-accelerated filer

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b(2) of the Exchange Act). o Yes  þ No

     As of August 8, 2007 there were 49,747,129 of the registrant’s Common Shares outstanding.

INDEX

PART I. FINANCIAL INFORMATION
	Item 1.	Consolidated Financial Statements (unaudited)
		Consolidated Statements of Operations for the three and six months ended June 30, 2007 and 2006
		Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006
		Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006
		Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2007
		Notes to Interim Consolidated Financial Statements
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk
	Item 4.	Controls and Procedures
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings
	Item 1A.	Risk Factors
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
	Item 3.	Defaults Upon Senior Securities
	Item 4.	Submission of Matters to a Vote of Security Holders
	Item 5.	Other Information
	Item 6.	Exhibits
		Signatures
Purchase Agreement
CEO's Certification
CFO's Certification
Section 906 CEO's Certification
Section 906 CFO's Certification

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PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

TLC VISION CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED) (In thousands except per share amounts)

	THREE MONTHS ENDED						SIX MONTHS ENDED
	JUNE 30,						JUNE 30,
	2007			2006			2007			2006
Revenues:
Refractive centers	$	46,952		$	43,679		$	98,656		$	91,771
Doctor services		25,964			25,405			51,882			50,301
Eye care		8,214			7,131			13,786			11,724
Total revenues		81,130			76,215			164,324			153,796
Cost of revenues (excluding amortization expense shown below):
Refractive centers		32,656			29,944			66,853			61,941
Doctor services		18,258			18,040			36,639			34,800
Eye care		3,959			3,030			6,434			6,662
Total cost of revenues (excluding amortization expense shown below)		54,873			51,014			109,926			103,403
Gross profit		26,257			25,201			54,398			50,393
General and administrative		8,966			7,085			18,896			17,912
Marketing and sales		10,686			6,704			19,121			13,675
Research and development, clinical and regulatory		—			—			—			1,475
Amortization of intangibles		927			874			1,719			1,738
Other expenses (income), net		96			(169	)		534			323
		20,675			14,494			40,270			35,123
Operating income		5,582			10,707			14,128			15,270
Gain on sale of OccuLogix, Inc. stock		933			1,450			933			1,450
Interest income		579			464			1,147			1,235
Interest expense		(689	)		(383	)		(1,129	)		(679	)
Minority interests		(2,761	)		(2,938	)		(5,300	)		(2,752	)
Earnings (losses) from equity investments		(1,115	)		(899	)		(2,821	)		24
Income before income taxes		2,529			8,401			6,958			14,548
Income tax (expense) benefit		(1,653	)		2,466			(2,604	)		(969	)
Net income	$	876		$	10,867		$	4,354		$	13,579
Earnings per share — basic	$	0.01		$	0.16		$	0.06		$	0.20
Earnings per share — diluted	$	0.01		$	0.16		$	0.06		$	0.19
Weighted average number of common shares outstanding — basic		68,054			68,881			68,589			68,819
Weighted average number of common shares outstanding — diluted		68,581			69,830			69,104			69,832

See the accompanying notes to unaudited interim consolidated financial statements.

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TLC VISION CORPORATION

CONSOLIDATED BALANCE SHEETS

(In thousands)

	(UNAUDITED)
	JUNE 30,			DECEMBER 31,
	2007			2006
ASSETS
Current assets:
Cash and cash equivalents	$	17,216		$	28,917
Short-term investments		—			11,575
Accounts receivable, net		21,105			19,315
Deferred tax asset		11,464			7,153
Prepaid expenses, inventory and other		14,863			13,911
Total current assets		64,648			80,871
Restricted cash		1,035			1,035
Investments and other assets		35,489			38,857
Goodwill		90,567			96,148
Other intangible assets, net		18,785			20,503
Fixed assets, net		62,141			56,888
Total assets	$	272,665		$	294,302
LIABILITIES
Current liabilities:
Accounts payable	$	13,086		$	12,314
Accrued liabilities		18,920			20,231
Current maturities of long-term debt		9,951			8,311
Total current liabilities		41,957			40,856
Long term-debt, less current maturities		100,940			15,122
Other long-term liabilities		4,571			4,442
Minority interests		15,421			14,583
Total liabilities		162,889			75,003
STOCKHOLDERS’ EQUITY
Common stock, no par value; unlimited number authorized		336,013			450,133
Option and warrant equity		1,299			1,806
Accumulated deficit		(227,536	)		(232,640	)
Total stockholders’ equity		109,776			219,299
Total liabilities and stockholders’ equity	$	272,665		$	294,302

See the accompanying notes to unaudited interim consolidated financial statements.

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TLC VISION CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED) (In thousands)

	SIX MONTHS
	ENDED JUNE 30,
	2007			2006
OPERATING ACTIVITIES
Net income	$	4,354		$	13,579
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization		9,134			7,676
Deferred taxes		1,939			2,019
Minority interests		5,300			2,752
(Income) expense from equity investments		2,821			(24	)
Loss (gain) on sales and disposals of fixed assets		(81	)		1
Reimbursements from investments in research and development arrangements		—			(300	)
Write-down of OccuLogix, Inc. inventory		—			1,625
Gain on sale of OccuLogix, Inc. stock		(933	)		(1,450	)
Non-cash compensation expense		731			925
Other		117			26
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable		(1,790	)		136
Prepaid expenses, inventory and other current assets		(687	)		(1,081	)
Accounts payable and accrued liabilities		796			(3,103	)
Cash from operating activities		21,701			22,781
INVESTING ACTIVITIES
Purchases of fixed assets		(7,281	)		(6,349	)
Proceeds from sales of fixed assets		268			516
Proceeds from sale of OccuLogix, Inc. stock, net		2,000			2,226
OccuLogix, Inc. cash balance at time of deconsolidation		—			(14,814	)
Distributions and loan payments received from equity investments		1,857			1,854
Reimbursements from investments in research and development arrangements		—			300
Acquisitions and equity investments		(3,889	)		(3,171	)
Proceeds from sales of short-term investments		17,375			9,925
Purchases of short-term investments		(5,800	)		(3,275	)
Other		33			(47	)
Cash from investing activities		4,563			(12,835	)
FINANCING ACTIVITIES
Restricted cash movement		—			(35	)
Principal payments of debt financing and capital leases		(3,497	)		(1,968	)
Proceeds from debt financing		85,317			283
Capitalized debt costs		(1,631	)		—
Distributions to minority interests		(4,560	)		(4,754	)
Proceeds from issuances of common stock		2,154			445
Purchases of treasury stock		(115,748	)		—
Proceeds from issuances of OccuLogix, Inc. stock		—			233
Cash from financing activities		(37,965	)		(5,796	)
Net (decrease) increase in cash and cash equivalents during the period		(11,701	)		4,150
Cash and cash equivalents, beginning of period		28,917			31,729
Cash and cash equivalents, end of period	$	17,216		$	35,879

See the accompanying notes to unaudited interim consolidated financial statements.

5

TLC VISION CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(UNAUDITED) (In thousands)

													OPTION
													AND
	COMMON STOCK						TREASURY STOCK						WARRANT			ACCUMULATED
	SHARES			AMOUNT			SHARES			AMOUNT			EQUITY			DEFICIT			TOTAL
Balance December 31, 2006		69,091		$	450,133			—		$	—		$	1,806		$	(232,640	)	$	219,299
Shares issued as part of the employee share purchase plan and 401(k) plan		31			137															137
Exercises of stock options		593			2,524									(507	)					2,017
Stock-based compensation					731															731
Adjustment related to adoption of FIN 48 (see note 12)																	750			750
Purchases of treasury stock								20,000			(117,512	)								(117,512	)
Retirement of treasury stock		(20,000	)		(117,512	)		(20,000	)		117,512									—
Net income and comprehensive income																	4,354			4,354
Balance September 30, 2005		49,715		$	336,013			—			—		$	1,299		$	(227,536	)	$	109,776

See the accompanying notes to unaudited interim consolidated financial statements.

6

TLC VISION CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM

CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2007 (Unaudited)

(Tabular amounts in thousands, except per share amounts)

1.	BASIS OF PRESENTATION AND ACCOUNTING POLICIES
	The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The unaudited interim consolidated financial statements included herein should be read in conjunction with the Annual Report on Form 10-K for the year ended December 31, 2006 filed by TLC Vision Corporation (the “Company” or “TLCVision”) with the Securities and Exchange Commission. In the opinion of management, all normal recurring adjustments and estimates considered necessary for a fair presentation have been included. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2007. The consolidated financial statements as of December 31, 2006 and unaudited interim consolidated financial statements for the three and six months ended June 30, 2007 and 2006 include the accounts and transactions of the Company and its majority-owned subsidiaries that are not considered variable interest entities (“VIEs”) and all VIEs for which the Company is the primary beneficiary. All significant intercompany accounts and transactions have been eliminated.
	In April 2006, the Company sold 0.8 million shares of its OccuLogix, Inc. common stock reducing its ownership to below 50%. In connection with that transaction, the Company deconsolidated OccuLogix, Inc. and began accounting for its investment in OccuLogix, Inc. under the equity method. At June 30, 2007, the Company owned18.8 million shares or approximately 33% of OccuLogix, Inc.’s issued and outstanding common stock.
	The unaudited interim consolidated financial statements for the three and six months ended June 30, 2007 include certain reclassifications to conform with classifications for the three and six months ended June 30, 2007. Beginning in 2007, the Company realigned its organization into three businesses: refractive centers, doctor services and eye care. Refractive centers, which is also a reportable segment, is comprised of the Company’s 79 centers that provide corrective laser surgery, of which 65 centers are majority-owned and 14 centers are minority-owned. The Company refined its definition of a center primarily based on its level of operating control at each location and its consistency with the Company’s center operating model. Prior period classifications have been changed to conform with classifications for the three and six months ended June 30, 2007. Doctor services is comprised of the Company’s refractive access and mobile cataract segments along with certain other operations. Eye care is comprised of the Company’s optometric franchising and age-related macular degeneration (“AMD”) segments. See Note 8 for more information on the Company’s reportable segments.
2.	STOCK-BASED COMPENSATION
	Effective January 1, 2006, the Company adopted the fair value recognition provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (“Statement 123(R)”) using the modified prospective method of application.
	Total stock-based compensation for the three months ended June 30, 2007 was $0.4 million ($0.3 million after tax or less than $0.01 per basic and diluted share) and relates to the TLCVision Stock Option Plan and its Employee Share Purchase Plan. Total stock-based compensation for the three months ended June 30, 2006 was $0.3 million. Total stock-based compensation includes $0.2 million ($0.2 million after tax or less than $0.01 per basic and diluted share) for TLCVision stock options and its Employee Share Purchase Plan, and $0.1 million ($0.1 million after tax or less than $0.01 per basic and diluted share) for the value of stock issued in connection with the Company’s 401(k) matching program.

