UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                  -------------

                                   FORM 10-QSB
                                   -----------

(MARK ONE)

           X   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         -----
                         SECURITIES EXCHANGE ACT OF 1934
                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

                                       OR

          ____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   FOR THE TRANSITION PERIOD FROM ____ TO ____


                        COMMISSION FILE NUMBER 000-32045

                              DIOMED HOLDINGS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                   DELAWARE                                       84-140636
(STATE OR OTHER JURISDICTION OF INCORPORATION                 (I.R.S. EMPLOYER
               OR ORGANIZATION)                              IDENTIFICATION NO.)

                 1 DUNDEE PARK
                  ANDOVER, MA                                      01810
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                     (ZIP CODE)

                                 (978) 475-7771
                         (REGISTRANT'S TELEPHONE NUMBER)

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 EXCHANGE ACT OF 1934 DURING
THE  PRECEDING 12 MONTHS (OR FOR SUCH  SHORTER  PERIOD THAT THE  REGISTRANT  WAS
REQUIRED  TO FILE  SUCH  REPORTS),  AND  (2) HAS  BEEN  SUBJECT  TO SUCH  FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES  X    NO
                                       ---     ---



As of March 31, 2002,  there were 14,200,000  shares of common stock,  par value
$0.001   outstanding   (excluding   securities  which,   subject  to  applicable
conditions, are convertible into shares of common stock).

<PAGE>

                     DIOMED HOLDINGS, INC. AND SUBSIDIARIES

                         QUARTERLY REPORT ON FORM 10-QSB
                    FOR THE THREE MONTHS ENDED MARCH 31, 2002

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
ITEM NUMBER                      CAPTION                                                    PAGE NUMBER
<S>           <C>                                                                               <C>
              PART I - FINANCIAL INFORMATION
    1         Condensed Consolidated Balance Sheets - March 31, 2002 and December 31,            2
              2001
              Condensed Consolidated Statements of Operations - Three Months Ended March         3
              31, 2002 and 2001
              Condensed Consolidated Statements of Cash Flows - Three Months Ended March         4
              31, 2002 and 2001
              Notes to Condensed Consolidated Financial Statements                               5
    2         Management's Discussion and Analysis or Plan of Operation                         13

              PART II - OTHER INFORMATION
    2         Changes in Securities and Use of Proceeds                                         20
    4         Submission of Matters to a Vote of Security Holders                               20
    5         Other Information                                                                 20
    6         Exhibits and Reports on Form 8-K                                                  20
              Signatures                                                                        22
</TABLE>





<PAGE>

Diomed Holdings, Inc.
Consolidated Balance Sheets
(unaudited)

<TABLE>
<CAPTION>
ASSETS                                                                   MARCH 31, 2002     DECEMBER 31, 2001
<S>                                                                     <C>                  <C>
Current Assets:
   Cash and cash equivalents                                            $     4,747,875      $       322,566
   Accounts receivable, net of allowance for doubtful accounts of
     $225,000 and $217,000 in 2002 and 2001, respectively                       605,921              869,231
   Inventories                                                                2,154,960            2,402,182
   Prepaid expenses and other current assets                                    735,239              201,429
                                                                        ---------------      ---------------

         Total current assets                                                 8,243,995            3,795,408
                                                                        ---------------      ---------------

Property and Equipment:
   Office equipment and furniture and fixtures                                1,270,190            1,209,649
   Manufacturing equipment                                                      740,000              740,000
   Leasehold improvements                                                       637,900              631,900
                                                                        ---------------      ---------------

                                                                              2,648,090            2,581,549

   Less--Accumulated depreciation and amortization                            1,621,295            1,519,607
                                                                         ---------------      ---------------

                                                                              1,026,795            1,061,942
                                                                         ---------------      ---------------

Intangible Assets, net of accumulated amortization of  $270,000 and
$221,000 in 2002 and 2001, respectively                                         711,474              760,542
                                                                        ---------------      ---------------

Other Assets:
   Deposits                                                                     585,301              590,600
   Deferred offering costs                                                            -              387,133
   Deferred acquisition costs                                                         -               39,981
                                                                        ---------------      ---------------

                                                                        $    10,567,565      $     6,635,606
                                                                        ===============      ===============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
   Bank loan                                                            $       275,557      $       874,449
   Current maturities of convertible debt                                       835,664            1,786,640
   Current maturities of capital lease obligations                               46,053               46,383
   Accounts payable                                                           1,402,383            2,866,346
   Accrued expenses                                                           1,196,692              883,769
   Customer advance                                                                   -              293,463
                                                                        ---------------      ---------------

         Total current liabilities                                            3,756,349            6,751,050
                                                                        ---------------      ---------------

Promissory Note Payable                                                         936,000              936,000
                                                                        ---------------      ---------------

Capital Lease Obligations, less current maturities                               26,747               39,817
                                                                        ---------------      ---------------

Stockholders' Equity (Deficit):
   Series A convertible preferred stock, $0.01 par value-
     Authorized--3,500,000 shares
     Issued and outstanding--2,725,000 shares at December 31, 2001                   --               27,250
   Class A convertible preferred stock., $0.001 par value
        Authorized - 5,000,000 shares
        Issued and outstanding - 3,691,422 shares at March 31, 2002
   Common stock, $0.001 par value                                                 3,692                   --
        Authorized - 80,000,000 and 40,000,000 shares at March 31,
        2002 and December 31, 2001, respectively
        Issued and  outstanding - 14,200,000  and 9,179,955 shares at
        March 31, 2002 and December 31, 2001, respectively                       14,200                9,180
   Additional paid-in capital                                                39,077,721           30,324,556
   Cumulative translation adjustment                                              2,200                  130
   Accumulated deficit                                                      (33,249,344)         (31,452,377)
                                                                        ---------------      ---------------

         Total stockholders' equity (deficit)                                 5,848,469           (1,091,261)
                                                                        ---------------      ----------------

                                                                        $    10,567,565      $     6,635,606
                                                                        ===============      ===============
</TABLE>


THE  ACCOMPANYING  NOTES ARE AN INTEGRAL  PART OF THESE  CONSOLIDATED  FINANCIAL
STATEMENTS.

                                       2
<PAGE>


Diomed Holdings, Inc.
Consolidated Statements of Operations
(unaudited)

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                  MARCH 31, 2002      MARCH 31, 2001

<S>                                             <C>                   <C>
Revenues                                        $         956,637     $   3,484,704

Cost of Revenues                                        1,154,890         2,232,497
                                                -----------------     -------------

         Gross profit                                   (198,253)         1,252,207
                                                -----------------     -------------

Operating Expenses:
   Research and development                               171,000           343,561
   Selling and marketing                                  342,728           608,329
   General and administrative                             820,647           611,739
                                                -----------------     -------------

         Total operating expenses                       1,334,375         1,563,629
                                                -----------------     -------------

         Loss from operations                         (1,532,628)          (311,422)

Interest Expense, net                                   (264,339)        (2,784,619)
                                                ----------------      -------------

         Net loss                               $     (1,796,967)     $  (3,096,041)
                                                ================      =============

Net loss per share (Note 3):
   Basic and diluted net loss per share
   applicable to common stockholders            $          (0.15)     $       (0.51)
                                                ================      =============

   Basic and diluted weighted average common
     shares outstanding                                11,771,395         6,093,059
                                                =================     =============
</TABLE>


THE  ACCOMPANYING  NOTES ARE AN INTEGRAL  PART OF THESE  CONSOLIDATED  FINANCIAL
STATEMENTS


                                       3
<PAGE>

Diomed Holdings, Inc.
Consolidated Statements of Cash Flows
(unaudited)

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                        MARCH 31, 2002    MARCH 31, 2001

<S>                                                    <C>                <C>
Cash Flows from Operating Activities:
   Net loss                                            $(1,796,967)       $ (3,096,041)
   Adjustments to reconcile net loss to net cash
   used in operating activities-
     Depreciation and amortization                         150,756             133,000
     Noncash interest expense on convertible debt          225,260           2,700,000
     Changes in operating assets and liabilities
       Accounts receivable                                 263,310             102,510
       Inventories                                         247,222             354,701
       Prepaid expenses and other current assets          (533,810)           (434,595)
       Deposits                                             (5,299)                  -
       Accounts payable                                 (1,463,963)           (296,206)
       Accrued expenses                                    376,923            (272,962)
       Customer advance                                   (293,463)                  -
                                                       -----------        ------------

         Net cash used in operating activities          (2,830,031)           (809,593)
                                                       -----------        ------------

