<PAGE>

                                  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, 2003

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
(State or other jurisdiction of incorporation or organization)   84-140636
(I.R.S. Employer Identification No.)

1 Dundee Park
Andover, MA
(Address of principal executive offices)
01810
(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, 2003, there were 29,711,749 shares of common stock, par value
$0.001  outstanding  and no other shares of capital stock outstanding. As of May
15, 2003, there were 29,711,749 shares of common stock outstanding, 20 shares of
Class  C  Convertible Preferred Stock, par value $0.001 outstanding (convertible
into  27,117,240  shares  of  common stock) and 24 shares of Class D Convertible
Preferred Stock, par value $0.001 outstanding (convertible into 3,021,552 shares
of  common  stock).




<PAGE>

<TABLE>
<CAPTION>

                     DIOMED HOLDINGS, INC. AND SUBSIDIARIES

                         QUARTERLY REPORT ON FORM 10-QSB
                    FOR THE THREE MONTHS ENDED MARCH 31, 2003

                                TABLE OF CONTENTS


  ITEM                                                                                          PAGE
  NUMBER                                                                                       NUMBER
                                                    CAPTION

<S>   <C>        <C>

                  PART I - FINANCIAL INFORMATION
       1          Unaudited Condensed Consolidated Balance Sheets - March 31, 2003 and           F-1
                  December 31, 2002
                  Unaudited Condensed Consolidated Statements of Operations - Three Months       F-2
                  Ended March 31, 2003 and 2002
                  Unaudited Condensed Consolidated Statements of Cash Flows - Three Months       F-3
                  Ended March 31, 2003 and 2002
                  Notes to Condensed Consolidated Financial Statements                           F-4
       2          Management's Discussion and Analysis or Plan of Operations                       1

                  PART II - OTHER INFORMATION
       2          Changes in Securities and Use of Proceeds                                        10
       4          Submission of Matters to a Vote of Security Holders                              11
       5          Other Information                                                                11
       6          Exhibits and Reports on Form 8-K                                                 13
                  Signatures and Certifications                                          14

EXHIBIT No. 99.1    Statement and Oath of Principal Financial Officer
                    Regarding Facts and Circumstances Relating to Exchange Act Filings
EHXIBIT No. 99.2    Statement under Oath of Principal Executive Officer
                    Regarding Facts and Circumstances Relating to Exchange Act Filings



</TABLE>
                                       (i)


<TABLE>
<CAPTION>


DIOMED HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


ASSETS                                                                   MARCH 31,       DECEMBER 31,
                                                                          2003              2002
<S>                                                                        <C>                 <C>
                                                                        (UNAUDITED)
Current Assets:

   Cash and cash equivalents                                            $       131,193  $  1,848,646


   Restricted cash                                                                    -        75,000
   Accounts receivable, net of allowance for doubtful accounts of
     $247,000 and $308,000 in 2003 and 2002, respectively                       696,898       676,444
   Inventories                                                                1,783,741     2,012,141
   Prepaid expenses and other current assets                                    791,816       214,253
                                                                        ---------------  ------------

         Total current assets                                              3,403,648        4,826,484
                                                                        ---------------  ------------

Property and Equipment:
   Office equipment and furniture and fixtures                                1,255,297     1,229,307
   Manufacturing equipment                                                      735,098       731,787
   Leasehold improvements                                                       647,289       652,141
                                                                        ---------------  ------------

                                                                              2,637,684     2,613,235

   Less--Accumulated depreciation and amortization                            1,830,280     1,548,085
                                                                         ---------------  -----------

                                                                                807,404     1,065,150

Intangible Assets, net of accumulated amortization of  $466,000 and
$417,000 in 2003 and 2002, respectively                                         515,201       564,270
                                                                        ---------------  ------------

Other Assets:

   Deposits                                                                    468,611       597,426

   Deferred financing costs, net                                                60,000        80,000
                                                                        ---------------  ------------

         Total other assets                                                    528,611        677,426
                                                                        ---------------  ------------

                                                                        $    5,254,864   $  7,133,330
                                                                        =============== =============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Bank loan                                                            $      149,600   $    216,306
   Related Party Convertible Debt ($2,000,000 face value, net of
   $1,500,000 debt discount at March 31, 2003)                                 500,000             -
   Promissory notes                                                          1,375,462       445,208
   Deferred revenues                                                             9,999             -
   Current maturities of capital lease obligations                              34,606        33,993
   Accounts payable                                                          1,625,406     1,608,623
   Accrued expenses                                                          1,280,872     1,444,100
                                                                        ---------------  ------------

