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 JUNE 30, 2004

                                       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                                84-1480636
    (State or other jurisdiction of         (I.R.S. Employer Identification No.)
     incorporation or organization)

               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 AUGUST 11, 2004, THERE  WERE 14,606,422  SHARES OF COMMON STOCK, PAR VALUE
$0.001, OUTSTANDING.


<PAGE>

                     DIOMED HOLDINGS, INC. AND SUBSIDIARIES

                         QUARTERLY REPORT ON FORM 10-QSB
             FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2004


                                TABLE OF CONTENTS


                                                                           Page
Item Number                                                               Number
-----------                                                               ------

             Part I - Financial Information

     1       Condensed Consolidated Balance Sheets -                        F-1
             June 30, 2004 (unaudited) and December 31, 2003

             Unaudited Consolidated Statements of Operations -              F-3
             Three Months and Six Months Ended June 30, 2004 and 2003

             Unaudited Consolidated Statements of Cash Flows -              F-4
             Six Months Ended June 30, 2004 and 2003


             Notes to Consolidated Financial Statements                     F-6


     2       Management's Discussion and Analysis or Plan of Operation        1

     3       Controls and Procedures                                          7


             Part II - Other Information                                      8

     1       Legal Proceedings                                                8

     2       Changes in Securities                                            8

     3       Submission of Matters for a Vote of Securities Holders           9

     5       Other                                                           11

     6       Exhibits and Reports on Form 8-K                                11

             Signatures                                                      12


<PAGE>

DIOMED HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003

<TABLE>
<CAPTION>
ASSETS
                                                              JUNE 30,    DECEMBER 31,
                                                                2004         2003
                                                            -----------    -----------
<S>                                                         <C>            <C>
CURRENT ASSETS:
  Cash and Cash Equivalents                                 $ 9,182,133    $13,398,075
  Accounts Receivable, net                                    2,089,201      1,437,238
  Inventories                                                 2,115,099      1,892,241
  Prepaid Expenses and Other Current Assets                     766,640        449,625
                                                            -----------    -----------

    Total current assets                                     14,153,073     17,177,179

Property, Plant and Equipment, net                              772,369        747,728
Intangible Assets, net                                        4,727,172      4,972,253
Other Assets                                                    269,516        183,756
                                                            -----------    -----------

Total assets                                                $19,922,130    $23,080,916
                                                            ===========    ===========
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                   statements.

                                      F-1
<PAGE>

DIOMED HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2004 (UNAUDITED) AND DECEMBER 31, 2003

<TABLE>
<CAPTION>
ASSETS
                                                              JUNE 30,    DECEMBER 31,
                                                                2004         2003
                                                            -----------    -----------
<S>                                                         <C>            <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Bank Loan                                                 $        --    $   261,676
  Promissory Notes                                                   --        936,000
  Accounts Payable                                            2,122,186      1,497,541
  Accrued Expenses and Other                                  1,304,152      1,852,480
  Deferred Revenue                                              149,118         56,802
  EVLT Technology Payable ($1,000,000 Face Value,
   net of $121,287 and $35,609
   Debt Discount at June 30, 2004
   and December 31, 2003)                                       878,713        964,391
                                                            -----------    -----------

    Total Current Liabilities                                 4,454,169      5,568,890

EVLT Technology Payable ($750,000 Face Value, net of
   $29,029 Debt Discount at June 30, 2004 and $1,250,000
   Face Value, net of $173,832 Debt Discount
   at December at December 31, 2003.                            720,971      1,076,168
                                                            -----------    -----------
Total Liabilities                                             5,175,140      6,645,058

Stockholders' Equity                                         14,746,990     16,435,858
                                                            -----------    -----------
Total Liabilities and Stockholders' Equity                  $19,922,130    $23,080,916
                                                            ===========    ===========
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                   statements.

                                      F-2
<PAGE>

DIOMED HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED                      SIX MONTHS ENDED
                                                         --------------------------------       --------------------------------
                                                          JUNE 30, 2004     JUNE 30, 2003       JUNE 30, 2004      JUNE 30, 2003
                                                         --------------------------------       --------------------------------

<S>                                                      <C>                  <C>               <C>                  <C>
Revenues                                                 $  3,182,706         $ 2,148,540       $  6,132,303         $ 4,272,350

Cost of Revenues                                            1,918,277           1,271,947          3,862,647           2,671,406
                                                         --------------------------------       --------------------------------

Gross Profit                                                1,264,429             876,593          2,269,656           1,600,944
                                                         --------------------------------       --------------------------------

Operating Expenses:
   Research and Development                                   373,449             198,693            669,603             386,786
   Selling and Marketing                                    1,551,536             878,764          3,157,498           2,021,978
   General and Administrative                               1,409,382             980,968          2,808,647           1,781,717
                                                         --------------------------------       --------------------------------

      Total Operating Expenses                              3,334,367           2,058,425          6,635,748           4,190,481
                                                         --------------------------------       --------------------------------

      Loss from Operations                                 (2,069,938)         (1,181,832)        (4,366,092)         (2,589,537)
                                                         --------------------------------       --------------------------------

Interest Expense, Non-cash                                         --             426,386                 --             946,386
Interest Expense, Cash-based                                    9,756             152,973             21,761             222,346
                                                         --------------------------------       --------------------------------
             Total Interest Expense                             9,756             579,359             21,761           1,168,732
                                                         --------------------------------       --------------------------------

         Net Loss Applicable to Common Stockholders      $ (2,079,694)        $(1,761,191)      $ (4,387,853)        $(3,758,269)
                                                         ================================       ================================


Basic and Diluted Net Loss per Share Applicable to
Common Stockholders                                      $      (0.14)        $     (1.48)      $      (0.31)        $     (4.11)
                                                         ================================       ================================
Basic and Diluted Weighted Average Common Shares
Outstanding *                                              14,366,540           1,188,470         14,237,137             914,942
                                                         ================================       ================================
</TABLE>

* All amounts reflect the reverse stock split on a retroactive basis.

  The accompanying notes are an integral part of these consolidated financial
                                   statements.

                                      F-3

<PAGE>

DIOMED HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                      Six Months Ended June 30,
                                                                -----------------------------------
                                                                     2004                    2003
                                                                ------------            -----------

<S>                                                             <C>                     <C>
Cash Flows from Operating Activities:
         Net loss                                               $ (4,387,853)           $(3,758,269)
         Adjustments to reconcile net loss
         to net cash used in operating activities:
                Depreciation and amortization                        464,907                283,912

                Non-cash interest expense on
                      related party debt                                  --                937,849
                Non-cash interest expense on
                      EVLT(R)purchase obligation                      59,125                     --
                Issuance of stock options
                      to third party                                  62,231                  8,600
                Changes in operating assets
                      and liabilities:
                      Accounts receivable                           (651,963)                47,978
                      Inventories                                   (222,858)               269,449
                      Prepaid expenses
                           and other current assets                 (317,014)              (435,300)
                      Deposits                                       (85,762)               242,928
                      Accounts payable                               624,646                 49,664
                      Accrued expenses
                           and deferred revenue                     (444,274)                45,865
                                                                ------------            -----------

Net cash used in operating activities                             (4,898,815)            (2,307,324)
                                                                ------------            -----------

Cash Flows from Investing Activities:
                Purchases of property and equipment                 (256,867)              (185,130)
                                                                ------------            -----------

Net cash used in investing activities                               (256,867)              (185,130)
                                                                ------------            -----------
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                   statements.