7

	Total stock-based compensation for the six months ended June 30, 2007 was $0.7 million ($0.4 million after tax or less than $0.01 per basic and diluted share) and relates to the TLCVision Stock Option Plan and its Employee Share Purchase Plan. Total stock-based compensation for the six months ended June 30, 2006 was $0.9 million. Total stock-based compensation includes $0.5 million ($0.4 million after tax or less than $0.01 per basic and diluted share) for TLCVision stock options and its Employee Share Purchase Plan, and $0.3 million ($0.2 million after tax or less than $0.01 per basic and diluted share) for the value of stock issued in connection with the Company’s 401(k) matching program. Total stock-based compensation for the six months ended June 30, 2006 also included $0.2 million ($0.1 million after minority interests and tax or less than $0.01 per basic and diluted share) of stock-based compensation expense recorded by OccuLogix, Inc. in connection with its adoption of Statement 123(R).
	As of June 30, 2007, the total unrecognized compensation expense related to TLCVision non-vested employee awards was approximately $3.5 million. The unrecognized compensation expense will be recognized over the remaining vesting period, which expires December 2010 for certain options.
	For awards granted prior to the adoption of Statement 123(R), the Company uses the attribution method under FASB Interpretation No. 28, “Accounting for Stock Appreciation Rights and Other Variable Stock Option Award Plans,” to amortize stock-based compensation cost. For awards granted subsequent to the adoption of Statement 123(R), the Company uses the straight-line method to amortize stock-based compensation cost.
	The Company granted 35,000 options during the three and six months ended June 30, 2007. The Company granted 5,000 and 883,000 options during the three and six months ended June 30, 2006, respectively. The fair value of stock options granted to employees is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for 2007 and 2006, respectively: risk-free interest rate of 4.5% and 4.4% for 2007 and 2006, respectively; expected dividend yield of 0%; expected life of 5 and 3 years for 2007 and 2006, respectively; and expected volatility of 63% and 57% for 2007 and 2006, respectively.
3.	ACQUISITIONS AND DISPOSITIONS
	On April 11, 2006, the Company sold 0.8 million shares of OccuLogix, Inc. common stock and recorded a gain of $1.4 million. After the sale of stock, the Company owned approximately 49% of OccuLogix, Inc.’s outstanding stock. Due to the insignificance of the results of operations of OccuLogix, Inc. from April 1, 2006 through April 11, 2006, the Company deconsolidated OccuLogix, Inc. effective April 1, 2006 and has accounted for its investment in OccuLogix, Inc. under the equity method since that date (see Note 4).
	On May 30, 2007, the Company entered into an agreement with JEGC OCC Corporation for the sale of all of its common shares of OccuLogix, Inc. The transaction was a two-step sale, and on June 22, 2007, the Company completed its sale of 1.9 million shares of OccuLogix, Inc. common stock for $2.0 million and recorded a gain of $0.9 million. After the sale of stock, the Company owns approximately 33% of OccuLogix, Inc.’s outstanding stock. The remaining shares are to be sold by August 28, 2007 subject to certain conditions including financing by the purchaser.
	The Company’s strategy includes periodic acquisitions of or investments in entities that operate in the refractive, cataract or eye care markets. During the six months ended June 30, 2007, the Company paid approximately $3.9 million to acquire or invest in several entities, none of which were individually material. Of this amount, approximately $2.8 million related to cash paid for the first year earn-out related to the 2005 acquisition of TruVision, which has been included in the purchase price allocation.
4.	INVESTMENTS AND OTHER ASSETS
	Included in investments and other assets as of June 30, 2007 is the Company’s equity investment in OccuLogix, Inc., which totaled $9.1 million. Since April 1, 2006, the Company has accounted for the results of OccuLogix, Inc. under the equity method. As of June 30, 2007, the Company owns approximately 33% of OccuLogix, Inc.’s issued and outstanding common stock. For the three months ended June 30, 2007, OccuLogix, Inc. reported the following:

8

Net sales	$	121
Gross profit	$	39
Net loss	$	(2,579	)

	Because the Company accounted for its original investment in OccuLogix, Inc. at historical cost, the Company must eliminate certain items when it recognizes equity earnings (losses) from OccuLogix, Inc. For the six months ended June 30, 2007, the Company recognized $4.1 million of equity losses from OccuLogix, Inc.
5.	OTHER EXPENSES (INCOME), NET
	Other expenses (income), net includes the following operating items:

	THREE MONTHS ENDED JUNE 30,						SIX MONTHS ENDED JUNE 30,
	2007			2006			2007			2006
Loss (gain) on sales and disposals of fixed assets	$	7		$	(45	)	$	(81	)	$	17
Center closing costs		13			(40	)		141			(32	)
Severance accruals for employees under terms of employment contracts		109			—			534			—
Reimbursements from previous research and development arrangements		—			—			—			(300	)
OccuLogix, Inc. severance accruals		—			—			—			820
Miscellaneous income		(33	)		(84	)		(60	)		(182	)
	$	96		$	(169	)	$	534		$	323

6.	INCOME TAXES
	The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate. The Company believes that there is potential for significant volatility in its 2007 effective tax rate due to several factors, primarily from the impact of any changes to the forecasted current and future year earnings and the nature of net operating loss carryforwards utilized. The Company’s 2007 effective tax rate is estimated to be lower than the statutory rate primarily due to the nature of the net operating loss carryforwards for which the valuation allowance has been released.
	As of June 30, 2007, the Company continues to believe that there is sufficient evidence to recognize certain deferred tax assets. This determination was based on many factors, including a forecast of positive taxable income in future periods, the continued trend of historical taxable income and other relevant factors.
	The Company’s determination of the amount of valuation allowance to release, and the resulting deferred tax asset to recognize, is based primarily on expected taxable income in future years. However, due to uncertainty of future earnings in later years caused by the change in the Company’s business model currently in process, uncertainty in the overall industry and other factors, the Company considered the expected utilization of additional deferred tax assets through 2008. As a result, during the three months ended June 30, 2007, the Company recognized additional deferred tax assets of approximately $3.0 million which is comprised primarily of a reduction to goodwill of $3.0 million.

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7.	EARNINGS PER SHARE
	The following table sets forth the computation of diluted earnings per share:

	THREE MONTHS ENDED JUNE 30,				SIX MONTHS ENDED JUNE 30,
	2007		2006		2007		2006
Net income	$	876	$	10,867	$	4,354	$	13,579
Weighted-average shares outstanding — basic		68,054		68,881		68,589		68,819
Dilutive effect of stock options and warrants		527		949		515		1,013
Weighted-average shares outstanding — diluted		68,581		69,830		69,104		69,832
Earnings per share — diluted	$	0.01	$	0.16	$	0.06	$	0.19

8.

SEGMENT INFORMATION

The Company’s reportable segments are strategic business units that offer different products and services. They are managed and evaluated separately by the chief operating decision maker because each business requires different management and marketing strategies. Prior to 2007, the Company aggregated the refractive centers and access operations into one reportable segment. Beginning in 2007, the Company realigned its organization such that the refractive access segment is now being managed and reported separately. For comparison purposes, the segment information for the three and six months ended June 30, 2006 has been restated to reflect this change in reportable segments. The Company has three lines of business and five reportable segments as follows:

• Refractive Centers: The refractive centers business provides the majority of the Company’s revenue and is in the business of providing corrective laser surgery (principally LASIK) in fixed sites typically branded under the TLC name.

• Doctor Services: The doctor services business provides a variety of services and products directly to doctors and the facilities in which they perform surgery. It consists of the following businesses:

• Refractive Access: The refractive access segment assists surgeons in providing corrective laser surgery in their own practice location by providing refractive technology, technicians, service and practice development support at the surgeon’s office.

• Mobile Cataracts: The mobile cataract segment provides technology and diagnostic equipment and services to doctors and hospitals to support cataract surgery as well as other eye diseases.

• Other: The Company has an accumulation of businesses that manage surgical and secondary care centers. None of these businesses meet the quantitative criteria to be disclosed separately as a reportable segment and are included in “Other” for segment disclosure purposes.

• Eye Care: The eye care business consists of two business segments:

• Optometric Franchising: The optometric franchising segment provides marketing, practice development and purchasing power to independently-owned and operated optometric practices in the United States.

• Age-Related Macular Degeneration (“AMD”): The AMD segment includes the Company’s ownership interest in OccuLogix, Inc., which is pursuing commercial applications for specific eye diseases including dry age-related macular degeneration, glaucoma and dry-eye syndrome.

Corporate depreciation and amortization of $1.3 million for both the six months ended June 30, 2007 and 2006 is included in corporate operating expenses. For purposes of the depreciation and amortization disclosures shown below, these amounts are included in the “Refractive Centers” segment.