         Total current liabilities                                           4,975,945     3,748,230
                                                                        ---------------  ------------

Promissory Note Payable                                                              -       936,000

Related Party Convertible Debt, less current maturities ($2,000,000
face value,  net of $2,000,000 debt discount at December 31, 2002)                   -             -
Capital Lease Obligations, less current maturities                                   -        10,018
                                                                        ---------------  ------------

                Total liabilities                                            4,975,945     4,694,248
                                                                        ---------------  ------------

Stockholders' Equity (Deficit):
   Series A convertible preferred stock, $0.01 par value-
     Authorized--3,500,000 shares
     Issued and outstanding--zero shares                                            -             -
   Preferred stock., $0.001 par value
       Authorized - 20,000,000 shares
              Designated Class A convertible preferred stock,
              $0.001 par value
                  Authorized--18,000,000 shares
                  Issued and outstanding--zero shares at March 31,
                     2003 and 14,688,662
                     shares at December 31, 2002                                     -       14,689
              Undesignated preferred stock, $0.001 par value
                  Authorized--2,000,000 shares
                  Issued and outstanding--zero shares                                -            -
   Common stock, $0.001 par value
        Authorized - 80,000,000 shares
        Issued and outstanding - 29,711,749 and 15,023,087 shares at
        March 31, 2003
        and December 31, 2002, respectively                                     29,712       15,023
   Additional paid-in capital                                               41,713,374   41,704,774
   Cumulative translation adjustment                                           (13,481)     158,312
   Accumulated deficit                                                     (41,450,686) (39,453,715)
                                                                        ---------------  ------------


         Total stockholders' equity                                            278,920    2,439,083
                                                                        ---------------  ------------
                                                                        $    5,254,864   $7,133,330
                                                                        ===============  ============



The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>

                                       F-1




<PAGE>
<PAGE>



<TABLE>
<CAPTION>

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


                                                               THREE MONTHS ENDED
                                                     MARCH 31, 2003        MARCH 31, 2002

<S>                                                       <C>                    <C>

Revenues                                        $       2,123,810         $         956,637

Cost of Revenues                                        1,399,459                 1,154,890
                                                -----------------         -----------------

         Gross margin                                     724,351                 (198,253)
                                                -----------------         -----------------

Operating Expenses:
   Research and development                               188,093                   171,000
   Selling and marketing                                1,143,214                   342,728
   General and administrative                             800,749                   820,647
                                                -----------------         -----------------

         Total operating expenses                       2,132,056                 1,334,375
                                                -----------------         -----------------

         Loss from operations                         (1,407,705)               (1,532,628)

Interest Expense, net                                   (589,373)                 (264,339)
                                                ----------------          ----------------

         Net loss                               $     (1,997,078)         $     (1,796,967)
                                                ================          ================

Net loss per share (Note 3):
   Basic and diluted net loss per share
   applicable to common stockholders            $          (0.13)         $          (0.15)
                                                ================          ================

   Basic and diluted weighted average common
     shares outstanding                                15,959,381                11,771,395
                                                =================         =================


</TABLE>

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

                                       F-2

<PAGE>
<TABLE>
<CAPTION>

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

                                                                  THREE MONTHS ENDED
                                                         MARCH 31, 2003      MARCH 31, 2002

<S>                                                           <C>               <C>

Cash Flows from Operating Activities:
   Net loss                                             $ (1,997,078)     $   (1,796,967)
   Adjustments to reconcile net loss to net cash used
   in operating activities
     Depreciation and amortization                           143,496             150,756
     Noncash interest expense on related party
       convertible debt                                      520,000             225,260

     Issuance of stock options to a third party                8,600                   -
     Changes in operating assets and liabilities
       Accounts receivable                                   (20,453)            263,310

       Inventories                                           228,400             247,222
       Prepaid expenses and other current assets            (577,563)           (533,810)
       Deposits                                              117,979              (5,299)
       Accounts payable                                       16,785          (1,463,963)

       Accrued expenses                                     (163,228)            376,923
       Customer advance                                            -            (293,463)
                                                        ------------      ---------------

         Net cash used in operating activities            (1,723,062)         (2,830,031)
                                                        ------------      ---------------

Cash Flows from Investing Activities:
   Purchases of property and equipment                       (69,859)            (66,541)
                                                        ------------      ---------------