                                      F-4

<PAGE>

DIOMED HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

<TABLE>
<CAPTION>
                                                                      Six Months Ended June 30,
                                                                -----------------------------------
                                                                     2004                    2003
                                                                ------------            -----------

<S>                                                             <C>                     <C>
Cash Flows from Financing Activities:
                Payment on promissory notes                         (936,000)                (7,454)
                Net payments on bank borrowings                     (261,676)              (161,411)
                Payment on EVLT(R)purchase obligation               (500,000)                    --
                Increase in deferred financing costs                      --                (51,100)
                Increase in deferred offering costs                       --               (198,682)
                Proceeds from redeemable debt                             --              1,100,000
                Net Proceeds from Equity Financing                 2,723,620                     --
                Payments on capital lease obligations                (11,739)               (16,757)
                                                                ------------            -----------

Net cash provided by financing activities                          1,014,205                664,596
                                                                ------------            -----------

Effect of Exchange Rate Changes                                      (74,465)               228,653
                                                                ------------            -----------

Net Decrease in Cash and Cash Equivalents                         (4,215,942)            (1,599,205)

Cash and Cash Equivalents, beginning of period                    13,398,075              1,848,646
                                                                ------------            -----------

Cash and Cash Equivalents, end of period                        $  9,182,133            $   249,441
                                                                ============            ===========

Supplemental Disclosure of Cash Flow Information:
         Cash paid for interest                                 $         --            $    40,843
                                                                ============            ===========

Value ascribed to debt discount related
         to redeemable debt                                                             $   240,000
                                                                                        ===========

Value ascribed to debt discount related
         to debt                                                                        $ 2,000,000
                                                                                        ===========
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                   statements.

                                      F-5

<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004
                                   (UNAUDITED)

(1)      OPERATIONS

         Diomed  Holdings,   Inc.  ("Diomed"  or  "the  Company")  develops  and
commercializes  minimally  invasive  medical  procedures  that  employ its laser
technologies  and  associated   disposable   products.   Using  its  proprietary
technology,  including its exclusive  rights to U.S. Patent No.  6,398,777,  the
Company  currently  focuses on endovenous laser treatment  (EVLT(R)) of varicose
veins. The Company also develops and markets lasers and disposable  products for
photodynamic  therapy (PDT) cancer  procedures  and products for other  clinical
applications, including dental and general surgical procedures.

         In  developing  and  marketing its clinical solutions, the Company uses
proprietary  technology  and aims to secure strong  commercial  advantages  over
competitors  by  gaining  governmental   approvals  in  advance  of  others,  by
developing  and offering  innovative  practice  enhancement  programs  including
physician training and promotional materials, and obtaining exclusive commercial
arrangements.  To optimize revenues,  Diomed focuses on clinical procedures that
generate revenues from both capital equipment and disposable  products,  such as
procedure kits and optical fibers.

         Diomed's  high  power   semiconductor  diode  lasers  combine  clinical
efficacy, operational efficiency and cost effectiveness in a versatile, compact,
lightweight,  easy-to-use  and  easy-to-maintain  system.  Along with lasers and
single-use  procedure kits for EVLT(R),  the Company provides its customers with
state of the art  physician  training  and  practice  development  support.  The
EVLT(R)  procedure and the Company's related products were cleared by the United
States FDA in January of 2002.

(2)      BASIS OF PRESENTATION

         In the opinion of management,  these unaudited  consolidated  financial
statements contain all adjustments considered normal and recurring and necessary
for their fair presentation.  Interim results are not necessarily  indicative of
results to be expected for the year.  These interim  financial  statements  have
been  prepared  in  accordance  with  the  instructions  for  Form  10-QSB,  and
therefore, do not include all information and footnotes necessary for a complete
presentation of operations, financial position, and cash flows of the Company in
conformity with accounting  principles  generally accepted in the United States.
The Company filed with the  Securities  and Exchange  Commission its 2003 annual
report on Form 10-KSB on March 30, 2004,  which  included  audited  consolidated
financial  statements  for the  year  ended  December  31,  2003,  and  included
information  and footnotes  necessary  for such  presentation.  These  unaudited
consolidated financial statements should be read in conjunction with the audited
consolidated  financial  statements and the notes thereto included in our annual
report on Form 10-KSB for the year ended December 31, 2003.

(3)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Our Annual  Report on Form 10-KSB for the year ended  December 31, 2003
includes a  comprehensive  summary of the  significant  accounting  policies and
methods used in the preparation of our consolidated  financial  statements.  The
application of these policies has a significant  impact on our reported results.
In addition,  the application of some of these policies  depends on management's
judgment,   with  financial   reporting   results  relying  on  estimations  and
assumptions about the effect of matters that are inherently  uncertain.  For all
of these policies, management cautions that future events rarely develop exactly
as forecast and the best estimates routinely require adjustment.

          (a)     REVERSE STOCK SPLIT

         On June 16, 2004, we announced  that the Board of Directors  approved a
one-for-twenty-five  reverse  stock split of our common stock to be effective on
June 17, 2004. The Board of Directors had been granted  authority to implement a
one-for-twenty-five  reverse stock split and reduce the authorized  shares to 50
million at the Board's  discretion by affirmative  vote of the Company's  Common
Stockholders  at the Company's 2004 Annual Meeting of Stockholders  held on June
15, 2004. All amounts within the accompanying  consolidated financial statements
and  footnotes  reflect   the  reverse  stock  split  on  a  retroactive  basis.
Additionally,  the Company  reduced the  number of  authorized  shares of common
stock from 500 million to 50 million shares.


                                      F-6
<PAGE>

                              DIOMED HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004
                                   (UNAUDITED)

          (b)     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:

                                                June 30,           December 31,
                                                 2004                 2003
                                               ----------          ----------
           Raw Materials                       $  813,724          $  856,886
           Work-in-Process                        584,115             456,934
           Finished Goods                         717,260             578,421
                                               ----------          ----------
                                               $2,115,099          $1,892,241
                                               ==========          ==========


          (c)     ACCOUNTING FOR STOCK-BASED COMPENSATION

          The Company accounts for its employee  stock-based  compensation plans
under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees utilizing the intrinsic value method.  Accordingly,  compensation cost
for stock options issued to employees is measured as the excess,  if any, of the
fair market price of the Company's stock at the date of the fixed grant over the
amount an employee must pay to acquire the stock.  SFAS No. 123,  Accounting for
Stock-Based  Compensation  as  amended  by  SFAS  No.  148,  establishes  a fair
value-based method of accounting for stock-based compensation plans. The Company
has adopted the disclosure only alternative  under SFAS No. 123, with respect to
its employee stock compensation plan, which requires disclosure of the pro forma
effects  on net loss and loss per share as if SFAS No.  123 had been  adopted as
well as certain other information.

<TABLE>
<CAPTION>
                                                                  Three-Months    Three-Months      Six Months       Six Months
                                                                     Ended           Ended            Ended             Ended
                                                                 June 30, 2004    June 30, 2003    June 30, 2004    June 30, 2003
                                                                   ----------       ----------       ----------       ----------
<S>                                                                <C>              <C>              <C>              <C>
Net loss as reported:                                             $(2,079,694)     $(1,761,191)     $(4,387,853)     $(3,758,269)
Add : Stock-based employee compensation
           expense included in reported net loss, net of tax               --               --               --               --
Deduct : total stock-based employee compensation;
              expense determined under the fair value-based
              method for all awards, net of tax                      (242,131)         (71,060)        (489,256)        (140,669)
                                                                  -----------      -----------       ----------      -----------
   Pro forma net loss                                             $(2,321,825)     $(1,832,251)     $(4,877,109)     $(3,898,938)
                                                                  ===========      ===========      ===========      ===========
   Loss per share:
             Basic and diluted - as reported                      $     (0.14)     $     (1.48)     $     (0.31)     $     (4.11)
                                                                  ===========      ===========      ===========      ===========
             Basic and diluted - pro forma                        $     (0.16)     $     (1.54)     $     (0.34)     $     (4.26)
                                                                  ===========      ===========      ===========      ===========
</TABLE>


          (d)      COMPREHENSIVE INCOME

          SFAS No. 130, Reporting  Comprehensive Income,  requires disclosure of
all components of comprehensive  income (loss).  Comprehensive income is defined
as the change in stockholders'  equity of a business  enterprise during a period