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The Company’s reportable segments are as follows:

THREE MONTHS ENDED JUNE 30, 2007
(IN THOUSANDS)			DOCTOR SERVICES						EYE CARE
	REFRACTIVE		REFRACTIVE		MOBILE				OPTOMETRIC
	CENTERS		ACCESS		CATARACT		OTHER		FRANCHISING		AMD			TOTAL
Revenues	$	46,952	$	9,386	$	9,542	$	7,036	$	8,214	$	—		$	81,130
Cost of revenues		32,656		7,169		6,824		4,265		3,959		—			54,873
Gross profit		14,296		2,217		2,718		2,771		4,255		—			26,257
Segment expenses:
Gain on sale of OccuLogix, Inc. stock		—		—		—		—		—		933			933
Marketing and sales		8,139		312		1,058		117		1,060		—			10,686
G&A, amortization and other		2,166		33		987		860		45		—			4,091
Minority interests		483		39		—		757		1,482		—			2,761
(Losses) earnings from equity investments		128		—		—		371		—		(1,614	)		(1,115	)
Segment profit (loss)	$	3,636	$	1,833	$	673	$	1,408	$	1,668	$	(681	)	$	8,537
Corporate operating expenses															(5,898	)
Interest expense, net															(110	)
Income tax expense															(1,653	)
Net income														$	876
Depreciation and amortization	$	2,911	$	585	$	722	$	368	$	15	$	—		$	4,601

THREE MONTHS ENDED JUNE 30, 2006
(IN THOUSANDS)				DOCTOR SERVICES								EYE CARE
	REFRACTIVE			REFRACTIVE			MOBILE					OPTOMETRIC
	CENTERS			ACCESS			CATARACT		OTHER			FRANCHISING			AMD			TOTAL
Revenues	$	43,679		$	9,690		$	9,068	$	6,647		$	7,131		$	—		$	76,215
Cost of revenues		29,944			7,124			6,263		4,653			3,030			—			51,014
Gross profit		13,735			2,566			2,805		1,994			4,101			—			25,201
Segment expenses:
Gain on sale of OccuLogix, Inc. stock		—			—			—		—			—			1,450			1,450
Marketing and sales		4,806			114			664		90			1,030			—			6,704
G&A, amortization and other		2,657			(755	)		968		43			47			—			2,960
Minority interests		(660	)		(75	)		—		(766	)		(1,437	)		—			(2,938	)
(Losses) earnings from equity investments		414			—			—		537			—			(1,850	)		(899	)
Segment profit (loss)	$	6,026		$	3,132		$	1,173	$	1,632		$	1,587		$	(400	)	$	13,150
Corporate operating expenses																			(4,830	)
Interest income, net																			81
Income tax benefit																			2,466
Net income																		$	10,867
Depreciation and amortization	$	2,251		$	610		$	659	$	350		$	14		$	—		$	3,884

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SIX MONTHS ENDED JUNE 30, 2007
(IN THOUSANDS)			DOCTOR SERVICES							EYE CARE
	REFRACTIVE		REFRACTIVE			MOBILE				OPTOMETRIC
	CENTERS		ACCESS			CATARACT		OTHER		FRANCHISING		AMD			TOTAL
Revenues	$	98,656	$	20,182		$	18,417	$	13,283	$	13,786	$	—		$	164,324
Cost of revenues		66,853		14,946			13,152		8,541		6,434		—			109,926
Gross profit		31,803		5,236			5,265		4,742		7,352		—			54,398
Segment expenses:
Gain on sale of OccuLogix, Inc. stock		—		—			—		—		—		933			933
Marketing and sales		14,204		655			1,965		208		2,089		—			19,121
G&A, amortization and other		5,234		(33	)		1,968		1,228		77		—			8,474
Minority interests		1,328		104			—		1,488		2,380		—			5,300
(Losses) earnings from equity investments		642		—			—		668		—		(4,131	)		(2,821	)
Segment profit (loss)	$	11,679	$	4,510		$	1,332	$	2,486	$	2,806	$	(3,198	)	$	19,615
Corporate operating expenses																(12,676	)
Interest income, net																19
Income tax expense																(2,604	)
Net income															$	4,354
Depreciation and amortization	$	5,799	$	1,144		$	1,433	$	728	$	30	$	—		$	9,134

SIX MONTHS ENDED JUNE 30, 2006
(IN THOUSANDS)			DOCTOR SERVICES							EYE CARE
	REFRACTIVE		REFRACTIVE			MOBILE				OPTOMETRIC
	CENTERS		ACCESS			CATARACT		OTHER		FRANCHISING		AMD			TOTAL
Revenues	$	91,771	$	20,525		$	17,010	$	12,766	$	11,724	$	—		$	153,796
Cost of revenues		61,941		14,531			11,940		8,329		5,003		1,659			103,403
Gross profit		29,830		5,994			5,070		4,437		6,721		(1,659	)		50,393
Segment expenses:
Gain on sale of OccuLogix, Inc. stock		—		—			—		—		—		1,450			1,450
Marketing and sales		9,730		237			1,354		209		1,977		168			13,675
G&A, amortization and other		5,951		(1,374	)		2,144		927		98		4,068			11,814
Minority interests		1,548		186			—		1,562		2,171		(2,715	)		2,752
(Losses) earnings from equity investments		830		—			—		1,044		—		(1,850	)		24
Segment profit (loss)	$	13,431	$	6,945		$	1,572	$	2,783	$	2,475	$	(3,580	)	$	23,626
Corporate operating expenses																(9,634	)
Interest income, net																556
Income tax expense																(969	)
Net income															$	13,579
Depreciation and amortization	$	4,421	$	1,159		$	1,291	$	743	$	28	$	34		$	7,676

9.	SUPPLEMENTAL CASH FLOW INFORMATION
	Non-cash transactions:

	SIX MONTHS ENDED JUNE 30,
	2007		2006
Capital lease obligations relating to equipment purchases	$	5,639	$	4,467
Inventory contributed to OccuLogix, Inc.		—		25
Option and warrant reduction		507		47

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Cash paid for the following:

	SIX MONTHS ENDED JUNE 30,
	2007		2006
Interest	$	941	$	678
Income taxes		1,776		860

10.	DEBT
	On June 20, 2007, the Company entered into a $110.0 million credit facility (“Credit Facility”) with CIT Corporation and other financial institutions. The facility is secured by substantially all the assets of the Company and consists of both senior term debt and a revolver as follows:

Senior term debt, totaling $85.0 million, has a six-year term and required amortization payments of 1% per annum plus a percentage of excess cash flow (as defined in the agreement) and sales of assets or borrowings outside of the normal course of business. As of June 30, 2007, $85.0 million was outstanding on this portion of the facility.

Revolving credit facility, totaling $25.0 million with a five-year term. As of June 30, 2007, no borrowings were outstanding under this portion of the facility and approximately $23.8 million was unused and available, which is net of outstanding letters of credit totaling approximately $1.2 million.

The Credit Facility also requires the Company to maintain various financial and non-financial covenants as defined in the agreement.

	Interest on the facility is calculated based on either prime rate or the London Interbank Offered Rate (LIBOR) plus a margin which at June 30, 2007 was 2.50%. In addition, the Company will pay a commitment fee equal to 0.35% on the undrawn portion of the revolving credit facility. In connection with this facility, total costs of $1.9 million were incurred and recorded in other assets as deferred financing costs, and will be amortized over the life of the facility.
11.	SHARE REPURCHASE
	On April 10, 2007, the Board of Directors authorized the Company to repurchase up to 20.0 million of its outstanding common stock at a price per share not less than $5.75 and not greater than $6.25. On June 20, 2007, the Company repurchased 20.0 million of its outstanding common shares (representing approximately 30% of total shares outstanding) through a modified “Dutch” auction. The shares were purchased at a price of $5.75 per share with a total cost of $117.5 million (including applicable transaction expenses). This transaction was financed through a combination of cash-on-hand and the $85 million proceeds under the Company’s new Credit Facility noted above.
12.	RECENT ACCOUNTING PRONOUNCEMENT
	In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes.” FIN 48 provides a two-step approach to recognizing and measuring uncertain tax positions (“UTP”) accounted for in accordance with SFAS No. 109. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the tax position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company adopted the provisions of FIN 48 effective January 1, 2007.
	As a result of implementing FIN 48, the Company recognized a $0.8 million decrease to reserves for uncertain tax positions. This decrease was accounted for as an adjustment to the beginning balance of accumulated deficit

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	on the balance sheet. Including the cumulative effect decrease, at the beginning of 2007 the Company had approximately $0.3 million of total gross unrecognized tax benefits, all of which would favorably affect the effective tax rate. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The Company has accrued $0.1 million in interest and penalties related to unrecognized tax benefits. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not reflect actual outcomes.
	The Company, including its domestic and foreign subsidiaries, is subject to U.S. federal income tax as well as income tax of multiple state and other jurisdictions. Tax years 1994 through present are not yet closed for U.S. federal and state income tax purposes due to net operating losses carried forward from that time.
13.	RECENT ACCOUNTING STANDARDS PENDING ADOPTION
	In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115,” which will become effective in 2008. SFAS No. 159 permits entities to measure eligible financial assets, financial liabilities, and firm commitments at fair value, on an instrument-by-instrument basis, that are otherwise not permitted to be accounted for at fair value under other generally accepted accounting principles. The fair value measurement election is irrevocable and subsequent changes in fair value must be recorded in earnings. The Company will adopt this Statement as of January 1, 2008 and is currently evaluating if it will elect the fair value option for any of its eligible financial instruments and other items.
	In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This Statement clarifies how to measure fair value as permitted under other accounting pronouncements but does not require any new fair value measurements. The Company will be required to adopt SFAS No. 157 as of January 1, 2008. The Company is currently evaluating the impact of SFAS No. 157 and has not yet determined the impact on its financial statements.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q (together with all amendments, exhibits and schedules hereto, referred to as the “Form 10-Q”) contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which statements can be identified by the use of forward looking terminology, such as “may,” “will,” “expect,” “anticipate,” “estimate,” “plans,” “intends” or “continue” or the negative thereof or other variations thereon or comparable terminology. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth elsewhere in this Form 10-Q in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. Unless the context indicates or requires otherwise, references in this Form 10-Q to the “Company” or “TLCVision” shall mean TLC Vision Corporation and its subsidiaries. References to “$” or “dollars” shall mean U.S. dollars unless otherwise indicated. References to “C$” shall mean Canadian dollars. References to the “Commission” shall mean the U.S. Securities and Exchange Commission.