Cash Flows from Investing Activities:
   Purchases of property and equipment                     (66,541)           (338,250)
                                                       -----------        ------------


Cash Flows from Financing Activities:
   Net proceeds (payments) from bank borrowings           (598,892)           (338,116)
   Proceeds from issue of common stock, net              8,646,399                   -


   Proceeds from issue of preferred stock, net                   -           1,846,365
   Payments on convertible debt                           (700,000)           (225,000)
   Payments on capital lease obligations                   (13,000)            (16,000)
                                                           -------        ------------

         Net cash provided by financing activities       7,334,507           1,267,249
                                                       -----------        ------------

Effect of Exchange Rate Changes                            (12,626)             29,849
                                                       ------------       ------------

Net Increase in Cash and Cash Equivalents                4,425,309             149,255

Cash and Cash Equivalents, beginning of period             322,566             118,872
                                                       -----------        ------------

Cash and Cash Equivalents, end of period               $ 4,747,875        $    268,127
                                                       ===========        ============

Supplemental Disclosure of Cash Flow Information:
   Cash paid for interest                              $    48,039        $    123,418
                                                       ===========        ============

Supplemental Disclosure of Noncash Investing and
Financing Activities:
   Conversion of convertible debt into common stock    $         -        $  2,475,000
                                                       ===========        ============
Reclassification offering costs incurred in 2001
   to APIC                                             $   387,133        $          -
                                                       ===========        ============

</TABLE>


THE  ACCOMPANYING  NOTES ARE AN INTEGRAL  PART OF THESE  CONSOLIDATED  FINANCIAL
STATEMENTS.


                                       4
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002


(1)  OPERATIONS

     Diomed Holdings,  Inc. and subsidiaries (the Company)  provides  innovative
     clinical   modalities  and  specializes  in  developing  and   distributing
     equipment  and  disposables  used in  minimal  and  micro-invasive  medical
     procedures.

     Some of the  Company's  medical  laser  products  and  applications  are in
     various  stages  of  development,  and  as  such,  the  success  of  future
     operations  is  subject  to a  number  of risks  similar  to those of other
     companies in similar stages of development. Principal among these risks are
     the  continued  successful  development  and  marketing  of  the  Company's
     products,  proper  regulatory  approval,  the  need to  achieve  profitable
     operations,  competition from substitute products and larger companies, the
     need to obtain adequate  financing to fund future operations and dependence
     on key  individuals.  The Company has  incurred  significant  losses  since
     inception and is devoting  substantially  all its efforts towards  research
     and  development,  regulatory  approvals,  manufacturing  and marketing its
     products.

     As  discussed  in Note 10,  during the quarter  ended March 31,  2002,  the
     Company  merged with  another  company,  raised $10  million in  additional
     funding through a private  placement  offering and paid certain of its debt
     outstanding at December 31, 2001.  Management believes that this additional
     capital,  along with its cash flows from operations,  will be sufficient to
     fund its  operations  through  December  2002,  depending on the  Company's
     ability to achieve its business plan  pertaining to the commercial  success
     of EVLT(TM)  post-FDA  clearance.  In  addition,  the  Company  anticipates
     seeking a global banking relationship to support the anticipated commercial
     success of EVLT(TM).

     The accompanying  consolidated  financial  statements at March 31, 2002 and
     for the three-month periods ended March 31, 2002 and 2001 are unaudited. In
     management's  opinion,  these unaudited  consolidated  financial statements
     have been prepared on the same basis as the audited consolidated  financial
     statements  included  in the  Company's  Annual  Report  on Form  10-K,  as
     amended, for the year ended December 31, 2001, and include all adjustments,
     consisting  of only  normal  recurring  adjustments,  necessary  for a fair
     presentation  of the  results for such  interim  periods.  These  financial
     statements  should be read in  conjunction  with the  audited  consolidated
     financial  statements included in the Company's Annual Report on Form 10-K,
     as amended, for the year ended December 31, 2001. The results of operations
     for the  three-month  period  ended  March  31,  2002  are not  necessarily
     indicative of the results  expected for the fiscal year ending December 31,
     2002.

     Certain  footnote  disclosures  normally  included in financial  statements
     prepared with generally accepted accounting  principles have been condensed
     or omitted  pursuant to such rules and  regulations,  although  the Company
     believes that the disclosures in these financial statements are adequate to
     make the information presented not misleading.

(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accompanying  consolidated financial statements reflect the application
     of certain  accounting  policies as described  below and elsewhere in these
     notes to consolidated financial statements.

     (a)  PRINCIPLES OF CONSOLIDATION

          These financial statements include the accounts of the Company and its
          wholly owned subsidiaries.  All significant intercompany  transactions
          have been eliminated.

                                       5
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

     (b)  USE OF ESTIMATES

          The preparation of financial  statements in conformity with accounting
          principles generally accepted in the United States requires management
          to make estimates and assumptions  that affect the amounts reported in
          the financial  statements and accompanying notes. Actual results could
          differ from those estimates.

     (c)  CASH AND CASH EQUIVALENTS

          Cash  and cash  equivalents  consists  of  short-term,  highly  liquid
          investments  with  original  maturity  dates of 90 days or less.  Cash
          equivalents are carried at cost, which approximates fair value.

     (d)  FOREIGN CURRENCY TRANSLATION

          Assets and liabilities of the foreign  subsidiaries  are translated at
          the rate of exchange in effect at year-end.  Results of operations are
          translated  using the weighted  average exchange rate in effect during
          the period.  Translation  adjustments,  resulting  from changes in the
          rate of exchange between the subsidiaries' functional currency and the
          U.S.  dollar,  are recorded as a separate  component of  stockholders'
          equity in the accompanying  consolidated  balance sheets.  Transaction
          gains and  losses,  resulting  from the  revaluations  of  assets  and
          liabilities  denominated in other than the functional  currency of the
          Company or its  subsidiaries,  are included in operating  expenses for
          all periods presented.

     (e)  REVENUE RECOGNITION

          Revenue from product  sales is  recognized  at the time of shipment to
          the  customer  as  long  as  there  is   persuasive   evidence  of  an
          arrangement,  the sales price is fixed and determinable and collection
          of the  related  receivable  is  probable.  The Company  provides  for
          estimated  product  returns and warranty  costs at the time of product
          shipment.  In December 1999,  the  Securities and Exchange  Commission
          (SEC)  issued  Staff  Accounting   Bulletin  (SAB)  No.  101,  REVENUE
          RECOGNITION IN FINANCIAL  STATEMENTS,  which  establishes  guidance in
          applying   generally   accepted   accounting   principles  to  revenue
          recognition in financial  statements  and is effective  beginning with
          the Company's  fourth quarter of the year ended December 31, 2000. The
          Company has determined that its existing revenue recognition practices
          comply with the requirements of SAB No. 101 for all periods presented.

     (f)  INVENTORIES

          Inventories are valued at the lower of cost  (first-in,  first-out) or
          market.  Work-in-progress  and finished  goods  consist of  materials,
          labor  and  manufacturing   overhead.   Inventories   consist  of  the
          following:


                                    MARCH 31, 2002     DECEMBER 31, 2001

              Raw materials        $       991,201     $     1,211,870
              Work-in-progress           1,044,656           1,016,236
              Finished goods               119,103             174,076
                                   ---------------     ---------------

                                   $     2,154,960     $     2,402,182
                                   ===============     ===============

                                       6
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

     (g)  DEPRECIATION AND AMORTIZATION

          The Company  provides for  depreciation  and  amortization  using both
          straight-line  and  accelerated  methods by charges to  operations  in
          amounts  that  allocate  the cost of the assets  over their  estimated
          useful lives as follows:

                                                      ESTIMATED
              DESCRIPTION                             USEFUL LIFE

              Office equipment and furnitureand
              fixtures                                2-5 years
              Manufacturing equipment                 2-5 years
                                                      Lesser of estimated useful
              Leasehold improvements                  life or life of lease



     (h)  LONG-LIVED ASSETS

          The  Company  assesses  the  realizability  of  long-lived  assets  in
          accordance with Statement of Financial Accounting Standards (SFAS) No.
          144,  ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED  ASSETS.
          Under SFAS No. 144, if qualitative  factors suggest that an impairment
          may have occurred,  the Company is required to assess the valuation of
          its long-lived assets. As of December 31, 2001 and March 31, 2002, the
          Company has  determined  that no material  adjustment  to the carrying
          value of its long-lived assets was required.