                                      F-7
<PAGE>
                              DIOMED HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004
                                   (UNAUDITED)

from transactions and other events and circumstances from non-owner sources. For
all periods presented, comprehensive loss consists of the Company's net loss and
changes in the cumulative translation adjustment account. Comprehensive net loss
for all periods presented is as follows:

<TABLE>
<CAPTION>
                                                Three Months Ended June 30,         Six Months Ended June 30,
                                             --------------------------------   -------------------------------
                                               2004               2003              2004               2003
                                             -----------       -----------       -----------       -----------
<S>                                          <C>               <C>               <C>               <C>
Net loss                                     $(2,079,694)      $(1,761,191)      $(4,387,853)      $(3,758,269)
Foreign currency translation adjustment          (36,112)           21,423           (86,868)         (150,370)
                                             -----------       -----------       -----------       -----------

Comprehensive loss                           $(2,115,806)      $(1,739,768)      $(4,474,721)      $(3,908,639)
                                             ===========       ===========       ===========       ===========
</TABLE>

          (e)      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-month and six-month  periods ended
June  30,  2004  and  2003,  respectively,  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  of  the
three-month and six month periods, which were not included in the calculation of
diluted net loss per share since their inclusion would be antidilutive.

<TABLE>
<CAPTION>
                          Three Months Ended June 30,    Six Months Ended June 30,
                           -------------------------     -------------------------
                             2004             2003         2004             2003
                           ---------     ----------      ---------    -----------
<S>                        <C>           <C>             <C>          <C>
Common Stock Options       1,024,917     $  100,758      1,024,917    $   100,758
                           =========     ==========      =========    ===========

Common Stock Warrants        882,625          4,877        882,625          4,877
                           =========     ==========      =========    ===========

Convertible Debt                  --      2,619,048             --      2,619,048
                           =========     ==========      =========    ===========
</TABLE>

(4)      LINE OF CREDIT ARRANGEMENTS

          Diomed, Ltd., the Company's United Kingdom-based subsidiary,  utilizes
a line of credit  with  Barclays  Bank,  limited to the  lesser of  (GBP)150,000
($272,000 at June 30, 2004) or 80% of eligible accounts  receivable.  The credit
line bears  interest at a rate of 3% above  Barclays base rate (4.5% at June 30,
2004) and borrowings are due upon collection of receivables  from customers.  As
security  interest,  Barclay's  Bank has a lien on all of the  assets  of Diomed
Ltd., excluding certain intellectual  property.  As of June 30, 2004, there were
no amounts outstanding under this line of credit.

          On June 8, 2004,  the Company  entered into a line of credit  facility
with Silicon  Valley Bank for  $2,500,000,  limited to 80% of domestic  accounts
receivable and 50% of eligible inventory balances,  as defined.  The credit line
bears interest at a

                                      F-8
<PAGE>

                              DIOMED HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004
                                   (UNAUDITED)

rate of prime plus one  percent  (5.25% at June 30,  2004).  The credit  line is
secured by the assets of Diomed Inc., excluding certain  intellectual  property,
and  is  subject  to  financial  covenants  including  tangible  net  worth  and
liquidity.  At June 30, 2004, there were no amounts  outstanding under this line
of credit and the Company was in compliance with the bank covenants.

(5)      STOCK OPTIONS

          (a) In November  2003,  the Company's  stockholders  approved the 2003
Omnibus Plan, under which the Company reserved  1,600,000 shares of common stock
for future  issuance.  The 2003  Omnibus  Plan  provides for grants or awards of
stock options,  restricted  stock awards,  restricted  stock units,  performance
grants,  stock awards,  and stock appreciation  rights.  Only present and future
employees  and  outside  directors  and  consultants  are  eligible  to  receive
incentive awards under the 2003 Omnibus Plan.

          The  exercise  price  and  vesting  are  determined  by the  Board  of
Directors at the date of grant.  Options  generally vest over two to four years,
and expire 10 years after the date of grant.  Incentive  stock options under the
Plans are granted at not less than fair market  value per share of Common  Stock
on the date of grant or 110% of fair market value for any  stockholder who holds
more than 10% of the total combined  voting power of all classes of stock of the
Company.

          As of June 30, 2004,  671,996 options and other incentive stock awards
were  available  for future  grants  under the 2003 Omnibus  Plan.  In addition,
25,065  options  were  available  under the 1998 Plan and  12,178  options  were
available  under the 2001 Plan as of June 30, 2004.  We  anticipate  that future
stock options will only be granted under the 2003 Omnibus Plan.

A summary of stock option activity is as follows:

<TABLE>
<CAPTION>
                                 Range of Exercise                       Weighted Average
                                       Price         Number of Shares     Exercise Price
                                 --------------------------------------------------------
<S>                               <C>                   <C>                  <C>
Outstanding, December 31, 2003    $2.00 - $205.75         222,343             $ 24.13

        Granted                    2.50 -    6.75         846,971                4.74
        Forfeited                  5.00 -  138.00         (44,397)              10.95
                                 --------------------------------------------------------

Outstanding, June 30, 2004        $2.00 - $205.75       1,024,917             $  8.80
                                 ========================================================

Exercisable June 30, 2004         $2.00 - $205.75         180,561             $ 25.10
                                 ========================================================
</TABLE>



                                      F-9
<PAGE>

                              DIOMED HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004
                                   (UNAUDITED)

The following table summarizes currently  outstanding and exercisable options as
of June 30, 2004.
<TABLE>
<CAPTION>
                                                     OUTSTANDING                                   EXERCISABLE
                                      -------------------------------------------      -------------------------------------
                                                                 Weighted Average                            Weighted Average
Exercise Price              Shares       Remaining Life*           Exerise Price             Shares           Exercise Price
--------------              ------       ---------------         ----------------            ------          ----------------
<S>                         <C>               <C>                         <C>                <C>                    <C>
 $2.00 - $50.00             1,000,123         9.80                        $ 5.79             157,124                $  8.88
 56.25 - 88.50                  7,146         2.55                         65.23               6,305                  66.43
100.00 - 164.00                17,008         3.24                        153.83              16,492                 155.37
$201.25 - $205.75                 640         1.66                        205.75                 640                 205.75
                        --------------                     ----------------------      -------------------------------------
                            1,024,917                                     $ 8.80             180,561                $ 25.10
                        ==============                     ======================      =====================================
</TABLE>

     * Weighted average remaining contractual life (in years).

          (b) In the first quarter of 2004,  the Company  granted 20,059 options
to purchase  shares of Common Stock at exercise prices in the range of $5.00 per
share to $6.75 per share to two consultants  and a third party service  provider
for services  performed.  The Company  recorded the fair value of such  options,
based on the  Black-Scholes  option pricing model,  as stock-based  compensation
expense totaling $62,231 in the statement of operations for the six-month period
ended June 30, 2004.