                Net cash used in investing activities        (69,859)            (66,541)


Cash Flows from Financing Activities:
   Net proceeds (payments) from bank borrowings              (66,707)           (598,892)


   Proceeds from issue of common stock, net                        -           8,646,399

   Payments on convertible debt                                    -            (700,000)
   Payments on promissory notes                               (5,746)                  -
   Payments on capital lease obligations                      (9,405)            (13,000)
                                                        ------------      ---------------

         Net cash (used by) provided by financing
         activities                                          (81,858)           7,334,507
                                                        ------------      ---------------

Effect of Exchange Rate Changes                              157,326             (12,626)
                                                        ------------      ---------------

Net Increase (decrease) in Cash and Cash Equivalents      (1,717,453)           4,425,309

Cash and Cash Equivalents, beginning of period             1,848,646              322,566
                                                        ------------      ---------------

Cash and Cash Equivalents, end of period                 $   131,193      $     4,747,875
                                                         ===========      ===============

Supplemental Disclosure of Cash Flow Information:

   Cash paid for interest                                $    25,438      $       48,039
                                                         ===========      ===============

Supplemental Disclosure of Noncash Investing and
Financing Activities:

   Conversion of convertible debt into common stock     $          -      $      339,337
                                                        ============      ===============


   Reclassification of offering costs incurred in       $          -      $      387,133
        2001 to APIC                                    ============      ===============


   Value ascribed to warrants issued in connection      $          -      $        8,200
        with issuance of debt to stockholders           ============      ===============


</TABLE>


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

                                       F-3
<PAGE>




                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003


(1)    OPERATIONS

     Diomed  Holdings,  Inc.  (the Company) and its  subsidiaries  specialize in
developing and  commercializing  minimal and  micro-invasive  medical procedures
that use its laser technologies and disposable products.

     Previously,  the operations of the Company were that of Diomed, Inc., which
was  incorporated  in December 1997 under the laws of the state of Delaware.  On
February 14, 2002, Diomed,  Inc. became Diomed Holdings,  Inc. through a reverse
merger. (see Note 9)

      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 sales
and marketing of its products.

     In December 2002, the Company completed a bridge financing with Gibralt US,
Inc.  ("Gibralt")  in  the  form  of  $2.0  million  in  secured  and  unsecured
convertible Notes due January 1, 2004, and issued warrants to purchase 8,333,333
shares  of  Common Stock. In order to fund its operations in 2003, to enable the
Company  to  expand  critical  sales  and  marketing  programs  and  to  further
strengthen  Diomed's  leadership  position  in the marketplace, the Company will
need to complete an additional debt or equity financing or put in place a credit
facility  to supplement the Company's commercialization of EVLT(TM). The Company
anticipates  it  will  have access to additional funding sources and has entered
into discussions that it believes may lead to a financing transaction during the
second  quarter  of  2003.  The  Company  will  require the proceeds of any such
financing,  together  with  its  current  cash resources, to continue as a going
concern,  and  will  use these proceeds to fund its operations and commercialize
its  products  in  2003.  Additional financing may not, however, be available on
acceptable  terms  or at all. The inability to obtain additional financing would
cause  the  Company  to reduce or cease operations, sell all or a portion of its
assets,  seek  a sale of the Company or enter into a business combination with a
third party. As a result of additional financing needed to support operations in
2003,  the  auditors'  opinion  for the year ended December 31, 2002 included an
explanatory paragraph raising doubt about the Company's ability to continue as a
going  concern.

      The accompanying  consolidated  financial statements at March 31, 2003 and
for the  three-month  period  ended  March 31, 2003 and 2002 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, 2002, 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, 2002. The
results  of  operations  for  the  three-month  period ended March 31, 2003, the
auditors'  opinion  for  the  fiscal  year  ending  December  31,  2003  are not
necessarily  indicative  of  the  results  expected  for  the fiscal year ending
December  31,  2003.

                                      F-4
<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

(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.

      (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  the  end of the period. 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 included in other comprehensive income (loss) with the
     cumulative  effect included 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. The Company follows
     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. The
     Company  has  determined  that  its  existing revenue recognition practices
     comply  with  the  requirements  of  SAB No. 101 for all periods presented.