     (i)  FAIR VALUE OF FINANCIAL INSTRUMENTS

          The carrying amounts of the Company's cash, cash equivalents, accounts
          receivable,  accounts payable and various debt instruments approximate
          fair  value due to the  short-term  nature of these  instruments.  The
          carrying  amounts of debt  issued  pursuant to  agreements  with banks
          approximate  fair  value as the  interest  rates on these  instruments
          fluctuate with market interest rates.

     (l)  RESEARCH AND DEVELOPMENT EXPENSES

          The Company charges research and development expenses to operations as
          incurred.

     (m)  COMPREHENSIVE INCOME

          SFAS No. 130, REPORTING  COMPREHENSIVE INCOME,  requires disclosure of
          all  components  of  comprehensive  income.  Comprehensive  income  is
          defined as the change in stockholders' equity of a business enterprise
          during a period from  transactions and other events and  circumstances
          from nonowner sources. For all periods presented, comprehensive income
          consists  of  the   Company's  net  loss  and  changes  in  cumulative
          translation adjustment account as follows:

                                                  MARCH 31,       MARCH 31,
                                                  2002            2001

              Net loss                            $(1,796,967)    $(3,096,041)

              Foreign currency translation
                adjustment                              2,070         (15,202)
                                                  -----------     -----------

              Comprehensive loss                  $(1,794,897)    $(3,111,243)
                                                  ===========     ===========

                                       7
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

     (n)  INCOME TAXES

          The Company  follows the  provisions of SFAS No. 109,  ACCOUNTING  FOR
          INCOME  TAXES.   Deferred  income  taxes  are  provided  on  temporary
          differences  that arise in the recording of transactions for financial
          and tax  reporting  purposes  and  result in  deferred  tax assets and
          liabilities.  Deferred  tax  assets  are  reduced  by  an  appropriate
          valuation  allowance if it is  management's  judgment that part of the
          deferred tax asset will not be realized. Tax credits are accounted for
          as reductions of the current provision for income taxes in the year in
          which the related expenditures are incurred.

     (o)  RECENT ACCOUNTING PRONOUNCEMENTS

          In July 2001,  the FASB issued SFAS No.  141,  BUSINESS  COMBINATIONS.
          SFAS No. 141 requires all business  combinations  initiated after June
          30, 2001 to be accounted for using the purchase method. This statement
          is effective for all business  combinations  initiated  after June 30,
          2001.

          In July  2001,  the FASB  issued  SFAS No.  142,  GOODWILL  AND  OTHER
          INTANGIBLE  ASSETS.  This statement applies to goodwill and intangible
          assets  acquired  after  June  30,  2001,  as  well  as  goodwill  and
          intangible assets previously acquired. Under this statement,  goodwill
          as well as  certain  other  intangible  assets  determined  to have an
          infinite life will no longer be amortized;  instead, these assets will
          be reviewed for  impairment  on a periodic  basis.  This  statement is
          effective  for the  Company  for the first  quarter in the fiscal year
          ended  December 2002. The Company has not yet completed its assessment
          of whether the adoption of this new  accounting  standard  will have a
          material impact on the Company's financial statements. As of March 31,
          2002,  the  carrying  value  of the  Company's  intangible  assets  is
          $711,474.  Related to those  intangible  assets,  the Company recorded
          amortization  expense of  approximately  $49,000  and  $99,000 for the
          three months ended March 31, 2002 and 2001, respectively.

          In August  2001,  the FASB  issued SFAS No.  144,  ACCOUNTING  FOR THE
          IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS, which supercedes SFAS No.
          121,  ACCOUNTING  FOR THE  IMPAIRMENT  OF  LONG-LIVED  ASSETS  AND FOR
          LONG-LIVED  ASSETS TO BE DISPOSED OF. SFAS No. 144 further refines the
          requirements   of  SFAS  No.  121  that  companies  (i)  recognize  an
          impairment loss only if the carrying  amount of a long-lived  asset is
          not recoverable  based on its undiscounted  future cash flows and (ii)
          measure an  impairment  loss as the  difference  between the  carrying
          amount  and the fair  value of the asset.  In  addition,  SFAS No. 144
          provides  guidance on accounting  and  disclosure  issues  surrounding
          long-lived assets to be disposed of by sale. The Company's adoption of
          this statement has not had a material impact on its financial position
          or results of operations.

(3)  NET LOSS PER SHARE

     Net loss per  share is  computed  based on the  guidance  of SFAS No.  128,
     EARNINGS PER SHARE.  SFAS No. 128  requires  companies to report both basic
     loss per share,  which is based on the  weighted  average  number of common
     shares  outstanding,  and  diluted  loss per  share,  which is based on the
     weighted  average  number of common  shares  outstanding  and the  weighted
     average  dilutive  potential common shares  outstanding  using the treasury
     stock  method.  As a result of the losses  incurred  by the Company for the
     three months ended March 31, 2002 and 2001 all potential common shares were
     antidilutive  and were  excluded  from  the  diluted  net  loss  per  share
     calculations.

The following  table  summarizes  securities  outstanding as of each  period-end
which were not included in the  calculation  of diluted net loss per share since
their inclusion would be antidilutive.


                                       8
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

                                                       MARCH 31,    MARCH 31,
                                                         2002         2001

              Common stock options and warrants        1,915,832      876,994
                                                      ==========   ==========

              Convertible preferred stock             14,765,690    5,450,000
                                                      ==========   ==========

              Convertible debt                           167,000      165,000
                                                      ==========   ==========



(4)  ACQUISITION OF MANUFACTURING RIGHTS

     Effective  October 16, 2000,  the Company  acquired  certain  manufacturing
     rights  and   inventory  of  QLT,  Inc.   (QLT)   necessary  or  useful  to
     commercialize certain series of its OPTIGUIDE(R) fibers for $1.2 million in
     the form of two  promissory  notes,  payable  within two  years.  The first
     promissory note is payable in cash or in shares of common stock. The second
     promissory note is payable,  at the election of the Company,  in cash or in
     shares of common  stock.  In the event that the  Company  closes an initial
     public  offering  (IPO) of its  securities  within two years of the closing
     date, the due date of the balance  payment would be accelerated to the time
     of completion of the IPO and QLT would receive  payment in full in the form
     of common stock,  at a 40% discount on the offering  price per share to the
     public. This contingent beneficial  conversion feature,  valued at $556,667
     and computed in accordance  with  Emerging  Issues Task Force (EITF) 00-27,
     APPLICATION  OF EITF  ISSUE NO.  98-5 TO CERTAIN  CONVERTIBLE  INSTRUMENTS,
     would be recorded  upon the  occurrence of an IPO as a discount to the debt
     and amortized  ratably to interest  expense over the remaining  term of the
     debt, unless converted earlier.  The Company has determined that the merger
     and private  offering of common  stock,  as  discussed in Note 10, does not
     qualify as an IPO. The aggregate purchase price of $1,200,000 was allocated
     based on the fair value of the tangible and intangible  assets  acquired as
     follows:

              Inventory                        $     218,623
              Manufacturing rights                   981,377
                                               -------------

                                               $   1,200,000
                                               =============


     Amounts  allocated  to  manufacturing  rights  are being  amortized  on the
     straight-line  basis over a  five-year  period.  Included  in  general  and
     administrative  expenses is amortization  expense of approximately  $49,000
     and $99,000 for the months ended March 31, 2002 and 2001, respectively.

(5)  LINE-OF-CREDIT ARRANGEMENT

     Diomed, Ltd., the Company's subsidiary in the United Kingdom, has a line of
     credit   with   Barclays   Bank,   which  is   limited  to  the  lesser  of
     (pound)1,200,000  ($1,728,840  at March 31, 2002 and $1,745,160 at December
     31, 2001) or 80% of eligible accounts receivable.  This line bears interest
     at 3% above Barclays Bank's base rate (4.00% at March 31, 2002 and 4.00% at
     December 31, 2001) and  borrowings  are due upon  collection of receivables
     from   customers.   As  of  March  31,  2002,   there  were  borrowings  of
     (pound)191,289  ($275,557) outstanding under this line and available future
     borrowings of approximately $137,000.

(6)  CONVERTIBLE LOAN NOTES

     Between  March  and June  2000,  the  Company  issued  $2.7  million  of 9%
     convertible  subordinated  notes (the  Notes),  which were due on March 31,
     2001.  The  original  conversion  rate for the Notes was $3.50 per share of
     common stock. The conversion rate was subject to adjustment in the event of
     certain circumstances  occurring,  including certain issues of common stock
     at a price below $3.50 per share.