          (c) A summary of warrant activity is as follows:

<TABLE>
<CAPTION>
                                                                                                            Weighted Averge
                                             Range of Exercise                         Weighted Average   Remaining Contractual
                                                  Price            Number of Shares     Exercise Price       Life (In Years)
                                           ----------------------------------------------------------------------------------
<S>                                            <C>                    <C>                    <C>                        <C>
Outstanding, December 31, 2003                $0.025 - $87.50         1,196,838              $ 2.00                     4.9

        Exercised by former Placement Agent    0.025 -   2.50          (313,813)               0.03                      --
        Forfeited due to expiration                     50.00              (400)              50.00                      --
                                           ---------------------------------------------------------------------------------

Outstanding, June 30, 2004                    $0.025 - $87.50           882,625              $ 2.50                     4.6
                                           =================================================================================

Exercisable June 30, 2004                     $0.025 - $87.50           882,625              $ 2.50                     4.6
                                           =================================================================================
</TABLE>


                                      F-10

<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 2004
                                   (UNAUDITED)

(6)      SEGMENT REPORTING

          The  Company's  reportable  segments are  determined  by product type:
laser  systems and  fibers,  accessories  and  service.  The Board of  Directors
evaluates segment  performance based on revenue.  Accordingly,  all expenses are
considered  corporate level activities and are not allocated to segments.  Also,
the Board of  Directors  does not  assign  assets to its  segments.  This  table
presents revenues by reportable segment:

<TABLE>
<CAPTION>
                                       Three Months Ended June 30,       Six Months Ended June 30,
                                      ---------------------------       --------------------------
                                        2004              2003            2004              2003
                                      ----------       ----------       ----------      ----------
<S>                                   <C>              <C>              <C>             <C>
Laser systems                         $1,855,356       $1,295,953       $3,658,871      $2,701,697
Fibers, accessories, and service       1,327,350          852,587        2,473,432       1,570,653
                                      ----------       ----------       ----------      ----------
Total                                 $3,182,706       $2,148,540       $6,132,303      $4,272,350
                                      ==========       ==========       ==========      ==========
</TABLE>

The following table represents percentage of revenues and long-lived assets by
geographic destination:

<TABLE>
<CAPTION>
                                              % of Revenue                   Long-lived Assets
                                      ---------------------------       --------------------------
                                        Six Months Ended June 30,
                                      ---------------------------         June 30,    December 31,
                                        2004              2003             2004            2003
                                      ----------       ----------       ----------      ----------
<S>                                   <C>              <C>              <C>             <C>
North America                                 60%              57%      $5,199,588      $5,300,029
Asia/Pacific                                  27%              25%              --              --
Europe                                        10%              18%         569,469         603,708
Other                                          3%               0%              --              --
                                      ----------       ----------       ----------      ----------
Total                                        100%             100%      $5,769,057      $5,903,737
                                      ==========       ==========       ==========      ==========
</TABLE>


                                      F-11
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS

         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 actual
results could differ  materially from those discussed in these  statements.  Our
2003  Annual  Report on Form SEC  10-KSB/A  (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 19 through 32 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 the  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 June 30, 2004, we had an accumulated  deficit of approximately  $63.7 million
including $15.9 million in non-cash interest  expense.  We may continue to incur
operating losses due to spending on research and development programs,  clinical
trials,   regulatory   activities,   and  sales,  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 losses
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 in the Annual Report.

(1)      OVERVIEW

         Diomed  Holdings,   Inc.  ("Diomed"  or  "the  Company")  develops  and
commercializes  minimally  invasive  medical  procedures  that  employ its laser
technologies  and  associated   disposable   products.   Using  its  proprietary
technology,  including its exclusive  rights to U.S. Patent No.  6,398,777,  the
Company  currently  focuses on endovenous laser treatment  (EVLT(R)) of varicose
veins. The Company also develops and markets lasers and disposable  products for
photodynamic  therapy (PDT) cancer  procedures  and products for other  clinical
applications, including dental and general surgical procedures.

         In developing  and marketing its clinical  solutions,  the Company uses
proprietary  technology  and aims to secure strong  commercial  advantages  over
competitors  by  gaining  governmental   approvals  in  advance  of  others,  by
developing  and offering  innovative  practice  enhancement  programs  including
physician training and promotional materials, and obtaining exclusive commercial
arrangements.  To optimize revenues,  Diomed focuses on clinical procedures that
generate revenues from both capital equipment and disposable  products,  such as
procedure kits and optical fibers.

         Diomed's  high  power   semiconductor  diode  lasers  combine  clinical
efficacy, operational efficiency and cost effectiveness in a versatile, compact,
lightweight,  easy-to-use  and  easy-to-maintain  system.  Along with lasers and
single-use  procedure kits for EVLT(R),  the Company provides its customers with
state of the art  physician  training  and  practice  development  support.  The
EVLT(R)  procedure and the Company's related products were cleared by the United
States FDA in January of 2002.


                                       1
<PAGE>

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

EVLT(R)  was a primary  source of revenue  in 2003,  and will  continue  to be a
primary  source of revenue in 2004.  We believe that EVLT(R) will achieve a high
level  of  commercial  acceptance  due to its  related  short  recovery  period,
immediate return to one's normal routine barring vigorous  physical  activities,
reduced  pain  and  minimal  scarring,  and  reduced  costs  compared  to  other
treatments  for  varicose  veins.  We  developed  our EVLT(R)  product line as a
complete  clinical solution and marketing model,  including a laser,  disposable
kit, clinical training and customized marketing programs, to assist office-based
and hospital-based  physicians in responding to the growing demand for treatment
of  varicose  veins in a minimally  invasive  manner.  We have also  published a
health insurance  reimbursement  guide to assist physicians in the reimbursement
submission process.  We believe that these attributes,  in addition to EVLT(R)'s
superior  clinical trial  results,  favorable  peer reviews,  and  comparatively
larger and longer  follow-up  data reports  provide  EVLT(R) with a  competitive
advantage  over  competing  traditional  and  minimally  invasive  varicose vein
treatment products.

We expect that as the number of EVLT(R) procedures increases,  so will our sales
of associated  disposable items. We believe that the U.S.  represents the single
largest market for EVLT(R).  We are targeting our sales and marketing efforts at
hospitals,  private  physician  practices  and clinics.  We sell our products to
hospital and office-based  physicians in major population centers throughout the
U.S.,  focusing on  specialists in vascular  surgery,  interventional-radiology,
general surgery, phlebology, gynecology and dermatology.

We utilize a direct sales force to market our products in the United  States and
a network  of more  than 35  distributors  to market  our  products  abroad.  We
increased our number of sales representatives from 10 at December 31, 2003 to 18
by June 30, 2004, and 20 in July 2004. This represents a significant  investment
in sales staff, as we estimate that it takes approximately two quarters before a
sales representative can deliver consistent targeted sales performance.  We also
added two clinical  specialists to support field sales  efforts.  These clinical
specialists  assist in physician  training and post-sales  support,  freeing the
sales representatives to focus on new sales opportunities.

We have  developed  and  maintain  a website  -  www.EVLT.com  - to assist  both
patients  and  physicians.  EVLT.com  provides  patients  with  education  about
treatment options and benefits of EVLT(R) and provides physicians with education
about the  EVLT(R)  procedure.  At  www.EVLT.com,  patients  can also locate the
nearest physician performing EVLT(R) by inputting their city and state.

Our  technology  and  manufacturing   capability  has  also  attracted  original
equipment  manufacturing  (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
uses our technology for surgical and dental applications and is currently in the
process  of  registering  EVLT(R)  in Japan.  In  addition  we have a  long-term
partnership  with Dentek Medical  Systems GmbH,  which uses our laser module for
dental applications.

In 2004, we expect to continue to focus on the development and growth of EVLT(R)
sales both  domestically  and  internationally,  to support the  development and
approval of new applications  for PDT products,  and to continue the development
of enhancements to our products in order to further improve their  effectiveness
and manufacturing efficiency.


                                       2
<PAGE>

(2)      RESULTS OF OPERATIONS

         THREE  MONTHS  ENDED JUNE 30, 2004  COMPARED TO THE THREE  MONTHS ENDED
JUNE 30, 2003

REVENUE

         Revenue  for the  three  months  ended  June 30,  2004 was  $3,183,000,
increasing approximately $1,034,000, or 48%, from $2,149,000 for the same period
in 2003. In the three months ended June 30, 2004, approximately  $1,855,000,  or
58%,  of our total  revenue  was  derived  from  laser  sales,  as  compared  to
approximately  $1,296,000,  or 60%,  in the same  period  in 2003.  In the three
months  ended June 30,  2004,  approximately  $1,327,000,  or 42%,  of our total
revenues were derived from sales of disposable fibers and kits,  accessories and
service,  as compared to approximately  $853,000,  or 40%, in the same period in
2003.  Revenue from the EVLT(R)  product line increased 65% over the same period
last year, including growth of 90% in disposable procedure product revenue.