                                      F-5
<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003


      (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, 2003 DECEMBER 31, 2002

         Raw materials                $       877,745     $       982,622
         Work-in-progress                     383,633             446,820
         Finished goods                       522,363             582,699
                                      ---------------     ---------------

                                      $     1,783,741     $     2,012,141
                                      ===============     ===============


      (G)    PROPERTY AND EQUIPMENT

            The Company records property and equipment at cost.

            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:

DESCRIPTION                                   ESTIMATED USEFUL LIFE
------------                                  ---------------------
Office equipment and furniture and fixtures   2-5 years
Manufacturing equipment                       2-5 years
                                              Lesser of estimated useful life or
Leasehold improvements                        life of lease

            Depreciation expense for the three-month period ended March 31, 2003
         and March 31, 2002 was $94,428 and $101,688, respectively.


      (H) INTANGIBLE ASSETS

               Intangible   assets  are   recorded   at  cost  and   consist  of
      manufacturing  rights acquired in 2001. The manufacturing rights are being
      amortized over a five-year estimated useful life. (see Note 4)


      (I)    LONG LIVED ASSETS

               The  Company  evaluates  long-lived  assets,  such as  intangible
      assets,  equipment and certain other assets,  for impairment in accordance
      with Financial  Accounting  Standards Board issued  Statement of Financial
      Standards No. 144 (SFAS 144),  "Accounting  for the Impairment or Disposal
      of Long-Lived  Assets.  This statement  supersedes  Statement of Financial
      Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of
      Long-Lived  Assets and for Long-Lived Assets to be Disposed Of" and amends
      Accounting   Principles  Board  Opinion  No.  30,  "Reporting  Results  of
      Operations - Reporting  the Effects of Disposal of a Segment of a Business
      and   Extraordinary,   Unusual  and  Infrequently   Occurring  Events  and
      Transactions."  SFAS 144 retained the  fundamental  provisions of SFAS 121
      for recognition and measurement of impairment,  but amended the accounting
      and reporting  standards for segments of a business to be disposed of. The
      Company  records  an  impairment  charge  whenever  events or  changes  in
      circumstances  indicate that the carrying  amount of the assets may not be
      recoverable through the estimated  undiscounted future cash flows from the
      use of these assets.  When any such impairment  exists, the related assets
      are written  down to fair value.  The  adoption of SFAS 144 did not have a
      material  impact  on  the  Company's  financial  position  or  results  of
      operations.


                                      F-6
<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

      (J)    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.

      (K)    CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

          The  Company  places  its  cash  and  cash  equivalents in established
     financial  institutions. The Company has no off-balance-sheet concentration
     of  credit  risk  such  as foreign exchange contracts, options contracts or
     other  foreign  hedging  arrangements.  The  Company's  accounts receivable
     credit risk is not concentrated within any one geographic area. The Company
     has  not experienced any significant losses related to receivables from any
     individual  customers or groups of customers in any specific industry or by
     geographic  area.  Due  to  these factors, no additional credit risk beyond
     amounts  provided  for  collection  losses  is believed by management to be
     inherent  in  the  Company's  accounts  receivable.

            Accounts receivable are customer  obligations due under normal trade
      terms.  The Company sells its products to private  physicians,  hospitals,
      health  clinics,  distributors  and OEM customers.  The Company  typically
      requires  signed sales  agreements,  non-refundable  advance  payments and
      purchase orders depending upon the type of customer, and letters of credit
      may be required in certain circumstances. Accounts receivable is stated at
      the amount billed to the customer less a valuation  allowance for doubtful
      accounts.

            Senior management reviews accounts  receivable on a monthly basis to
      determine if any  receivables  could  potentially  be  uncollectible.  The
      Company includes specific accounts receivable balances that are determined
      to be  uncollectible,  along  with  a  general  reserve,  in  its  overall
      allowance  for  doubtful  accounts.   After  all  attempts  to  collect  a
      receivable  have  failed,  the  receivable  is  written  off  against  the
      allowance.  Based on  available  information,  the  Company  believes  its
      allowance  for  doubtful  accounts as of March 31, 2003 is  adequate.  The
      allowance for doubtful accounts as of March 31, 2003 and December 31, 2002
      was $247,005 and $308,145, respectively.


                                      F-7
<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

(L)    ACCOUNTING FOR STOCK-BASED COMPENSATION

                  The Company  accounts for its 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 grant over the  amount an  employee  must pay to  acquire  the
      stock. SFAS No. 123, Accounting for Stock-Based Compensation,  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,  which  requires  disclosure of the pro forma effects on earnings
      and  earnings  per share as if SFAS No.  123 had been  adopted  as well as
      certain other information (see Note 7).