OVERVIEW

TLC Vision Corporation is a healthcare services company focused on working with eye doctors to help them provide high quality patient care primarily in the eye care industry. Beginning in 2007, the Company realigned its organization into three businesses: refractive centers, doctor services and eye care. The majority of the Company’s revenues comes from refractive surgery at its owned and managed refractive centers. Refractive surgery (principally LASIK) involves using an excimer laser to treat common refractive vision disorders such as myopia (nearsightedness), hyperopia (farsightedness) and astigmatism. The Company’s doctor services business includes the refractive access segment, which provides refractive technology and support to surgeons for use in their own practice locations. Doctor services also includes the mobile cataract segment, which provides technology and diagnostic equipment and services to doctors and hospitals to support cataract surgery as well as other eye diseases, and the “other” segment, which develops, manages and has equity participation in single-specialty eye care ambulatory surgery centers and multi-specialty ambulatory surgery centers. The Company’s eye care business includes its 51% interest in Vision Source, which provides franchise opportunities to independent optometrists. The eye care segment also includes the Company’s investment in OccuLogix, Inc., a public company focused on the treatment of specific eye diseases, including dry age-related macular degeneration, glaucoma and dry-eye. As of June 30, 2007, the Company owned approximately 33% of OccuLogix, Inc. OccuLogix, Inc. is also a reporting company with the Commission, and its stock is publicly traded on the Nasdaq Global Market and the Toronto Stock Exchange.

The Company serves surgeons who performed over 142,800 procedures including refractive and other surgical procedures, at the Company’s centers or using the Company’s equipment during the six months ended June 30, 2007.

The Company continually assesses patient, optometric and ophthalmic industry trends and developing strategies to improve laser vision correction revenues and procedure volumes. Additionally, it is pursuing growth initiatives and investment opportunities in the refractive market and within its other healthcare services.

RECENT DEVELOPMENTS

During the six months ended June 30, 2007, the Company paid approximately $2.8 million for the first year earn-out related to the 2005 acquisition of TruVision, which has been included in the purchase price allocation.

On May 30, 2007, the Company entered into an agreement with JEGC OCC Corporation for the sale of all of its common shares of OccuLogix, Inc. The transaction was a two-step sale, and on June 22, 2007, the Company completed its sale of 1.9 million shares of OccuLogix, Inc. common stock for $2.0 million and recorded a gain of $0.9 million. After the sale of stock, the Company owns approximately 33% of OccuLogix, Inc. The remaining shares are to be sold by August 28, 2007 subject to certain conditions including financing by the purchaser.

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On June 20, 2007, the Company entered into a $110.0 million credit facility (“Credit Facility”) with CIT Corporation and other financial institutions. The facility is secured by substantially all the assets of the Company and consists of both senior term debt and a revolver as follows:

Senior term debt, totaling $85.0 million, has a six-year term and required amortization payments of 1% per annum plus a percentage of excess cash flow (as defined in the agreement) and sales of assets or borrowings outside of the normal course of business. As of June 30, 2007, $85.0 million was outstanding on this portion of the facility.

Revolving credit facility, totaling $25.0 million with a five-year term. As of June 30, 2007, no borrowings were outstanding under this portion of the facility and approximately $23.8 million was unused and available, which is net of outstanding letters of credit totaling approximately $1.2 million.

The Credit Facility also requires the Company to maintain various financial and non-financial covenants as defined in the agreement.

Interest on the facility is calculated based on either prime rate or the London Interbank Offered Rate (LIBOR) plus a margin which at June 30, 2007 was 2.50%. In addition, the Company will pay a commitment fee equal to 0.35% on the undrawn portion of the revolving credit facility. In connection with this facility, total costs of $1.9 million were incurred and recorded as deferred financing costs, and will be amortized over the life of the facility.

On April 10, 2007, the Board of Directors authorized the Company to repurchase up to 20.0 million of its outstanding common stock at a price per share not less than $5.75 and not greater than $6.25. On June 20, 2007, the Company repurchased 20.0 million of its outstanding common shares (representing approximately 30% of total shares outstanding) through a modified “Dutch” auction. The shares were purchased at a price of $5.75 per share with a total cost of $117.5 million (including applicable transaction expenses). This transaction was financed through a combination of cash-on-hand and the $85 million proceeds under the Company’s new Credit Facility noted above.

RESULTS OF OPERATIONS

The Company refined its definition of a center primarily based on its level of operating control at each location and its consistency with the Company’s core center model. As a result, certain locations considered a center in prior periods are no longer included as a center and are included in refractive access under doctor services. Conversely, one location considered an access site in prior periods is no longer included as an access site and has been included as a refractive center.

The following table sets forth certain center and procedure operating data for the periods presented:

	Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006
OPERATING DATA (unaudited)
Number of majority-owned eye care centers at end of period		65		66		65		66
Number of minority-owned eye care centers at end of period		14		9		14		9
Number of TLCVision branded eye care centers at end of period		79		75		79		75
Number of laser vision correction procedures:
Majority-owned centers		28,400		27,000		60,100		57,000
Minority-owned centers		5,500		5,200		11,800		10,900
Total TLCVision branded center procedures		33,900		32,200		71,900		67,900
Total access procedures		15,700		17,200		34,600		37,800
Total laser vision correction procedures		49,600		49,400		106,500		105,700

THREE MONTHS ENDED JUNE 30, 2007 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2006

Total revenues for the three months ended June 30, 2007 were $81.1 million, an increase of $4.9 million, or 6%, over revenues of $76.2 million for the three months ended June 30, 2006. The increase in revenue resulted from growth in all three business components: refractive centers, doctor services and eye care.

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Revenues from refractive centers for the three months ended June 30, 2007 were $47.0 million, an increase of $3.3 million, or 8% from revenues of $43.7 million for the three months ended June 30, 2006. The increase in revenues from centers resulted from a combination of increases in center procedures, which accounted for an increase in revenues of approximately $2.3 million, and an increased mix of higher priced procedures, which accounted for approximately $1.0 million of the revenue increase. For the three months ended June 30, 2007, majority-owned center procedures were approximately 28,400, an increase of 1,400 or 5% from 27,000 procedures for the three months ended June 30, 2006.

Revenues from doctor services for the three months ended June 30, 2007 were $26.0 million, an increase of $0.6 million, or 2% from revenues of $25.4 million for the three months ended June 30, 2006. This increase was primarily due to an increase in the Company’s mobile cataract segment.

Revenues from the Company’s mobile cataract segment for the three months ended June 30, 2007 were $9.5 million, an increase of $0.4 million, or 5% from revenues of $9.1 million for the three months ended June 30, 2006. This increase was due to a higher average price and a new product that the Company began offering at the end of 2006.

Revenues from the refractive access services segment for the three months ended June 30, 2007 were $9.4 million, a decrease of $0.3 million, or 3% from revenues of $9.7 million for the three months ended June 30, 2006. For the three months ended June 30, 2007, access procedures declined by 1,500 or 9% from the prior year period and accounted for a decrease in revenues of approximately $0.9 million. This decrease in access revenues was offset by higher average pricing, which increased access revenues by approximately $0.6 million.

Revenues from the Company’s accumulation of businesses that manage cataract and secondary care centers for the three months ended June 30, 2007 were $7.1 million, an increase of $0.5 million, or 6% from revenues of $6.6 million for the three months ended June 30, 2006.

Revenues from eye care for the three months ended June 30, 2007, were $8.2 million, an increase of $1.1 million or 15% from revenues of $7.1 million for the three months ended June 30, 2006. This increase was primarily due to an increase in the Company’s optometric franchising segment and its continued growth in the number of franchisees that it serves.

Total cost of revenues (excluding amortization expense for all segments) for the three months ended June 30, 2007 was $54.9 million, an increase of $3.9 million, or 8% over the cost of revenues of $51.0 million for the three months ended June 30, 2006.

The cost of revenues from refractive centers for the three months ended June 30, 2007 was $32.7 million, an increase of $2.8 million from cost of revenues of $29.9 million for the three months ended June 30, 2006. This increase was primarily attributable to an increase in center procedures, which accounted for an increase in cost of revenues of approximately $1.6 million, and approximately $1.2 million of higher costs primarily associated with higher-priced procedures and costs from centers acquired or opened within the past year. Gross margins for centers decreased to 30% during the three months ended June 30, 2007 from 31% in the prior year period. This decrease in margin was primarily due to higher fixed costs associated with opening new centers.

The cost of revenues from doctor services for the three months ended June 30, 2007 was $18.2 million, an increase of $0.2 million from cost of revenues of $18.0 million for the three months ended June 30, 2006. This increase was due to the following:

The cost of revenues from the Company’s mobile cataract segment for the three months ended June 30, 2007 was $6.8 million, an increase of $0.5 million from cost of revenues of $6.3 million for the three months ended June 30, 2006. This increase was consistent with the increase in revenues, which was due to higher cataract volume and a new product that the Company began offering at the end of 2006.

The cost of revenues from refractive access services for the three months ended June 30, 2007 was $7.2 million, an increase of $0.1 million from cost of revenues of $7.1 million for the three months ended June

17

30, 2006. This increase was primarily attributable to $0.8 million of higher costs primarily associated with higher priced procedures, partially offset by the decrease in access procedures that accounted for a decrease in cost of revenues of $0.7 million. Gross margins decreased to 24% during the three months ended June 30, 2007 from 26% in the prior year period. This decrease in margin was primarily due to lower volume and lower margins on higher priced procedures.