         The increase in revenue is attributable primarily to:

          o    increased penetration in the EVLT(R)market,

          o    the  compounding  impact of the  recurring  revenue  stream  from
               disposable sales to both new and existing customers, and

          o    the  impact  of new  sales  management,  and  the  expansion  and
               development of our sales team.

COST OF REVENUE AND GROSS PROFIT

Cost of  revenue  for the  three  months  ended  June 30,  2004 was  $1,918,000,
increasing  approximately  $646,000, or 51%, from $1,272,000 for the same period
in 2003.  Gross  profit for the three  months  ended June 30,  2004,  at 40% was
$1,264,000,  increasing approximately $388,000 from $877,000 for the same period
last year.  Our gross profit at 40%,  remained  comparable to the same period in
the prior year, as costs from new royalties and the foreign  exchange  impact on
materials,  were offset by  decreasing  costs of  materials  and the leverage of
fixed manufacturing costs across a greater number of units.

OPERATING EXPENSES

         RESEARCH AND  DEVELOPMENT  EXPENSES for the three months ended June 30,
2004 were $373,000,  increasing $174,000,  or 88%, from the same period in 2003.
R&D expenditures are expected to remain at an elevated level through year-end as
we strive to improve the feature-function of our products and continue to reduce
product costs.

         SELLING AND MARKETING EXPENSES for the three months ended June 30, 2004
were  $1,552,000,  increasing  approximately  $673,000,  or 77%, over 2003.  The
increase was driven by a  significant  expansion in the size of the sales force,
higher  sales  commissions  resulting  from  the  increased  sales  volume,  and
increased  marketing  expenditures in support of the sales efforts.  The Company
anticipates  increased spending in sales and marketing programs through year-end
to support our continued commercialization of EVLT(R).

         GENERAL AND ADMINISTRATIVE EXPENSES for the three months ended June 30,
2004 were $1,409,000,  increasing  approximately $428,000, or 44%, from the same
period in 2003. Incremental legal fees and infrastructure enhancements primarily
drove this  increase.  Legal  expenses  included  the  continued  cost of patent
litigation against Angiodynamics,  Vascular Solutions, and Total Vein Solutions,
and the cost of  litigation  against  Vascular  Solutions  in the theft of trade
secrets suit filed in the fourth quarter of 2003.


                                       3
<PAGE>

LOSS FROM OPERATIONS

         Loss from  operations  for the three  months  ended  June 30,  2004 was
$2,070,000, increasing approximately $888,000, from the same period in 2003.

INTEREST EXPENSE, NET

         Interest  expense for the three months ended June 30, 2004 was $10,000,
compared to $579,000 for the same period in 2003.  Interest expense in the three
months ended June 30, 2003 included  non-cash charges totaling  $426,000 related
to the December 2002 debt financing for the  amortization  of the  corresponding
discount and beneficial conversion feature.

NET LOSS APPLICABLE TO COMMON STOCKHOLDERS

         Net loss applicable to common  stockholders  for the three months ended
June 30, 2004 was  $2,080,000,  or $0.14 per share,  compared to $1,761,000,  or
$1.48 per share,  for the same  period in 2003.  As a result of the 2003  equity
financing   and  the   April   2004   targeted   offering,   adjusted   for  the
one-for-twenty-five  share reverse split effective June 17, 2004, basic weighted
average  common shares  outstanding  increased  from  approximately  1.2 million
shares to 14.4 million shares for the corresponding 2003 and 2004 quarters.

SIX MONTHS ENDED JUNE 30, 2004 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2003

REVENUE

         Revenue  for the  six  months  ended  June  30,  2004  was  $6,132,000,
increasing approximately $1,860,000, or 44%, from $4,272,000 for the same period
in 2003.  In the six months ended June 30, 2004,  approximately  $3,659,000,  or
60%,  of our total  revenue  was  derived  from  laser  sales,  as  compared  to
approximately  $2,702,000, or 63%, in the same period in 2003. In the six months
ended June 30, 2004,  approximately  $2,473,000,  or 40%, of our total  revenues
were derived from sales of disposable fibers and kits,  accessories and service,
as compared  to  approximately  $1,570,000,  or 37%, in the same period in 2003.
Revenue from the EVLT(R)  product line  increased  59% over the same period last
year, including growth of 96% in disposable procedure product revenue.

         The increase in revenue is attributable primarily to:

          o    increased penetration in the EVLT(R)market,

          o    the  compounding  impact of the  recurring  revenue  stream  from
               disposable sales to both new and existing customers, and

          o    the  impact  of new  sales  management,  and  the  expansion  and
               development of our sales team.

COST OF REVENUE AND GROSS PROFIT

Cost of  revenue  for  the six  months  ended  June  30,  2004  was  $3,863,000,
increasing approximately $1,191,000, or 45%, from $2,671,000 for the same period
in 2003.  Gross  profit for the six months  ended June 30, 2004 was  $2,270,000,
increasing approximately $669,000 from $1,601,000 for the same period last year.
Our gross profit,  at 37%,  remained  comparable to the same period last year as
cost increases from new royalties and the foreign  exchange impact on materials,
were  offset  by  decreasing  costs  of  materials  and the  leverage  of  fixed
manufacturing  costs across a greater number of lasers and  disposable  products
sold.


                                        4
<PAGE>

OPERATING EXPENSES

         RESEARCH  AND  DEVELOPMENT  EXPENSES  for the six months ended June 30,
2004 were $670,000,  increasing $283,000,  or 73%, from the same period in 2003.
R&D expenditures are expected to remain at an elevated level through year-end as
we strive to improve the feature-function of our products and continue to reduce
product costs.

         SELLING AND  MARKETING  EXPENSES for the six months ended June 30, 2004
were $3,157,000,  increasing  approximately  $1,136,000,  or 56%, over 2003. The
increase was driven by a  significant  expansion in the size of the sales force,
higher  sales  commissions  resulting  from  the  increased  sales  volume,  and
increased  marketing  expenditures in support of the sales efforts.  The Company
anticipates  increased spending in sales and marketing programs through year-end
to support the continued commercialization of EVLT(R).

         GENERAL AND  ADMINISTRATIVE  EXPENSES for the six months ended June 30,
2004 were $2,809,000, increasing approximately $1,027,000, or 58%, from the same
period in 2003. The increase was driven by incremental  legal fees, sales volume
based product  liability  insurance  costs,  infrastructure  enhancements  and a
non-cash  charge for stock  options  granted to a third  party.  Legal  expenses
included  the  continued  costs  of  patent  litigation  against  Angiodynamics,
Vascular Solutions, and Total Vein Solutions, and the cost of litigation against
Vascular  Solutions  in the  theft of trade  secrets  suit  filed in the  fourth
quarter of 2003.

LOSS FROM OPERATIONS

         Loss  from  operations  for the six  months  ended  June  30,  2004 was
$4,366,000, increasing approximately $1,777,000 from the same period in 2003.

INTEREST EXPENSE, NET

         Interest  expense for the six months  ended June 30, 2004 was  $22,000,
compared to $1,169,000 for the same period in 2003.  Interest expense in the six
months ended June 30, 2003 included  non-cash charges totaling  $946,000 related
to the December 2002 debt financing for the  amortization  of the  corresponding
discount and beneficial conversion feature.

NET LOSS APPLICABLE TO COMMON STOCKHOLDERS

         Net loss  applicable  to common  stockholders  for the six months ended
June 30, 2004 was  $4,388,000,  or $0.31 per share,  compared to $3,758,000,  or
$4.11 per share,  for the same  period in 2003.  As a result of the 2003  equity
financing   and  the   April   2004   targeted   offering,   adjusted   for  the
one-for-twenty-five  share reverse split effective June 17, 2004, basic weighted
average common shares outstanding increased from approximately 915,000 shares to
14.2 million shares for the corresponding 2003 and 2004 quarters.