      In December 2002, the Financial  Accounting  Standards Board
      issued Statement of Financial  Accounting Standards No. 148,
      "Accounting  for  Stock-Based  Compensation - Transition and
      Disclosure" ("FAS 148"),  which (i) amends FAS Statement No.
      123,  "Accounting for Stock-Based  Compensation," to provide
      alternative   methods  of  transition  for  an  entity  that
      voluntarily  changes  to the  fair  value  based  method  of
      accounting for stock-based employee compensation (ii) amends
      the  disclosure  provisions of FAS 123 to require  prominent
      disclosure  about the effects on  reported  net income of an
      entity's   accounting   policy  decisions  with  respect  to
      stock-based  employee  compensation  and  (iii)  amends  APB
      Opinion No. 28,  "Interim  Financial  Reporting," to require
      disclosure   about  those   effects  in  interim   financial
      information. Items (ii) and (iii) of the new requirements in
      FAS 148 are effective for  financial  statements  for fiscal
      years  ending  after  December  15,  2002.  The  Company has
      adopted FAS 148 for the fiscal year ended December 31, 2002.
      The   Company   continues   to   account   for   stock-based
      compensation  utilizing  the  intrinsic  value  method.  The
      additional  disclosures  required by FAS 148 are as follows:

<TABLE>
<CAPTION>
                                                            Three Months Ended
                                                      March 31, 2003  March 31, 2002
<S>                                                       <C>               <C>

Net (loss) as reported                                   ($1,997,078)    (1,796,967)

Add : Stock-based employee compensation;                            0              0
         expense included in reported net (loss),
         net of tax

Deduct : total stock-based employee compensation;
          expense determined under the fair value           ($69,609)     ($311,254)
         based method for all awards, net of tax

Pro forma net (loss)                                     ($2,066,687)   ($2,108,221)

Earnings per share :
   Basic and diluted - as reported                             (0.13)         (0.15)
   Basic and diluted - pro forma                               (0.13)         (0.18)

</TABLE>

      (M)    RESEARCH AND DEVELOPMENT EXPENSES

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

      (N)    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  loss consists of the
      Company's  net loss  and  changes  in  cumulative  translation  adjustment
      account (see Note 2(d)).  The Company has disclosed  comprehensive  income
      (loss)  for  all  periods  presented  in  the  accompanying   consolidated
      statements of stockholders' equity (deficit) as follows :


                                      F-8
<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003


                                                  THREE MONTHS ENDED
                                                       MARCH 31,

                                                      2003            2002

Foreign currency translation adjustment          (171,793)                2,070
Net loss                                       (1,997,078)           (1,796,967)
                                          ----------------      ----------------

Comprehensive loss                        $    (2,168,871)      $    (1,794,897)
                                          ================      ================


       (O)    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.












                                      F-9
<PAGE>



                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003




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, 2003 and March 31, 2002; 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.


                                                       MARCH 31,
                                                  2003             2002


Common stock options                         2,321,478        1,803,908
                                            ==========       ==========

Common stock warrants                        8,445,257 (C)      111,924
                                            ==========       ==========

Convertible preferred stock                          - (A)   14,765,690 (A)
                                            ==========       ==========

Convertible debt                            14,705,882 (B)      167,000
                                            ==========       ==========


(A)   On February 14, 2002,  the Company  completed a reverse  merger and issued
Diomed Inc.  shareholders  Diomed Holdings,  Inc. Class A Convertible  Preferred
Stock ("Class A Stock") that is convertible  into Diomed  Holdings,  Inc. Common
Stock ("Common  Stock") by February 14, 2004,  the second annual  anniversary of
the reverse merger.  On December 31, 2002,  according to the Class A Convertible
Preferred Stock Certificate of Designation,  monthly  conversions of the Class A
Stock began converting into Common Stock at the rate of 5% of the initial shares
of  the  Class A Stock or 773,087 shares, and will continue to occur on the last
day  of each month during the period from January 2003 through January 2004. The
remaining  4,638,531  shares  of Class A Stock will convert into Common Stock in
February 2004. On March 31, 2003, the Company accelerated the conversions of the
13,142,188 share balance of the Class A Stock into Common Stock. As of March 31,
2003,  zero  shares of Class A Stock were outstanding after this conversion into
Com-  mon  Stock.