The cost of revenues from the Company’s accumulation of businesses that manage cataract and secondary care centers for the three months ended June 30, 2007 was $4.3 million, a decrease of $0.4 million from cost of revenues of $4.7 million for the three months ended June 30, 2006. The decrease was primarily due to decreased costs of supplies at several of the Company’s ambulatory surgery centers. Gross margins increased to 39% during the three months ended June 30, 2007 from 30% in the prior year period due higher revenues and a decrease in supply costs.

The cost of revenues from eye care for the three months ended June 30, 2007 was $3.9 million, an increase of $0.9 million from cost of revenues of $3.0 million for the three months ended June 30, 2006. This increase was primarily due to an increase in cost of revenues at the Company’s optometric franchising segment consistent with the increase in revenues and higher costs associated with an annual meeting. Gross margins decreased to 52% during the three months ended June 30, 2007 from 58% in the prior year period due to higher costs for the annual meeting of franchisees.

General and administrative expenses increased to $9.0 million for the three months ended June 30, 2007 from $7.1 million for the three months ended June 30, 2006. The $1.9 million increase was primarily related to $1.0 million in non-recurring accrual reductions in 2006, and $0.4 million in increased foreign exchange losses.

Marketing expenses increased to $10.7 million for the three months ended June 30, 2007 from $6.7 million for the three months ended June 30, 2006. The $4.0 million increase was primarily due to increased spending associated with the Company’s refractive centers growth initiatives that were implemented during the year.

During the three months ended June 30, 2007, the Company recorded a $0.9 million gain on the sale of 1.9 million shares of OccuLogix, Inc. common stock compared to a $1.4 million gain on the sale of 0.8 million shares of OccuLogix, Inc. common stock in the prior year period.

Interest income increased to $0.6 million for the three months ended June 30, 2007 from $0.5 million for the three months ended June 30, 2006. This $0.1 million increase was primarily due to higher earnings related to higher interest rates on invested cash balances.

Interest expense increased to $0.7 million for the three months ended June 30, 2007 from $0.4 million for the three months ended June 30, 2006. This $0.3 million increase was primarily due to interest related to the new credit facility and higher interest expense related to increased levels of capital expenditure financing over the same period in the prior year.

Minority interest expense decreased to $2.8 million for the three months ended June 30, 2007 from $2.9 million for the three months ended June 30, 2006.

Losses from equity investments were $1.1 million for the three months ended June 30, 2007 compared to a loss of $0.9 million for the three months ended June 30, 2006. This $0.2 million decrease was due to lower profits at the Company’s minority-owned refractive centers.

For the three months ended June 30, 2007, the Company recognized income tax expense of $1.7 million. The Company recognized $1.2 million in income tax due to the geographic mix of pretax earnings and $0.4 million of tax withholding on a dividend paid to its Canadian parent. For the three months ended June 30, 2006, the Company recognized income tax benefit of $2.5 million. This benefit

18

includes a $3.4 million benefit related to a change in estimate based on the results of a comprehensive IRC Section 382 study that was completed during the second quarter of 2006. Partially offsetting this $3.4 million benefit is $0.9 million of income tax expense. Approximately $0.8 million of this expense related to the utilization of certain net operating loss carryforwards that reduce goodwill.

Net income for the three months ended June 30, 2007 decreased to $0.9 million or $0.01 per diluted share from $10.9 million or $0.16 per diluted share for the three months ended June 30, 2006. This $10.0 million decrease included a $4.1 million decrease from higher income taxes, a $4.0 million increase in marketing costs, a $2.0 million increase in general and administrative expenses, and a $0.3 million increased loss from the AMD segment. Excluding the impact of the AMD segment, net income would have decreased to $1.6 million or $0.02 per diluted share for the three months ended June 30, 2007 from $11.3 million or $0.16 per diluted share for the prior year period.

SIX MONTHS ENDED JUNE 30, 2007 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2006

Total revenues for the six months ended June 30, 2007 were $164.3 million, an increase of $10.5 million, or 7% over revenues of $153.8 million for the six months ended June 30, 2006. The increase in revenue resulted from growth in all three business components: refractive centers, doctor services and eye care.

Revenues from refractive centers for the six months ended June 30, 2007 were $98.7 million, an increase of $6.9 million, or 8% from revenues of $91.8 million for the six months ended June 30, 2006. The increase in revenues from centers resulted from a combination of increases in procedures, which accounted for approximately $5.1 million in revenues, and an increased mix of higher-priced procedures, which accounted for approximately $1.8 million in revenues. For the six months ended June 30, 2007, majority-owned center procedures were approximately 60,100, an increase of 3,100 or 5% from 57,000 procedures for the six months ended June 30, 2006.

Revenues from doctor services for the six months ended June 30, 2007 were $51.9 million, an increase of $1.6 million, or 3% from revenues of $50.3 million for the six months ended June 30, 2006. This increase was primarily due to an increase in the Company’s mobile cataract segment.

Revenues from the Company’s mobile cataract segment for the six months ended June 30, 2007 were $18.4 million, an increase of $1.4 million, or 8% from revenues of $17.0 million for the six months ended June 30, 2006. This increase was due to a higher average price and a new product offering that the Company began selling at the end of 2006.

Revenues from the refractive access services segment for the six months ended June 30, 2007 were $20.2 million, a decrease of $0.3 million, or 2% from revenues of $20.5 million for the six months ended June 30, 2006. For the six months ended June 30, 2007, access procedures declined by 3,200 or 9% from the prior year period and accounted for a decrease in revenues of approximately $1.9 million. This decrease in access revenues was offset by higher average pricing, which accounted for an increase in access revenues of approximately $1.6 million.

Revenues from the Company’s accumulation of businesses that manage cataract and secondary care centers for the six months ended June 30, 2007 were $13.3 million, an increase of $0.5 million, or 4% from revenues of $12.8 million for the six months ended June 30, 2006.

Revenues from eye care for the six months ended June 30, 2007, were $13.8 million, an increase of $2.1 million or 18% from revenues of $11.7 million for the six months ended June 30, 2006. This increase was primarily due to an increase in the Company’s optometric franchising segment and its continued growth in the number of franchisees that it serves.

Total cost of revenues (excluding amortization expense for all segments) for the six months ended June 30, 2007 was $109.9 million, an increase of $6.5 million, or 6% over the cost of revenues of $103.4 million for the six months ended June 30, 2006.

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The cost of revenues from refractive centers for the six months ended June 30, 2007 was $66.8 million, an increase of $4.9 million from cost of revenues of $61.9 million for the six months ended June 30, 2006. This increase was primarily attributable to an increase in procedures, which accounted for approximately $3.4 million in costs, and approximately $1.5 million of costs associated with higher-priced procedures and costs from centers acquired or opened within the past year. Gross margins for centers remained consistent at 32% during the six months ended June 30, 2007 and 2006, respectively.

The cost of revenues from doctor services for the six months ended June 30, 2007 was $36.6 million, an increase of $1.8 million from cost of revenues of $34.8 million for the six months ended June 30, 2006. This increase was spread across all business components of doctor services.

The cost of revenues from the Company’s mobile cataract segment for the six months ended June 30, 2007 was $13.1 million, an increase of $1.2 million from cost of revenues of $11.9 million for the six months ended June 30, 2006. This increase was consistent with the increase in revenues, which was due to higher cataract volume and a new product offering that the Company began selling at the end of 2006.

The cost of revenues from refractive access services for the six months ended June 30, 2007 was $14.9 million, an increase of $0.4 million from cost of revenues of $14.5 million for the six months ended June 30, 2006. This increase was primarily attributable to $1.8 million of higher costs primarily associated with higher-priced procedures, offset in part by the decrease in access procedures that reduced cost of revenues by approximately $1.4 million. Gross margins decreased to 26% during the six months ended June 30, 2007 from 29% in the prior year period. This decrease in margin was primarily due to lower volume and lower margins on higher-priced procedures.

The cost of revenues from the Company’s accumulation of businesses that manage cataract and secondary care centers for the six months ended June 30, 2007 was $8.5 million, an increase of $0.2 million from cost of revenues of $8.3 million for the six months ended June 30, 2006. The increase was primarily due to increased costs of supplies at several of the Company’s ambulatory surgery centers in the current year. Gross margins increased to 36% during the six months ended June 30, 2007 from 35% in the prior year.

The cost of revenues from eye care for the six months ended June 30, 2007, was $6.4 million, a decrease of $0.3 million from cost of revenues of $6.7 million for the six months ended June 30, 2006. This decrease from the AMD segment of approximately $1.0 million due to the deconsolidation of OccuLogix, Inc., offset in part by increased cost of revenues at the Company’s optometric franchising segment consistent with the increase in revenues. Gross margins decreased to 53% during the six months ended June 30, 2007 from 57% in the prior year period.

General and administrative expenses increased to $18.9 million for the six months ended June 30, 2007 from $17.9 million for the six months ended June 30, 2006. The $1.2 million increase was primarily related to the Company’s long-term strategic planning initiatives, $1.3 million in non-recurring accrued reductions in 2006 and $0.6 million in foreign currency losses, offset by $1.8 million in costs incurred by OccuLogix, Inc. in 2006 (deconsolidated in April 2006).

Marketing expenses increased to $19.1 million for the six months ended June 30, 2007 from $13.7 million for the six months ended June 30, 2006. The $5.4 million increase was primarily due to increased spending associated with the Company’s refractive centers growth initiatives that were implemented during the six months ended June 30, 2007.

Research and development, clinical and regulatory expenses were incurred by OccuLogix, Inc. in 2006 as it conducted clinical trials related to its rheopheresis application to the FDA. Due to the deconsolidation of OccuLogix, Inc., the Company did not recognize any research and development, clinical and regulatory expenses during the six months ended June 30, 2007.