                                       9
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

     Pursuant  to  the  Stock  Purchase  and  Recapitalization   Agreement  (the
     Agreement),   dated  March  5,  2001,   which  provided   certain  existing
     shareholders with additional shares of common stock which had the effect of
     reducing  their  purchase  price to $1.00 per share,  the Company agreed to
     adjust  the  conversion  price  from  $3.50 per  share to $1.00 per  share.
     Concurrent with the Agreement,  the noteholders agreed to convert principle
     of $2,475,000  into  2,475,000  shares of common stock.  The balance due of
     $225,000 was repaid in cash.

     In  accordance  with EITF 00-27,  the  Company  recorded  noncash  interest
     expense  totaling  approximately  $2.7  million  in  March  2001 due to the
     adjustment of the original conversion price.

(7)  DEBT

     As of  December  31,  2001,  the two  promissory  notes  due to QLT for the
     acquisition of the  manufacturing  rights to the  OPTIGUIDE(R)  fibers (see
     Note 4) are shown on the consolidated balance sheet as convertible debt. As
     of March 31, 2002,  the second  promissory  note due to QLT is shown on the
     consolidated balance sheet as convertible debt.

     With  respect to the First QLT  Promissory  Note,  by letter  dated June 7,
     2001, QLT formally requested payment of the $339,336 balance due under that
     note.  QLT also  indicated  that it would  exercise  its  option  under the
     Optiguide  Asset Purchase  Agreement to require the Company to issue to QLT
     shares of Company Common Stock having a value equal to $339,336. On October
     1, 2001 the  Company  advised  QLT that it was  prepared  to issue  135,735
     shares  based on a per  share  price of  $2.50.  The  Company  asked QLT to
     respond if the calculation was acceptable to it and also asked that, if the
     calculation was not acceptable,  that the matter be referred to arbitration
     pursuant to the  applicable  provisions  of the  Optiguide  Asset  Purchase
     Agreement.  On January 28, 2002,  the Company  issued QLT 135,735 shares of
     Company Common Stock. On February 11, 2002, QLT informed the Company it was
     accepting  the 135,735  shares  issued to it under  protest as it disagreed
     with the per share price the Company had used in calculating  the number of
     shares  issued to it. It also  asserted  that the Company  had  failed,  in
     connection   with  the  issuance  of  those  shares,   to  confirm  certain
     registration rights and deliver a legal opinion.  The Company believes that
     QLT  may be  asserting  that it is  entitled  up to an  additional  542,940
     shares.  The Company  disputes this position  based on the express terms of
     its agreement with QLT and the relevant  facts.  The terms of the agreement
     between the Company and QLT require senior  management of both companies to
     meet  for a  period  of 60 days to  attempt  to  resolve  disputes  arising
     thereunder.

     In October 2000, a customer advanced the Company $936,000 to secure certain
     key materials.  In September  2001, the Company issued a promissory note to
     this customer in the amount of the advance.  The note matures on January 1,
     2004 and  bears  interest  at a rate of 8.5% per  year.  The note  does not
     provide for conversion rights.

     A summary of the debt at March 31, 2002 is as follows:

                                                  CURRENT         LONG-TERM

              Convertible debt--QLT               $    835,664    $         -
              Promissory note payable                        -        936,000
                                                  ------------    -----------

                                                  $    835,664    $   936,000
                                                  ============    ===========

(8)  SEGMENT REPORTING

     The Company has adopted  SFAS No.  131,  DISCLOSURES  ABOUT  SEGMENTS OF AN
     ENTERPRISE  AND  RELATED  INFORMATION,   which  establishes  standards  for
     reporting  information  regarding  operating  segments in annual  financial
     statements  and  requires  selected  information  for those  segments to be
     presented in interim financial

                                       10
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

     reports issued to stockholders. SFAS No. 131 also establishes standards for
     related disclosures about products and services and geographic areas.

     Operating  segments are  identified as  components  of an enterprise  about
     which separate discrete  financial  information is available for evaluation
     by the chief operating  decision maker, or decision making group, in making
     decisions  on  how  to  allocate  resources  and  assess  performance.  The
     Company's  chief decision  making group,  as defined under SFAS No. 131, is
     the Executive Management Committee.

     The Company's  reportable  segments are  determined by product type:  laser
     systems and fibers and other  accessories.  The accounting  policies of the
     segments  are the  same  as  those  described  in  Note  2.  The  Executive
     Management  Committee  evaluates  segment  performance  based  on  revenue.
     Accordingly, all expenses are considered corporate level activities and are
     not allocated to segments.  Also, the Executive  Management  Committee does
     not assign assets to its segments.

     This table presents revenues by reportable segment:


                                  MARCH 31,2002       MARCH 31, 2001

              Laser systems       $   518,242         $ 3,043,406
              Fibers and other
                 accessories          438,395             441,299
                                  -----------         -----------

                   Total          $   956,637         $ 3,484,705
                                  ===========         ===========




     The  following  table  represents  percentage  of  revenues  by  geographic
     destination:


                                  MARCH 31, 2002   MARCH 31, 2001

              North America              48%              47%

              Asia/Pacific               25%              27%

              Europe                     23%              25%

              Other                       4%               1%
                                  ---------        ---------

                   Total                100%             100%
                                  =========        =========



     The following table represents long-lived assets by geographic location:


                                        MARCH 31,        DECEMBER 31,
                                          2002               2001
              North America           $  1,005,733      $  1,417,681
              Europe                     1,317,837         1,382,536
                                      ------------      ------------

                   Total              $  2,323,570      $  2,800,217
                                      ============      ============

                                       11
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

(9)  BRIDGE LOANS FROM STOCKHOLDERS

     In September  2001, the Company  received an aggregate of $500,000 from two
     stockholders  of the Company in  exchange  for a bridge loan in the form of
     two secured  promissory notes  ("notes"),  dated October 5, 2001. The notes
     mature on January 1, 2003 and bear an annual interest rate of 7.5%.

     The notes are convertible, at the election of the noteholders,  into common
     stock prior to the maturity date under the following  scenarios:  1) in the
     event the Company does not  complete a reverse  merger by October 31, 2001,
     the  noteholders  may exercise  their call option  issued in the March 2001
     Series A Preferred Stock  financing and deliver their notes as payment,  2)
     in the  event  the  Company  completes  a  reverse  merger,  the  notes are
     convertible  into  common  stock at the  lesser  of $2.25 per share and the
     price per share in the reverse  merger,  3) in the event of another type of
     financing  transaction,  as defined,  the notes are convertible into common
     stock at the  lesser  of $2.25  per  share  and the  price per share in the
     transaction, and 4) in the event of a merger or consolidation,  excluding a
     reverse merger,  the notes are convertible  into common stock at the lesser
     of $2.25 per share  and the price per share of any  warrants  issued in the
     transaction.  However,  if the  Company  successfully  completes  a reverse
     merger  with a public  company,  where such  public  company has raised $10
     million in gross  proceeds in a private  placement  financing  prior to the
     reverse merger,  the notes become due and payable in cash within 10 days of
     the effective closing date. The call option expired on October 31, 2001.

     In addition,  the Company granted fully exercisable warrants to purchase an
     aggregate of 50,000  shares of common stock at a price per share equal to a
     maximum of $2.25,  adjustable for certain events, as defined.  The value of
     such warrants, calculated using the Black-Scholes option pricing model, was
     recorded  as a debt  discount  totaling  $43,000 and will be  amortized  to
     interest  expense over the life of the note.  In addition,  the  beneficial
     conversion feature attributable to the warrants,  totaling $43,000, will be
     recorded as interest  expense  upon the  occurrence  of an event which will
     trigger the note's right to convert.  In January 2002, due to the Company's
     delay in completing  the reverse  merger by December 31, 2001,  the Company
     was required to issue up to an  additional  aggregate  of 10,000  warrants,
     with terms  identical to the initial grant.  The warrants  expire two years
     from the date of issuance.  The value ascribed to these 10,000 warrants was
     $8,200 and was calculated using the Black Scholes option pricing model. The
     $8,200 was  recorded as a debt  discount  and will be amortized to interest
     expense over the life of the notes. In addition,  the beneficial conversion
     feature  attributable  to the warrants  totaling $8,200 will be recorded as
     interest  expense  upon the  occurrence  of an event which will trigger the
     notes' right to convert.