(B)   On December 27, 2002 (the "Closing  Date"),  the Company  completed a $2.0
million bridge  financing with Gibralt US, Inc (the  "Lender"),  whose Principal
Samuel Belzberg is a member of the Company's  Board of Directors.  The financing
is in the form of Notes,  including  $1.0  million in Class A secured  Notes and
$1.0 million in Class B unsecured  Notes  (collectively  known as the  "Notes"),
which are due on January 1, 2004. The Notes accrue  interest,  at an annual rate
of 8%,  over the life of the Notes and is  payable  upon  maturity.  The  Notes,
including principal and accrued interest,  are convertible into Common Stock, at


                                      F-10
<PAGE>



                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

the election of the Lender, at 80% of the price per share of the Common Stock in
defined  transactions.  Based on the $0.17 closing price per share of the Common
Stock  on  March  31,  2003 the Notes were convertible into 14,705,882 shares of
Common  Stock.

(C)   In connection  with the bridge  financing,  the Company  issued the Lender
100% Warrant coverage or 8,333,333 Warrants,  based upon the $0.24 closing price
of the Company's Common Stock on December 26, 2002. The warrants are exercisable
for a period of five years,  beginning  six months from the Closing  Date, at an
exercise price of $0.26. If the Company,  over the life of the Warrants,  issues
Common  Stock or Common  Stock  equivalents  at a price per share  less than the
$0.26  exercise  price of the Warrants,  the number of Warrants and the exercise
price of the Warrants are adjustable to the lower price per share (see Note 10).


(4)    ACQUISITION OF INTANGIBLE 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  $1,175,000  in the form of two
promissory  notes,  payable  within two years,  and  $25,000 in cash.  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
merger and private  offering of common stock,  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 for
each of the  three  month  periods  ended  March 31,  2003 and  March 31,  2002,
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
($1,895,000 at March 31, 2003) or 80% of eligible accounts receivable. This line
bears interest at 3% above  Barclays  Bank's base rate (4.00% at March 31, 2003)
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 inventory and certain intellectual property.

      As of March 31, 2003,  there were borrowings of  (pound)94,744  ($149,600)
outstanding  under this line and available  future  borrowings of  approximately
$88,000.


                                      F-11
<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

(6)    DEBT

      A) QLT, INC.

               As of December 31, 2001, the two promissory  notes due to QLT, in
      the aggregate  principal amount of $1,175,000,  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.

               With respect to the First QLT  Promissory  Note,  by letter dated
      June 7, 2001, QLT formally  requested  payment of the $339,337 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
      $339,337.  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 and stated that 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 have been asserting that it was
      entitled  to receive  up to an  additional  542,940  shares.  The  Company
      disputed  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.

               From the time it received notice of QLT's assertions, the Company
      engaged in discussions with QLT to resolve the dispute amicably. On August
      5, 2002,  the Company and QLT entered into an agreement  pursuant to which
      the Company  issued to QLT, and QLT accepted from the Company,  a total of
      696,059 shares of Convertible  Preferred Stock to both resolve the dispute
      as  to  the  First   Promissory  Note  and  fully  satisfy  the  Company's
      obligations  under the  Second  Promissory  Note.  The  Company  in effect
      re-valued the conversion  price of the First  Promissory Note to $1.50 per
      share, and converted the Second Promissory Note into Convertible Preferred
      Stock at the conversion price of $1.50 per share. In consideration for our
      issuance of these  shares,  QLT  released us from any claims under both of
      these promissory notes, as well as a related registration rights agreement
      and relevant portions of the 2000 Optiguide Asset Purchase Agreement.



      B) PROMISSORY NOTE ISSUED TO CUSTOMER

               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
      Promissory  Note  bears  interest,  at an  annual  rate of 8.5%,  which is
      payable  quarterly in arrears.  The Promissory  Note matures on January 1,
      2004 and does not provide for conversion  rights into equity.  As of March
      31, 2003 and December 31, 2002, the balance outstanding to this Promissory
      Note  was  $936,000,   and  accrued  interest  was  $19,618  and  $20,053,
      respectively.  As of March 31, 2003, the Promissory  Note became a current
      liability as it is due on January 1, 2004.