During the six months ended June 30, 2007, the Company recorded a $0.9 million gain on the sale of 1.9 million shares of OccuLogix, Inc. common stock compared to a $1.4 million gain on the sale of 0.8 million shares of OccuLogix, Inc. common stock in the prior year period.

20

For the six months ended June 30, 2007, other operating expenses, net primarily included $0.5 million of severance accruals for an employee under terms of an employment contract. For the six months ended June 30, 2006, other operating expenses, net of $0.3 million primarily included $0.8 million of severance accruals at OccuLogix, Inc., partially offset by a $0.3 million reimbursement received under a previous research and development arrangement and $0.2 million of miscellaneous income.

Interest income decreased to $1.1 million for the six months ended June 30, 2007 from $1.2 million for the six months ended June 30, 2006. This $0.1 million decrease was primarily due to a $0.4 million decrease from the AMD segment due to the deconsolidation of OccuLogix, Inc., offset in part by higher returns on invested balances.

Interest expense increased to $1.1 million for the six months ended June 30, 2007 from $0.7 million for the six months ended June 30, 2006. This $0.4 million increase was primarily due to interest related to our new credit facility and higher interest expense related to increased levels of capital expenditure financing over the same period in the prior year.

Minority interest expense increased to $5.3 million for the six months ended June 30, 2007 from $2.8 million for the six months ended June 30, 2006. This $2.5 million increase was primarily due to the Company not recognizing any minority interest for the AMD segment during the six months ended June 30, 2007 due to the Company accounting for its investment in OccuLogix, Inc. under the equity method which began in the second quarter of 2006.

Losses from equity investments were $2.8 million for the six months ended June 30, 2007 compared to $24 of earnings for the six months ended June 30, 2006. This $2.8 million change was primarily due to an increase of $2.4 million in the loss from the AMD segment in the six months ended June 30, 2007 due to the Company accounting for its investment in OccuLogix, Inc. under the equity method beginning in the second quarter of 2006.

For the six months ended June 30, 2007, the Company recognized income tax expense of $2.6 million. For the six months ended June 30, 2006, the Company recognized income tax expense of $1.0 million. This expense includes a $3.4 million benefit related to a change in estimate based on the results of a comprehensive IRC Section 382 study that was completed during the second quarter of 2006.

Net income for the six months ended June 30, 2007 decreased to $4.3 million or $0.06 per diluted share from $13.6 million or $0.19 per diluted share for the six months ended June 30, 2006. Excluding the impact of the AMD segment, net income would have increased to $7.6 million or $0.11 per diluted share for the six months ended June 30, 2007 from $16.8 million or $0.24 per diluted share for the prior year period.

LIQUIDITY AND CAPITAL RESOURCES

During the six months ended June 30, 2007, the Company focused its activities primarily on implementing its refractive centers growth strategy. Cash and cash equivalents and short-term investments were $17.2 million at June 30, 2007 compared to $40.5 million at December 31, 2006. This decrease was primarily due to cash used to repurchase 20 million shares of the Company’s common stock, capital expenditures, repayments of debt, earn-out payments and distributions to minority interests. Working capital at June 30, 2007 was $22.7 million, a decrease of $17.3 million from $40.0 million at December 31, 2006. This decrease was primarily due to the $23.3 million decrease in cash and short-term investments partially offset by a $4.3 million increase in deferred tax assets.

The Company’s principal cash requirements have included normal operating expenses, debt repayment, distributions to minority partners, capital expenditures, acquisitions and investments.

During the six months ended June 30, 2007, the Company invested $7.3 million in fixed assets and received vendor lease financing for an additional $5.6 million.

21

As new technologies emerge in the refractive market, the Company may need to upgrade its equipment, including excimer lasers and flap-making technology. The Company has access to vendor and third-party financing at fixed interest rates as well as borrowing capacity under its revolving credit facility, and expects to continue to have access to these financing options for at least the next 12 months.

On June 20, 2007, the Company entered into a $110.0 million credit facility (“Credit Facility”) with CIT Corporation and other financial institutions. The facility is secured by substantially all the assets of the Company and consists of both senior term debt and a revolver as follows:

Senior term debt, totaling $85.0 million, has a six-year term and required amortization payments of 1% per annum plus a percentage of excess cash flow (as defined in the agreement) and sales of assets or borrowings outside of the normal course of business. As of June 30, 2007, $85.0 million was outstanding on this portion of the facility.

Revolving credit facility, totaling $25.0 million with a five-year term. As of June 30, 2007, no borrowings were outstanding under this portion of the facility and approximately $23.8 million was unused and available, which is net of outstanding letters of credit totaling approximately $1.2 million.

The Credit Facility also requires the Company to maintain various financial and non-financial covenants as defined in the agreement.

Interest on the facility is calculated based on either prime rate or the London Interbank Offered Rate (LIBOR) plus a margin which at June 30, 2007 was 2.50%. In addition, the Company will pay a commitment fee equal to 0.35% on the undrawn portion of the revolving credit facility. In connection with this facility, total costs of $1.9 million were incurred and recorded as deferred financing costs, and will be amortized over the life of the facility.

On April 10, 2007, the Board of Directors authorized the Company to repurchase up to 20.0 million of its outstanding common stock at a price per share not less than $5.75 and not greater than $6.25. On June 20, 2007, the Company repurchased 20.0 million of its outstanding common shares (representing approximately 30% of total shares outstanding) through a modified “Dutch” auction. The shares were purchased at a price of $5.75 per share with a total cost of $117.5 million (including applicable transaction expenses), of which $115.7 million was paid in cash. This transaction was financed through a combination of cash-on-hand and the $85 million proceeds under the Company’s new Credit Facility.

The Company estimates that existing cash balances and short-term investments, together with funds expected to be generated from operations and available through credit facilities, will be sufficient to fund the Company’s anticipated level of operations and expansion plans for at least the next 12 months.

CASH FROM OPERATING ACTIVITIES

Net cash provided by operating activities was $21.7 million for the six months ended June 30, 2007. The cash flows provided by operating activities during the six months ended June 30, 2007 were primarily due to net income of $4.4 million plus non-cash items including depreciation and amortization of $9.1 million, deferred taxes of $1.9 million, minority interests of $5.3 million, losses from equity investments of $2.8 million and a decrease in net operating assets of $1.7 million. The decrease in net operating assets consisted of a $1.8 million increase in accounts receivable and a $0.7 million increase in prepaid expenses and other current assets, partially offset by a $0.8 million increase in accounts payable and accrued liabilities. The increase in accounts receivable was primarily due to higher revenues from the doctor services and eye care businesses. The increase in prepaid expenses and other current assets was primarily due to annual insurance premiums offset by normal amortization of prepaid insurance. The increase in accounts payable and accrued liabilities was primarily due to the timing of payments to vendors.

CASH FROM INVESTING ACTIVITIES

Net cash generated in investing activities was $4.6 million for the six months ended June 30, 2007. The cash used in investing activities included capital expenditures of $7.3 million, acquisitions and investments of $3.9 million and purchases of short-term investments of $5.8 million. These cash outflows were offset by $17.4 million of proceeds from the sale of short-term investments, distributions and loan payments received from equity investments of $1.9 million, proceeds from the sales of fixed assets of $0.3 million and proceeds from the sale of OccuLogix, Inc. stock of $2.0 million.

22

CASH FROM FINANCING ACTIVITIES

Net cash used in financing activities was $38.0 million for the six months ended June 30, 2007. Net cash used in financing activities during the six months ended June 30, 2007 was primarily related to the repurchase of 20 million shares of the Company’s common stock of $117.5 million of which $115.7 million was paid in cash, repayment of certain notes payable and capitalized lease obligations of $3.5 million and distributions to minority interests of $4.6 million, partially offset by proceeds from debt financing of $85.3 million, issuances of common stock of $2.2 million, and $1.6 million in capitalized debt costs.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the ordinary course of business, the Company is exposed to interest rate risks and foreign currency risks. Its interest rate risks consist primarily of having floating-rate debt tied to the published prime rate or LIBOR and short-term investments earning short-term interest rates. The Company is required by its Credit Facility to secure interest rate protection for at least 50% of its outstanding term debt (or $42.5 million as of June 30, 2007) within 60 days of the closing of the loan. It is currently evaluating options to meet this requirement. The Company views its investment in foreign subsidiaries as a long-term commitment and does not hedge any of its foreign currency translation exposure.

ITEM 4. CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by the report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act). Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required.

There have been no significant changes in the Company’s internal controls over financial reporting during the period that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

There have been no material changes in legal proceedings from that reported in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

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ITEM 1A. RISK FACTORS

Not applicable.

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

On April 10, 2007, the Board of Directors authorized the Company to repurchase up to 20.0 million of its outstanding common stock at a price per share not less than $5.75 and not greater than $6.25. On June 20, 2007, the Company repurchased 20.0 million of its outstanding common shares (representing approximately 30% of total shares outstanding) through a modified “Dutch” auction. The shares were purchased at a price of $5.75 per share with a total cost of $117.5 million (including applicable transaction expenses). This transaction was financed through a combination of cash-on-hand and the $85 million proceeds under the Company’s new Credit Facility.

							Maximum Number (or
							Approximate Dollar Value)
					Total Number of Shares (or		of Shares (or Units)
	Total Number of				Units) Purchased as Part of		that May Yet Be
	Shares (or units)		Average Price as Paid		Publicly Announced		Purchased Under the
FISCAL MONTH	Purchased		per Share (or Unit)		Plans or Programs		Plans or Programs
May (5/11/07 - 5/30/07)		—	$	—		—		20,000,000
June (6/1/07 - 6/20/07)		20,000,000		5.75		20,000,000		—
Total		20,000,000	$	5.75		20,000,000		—

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

The Company’s annual meeting of shareholders was held on June 28, 2007. At the annual meeting, shareholders of the Company voted on the following proposals: (a) to elect six directors for the ensuing year; (b) to appoint Ernst & Young LLP as auditors of the Company for the ensuing year and to authorize the directors to fix the remuneration to be paid to the auditors; and (c) to approve certain amendments to the Company’s Amended and Restated Share Option Plan. Each of the proposals, including the election of directors, was approved at the annual meeting.