     In December 2001, the Company received an additional  aggregate of $200,000
     from the same two  noteholders  through  issuance of additional  promissory
     notes,  with terms  identical  to those  specified  above,  except as noted
     below. The maximum  conversion price of the notes and the exercise price of
     the warrants is $2.00 per share,  adjustable for certain events as defined.
     In addition,  the Company granted fully exercisable warrants to purchase an
     aggregate of 20,000  shares of common stock at a price per share equal to a
     maximum of $2.00,  adjustable for certain events,  as defined.  The Company
     completed a reverse merger by March 31, 2002, and  accordingly did not have
     to issue any  contingent  warrants.  Under the  December  2001  notes,  the
     conversion  price of the  notes  and the  exercise  price  of the  warrants
     included under the October 2001 notes were reduced to a maximum of $2.00 to
     be  consistent  with the terms of the December  2001 notes.  Such  revision
     creates an  additional  beneficial  conversion  feature  attributed  to the
     reduction of the conversion price,  totaling  $62,500,  to be recorded upon
     the  occurrence of an event which will trigger the notes' right to convert.
     Additionally, such revision created an additional debt discount, attributed
     to the  establishment  of a new measurement  date for the amended  warrant,
     totaling $39,000.

     In February  2002,  subsequent  to the closing of the reverse  merger,  the
     $700,000  aggregate  principal  amount of the promissory  notes,  issued in
     October and December  2001, was repaid to the two  stockholders,  including
     cumulative  interest.  During the three month  period ended March 31, 2002,
     the Company  recorded  $225,260 as  additional  non-cash  interest  expense
     related to warrants issued in connection with the bridge loan in 2001


                                       12
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

     and 2002, as well as beneficial  conversion  features discussed above which
     were triggered by the acquisition discussed in Note 10.

(10) MERGER AND PRIVATE OFFERING OF COMMON STOCK

     On February 14, 2002, Diomed Acquisition Corp. ("Acquisition"),  a Delaware
     corporation  and a  wholly-owned  subsidiary  of Diomed  Holdings,  Inc., a
     Nevada  corporation  formerly known as Natexco  Corporation (the "Parent"),
     merged  with and into the  Company  pursuant  to an  Agreement  and Plan of
     Merger,  dated as of January 29, 2002.  In the merger (the  "Merger")  that
     occurred under the Agreement and Plan of Merger,  the  stockholders  of the
     Company  received  shares of Parent.  As a condition to the Merger,  Parent
     raised gross proceeds of $10,000,000 in a private offering of shares of its
     common stock.  The shares issued in the private offering are not subject to
     refund,  redemption or rescission and,  accordingly,  will be included as a
     component of stockholders'  equity, net of the applicable costs. The merger
     agreement  provides that the proceeds of that offering will be available to
     the Company for payment of its  existing  obligations  and,  subject to the
     approval of its board of directors,  certain future expenses, including the
     financing of product developments and acquisitions.  Parent is obligated to
     use its best efforts to file a  registration  statement with the Securities
     and Exchange  Commission  to register for resale its common  shares that it
     issued in the  private  offering  and those of its  common  shares  that it
     issued to the Company's  former  stockholders and to cause the registration
     statement to be declared  effective.  In the event that the Parent fails to
     file or cause the  registration  statement to be declared  effective within
     240 days of completing the Merger,  or remain  effective  through the first
     anniversary of the Merger,  the Parent will be required to issue additional
     shares of its common  stock,  up to a maximum  of 4% of the shares  held by
     each party subject to the agreement.

     After the Merger,  the Company's former  stockholders own approximately 51%
     of the issued and  outstanding  shares of Parent (in terms of common  share
     equivalents).  The shares of Parent into which the shares of the  Company's
     existing  common  stock and the  Company's  Series A  preferred  stock were
     converted in the Merger will thereafter automatically convert into Parent's
     common stock in installments  beginning 60 days after Parent's registration
     statement has become  effective and continuing,  unless  interrupted  under
     certain circumstances, until the second anniversary of the Merger, at which
     time all such shares  will  automatically  convert  into shares of Parent's
     common stock.

     The Merger will be  accounted  for as a  recapitalization.  The  historical
     records of the Company are the historical records of Parent.  Following the
     Merger,  the business  conducted by Parent is the business conducted by the
     Company prior to the Merger.

     Costs of  approximately  $1.7  million  related to the issuance of Parent's
     shares  in  the  offering  and  its  preparation  and  negotiation  of  the
     documentation  for the Merger were  incurred and paid at the closing of the
     Merger and subsequent to the Merger.

ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         In this Quarterly  Report,  the terms  "Company" and "Diomed  Holdings"
both refer to Diomed  Holdings,  Inc. The term "Diomed"  refers to the Company's
principal subsidiary, Diomed, Inc. and its consolidated subsidiaries. We use the
terms  "we,"  "our"  and "us"  when we do not need to  distinguish  among  these
entities  or their  predecessors,  or when  any  distinction  is clear  from the
context.

         This section contains forward-looking  statements,  which involve known
and  unknown  risks and  uncertainties.  These  statements  relate to our future
plans,  objectives,   expectations  and  intentions.  These  statements  may  be
identified  by the use of words such as "may,"  "will,"  "should,"  "potential,"
"expects,"   "anticipates,"   "intends,"   "plans,"   "believes"   and   similar
expressions. These statements are based on our current beliefs, expectations and
assumptions and are subject to a number of risks and  uncertainties.  Our

                                       13
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

actual results could differ materially from those discussed in these statements.
Our Annual Report on Form SEC 10-KSB (the "Annual Report") contains a discussion
of certain of the risks and uncertainties that affect our business. We refer you
to the  "Risk  Factors"  on  pages  5  through  16 of the  Annual  Report  for a
discussion  of certain  risks,  including  those  relating to our  business as a
medical device company without a significant operating record and with operating
losses,  our risks relating to our  commercialization  of our current and future
products and  applications and risks relating to our common stock and its market
value.

         In view of our relatively  limited operating  history,  we have limited
experience forecasting our revenues and operating costs.  Therefore,  we believe
that  period-to-period  comparisons  of  financial  results are not  necessarily
meaningful and should not be relied upon as an indication of future performance.
To date, the Company has incurred  substantial costs to create our products.  As
of March 31, 2002, we had an accumulated deficit of approximately $33.2 million.
We may  continue to incur  operating  losses due to  spending  on  research  and
development  programs,  clinical trials,  regulatory  activities,  marketing and
administrative activities.  This spending may not correspond with any meaningful
increases  in  revenues in the near term,  if at all.  As such,  these costs may
result in negative operating cash flows until such time as the Company generates
sufficient revenue to offset such costs.

         The  following  discussion  should  be read  in  conjunction  with  the
Consolidated  Financial  Statements  and Notes set forth above in this Quarterly
Report and our Annual Report.

OVERVIEW

         Diomed  provides  innovative  clinical  modalities  and  specializes in
developing and  distributing  equipment and disposable items used in minimal and
micro-invasive medical procedures. Minimal and micro-invasive medical procedures
typically  result in reduced pain and  scarring,  shorter  recovery  periods and
increased effectiveness compared to traditional surgical procedures. Most of the
pain associated with traditional surgical procedures results from the slicing of
the layers of skin and muscle tissue, which also takes time to heal. This can be
diminished by using minimal and micro-invasive procedures instead of traditional
surgical treatments.  In developing and marketing our innovative  solutions,  we
use  proprietary  technology and we aim to secure strong  commercial  advantages
over our competitors by gaining governmental  approvals in advance of others and
through exclusive commercial arrangements. To participate in the rapidly growing
minimal and micro-invasive  medical procedure industry, we integrated disposable
items into our product  lines.  To optimize our  revenues,  we focus on clinical
procedures  that require the health care  provider to own our equipment and also
purchase our disposable  products,  such as optical fibers. We sell our products
to hospital  and  office-based  physicians,  including  specialists  in vascular
surgery, oncology, interventional-radiology, phlebology and dermatology.

         Utilizing   our   proprietary   technology   in   certain   methods  of
synchronizing  diode light sources and in certain optical  fibers,  we currently
focus on  photodynamic  therapy  (our  PDT(TM)  product  line) for use in cancer
treatments,  and endovenous laser treatment (our EVLT(TM) product line), for use
in varicose vein treatments. We also market our lasers and disposables for other
clinical  applications,  such as dentistry and cosmetic surgery. If the treating
physician  is  knowledgeable   about  the   reimbursement   system  and  obtains
preapproval,  then typically  health insurance payors will reimburse for PDT(TM)
and EVLT(TM)  procedures.  Using high power semiconductor diodes as their energy
source, our diode lasers combine clinical efficacy,  operational  efficiency and
cost  effectiveness  in  a  versatile,  compact,  lightweight,  easy-to-use  and
easy-to-maintain system.