(3)      LIQUIDITY, CAPITAL RESOURCES AND CAPITAL TRANSACTIONS

CASH POSITION AND CASH FLOW

         The Company has  financed  its  operations  primarily  through  private
placements  of common  stock and  preferred  stock,  and private  placements  of
convertible  notes and short-term  notes and credit  arrangements.  In September
2003,  we entered  into an equity  financing  transaction  pursuant  to which we
raised gross proceeds of $22,000,000 and satisfied  $1,200,000 in debt, which we
had issued in a May 2003 bridge financing. Of the new cash proceeds, the Company
utilized  approximately $8.6 million as follows:  $2,250,000 in initial payments
to acquire the exclusive rights to the EVLT(R) patent,  $2,132,000 to retire the
notes  we  issued  in  December  2002,  $438,000  to  retire  short-term  notes,
$1,160,000  in equity  financing  costs,  $1,141,000  in the  reduction of trade
payables,


                                        5
<PAGE>

$150,000 in the  Augenbaum  litigation  settlement,  and  $1,329,000  in working
capital from September through December.

         The  Company  had  cash  balances  of   approximately   $9,182,000  and
$13,398,000  at June 30, 2004 and December 31, 2003,  respectively.  At June 30,
2004,  the ending cash balance  reflected a $4,216,000  reduction in cash during
the six months and included  $2,300,000 in payments not expected to recur in the
remaining  quarters  of  2004;   specifically   $1,200,000  in  debt  repayments
(including the $936,000 promissory note we owed to our customer,  Axcan Pharma),
$261,000 in costs related to the 2003 equity  financing,  and $875,000 in annual
insurance premiums and other annual costs which benefit future quarters. We also
raised an additional  $2,971,000 in April 20, 2004 through the targeted offering
to shareholders of record as of August 29, 2003.

         Cash used in  operations  for the six months  ended  June 30,  2004 was
approximately   $4,899,000.   This  principally  results  from  the  approximate
$4,388,000 loss from operations,  and $875,000 in annual insurance  premiums and
other annual costs (primarily sales  volume-based  product  liability  insurance
costs).  The cash used in operations also reflects the significant  expansion in
the size of the sales force and external marketing initiatives in support of the
commercialization of EVLT(R).

         Cash used in  investing  activities  for the six months  ended June 30,
2004 was approximately  $257,000,  primarily related to demonstration  equipment
and customer trial programs.

         Cash provided by financing activities for the six months ended June 30,
2004 was  approximately  $1,014,000.  This  primarily  includes  the  $2,971,000
proceeds  received  from the  targeted  offering,  and was  offset  by the first
quarter  retirement  of a  promissory  note to  Axcan  Pharma  in the  aggregate
principal amount of $936,000, a reduction in the borrowing outstanding under the
UK tradeline  facility with  Barclay's Bank  ($262,000),  and in legal and other
fees related to the recent resale and targeted offering registration  statements
($248,000).  Financing  activities also included payments of $500,000 related to
current maturities of the EVLT(R) technology acquisition obligation.

OFFERING TO STOCKHOLDERS AS OF AUGUST 29, 2003

         The terms of the equity financing  contemplated  that we would commence
an  offering  of up to  29,711,749  (pre-split)  shares of  common  stock to the
holders of our common stock as of August 29, 2003 (the "targeted offering").  We
filed a  registration  statement  to  register  the  shares to be offered to the
stockholders as of August 29, 2003. The SEC declared that registration statement
effective on February 13, 2003.

         On April 20, 2004, the Company  completed its offering to those persons
who held  shares  of its  common  stock  as of  August  29,  2003,  raising  the
approximate $3.0 million maximum in additional  equity  financing.  The targeted
offering,  for  29,711,749  shares of the  Company's  common  stock at $0.10 per
share,  allowed stockholders to purchase one share of the Company's common stock
for each share of common  stock held on August 29, 2003.  The targeted  offering
also  included  an  "over-subscription  right"  which  allowed  stockholders  to
purchase  additional  shares to the  extent the  "basic  rights"  were not fully
subscribed.  Proceeds  from the  targeted  offering  are being used for  general
working capital purposes,  including  supporting the Company's  continued growth
and intellectual property strategies.

CHANGES IN CAPITAL STOCK STRUCTURE

On June 15, 2004,  we held our 2004 Annual  Meeting of  Stockholders,  where our
stockholders  voted to permit the Board of Directors,  in their  discretion,  to
effect a  one-for-twenty-five  reverse stock split of our common stock.  On June
16, 2004, the Board of Directors approved the reverse stock split effective June
17,  2004.  Additionally,   our  stockholders  approved  the  reduction  in  our
authorized  shares of common  stock  from 500  million to 50  million,  which we
implemented after the reverse stock split took effect.

BANK LINES OF CREDIT

         Diomed, Ltd., the Company's United Kingdom-based subsidiary, utilizes a
line of credit  with  Barclays  Bank,  limited  to the  lesser  of  (GBP)150,000
($272,000 at June 30, 2004) or 80% of eligible accounts  receivable.  The credit
line bears  interest at a rate of 3% above  Barclays base rate (4.5% at June 30,
2004) and borrowings are due upon collection of receivables  from customers.  As
security  interest,  Barclay's  Bank has a lien on all of the  assets of our U.K
subsidiary, Diomed Ltd., excluding certain intellectual property. As of June 30,


                                        6
<PAGE>

2004 there were no amounts  outstanding under this line. At June 30, 2003, there
was approximately $51,000 outstanding under this line.

         On June 8, 2004, we entered into a line of credit facility with Silicon
Valley Bank for $2,500,000,  limited to 80% of our domestic accounts  receivable
and 50% of our eligible inventory balances, as defined. The line of credit bears
interest at a rate of prime plus one percent (5.25% at June 30, 2004).  The line
of  credit  is  secured  by  the  assets  of  Diomed,  Inc.,  excluding  certain
intellectual  property, and is subject to financial covenants including tangible
net worth and  liquidity.  At June 30, 2004,  there were no amounts  outstanding
under this line of credit and we were in compliance with the bank covenants.

(4)      CRITICAL ACCOUNTING POLICIES

         In the opinion of management,  these unaudited  consolidated  financial
statements contain all adjustments considered normal and recurring and necessary
for their fair presentation.  Interim results are not necessarily  indicative of
results to be expected for the year.  These interim  financial  statements  have
been  prepared  in  accordance  with  the  instructions  for  Form  10-QSB,  and
therefore, do not include all information and footnotes necessary for a complete
presentation of operations, financial position, and cash flows of the Company in
conformity with accounting  principles  generally accepted in the United States.
The Company filed its 2003 Annual Report on Form 10-KSB with the  Securities and
Exchange  Commission  on March 30, 2004,  which  included  audited  consolidated
financial  statements  for the  year  ended  December  31,  2003,  and  included
information  and footnotes  necessary  for such  presentation.  These  unaudited
consolidated financial statements should be read in conjunction with the audited
consolidated  financial  statements and the notes thereto included in our annual
report on Form 10-KSB for the year ended December 31, 2003.

         Our  discussion  and  analysis of the  Company's  financial  condition,
results of  operations,  and cash flows are based on the Company's  consolidated
financial statements.  The preparation of these financial statements requires us
to make  estimates  and  judgments  that affect the reported  amounts of assets,
liabilities,  revenues and expenses, and related disclosure of contingent assets
and liabilities.  On an on-going basis, we evaluate these  estimates,  including
those related to bad debts,  inventory  valuation and  obsolescence,  intangible
assets,  income taxes, warranty  obligations,  contingencies and litigation.  We
base our estimates on  historical  experience  and on various other  assumptions
that we believe to be reasonable under the  circumstances,  the results of which
form the basis for  making  judgments  about the  carrying  values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.