With respect to the election of directors, all of the following directors were elected by a show of hands:

Thomas N. Davidson
Richard L. Lindstrom, M.D.
Warren S. Rustand
James C. Wachtman
Toby S. Wilt
Michael D. DePaolis, O.D.

With respect to the resolution regarding appointment of Ernst & Young LLP as auditors of the Company for the ensuing year and to authorize the directors to fix the remuneration to be paid to the auditors, the resolution passed by a show of hands.

With respect to the approval of certain amendments to the Company’s Amended and Restated Share Option Plan, the following votes were cast:

Votes in Favor	Votes Against
35,953,595		5,597,058

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ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

2.1	Purchase Agreement By and Among TLC Vision Corporation and JEGC OCC Corp, dated as of May 30, 2007
10	Credit Agreement By and Among TLC Vision (USA) Corporation and TLC Vision Corporation, CIT Capital Securities, LLC, CIT Healthcare LLC, and various lenders named therein, dated as of June 21, 2007 incorporated by reference as exhibit to Schedule TO.
31.1	CEO’s Certification required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
31.2	CFO’s Certification required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
32.1	CEO’s Certification of periodic financial report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section 1350.
32.2	CFO’s Certification of periodic financial report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section 1350

25

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

TLC VISION CORPORATION
By:	/s/ James C. Wachtman
	James C. Wachtman
	Chief Executive Officer August 9, 2007
By:	/s/ Steven P. Rasche
	Steven P. Rasche
	Chief Financial Officer August 9, 2007

26

EXHIBIT INDEX

No.	Description
2.1	Purchase Agreement By and Among TLC Vision Corporation and JEGC OCC Corp, dated as of May 30, 2007
10	Credit Agreement By and Among TLC Vision (USA) Corporation and TLC Vision Corporation, CIT Capital Securities, LLC, CIT Healthcare LLC, and various lenders named therein, dated as of June 21, 2007 incorporated by reference as exhibit to Schedule TO.
31.1	CEO’s Certification required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
31.2	CFO’s Certification required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
32.1	CEO’s Certification of periodic financial report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section 1350.
32.2	CFO’s Certification of periodic financial report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, U.S.C. Section 1350

27

EX-2.1

Exhibit 2.1

JEGC OCC Corp.

as Purchaser

and

TLC VISION CORPORATION

as Seller

PURCHASE AGREEMENT

Dated as of May 30, 2007

PURCHASE AGREEMENT

     PURCHASE AGREEMENT dated as of May 30, 2007, between TLC Vision Corporation, a New Brunswick corporation (“Seller”), and JEGC OCC Corp., an Ontario corporation (“Purchaser”).

RECITALS

     WHEREAS, Seller beneficially owns 20,675,064 shares of common stock (the “Common Stock”) of OccuLogix, Inc. (“OccuLogix”), a Delaware corporation;

     WHEREAS, Purchaser desires to purchase from Seller, and Seller desires to sell to Purchaser, 20,675,064 shares of Common Stock (the “OccuLogix Shares”);

     NOW THEREFORE, in consideration of the premises and of the mutual covenants and obligations hereinafter set forth, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

ARTICLE 1

SALE AND PURCHASE OF SECURITIES

Section 1.1 Purchase Price.

     At the Closings, Purchaser shall purchase from Seller, and Seller shall sell and transfer to Purchaser:

(1)

1,904,762 of the OccuLogix Shares at a price per OccuLogix Share of U.S.$1.05; and

(2)

the remainder of the OccuLogix Shares at a price per OccuLogix Share equal to the lesser of the average trading price of the Common Stock during the 30 trading days prior to the Closing Date and 115% of the “market price” as defined in Section 183 of the Regulation made under the Securities Act (Ontario) (the “Securities Act”) determined as of the date hereof (the “OccuLogix Purchase Price” and the aggregate purchase price paid for the OccuLogix Shares pursuant to this clause (2), the “Aggregate OccuLogix Purchase Price”).

     Section 1.2 The Closing.

     The closing of the transaction contemplated by Section 1.1(1) of this Agreement (the “First Closing”) shall take place as soon as practicable, but in any event not later than June 22, 2007 (the “First Closing Date”). The closing of the transaction contemplated by Section 1.1(2) of this Agreement (the “Second Closing” and together with the First Closing, the “Closings”) shall take place as soon as practicable, but in any event not later than five business days after the satisfaction or waiver of the conditions contained in Section 1.5 and Section 1.6 (the “Second Closing Date”) or such other date as the parties hereto may agree upon.

Section 1.3 Actions at the Closings.

(1) On the First Closing Date, the following actions shall occur (the “First Closing Actions”):

(a)	Seller shall transfer to Purchaser stock certificates representing 1,904,762 of the OccuLogix Shares, free and clear of Encumbrances (as hereinafter defined), and deliver duly executed stock powers; and
(b)	Purchaser shall pay by wire transfer to Seller U.S. $2,000,000 in cash.

(2) On the Second Closing Date, the following actions shall occur (the “Second Closing Actions”):

(a)	Seller shall transfer to Purchaser stock certificate representing the remainder of the OccuLogix Shares, free and clear of Encumbrances, and deliver duly executed stock powers; and
(b)	Purchaser shall pay by wire transfer to Seller the Aggregate OccuLogix Purchase Price in cash.

Section 1.4 Exclusive Dealing

     Commencing on the date hereof and terminating on the 90th day herefrom, Seller shall not, directly or indirectly, through any representative or otherwise, solicit or entertain offers from, negotiate with or in any manner encourage, discuss, accept or consider any proposal of any other person relating to the acquisition of the OccuLogix Shares.

Section 1.5 Purchaser’s Obligations Conditional.

(1) The obligations of Purchaser to consummate the transactions contemplated in Section 1.1(1) are conditional upon:

(a)	there being no statute, rule or regulation or order of any court or administrative agency in effect which prohibits the consummation of the transactions to be consummated at the First Closing;
(b)	receipt of all necessary consents, approvals, exemptions and authorizations of governmental bodies and other third parties; and
(c)	delivery of customary legal opinions, closing certificates and other documentation.

(2) The obligations of Purchaser to consummate the transactions contemplated in Section 1.1(2) are conditional upon:

(a) Purchaser’s obtaining financing for the acquisition of the remainder of the OccuLogix Shares, satisfactory to Purchaser in its sole discretion;

(b)	there being no statute, rule or regulation or order of any court or administrative agency in effect which prohibits the consummation of the transactions to be consummated at the Second Closing;
(c)	receipt of all necessary consents, approvals, exemptions and authorizations of governmental bodies and other third parties; and
(d)	delivery of customary legal opinions, closing certificates and other documentation.

Section 1.6 Seller’s Obligations Conditional.

(1) The obligations of Seller to consummate the transactions contemplated herein are conditioned upon:

(a)	there being no statute, rule or regulation or order of any court or administrative agency in effect which prohibits the consummation of the transactions to be consummated at the Closings;
(b)	receipt of all necessary consents, approvals, exemptions and authorizations of governmental bodies and other third parties;
(c)	delivery of customary legal opinions, closing certificates and other documentation;
(d)	the OccuLogix Purchase Price contemplated in Section 1.1(2) not being less than U.S.$1.00; and
(e)	OccuLogix shall have disclosed to Seller immediately prior to each Closing all known or planned regulatory approvals or material communications to the market that might impact the share price of the Common Stock.

ARTICLE 2

SELLER REPRESENTATIONS & WARRANTIES

     Seller represents and warrants to Purchaser as follows as of the date hereof and as of each Closing Date:

Section 2.1 Organization, Power and Authority.

     Seller is a corporation organized and validly existing under the laws of the Province of New Brunswick. Seller has all requisite power and authority to enter into and carry out the transactions contemplated by this Agreement.

Section 2.2 Authorization of the Documents.

     The execution, delivery and performance of this Agreement has been duly authorized by all requisite corporate action on the part of Seller, and this Agreement constitutes a legal, valid and binding obligation of Seller, enforceable against Seller, in accordance with its terms.

Section 2.3 No Shareholder Approval.

     The transactions contemplated by this Agreement do not require the approval of the shareholders of Seller.

Section 2.4 No Conflict.

     The execution, delivery and performance by Seller of this Agreement and the consummation by Seller of the transactions contemplated hereby and the sale and delivery by Seller of the OccuLogix Shares will not (a) violate any provision of law, statute, rule or regulation, or any ruling, writ, injunction, order, judgment or decree of any court, administrative agency or other governmental body applicable to Seller, the OccuLogix Shares or any of Seller’s other respective properties or assets, (b) conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute (with due notice or lapse of time, or both) a default (or give rise to any right of termination, cancellation or acceleration) under any agreement of Seller, or result in the creation of any Encumbrance, upon any of the properties or assets of Seller, including the OccuLogix Shares, or (c) violate any provisions of Seller’s organizational documents, to the extent, with respect to any of the foregoing, that the same would adversely affect the ability of Seller to carry out its obligations under this Agreement.

Section 2.5 Consents.

     Except as would not prevent Seller from consummating the transactions contemplated hereby, no permit, authorization, consent or approval of or by, or any notification of or filing with any person (governmental or private) is required in connection with the execution, delivery and performance by Seller of this Agreement or any documentation relating thereto, the consummation by Seller of the transactions contemplated hereby, or the sale or delivery of the OccuLogix Shares.

Section 2.6 Ownership.