         Since the beginning of 2001, the  composition of Diomed's  product line
has changed.  In the first half of 2001, Diomed abandoned its Laserlite business
when we withdrew from the aesthetic laser market.  Diomed had acquired Laserlite
LLC, the  distributor of Diomed's  cosmetic laser systems,  in May 1998.  Diomed
subsequently migrated to its existing laser platform, and this led to a decision
to discontinue the sale of the Laserlite product line.

                                       14
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

         In 2001,  Diomed developed  endovenous laser treatment  (EVLT(TM)),  an
innovative  minimally  invasive  laser  procedure  for the treatment of varicose
veins caused by greater saphenous vein reflux. In September 2001, Diomed was the
first company to receive the CE mark of the European Economic Union for approval
for endovenous laser treatment, with respect to marketing EVLT(TM) in Europe. On
January 22,  2002,  Diomed was the first  company to receive FDA  clearance  for
endovenous laser treatment, with respect to marketing EVLT(TM) in the U.S.

         Diomed  expects that  EVLT(TM)  will be a primary  source of revenue in
2002.  Diomed  believes  that EVLT(TM) will result in a high-level of commercial
acceptance due to its quick recovery period, an immediate return to one's normal
routine barring vigorous physical activities, reduced pain and minimal scarring,
and reduced costs as compaired to vein stripping, the current prevalent clinical
treatment for varicose veins.  Also we developed our EVLT(TM)  product line as a
complete  clinical solution and marketing model,  including a laser,  disposable
kit, clinical training and a marketing plan, to assist physicians and clinics in
responding to the demand for treatment of varicose veins in a minimally invasive
manner. In addition,  Diomed has developed a website - WWW.EVLT.COM - to provide
patients with education about treatment options and benefits of EVLT(TM). Diomed
expects that as the volume of EVLT(TM) procedures performed increases so may its
disposable  sales.  Diomed  believes that the US represents  the single  largest
market for EVLT(TM).  In April 2002, Diomed began actively hiring a direct sales
force to supplement  its existing  sales  infrastructure  of  independent  sales
representatives.

         Diomed's  sales of its PDT product line are dependent to an extent upon
the clinical  development process and the  commercialization of PDT(TM) drugs by
PDT(TM) drug companies.  As a result, our sales may fluctuate in relation to the
timing of PDT(TM) drug companies achieving their strategic initiatives.

         Diomed  works  jointly  and  early on with  photodynamic  therapy  drug
(PDT(TM))  companies in their clinical  development process in order to design a
laser that  optimizes the most effective  wavelength in  combination  with their
PDT(TM) drugs. We have long-term  relationships with some of the world's leading
photodynamic therapy drug companies, including Axcan Pharma, DUSA, Pharmacyclics
and QLT,  and have sold them  lasers in  support  of their  clinical  trials for
photodynamic  therapy  applications.  In August  2000,  Axcan  Pharma and Diomed
together received  regulatory approval for Diomed's 630nm laser and OPTIGUIDE(R)
fiber, and Axcan's  Photofrin drug used in the treatment for late stage lung and
esophageal cancers. Axcan Pharma is developing other clinical applications using
Photofrin,  including treatment for Barrett's Esophagus,  a pre-cursor to cancer
of the esophagus.  Axcan Pharma is pursuing an application for FDA clearance for
Photofrin  and Diomed's  lasers and fibers for use in the treatment of Barrett's
Esophagus.

         In the US,  regulatory  approval by the FDA is given for each  specific
treatment in response to a specific pre-market approval  application,  or "PMA."
Each PMA is generally  addressed to a use for the device that the PMA specifies.
Our PDT(TM) line is a delivery  system of laser  technology,  services and fiber
disposables  to the global  photodynamic  therapy  industry.  The FDA  considers
PDT(TM) a modality that requires a combination  PMA approval,  where the PDT(TM)
drug company,  laser manufacturer and fiber manufacturer work together to obtain
regulatory approval for the complete medical procedure.

         Our technology and manufacturing capability has attracted OEM partners.
In a typical OEM  relationship,  we produce the laser and other  products to the
OEM's  specifications,  which will then be marketed under the OEM's label.  As a
result,  sales of our products to OEM partners may  fluctuate in relation to the
achievement of their strategic initiatives.  Our most prominent OEM relationship
is with Olympus in Japan,  which is using our technology for surgical and dental
applications.   In  addition  we  have  a  long-term   partnership  with  Dentek
Lasersystems  Vertriebs  GmbH,  which is  using  our  laser  module  for  dental
applications.

                                       15
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

         In 2001,  approximately one-third of our revenues were dependent upon a
few of our strategic  partners and approximately 50% of our sales were generated
domestically versus  internationally.  Going forward, we believe that our annual
dependence on any individual  customer or group of customers  should decrease as
more of our  revenues  may derive  from  sales of  EVLT(TM)  in the U.S.  market
directly to individual physician practices and less to large-scale distributors.
In addition, Diomed believes that its percentage of sales generated domestically
should increase as it grows the EVLT(TM) market in the U.S.

         Diomed envisions that by developing and marketing procedures to doctors
that  involve   selling  key  components  -  namely  lasers  and  their  related
disposables  designed for a single use, including fibers and kits - we will have
the  potential  to create  recurring  sales.  Diomed's  plan is that each future
procedure will be accompanied with a disposable component.

         In fiscal 2002,  Diomed expects to focus on the  development and growth
of EVLT(TM)  sales  worldwide,  to support the  development  and approval of new
applications  for PDT products and to continue the  development of new minimally
invasive medical procedures that offer long-term opportunities to the Company.

RESULTS OF OPERATIONS

THREE MONTHS  ENDED MARCH 31, 2002  COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2001

         REVENUES  Revenues  for the three months ended March 31, 2002 were $1.0
million, a $2.5 million, or 73%, decrease from $3.5 million for the three months
ended March 31, 2001.

         This decrease was principally  due to a $2.5 million  decrease in laser
sales. The decrease in laser sales was primarily  attributable to three factors:
(1) a 93% decrease  (or, $1.2  million) in sales of PDT(TM)  lasers,  (2) an 89%
decrease (or, $0.9 million) in OEM sales, and (3) the Company's  withdrawal from
the aesthetic  laser market (which had  represented  $460,000 in revenues in the
first quarter of 2001).

         The  decrease  in sales of our PDT  lasers was  principally  due to the
additional  time  needed by Axcan  Pharma to sell the $1.0  million in lasers it
purchased in the first  quarter of 2001 under our  exclusive  supply  agreement.
Axcan  Pharma  purchased  these  lasers in  support  of its  market  launch  for
Photofrin,  the PDT drug used to treat late stage lung and  esophageal  cancers.
The  remaining  portion  of the  decrease  results  from the fact  that  certain
customers who purchased PDT lasers in the first quarter of 2001 for use in their
clinical  trials have not  required  additional  lasers  while these  trials are
ongoing.

         The decrease in OEM sales is  principally  due to the  additional  time
needed by Olympus Japan to sell the $0.8 million in surgical lasers it purchased
in the first quarter of 2001 to support its market launch.

         We abandoned our Laserlite business when we withdrew from the aesthetic
laser market.  Diomed acquired  Laserlite,  LLC, the distributor of its cosmetic
laser systems, in May 1998. Diomed  subsequently  migrated to its existing laser
platform,  and this led to a decision to  discontinue  the sale of the Laserlite
product line.

COST OF REVENUES
         Cost of  revenues  for the three  months  ended March 31, 2002 was $1.2
million, a $1.1 million,  or 50% decrease from $2.2 million for the three months
ended March 31, 2001.  This decrease was  principally due to


                                       16
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

the decreased  sales volume in the first quarter of 2002 as compared to the same
time period in 2001, and a headcount  reduction in manufacturing  resulting from
the  restructuring  in December  2001 of our  subsidiary  operations  in the UK,
offset by  regulatory  costs  incurred in the US in the first  quarter 2002 that
were not incurred in the same period in 2001.

GROSS PROFIT (LOSS)
         Gross Loss for the three months ended March 31, 2002 was  approximately
$200,000,  a $1.5 million,  or 116%, decrease from $1.3 million gross profit for
the three months ended March 31, 2001.  This decrease was principally due to the
decreased sales volume in the first quarter of 2002 as compared to the same time
period in 2001.  As a result the Company  absorbed  fixed  costs for  production
quality, regulatory and service that otherwise would have been covered.