ITEM 3.  CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

         The Company's  principal  executive officer and its principal financial
officer have carried out an evaluation of the  effectiveness  of our  disclosure
controls and  procedures  (as defined in Rules 13a -15e and 15d-15(e)  under the
Securities Exchange Act of 1934) as of June 30, 2004 and have concluded that, as
of such date,  the  Company's  disclosure  controls and  procedures in place are
adequate  to  ensure  material  information  and  other  information   requiring
disclosure is identified and communicated on a timely basis.

(b) Changes in internal control over financial reporting.

         During  the  period  covered  by  this  report,   there  have  been  no
significant  changes in our internal control over financial  reporting that have
materially  affected or are reasonably  likely to materially affect our internal
control over financial reporting.


                                        7
<PAGE>
PART II.  OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

On December 12, 2003, we filed a lawsuit in the United States  Federal  District
Court for the  District of  Massachusetts  seeking  injunctive  and other relief
against Vascular  Solutions,  Inc. and one of its executives.  We allege,  among
other things,  that Vascular  Solutions  and the executive  misappropriated  our
trade secrets and then  improperly  used that  information to develop and market
laser  accessory  products.  We also  seek to  redress  what we allege to be the
willful and deceptive manner in which Vascular  Solutions has been marketing its
laser accessory products by, among other things:

      -     infringing our registered EVLT(R)mark;

      -     marketing Vascular  Solutions' products in a way designed to confuse
            consumers as to the source and origin of its products;

      -     making false and defamatory statements about us and our products;

      -     tortiously  interfering  with our existing and prospective  customer
            relationships; and

      -     tortiously  interfering with agreements  previously  entered into by
            the executive and us that prohibit the executive from disclosing our
            confidential  information  to Vascular  Solutions or any other third
            party.

On June 16, 2004,  Vascular Solutions and the other the defendants  answered the
complaint,  and filed a counterclaim for invalidity of the EVLT(R) trademark. We
are now proceeding with the discovery phase of the litigation.

On January 6, 2004,  we filed a lawsuit in the United  States  Federal  District
Court  for  the  District  of  Massachusetts  against  AngioDynamics,   Inc.,  a
subsidiary  of  E-Z-EM,   Inc.,   seeking  injunctive  relief  and  damages  for
infringement of our US Patent Number 6,398,777  covering the endovascular  laser
treatment  of  varicose  veins  which  we  use  in  our  EVLT(R)  product  line.
AngioDynamics  has generally denied our allegations and has sought a declaratory
judgment of non-infringement and invalidity of the EVLT(R) patent. AngioDynamics
has sought leave to add additional  counterclaims  against Diomed, but the Court
has not yet acted on that motion.  We are proceeding with the discovery phase of
this litigation.

On March 4, 2004, we filed a second lawsuit  against  Vascular  Solutions in the
United States Federal District Court for the District of  Massachusetts  seeking
injunctive relief and damages for infringement of our US Patent Number 6,398,777
covering the endovascular  laser treatment of varicose veins which we use in our
EVLT(R) product line, the exclusive  rights to which we acquired on September 3,
2003.

On April 28,  2004,  Vascular  Solutions  answered  the  complaint,  and filed a
counterclaim for declaratory judgment that the EVLT(R) patent is invalid and not
infringed.  We are now proceeding with the discovery phase of this litigation as
well.

On April 5, 2004, we filed a lawsuit in the United States Federal District Court
for the District of  Massachusetts  against Total Vein Solutions,  LLC,  seeking
injunctive relief and damages for infringement of our US Patent Number 6,398,777
covering the endovascular  laser treatment of varicose veins which we use in our
EVLT(R) product line.

On May 21, 2004, Total Vein Solutions answered the complaint,  generally denying
our allegations and counterclaiming for declaratory judgment of non-infringement
and invalidity of the EVLT(R) patent.

On May 26,  2004,  we learned  that we, our former  chairman,  our former  chief
executive  officer and a former director of ours had been named as defendants in
a class action lawsuit  commenced on March 3, 2004 in the United States District
Court,  District of Massachusetts (Kent Garvey vs. James Arkoosh, et. al., Civil
Action No.: 04-10438-RGS).

The complaint  alleges breach of fiduciary duty and violations of Sections 10(b)
and  20(a)  of the  Securities  Exchange  Act of  1934,  and  seeks  an award of
$4,500,000 on behalf of a purported  class of  plaintiffs  consisting of persons
who acquired our common stock from February 1, 2002 through and including  March
21, 2002. We are named only in the count alleging violation of Section 10(b). We
believe that the  allegations  in the complaint  are baseless,  and we intend to
defend the lawsuit vigorously.

ITEM 2.       CHANGES IN SECURITIES

a)       Pursuant to the approval of our  stockholders  given at the 2004 Annual
         Meeting of Stockholders  held June 15, 2004, we amended our certificate
         of  incorporation  to change  the vote  required  for  approval  by the
         holders of our common stock from a majority of total shares outstanding
         to a  majority  of  shares  present  when a vote is  taken.  Our  proxy
         statement for the 2004 Annual Meeting  details this change and contains
         as an exhibit the amendment to the  certificate of  incorporation  that
         was used to effect this change.



                                       8
<PAGE>

ITEM 3.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

a)       On June 15,  2004,  the  Company  held  it's  2004  Annual  Meeting  of
         Stockholders,  pursuant to a proxy statement that it had filed with the
         Securities  and  Exchange  Commission  and had  furnished to holders of
         record of the  outstanding  shares of its common  stock as of April 28,
         2004.  Of the  365,160,559  shares  entitled  to vote  at  the meeting,
         332,178,375 shares voted. The meeting included the election of all nine
         directors  to  serve  until  the next  annual  meeting  or until  their
         successors are duly elected and qualified. Those directors are:

         o   Geoffrey Jenkins
         o   Sidney Braginsky
         o   Gary Brooks
         o   A. Kim Campbell
         o   Joseph Harris
         o   Peter Klein
         o   Edwin Snape, Ph.D.
         o   David Swank
         o   James A. Wylie, Jr.

b)       Diomed Holdings  presented the following  proposals to our stockholders
         at that meeting:

         1. To elect nine  directors  to serve until the next annual  meeting of
         stockholders, or until their successors are duly elected and qualified;

         The results of which were as follows:

<TABLE>
<CAPTION>
                     ----------------------------- --------------------------- -------------------------- -------------------
                     For                           Against                     Abstained                  Broker Non-Votes
                     ----------------------------- --------------------------- -------------------------- -------------------
<S>                  <C>                           <C>                         <C>                        <C>
Geoffrey Jenkins     323,068,923                   1,100                       1,245,415                  7,862,937
                     ----------------------------- --------------------------- -------------------------- -------------------
Sidney Braginsky     323,068,923                   1,100                       1,245,415                  7,862,937
                     ----------------------------- --------------------------- -------------------------- -------------------
Gary Brooks          323,068,923                   1,100                       1,245,415                  7,862,937
                     ----------------------------- --------------------------- -------------------------- -------------------
A. Kim Campbell      323,068,923                   1,100                       1,245,415                  7,862,937
                     ----------------------------- --------------------------- -------------------------- -------------------
Joseph Harris        323,068,923                   1,100                       1,245,415                  7,862,937
                     ----------------------------- --------------------------- -------------------------- -------------------
Peter Klein          323,068,923                   1,100                       1,245,415                  7,862,937
                     ----------------------------- --------------------------- -------------------------- -------------------
Edwin Snape, Ph.D.   323,068,923                   1,100                       1,245,415                  7,862,937
                     ----------------------------- --------------------------- -------------------------- -------------------
David Swank          323,068,923                   1,100                       1,245,415                  7,862,937
                     ----------------------------- --------------------------- -------------------------- -------------------
James A. Wylie, Jr.  323,068,923                   1,100                       1,245,415                  7,862,937
                     ----------------------------- --------------------------- -------------------------- -------------------
</TABLE>

         2.  To  approve  an  amendment   to  the   Company's   certificate   of
         incorporation  permitting  the board to effect a  reverse  stock  split
         pursuant  to which the  Company's  outstanding  shares of common  stock
         would be exchanged for new shares of common stock in an exchange  ratio
         of one  newly  issued  share of common  stock  for each 25  outstanding
         shares of common stock;

         The results of which were as follows:

<TABLE>
<CAPTION>
               ----------------------------- --------------------------- -------------------------- -------------------
               For                           Against                     Abstained                  Broker Non-Votes
               ----------------------------- --------------------------- -------------------------- -------------------
<S>                                          <C>                         <C>                        <C>
               319,002,131                   5,169,925                   143,381                    7,862,938
               ----------------------------- --------------------------- -------------------------- -------------------
</TABLE>


                                       9
<PAGE>

         3.  To  approve  an  amendment   to  the   Company's   certificate   of
         incorporation  reducing the authorized number of shares of common stock
         from  500,000,000  to  50,000,000,  if the  reverse  split  were  to be
         implemented.