     As of each Closing Date, Seller will be the lawful owner of the OccuLogix Shares to be sold on such Closing Date, and Seller will have good title to the OccuLogix Shares, free and clear of any and all mortgages, rights of first refusal or first offer, security interests, liens, mortgages, pledges, charges and similar restrictions (collectively, the “Encumbrances”), other than any restrictions under applicable securities laws, and upon completion of the transaction contemplated by this Agreement, Seller will transfer to Purchaser good and valid title to the OccuLogix Shares free and clear of any Encumbrances.

Section 2.7 Public Filings.

     As of each Closing Date, Seller will have reviewed all filings that OccuLogix has actually made prior to such Closing Date pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the Securities Act, and which are available for review prior to such Closing Date.

Section 2.8 Brokers.

     Other than Cowen and Company, LLC (whose fee shall be paid by Seller), no agent, broker, investment banker or other person or entity acting on behalf of Seller or under the authority of Seller is or will be entitled to any fee or commission directly or indirectly from any party hereto in connection with any of the transactions contemplated hereby.

ARTICLE 3

PURCHASER REPRESENTATIONS & WARRANTIES

     Purchaser represents and warrants to Seller as of the date hereof and as of each Closing Date as to itself, as follows:

Section 3.1 Organization.

     Purchaser is duly organized and validly existing under the laws of the province of its organization and has all power and authority to enter into and perform this Agreement. This Agreement has been duly authorized by all necessary action on the part of Purchaser and constitutes a valid and binding agreement of Purchaser enforceable against Purchaser in accordance with its terms.

Section 3.2 No Conflict.

     The execution, delivery and performance by Purchaser of this Agreement and the consummation by Purchaser of the transactions contemplated hereby will not (a) violate any provision of law, statute, rule or regulation, or any ruling, writ, injunction, order, judgment or decree of any court, administrative agency or other governmental body applicable to Purchaser, or any of its properties or assets, (b) conflict with or result in any breach of any of the terms, conditions, or provisions of, or constitute (with due notice, lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under any agreement of Purchaser or (c) violate any provisions of Purchaser’s organizational documents, to the extent, with respect to any of the foregoing, that the same would adversely affect the ability of Purchaser to carry out its obligations under this Agreement.

Section 3.3 Consents.

     Except as would not prevent Purchaser from consummating the transaction contemplated hereby, no permit, authorization, consent or approval of or by, or any notification of or filing with any person (governmental or private) is required in connection with the execution, delivery and performance by Purchaser of this Agreement or any documentation relating thereto, or the consummation by Purchaser of the transactions contemplated hereby.

Section 3.4 Brokers.

     No agent, broker, investment banker or other person or entity acting on behalf of Purchaser or under the authority of Purchaser is or will be entitled to any fee or commission directly or indirectly from any party hereto in connection with any of the transactions contemplated hereby.

Section 3.5 Status of Purchaser.

     Purchaser is an accredited investor within the meaning of the rules of the Securities Act of 1933, as amended and the Securities Act (collectively, the “Applicable Securities Regulations”). Further,

Purchaser understands and acknowledges the restrictions imposed by Applicable Securities Regulations respecting resales of the OccuLogix Shares and represents that it is acquiring the OccuLogix Shares as principal and not on behalf of or as agent for others or with a view towards redistribution thereof in violation of Applicable Securities Regulations.

Section 3.6 Public Filings.

     As of each Closing Date, Purchaser will have reviewed all filings that OccuLogix has actually made prior to such Closing Date pursuant to the Exchange Act and the Securities Act, and which are available for review prior to such Closing Date.

Section 3.7 Due Diligence.

     Purchaser has such knowledge and experience in financial and business matters that Purchaser is capable of evaluating the merits and risks of completing the transactions contemplated by this Agreement. Purchaser has acquired sufficient information about OccuLogix to reach an informed and knowledgeable decision to enter into and complete the transactions contemplated by this Agreement. In evaluating the merits and risk of the transaction contemplated by this Agreement, Purchaser has relied on the advice of its investment advisors and/or its legal counsel.

Section 3.8 Material Information.

     Purchaser is not aware of any “material change” as defined in the Securities Act that has not been disclosed by OccuLogix, as it relates to OccuLogix.

ARTICLE 4

MISCELLANEOUS

Section 4.1 Confidentiality.

     Except as and to the extent required by law (including any applicable securities exchange regulations), the parties hereto agree not to disclose at any time to any other person or entity, whether by way of press release, announcement or in any other manner, the existence, intent or terms of this Agreement, or the occurrence or content of any discussions, negotiations or investigations which have occurred or which may occur regarding the transactions contemplated herein, provided that either party may at any time make disclosures to third parties who (i) agree to be bound by the confidentiality provisions hereof; and (ii) agree not to trade the Common Stock until the earlier of the Second Closing Date and the last day of the 6th month from the date hereof.

Section 4.2 Survival of Representations.

     The representations and warranties made in this Agreement shall survive for a period ending six months after the Second Closing Date; provided that the representation and warranty of Seller set forth in Section 2.6 shall survive without limitation.

Section 4.3 Notices.

     Except as otherwise provided in this Agreement, all notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or by telecopy (with confirmation promptly sent by regular mail),

nationally recognized overnight courier or first class registered or certified mail, return receipt requested, postage prepaid, addressed to such party at the address set forth below or such other address as may hereafter be designated in writing by such party to the other parties:

(a)	if to Seller, to:
	TLC Vision Corporation 16305 Swingley Ridge Road, Suite 300 Chesterfield, Missouri 63017 Attention: Brian L. Andrew, Esq.
(b)	if to Purchaser, to:
	JEGC OCC Corp. Suite 400, 260 Queen Street West Toronto, Ontario M5V 1Z8 Attention: Elias Vamvakas

     All such notices, requests, consents and other communications shall be deemed to have been given when received.

Section 4.4 Amendments and Waivers.

     This Agreement may be amended, modified, supplemented or waived only upon the written agreement of the party against whom enforcement of such amendment, modification, supplement or waiver is sought.

Section 4.5 Successors and Assigns.

     This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns, whether so expressed or not.

Section 4.6 Entire Agreement.

     This Agreement embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings relating to the subject matter hereof.

Section 4.7 Governing Law.

     This Agreement shall be construed and enforced in accordance with and governed by the laws of the Province of Ontario and the federal laws of Canada applicable therein without giving effect (to the fullest extent permitted by law) to the conflicts of law principles thereof which might result in the application of the laws of any other jurisdiction.

Section 4.8 Counterparts.

     This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument. All signatures need not appear on any one counterpart.

Section 4.9 Severability.

     Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.

Section 4.10 Further Assurances.

     Each party hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

Section 4.11 Expenses.

     Each party to this Agreement shall bear its own cost and expenses, including fees of consultant(s), accountant(s), counsel, and other persons acting on behalf of or for such party.

Section 4.12 Specific Performance.

     The parties hereto acknowledge that there would be no adequate remedy at law if any party fails to perform any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it might be entitled at law or in equity, shall be entitled to injunctive relief, including specific performance, to enforce such obligations without the posting of any bond, and, if any, should be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defence that there is an adequate remedy at law.

Section 4.13 Termination.

     This Agreement may be terminated by Seller upon written notice to Purchaser if the First Closing has not occurred by June 22, 2007, other than due to a material breach of this Agreement by Seller. In addition, this Agreement may be terminated as to the Second Closing by either party upon written notice to the other if the Second Closing has not occurred by 90 days after the date of this Agreement, other than due to a material breach of this Agreement by the party seeking to terminate. In addition, this Agreement may be terminated by either party upon written notice to the other if there shall have occurred any change or changes (or any development involving any prospective change or changes) in the business, assets, liabilities, properties, condition (financial or otherwise), operations, results of operations or prospects of OccuLogix or its subsidiaries that has, have or may have material adverse significance with respect to OccuLogix and its subsidiaries taken as a whole.

Section 4.14 Prohibited Transactions

     Purchaser agrees that it will require each potential investor in Purchaser or other financing source (an “Investor”) to represent that such Investor, and any person acting on behalf of or pursuant to any understanding with such Investor, has not, directly or indirectly, engaged in any purchases or sales of any securities, including any derivatives, of OccuLogix (including, without limitation, any Short Sales (as defined below) involving any of OccuLogix’s securities) (a "Transaction”) since the time that such Investor was first contacted by Purchaser. In addition, Purchaser will require each Investor to covenant that neither it nor any person acting on its behalf or pursuant to any understanding with such Investor will engage, directly or indirectly, in any Transactions prior to the time the transactions contemplated by this Agreement are publicly disclosed. “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Exchange Act and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps, derivatives and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker-dealers or foreign regulated brokers.

     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written.

SELLER: TLC VISION CORPORATION
By:
	Name:
	Title:

PURCHASER: JEGC OCC CORP.
By:
	Name:
	Title:

EX-31.1

EXHIBIT 31.1

CERTIFICATION

     I, James C. Wachtman, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of TLC Vision Corporation (the registrant);

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements or external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (that registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2007

/s/ James C. Wachtman  

James C. Wachtman 

Chief Executive Officer 

EX-31.2

EXHIBIT 31.2

CERTIFICATION

     I, Steven P. Rasche, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of TLC Vision Corporation (the registrant);

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements or external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

     (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (that registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 9, 2007

/s/ Steven P. Rasche  

Steven P. Rasche 

Chief Financial Officer 

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of TLC Vision Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James C. Wachtman, Chief Executive Officer, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2007

/s/ James C. Wachtman

James C. Wachtman

Chief Executive Officer

* A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to TLC Vision Corporation and will be retained by TLC Vision Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of TLC Vision Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven P. Rasche, Chief Financial Officer, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 9, 2007

/s/ Steven P. Rasche

Steven P. Rasche

Chief Financial Officer

* A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to TLC Vision Corporation and will be retained by TLC Vision Corporation and furnished to the Securities and Exchange Commission or its staff upon request.