 RESEARCH AND DEVELOPMENT EXPENSES
         Research and development  expenses for the three months ended March 31,
2002 were  $171,000, a $173,000, or 50%,  decrease  from  $344,000 for the three
months ended March 31, 2001.  The  decrease was  principally  due to a headcount
reduction  resulting from the  restructuring  in December 2001 of our subsidiary
operations in the UK,  offset by costs  incurred in the first quarter of 2001 to
wind down the aesthetic laser  business,  which was acquired from Laserlite LLC,
that was subsequently abandoned in the first half of 2001.

SELLING AND MARKETING  EXPENSES
         Selling and  marketing  expenses  for the three  months ended March 31,
2002 were  $343,000,  a $265,000,  or 44%,  decrease from $608,000 for the three
months ended March 31, 2001.  The  decrease was  principally  due to a headcount
reduction  resulting from the  restructuring  in December 2001 of our subsidiary
operations  in the UK,  offset  by sales and  marketing  staff  costs  that were
incurred in the first  quarter of 2002 that were not incurred in the same period
in 2001.

GENERAL AND ADMINISTRATIVE EXPENSES
         General and  administrative  expenses  for the three months ended March
31, 2002 were $820,000, a $210,000, or 34%, increase from $611,000 for the three
months ended March 31, 2001. The increase was  principally due to staffing costs
in the US in the first quarter of 2002 that were not incurred in the same period
in  2001,  and  incremental  legal,   accounting  and  other  professional  fees
associated  with becoming a public company in the first quarter of 2002,  offset
by a headcount  reduction resulting from a restructuring in December 2001 of our
subsidiary in the UK.

INTEREST EXPENSE, NET
         Interest  expense  for the  three  months  ended  March  31,  2002  was
$264,000, a $2.5 million, or 91%, decrease from $2.8 million in the three months
ended March 31, 2001.  Interest expense in the three months ended March 31, 2001
reflects a noncash charge totaling $2.7 million.  In March 2001,  holders of our
9% convertible  subordinated  notes, with a conversion price of $3.50 per share,
agreed to convert $2.5  million in  principal  amount of those notes into common
stock.  The  conversion  rate was subject to  adjustment in the event of certain
circumstances,  including  certain issues of common stock at a price below $3.50
per share.  Pursuant to our March 5, 2001 Stock  Purchase  and  Recapitalization
Agreement,  which provided certain shareholders with additional shares of common
stock at a purchase price of $1.00 per share,  we adjusted the conversion  price
of the notes  from $3.50 per share to $1.00 per  share.  At the same  time,  the
holders of the notes converted $2.475 million of the notes into 2,475,000 shares
of  common  stock.  We  repaid  the  remaining  $225,000  of notes  in cash.  In
accordance  with Emerging  Issues Task Force (EITF) 00-27,  Application  of EITF
Issue  No.98-5  to  certain  Convertible  Instruments,  we  recorded  a non-cash
interest  expense charge of $2.7 million due to the adjustment of the conversion
price.

         Interest  expense in the three  months  ended  March 31,  2002  include
non-cash charges totaling  approximately  $225,000.  In 2001, the Company issued
Promissory  Notes, in the aggregate principal amount of

                                       17
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

$700,000,  to two  stockholders  of the Company in exchange for bridge loans and
granted  these two  stockholders  fully  exercisable  warrants  to  purchase  an
aggregate  of 80,000  shares  of common  stock.  We  recorded  the value of such
warrants,  calculated  using the  Black-Scholes  option pricing model, as a debt
discount that would be amortized to interest expense over the life of the notes.
In addition,  we recorded the beneficial  conversion feature attributable to the
warrants as interest expense upon the closing of the Merger, which triggered the
right to convert the notes.

LIQUIDITY AND CAPITAL RESOURCES

         Since  inception  through March 31, 2002, we have incurred a cumulative
loss of  approximately  $33.2 million and may continue to incur operating losses
for the next few  years,  dependent  upon the  commercial  success  of  EVLT(TM)
post-FDA  clearance.  We have financed our operations  primarily through private
placements  of common  stock and  preferred  stock,  and private  placements  of
convertible notes and short-term notes and credit arrangements.

         We  anticipate  that we will have  sufficient  cash to fund  operations
through  December  2002,  in reliance on the  proceeds of the private  placement
financing  related to the  Merger  and  depending  on the  Company's  ability to
achieve its  business  plan  pertaining  to the  commercial  success of EVLT(TM)
post-FDA  clearance.  In  addition,  we  anticipate  seeking  a  global  banking
relationship to support the anticipated  commercial  success of EVLT(TM) . If we
are unable to achieve  our  business  plans,  we may need to continue to rely on
external sources of financing to meet our cash needs for future acquisitions and
internal expansion, and if necessary,  defer certain discretionary  expenditures
in order to continue operations. Additional financing, through subsequent public
offerings, or private equity or debt financings,  may not, however, be available
on  acceptable  terms or at all. The  inability to obtain  additional  financing
would  cause us to reduce or cease  operations  because  we would not be able to
fund the development of our applications so that they may be commercialized and,
thus, become profitable.

         We had cash of approximately $4.7 million as of March 31, 2002. Cash as
of December 31, 2001 was approximately $323,000.

         Cash used in  operations  for the three months ended March 31, 2002 was
approximately $2.8 million.  This is principally  attributable to the paydown of
trade payables of approximately $1.5 million and repayment of a customer advance
of  approximately  $300,000  subsequent  to  completing  the  private  placement
offering in connection with the Merger,  and an increase in prepaid  expenses of
approximately $500,000 for annual fees.

         Cash used in investing  activities for the three months ended March 31,
2002 was approximately  $66,000.  The net cash used in investing  activities was
principally  related  to the  purchase  of  office  equipment,  furnishings  and
fixtures, and leasehold improvements.

         Cash provided by financing  activities for the three months ended March
31, 2002, was approximately $7.3 million.  Cash provided by financing activities
is attributable to  approximately  $8.3 million in net proceeds from the sale of
Diomed  Holdings  common  stock  sold  in  the  private  placement  offering  in
connection with the Merger. Subsequent to closing the Merger, the Company repaid
the Promissory  Notes issued to two stockholders in October and December 2001 in
exchange for bridge loans  ($700,000),  and paid down the Barclays  bank line of
credit  ($600,000).

CAPITAL TRANSACTIONS IN 2002
         On  January  1,  2002,  in  accordance  with the  terms  of the  bridge
financing  provided  to us in October  2001,  we issued  warrants to purchase an
additional  10,000  (in  the  aggregate)  shares  of  common  stock  to the

                                       18
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

two  stockholders who provided that financing.  The bridge  financing  agreement
with these stockholders required us to issue an additional 10,000 warrants to in
that bridge financing for each month after December 31, 2001 in which we did not
consummate a reverse merger with a public company.  Because the Merger satisfied
that  requirement,  no  additional  warrants  are  issuable  in  respect of that
financing.

         In February 2002, in connection with the Merger, we conducted a private
placement  offering  of  common  stock.  In  the  private  placement,  investors
subscribed  to purchase  from  Diomed an  aggregate  of 5 million  shares of its
common  stock at a price per share of $2.00 per share,  which  resulted in gross
proceeds of $10.0 million and net proceeds of approximately $8.3 million. In the
Merger,  the shares of Diomed common stock issued in the private  placement were
exchanged  for an equal number of shares of the Company's  common  stock.  After
completing  the  Merger,  the  Company  paid back the  $700,000  in  convertible
promissory notes issued to two of our stockholders who provided bridge financing
in October and December 2001, including cumulative interest.

         As to our predecessor corporation, Natexco Corporation:

         On January 23, 2002,  Natexco  redeemed  400,000 shares of common stock
owned by Anthony Mulhall, a former director of Natexco.

         On February 5, 2002  Natexco  redeemed  all of the shares of  preferred
stock owned by R.H.  Consulting Group, Inc. and Desert Bloom Investments,  Inc.,
which represented all of Natexco's then outstanding preferred stock. All of such
shares of preferred stock were then canceled.