         The results of which were as follows:

<TABLE>
<CAPTION>
               ----------------------------- --------------------------- -------------------------- -------------------
               For                           Against                     Abstained                  Broker Non-Votes
               ----------------------------- --------------------------- -------------------------- -------------------
<S>                                          <C>                         <C>                        <C>
               319,782,956                   4,138,692                   393,789                    7,862,938
               ----------------------------- --------------------------- -------------------------- -------------------
</TABLE>

         4.  To  approve  an  amendment   to  the   Company's   certificate   of
         incorporation to eliminate cumulative voting for directors;

         The results of which were as follows:

<TABLE>
<CAPTION>
               ----------------------------- --------------------------- -------------------------- -------------------
               For                           Against                     Abstained                  Broker Non-Votes
               ----------------------------- --------------------------- -------------------------- -------------------
<S>                                          <C>                         <C>                        <C>
               147,976,790                   64,099,100                  882,800                    119,219,685
               ----------------------------- --------------------------- -------------------------- -------------------
</TABLE>

         As a result, we have not eliminated cummulative voting for Directors.

         5.  To  approve  an  amendment   to  the   Company's   certificate   of
         incorporation to change the vote required for stockholder approval from
         a majority of total shares outstanding to a majority of shares present;

         The results of which were as follows:

<TABLE>
<CAPTION>
               ----------------------------- --------------------------- -------------------------- -------------------
               For                           Against                     Abstained                  Broker Non-Votes
               ----------------------------- --------------------------- -------------------------- -------------------
<S>                                          <C>                         <C>                        <C>
               202,573,561                   9,759,798                   625,330                    119,219,686
               ----------------------------- --------------------------- -------------------------- -------------------
</TABLE>

         6.  To  ratify  the  selection  of BDO  Seidman,  LLP as the  Company's
         independent auditors for 2004; and

         The results of which were as follows:

<TABLE>
<CAPTION>
               ----------------------------- --------------------------- -------------------------- -------------------
               For                           Against                     Abstained                  Broker Non-Votes
               ----------------------------- --------------------------- -------------------------- -------------------
<S>                                          <C>                         <C>                        <C>
               322,738,826                   543,106                     1,033,506                  7,862,937
               ----------------------------- --------------------------- -------------------------- -------------------
</TABLE>


                                       10
<PAGE>

ITEM 5.  OTHER

CODE OF ETHICS AND CODE OF BUSINESS CONDUCT

In April 2004, our Board of Directors  adopted a formal policy regarding ethical
requirements  imposed  upon the  Company's  chief  executive  officer  and those
officers  engaged in financial  management.  Also,  in April 2004,  our Board of
Directors adopted a formal policy regarding the business  standards to which all
of the  Company's  directors,  employees and  consultants  will be held. We have
filed with the Securities and Exchange  Commission  copies of the Code of Ethics
and  Code  of  Business  Conduct,  and we  have  posted  them  on  our  website,
www.diomedinc.com. Copies of the Code of Ethics and Code of Business Conduct are
included as appendices  to the proxy  statement we filed with the SEC on May 12,
2004 in connection with our 2004 Annual Meeting of Stockholders held on June 15,
2004.  We will  provide  copies of the Code of Ethics  and/or  Code of  Business
Conduct free of charge upon written request directed to: Diomed Holdings,  Inc.,
One Dundee Park, Andover, MA 01810,  Attention:  Corporate Secretary, or by oral
request to the Corporate Secretary at telephone number 978-475-7771.

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

       10.1   Form  of  Loan and  Security  Agreement between  Diomed, Inc.  and
              Silicon Valley  Bank (filed as  Exhibit 10.1 to  Current Report on
              Form 8-K filed June 16, 2004)

       10.2   Form of Negative Pledge by Diomed, Inc.  (filed as Exhibit 10.2 to
              Current Report on Form 8-K filed June 16, 2004)

       10.3   Form of Unconditional Guaranty by  Diomed Holdings, Inc. in  favor
              of Silicon Valley Bank (filed as Exhibit 10.3 to Current Report on
              Form 8-K filed June 16, 2004)

       10.4   Form  of  Security  Agreement between  Diomed  Holdings, Inc.  and
              Silicon  Valley Bank  (filed as  Exhibit 10.4 to Current Report on
              Form 8-K filed June 16, 2004)

       31.1   Certification  by the Chief Executive  Officer pursuant to Section
              302 of the Sarbanes-Oxley Act of 2002

       31.2   Certification  by the Chief Financial  Officer pursuant to Section
              302 of the Sarbanes-Oxley Act of 2002

       32.1   Certification of Principal  Executive  Officer pursuant to Section
              906 of the Sarbanes-Oxley Act of 2002

       32.2   Certification of Principal  Financial  Officer pursuant to Section
              906 of the Sarbanes-Oxley Act of 2002

          (b)  Reports on Form 8-K.

         On May 26, 2004,  the Company filed a Form 8-K in  connection  with its
learning  that it, its former  chairman,  former chief  executive  officer and a
former  director  have  been  named  as  defendants  in a class  action  lawsuit
commenced  on May 18,  2004 in the United  States  District  Court,  District of
Massachusetts  (Kent  Garvey vs.  James  Arkoosh,  et.  al.,  Civil  Action No.:
04-10438-RGS).

         On June 16, 2004,  the Company filed a Form 8-K in connection  with the
results  of the  2004  Annual  Meeting  of  Stockholders,  announcing  that  the
stockholders voted to approve, among other things, a one-for-twenty-five reverse
stock split of the Registrant's  common stock, par value $0.001 per share, and a
concurrent  reduction in the authorized  shares of common stock from 500 million
to 50 million,  with no reduction in par value as a result of the reverse split,
and that the Board of  Directors  would meet on  June 16, 2004 to  determine the
timing of the implementation of the reverse stock split.

         On June 16, 2004, the  Company filed a Form 8-K in connection  with the
announcement of the obtaining by Diomed,  Inc. of a two-year,  $2.5 million line
of credit with Silicon Valley Bank,  secured by certain assets of Diomed,  Inc.,
excluding intellectual property.

         On June 17, 2004,  the Company filed a Form 8-K in connection  with the
Board   of   Directors'   determination   as  to  the   implementation   of  the
one-for-twenty-five  reverse stock split  (approved by the  stockholders  at the
Registrant's 2004 Annual Meeting of Stockholders held June 15, 2004).

                                       11
<PAGE>


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/ JAMES A. WYLIE, JR.
                                  ----------------------------------------
                                  Name:  James A. Wylie, Jr.
                                  Title: President and Chief Executive Officer,
                                  Director

                                  Date:  August 12, 2004



                                  By: /s/ DAVID B. SWANK
                                  ----------------------------------------
                                  Name:  David B. Swank
                                  Title: Chief Financial Officer, Director

                                  Date:  August 12, 2004



                                       12