BANK LINE OF CREDIT

         During 2001 and 2002,  our UK subsidiary has access to a line of credit
with  Barclays  Bank,  which  is  limited  to  the  lesser  of  (pound)1,200,000
(approximately  $1,745,000 at December 31, 2001 and approximately  $1,729,000 at
March 31, 2002) or 80% of eligible accounts receivable. This line bears interest
at 3% above  Barclays  Bank's base rate (4% at December 31, 2001 and 4% at March
31, 2002), and borrowings are due upon collection of receivables from customers.
As  of  December   31,  2001,   borrowings   of   approximately   (pound)601,000
(approximately  $874,000)  were  outstanding,  whereas  as  of  March  31,  2002
borrowings  of  approximately   (pound)191,000   (approximately  $276,000)  were
outstanding  under this line. The lower balance under the line of credit for the
three  months  ended March 31, 2002 is due to a decrease in accounts  receivable
and a  change  in our  customer  order  policy  for  financed  orders,  which we
instituted in the third quarter of 2001. Under this new policy,  customer orders
are  generally be supported  by a letter of credit,  advance  payment or payment
upon installation, which reduces our reliance on our line of credit.

RECENT ACCOUNTING PRONOUNCEMENTS

         In July 2001, the FASB issued SFAS No. 141, Business Combinations. SFAS
No. 141 requires all business  combinations  initiated after June 30, 2001 to be
accounted for using the purchase  method.  Accordingly,  we will account for the
Merger using the purchase method.

         In July  2001,  the  FASB  issued  SFAS No.  142,  Goodwill  and  Other
Intangible  Assets.  This statement  applies to goodwill and  intangible  assets
acquired  after  June  30,  2001,  as well as  goodwill  and  intangible  assets
previously  acquired.  Under this  statement,  goodwill as well as certain other
intangible  assets  determined  to have an  infinite  life  will  no  longer  be
amortized;  instead,  these assets will be reviewed for impairment on a periodic
basis.  This  statement  is effective  for the first  quarter in the fiscal year
ended  December  2002.  The  adoption  of this new  accounting  standard  is not
expected to have a material impact on our financial statements.

                                       19
<PAGE>
Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

         In August  2001,  the FASB  issued  SFAS No.  144,  Accounting  for the
Impairment  or Disposal of Long-Lived  Assets,  which  supercedes  SFAS No. 121,
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
Be Disposed Of. SFAS No. 144 further  refines the  requirements  of SFAS No. 121
that companies (i) recognize an impairment loss only if the carrying amount of a
long-lived asset is not recoverable based on its undiscounted  future cash flows
and (ii)  measure an  impairment  loss as the  difference  between the  carrying
amount and the fair  value of the  asset.  In  addition,  SFAS No. 144  provides
guidance on accounting and disclosure issues surrounding long-lived assets to be
disposed of by sale. The Company has yet to complete its impairment  review, but
we do not anticipate adoption of this new accounting standard to have a material
impact on the financial statements.

                           PART II: OTHER INFORMATION

ITEM 2.       CHANGES IN SECURITIES AND USE OF PROCEEDS

         (c) During the first  quarter of 2002,  the Company  issued  options to
purchase up to 25,000 shares of its Class A Stock,  and upon conversion of those
shares  100,000  shares of its common  stock,  at a purchase  price of $2.00 per
underlying share to a new director, Kim Campbell, and issued options to purchase
up to 15,532.5 shares of its Class A Stock,  and upon conversion of those shares
62,130 shares of its common stock,  at a purchase price in the range of $2.25 to
$4.18 per underlying share to five employees and two consultants, as follows:

                                                      OPTIONS GRANTED
                  OPTIONEE                 (EXPRESSED IN SHARES OF COMMON STOCK)
                  --------                 -------------------------------------

                  Robert Min (consultant)                  525
                  Steven Zimmet                            105
                  Sam Wade                              15,000
                  Susan Campbell                        10,000
                  Carl Simonds                           5,000
                  Jerry Sugars                           6,500
                  Lisa M. Bruneau                       25,000

Diomed issued options to Ms. Campbell and the above-listed optionees in reliance
upon the  exemption  from  registration  set  forth  under  Section  4(2) of the
Securities  Act of 1933,  as amended.  Each  optionee  agreed  that  neither the
options nor the underlying securities would be resold without registration under
the Securities Act or exemption therefrom. Each optionee also represented his or
her intention to acquire the securities for investment only, and not with a view
to the  distribution  thereof.  Prior to making  any offer or sale,  Diomed  had
reasonable  grounds to believe and believed  that the  purchaser  was capable of
evaluating  the  merits  and  risks of the  investment  and was able to bear the
economic risk of the investment represented by the options granted.

         All other sales of  unregistered  securities made by the Company during
the first quarter of 2002 are described under Item 5 of our Annual Report.

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

         On or about  February  6,  2002,  our  predecessor  solicited  from its
stockholders  a consent to change its name from  Natexco  Corporation  to Diomed
Holdings,  Inc. A copy of the  amendment  to our  certificate  of  incorporation
setting forth the approval  obtained from the  stockholders  in connection  with
this name change is  included  as Exhibit 3.2 to our Current  Report on Form SEC
8-K filed on February 14, 2002.

ITEM 5.       OTHER

         Arthur  Andersen  was  accused of  wrongdoing  in  connection  with its
representation of Enron Corp., and was recently indicted on criminal charges. On
March 18, 2002, the SEC adopted temporary rules giving instructions and guidance
to companies affected by this situation.  Under these rules,  companies who make
filings with the SEC that include accountant's reports issued by Arthur Andersen
after March 14, 2002,  such as ourselves,  are required to include as an exhibit
to their filings a letter  addressed to the SEC that states that Arthur Andersen
has  represented to the company that its audit was subject to Arthur  Andersen's
quality control system for the U.S.  accounting and auditing practice to provide
reasonable  assurance  that the  engagement  was  conducted in  compliance  with
professional  standards  and that  there was  appropriate  continuity  of Arthur
Andersen   personnel   working  on  audits,   availability  of  national  office
consultation  and  availability  of  personnel at foreign  affiliates  of Arthur
Andersen  to conduct the  relevant  portions  of the audit.  We received  such a
letter and filed it as Exhibit 99.3 with our Form 10-KSB for 2001.

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

(b) REPORTS ON FORM 8-K. State whether any reports on Form 8-K were filed during
the  quarter for which this report is filed,  listing  the items  reported,  any
financial statements filed and the dates of such reports.

The  Company  filed  a  Current  Report  on Form  8-K on  February  14,  2002 in
connection  with the Merger  and  related  transactions.  This  Report  included
details  regarding the change in control of the Company  effected by the Merger,
the  issuance of  securities  in  connection  with the Merger and other  details
regarding the Merger,  details  regarding the private  placement  sale of common
stock immediately preceding the Merger, certain documents relating to the Merger
and the private placement,  a descriptive  memorandum  regarding the Company and
certain other Company documents,  as well as certain financial data,  consisting
of  Consolidated
                                       20
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

Balance  Sheets  as of  December  31,  1999  and  2000 and  September  30,  2001
(unaudited),  Consolidated Statements of Operations for the Years Ended December
31, 1998,  1999, and 2000 and the Nine Months Ended  September 30, 2000 and 2001
(unaudited),  Consolidated  Statements of Stockholders' Equity (Deficit) for the
Years  Ended  December  31,  1998,  1999,  and 2000 and the  Nine  Months  Ended
September 30, 2001  (unaudited),  and Consolidated  Statements of Cash Flows for
the Years Ended  December  31,  1998,  1999,  and 2000 and the Nine Months Ended
September 30, 2000 and 2001 (unaudited).















                                       21
<PAGE>

Diomed Holdings, Inc.
Notes to Consolidated Financial Statements
March 31, 2002

                                   SIGNATURES

         IN  ACCORDANCE  WITH  SECTION  13 OR 15(d)  OF THE  EXCHANGE  ACT,  THE
REGISTRANT  HAS DULY  CAUSED  THIS  REPORT  TO BE  SIGNED  ON ITS  BEHALF BY THE
UNDERSIGNED HEREUNTO DULY AUTHORIZED.


                                 DIOMED HOLDINGS, INC.
                                 (Registrant)


                                 By:     /s/ PETER KLEIN
                                    --------------------------------------------
                                 Name:   Peter Klein
                                 Title:  President and Chief Executive Officer,
                                         Director


                                 Date:   May 15, 2002


                                 By:      /s/ CHARLES T. HOEPPER
                                    --------------------------------------------
                                 Name:   Charles T. Hoepper
                                 Title:  Chief Financial Officer


                                 By:     /s/ LISA M. BRUNEAU
                                    --------------------------------------------
                                 Name:   Lisa M. Bruneau
                                 Title:  Vice President Finance, Treasurer and
                                         Secretary






                                       22