                                      F-12
<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003


      C) 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 were  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 did not complete a reverse  merger
      by October 31,  2001,  the  noteholders  could have  exercised  their call
      option issued in the March 2001 Series A Preferred  Stock  financing  (see
      Note  10(b))  and  deliver  their  notes as  payment,  2) in the event the
      Company completed a reverse merger, the notes were 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 were 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
      were  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 completed 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 would
      have  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 note's 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  warrants  expire two years from the date of  issuance.  The
      value  ascribed to these 20,000  warrants  was $15,000 and was  calculated
      using the Black-Scholes  option pricing model. The $15,000 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  $15,000 will be recorded as interest  expense upon
      the  occurrence of an event which will trigger the note's right to convert
      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


                                      F-13
<PAGE>



                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

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


      D) PROMISSORY NOTES ISSUED TO SERVICE PROVIDERS

               In December 2002, the Company  converted fees for legal services,
      in the amount of $416,102, into a Promissory Note. Payment terms include a
      $100,000  payment due upon completing the $2.0 million bridge financing on
      December  27, 2002 and the balance due upon  completion  of a  longer-term
      capital financing in fiscal 2003, being the earlier of May 15, 2003 or the
      Company  completing  a debt  or  equity  financing  other  than  a  bridge
      financing.  The Promissory Note bears  interest,  at an annual rate of 6%,
      which  accrues  over the life of the  Promissory  Note and is payable upon
      maturity.  The Promissory Note does not provide for conversion rights into
      equity.  As  of  March  31,  2003  and  December  31,  2002,  the  balance
      outstanding to this Promissory Note was $316,102, and accrued interest was
      $6,287 and $1,611, respectively.

               In December 2002,  the Company  converted fees due a professional
      service  provider for  external  marketing  initiatives,  in the amount of
      $183,016,  into a Promissory Note. Payment terms include a $50,000 payment
      due upon  completing  the $2.0  million  bridge  financing on December 27,
      2002, a 20% surcharge of monthly  services  until the  Promissory  Note is
      paid,  and the balance due upon  completion of a longer-term  financing in
      fiscal 2003. The  Promissory  Note does not bear any interest and does not
      provide  for  conversion  rights  into  equity.  As of March 31,  2003 and
      December 31, 2002,  the balance  outstanding to this  Promissory  Note was
      $123,360 and $129,106, respectively.


      E) BRIDGE LOANS FROM RELATED PARTY

               On December 27, 2002 (the "Closing Date"),  the Company completed
      a $2.0 million bridge financing with Gibralt US, Inc (the "Lender"), whose
      Principal Samuel Belzberg is a member of the Company's Board of Directors.
      The financing is in the form of Notes,  including  $1.0 in Class A secured
      Notes and $1.0 million in Class B unsecured Notes  (collectively  known as
      the "Notes"), which are due on January 1, 2004. The Notes accrue interest,
      at an annual  rate of 8%,  over the life of the Notes and is payable  upon
      maturity. The Company and the Lender entered into a Note Agreement,  Class
      A Secured  Note  Agreement,  Class B Unsecured  Note  Agreement,  Security
      Agreement,  Pledge  Agreement,  Registration  Rights Agreement and Warrant
      Agreement. (collectively known as the "Bridge Financing Agreements") As of
      March 31, 2003 and  December 31, 2002,  the balance  outstanding  to these
      Notes  was $2.0  million  and  accrued  interest  was  $41,205  and  zero,
      respectively.

               As security  interest  for the Notes,  the  Company  formed a new
      subsidiary  company ("PDT Co"),  transferred  its assets for  photodynamic
      therapy ("PDT") to PDT Co, including intellectual property,  manufacturing
      rights and trademarks for lasers and disposable  Optiguide(R)  fibers, and
      pledged 100% of the shares of stock in PDT Co to the Lender. As additional
      security interest,  the Company pledged the following  unencumbered assets
      of Diomed Inc. to the Lender: equipment,  inventory,  accounts receivable,
      intellectual property, and cash deposit accounts. The Lender's lien on the
      inventory is junior and subordinate to Axcan Pharma's lien on inventory as
      collateral  for  the  September  2001  Promissory  Note in the  amount  of
      $936,000, so long as Axcan Pharma's Promissory Note is outstanding.


                                      F-14
<PAGE>

                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003


               The Company issued the Lender 100% warrant  coverage or 8,333,333
      Warrants based upon the $0.24 closing price of the Company's  Common Stock
      on December 26, 2002.  The Warrants are  exercisable  for a period of five
      years, beginning six months from the Closing Date, at an exercise price of
      $0.26,  which is 110% of the  market  price of the stock on  December  26,
      2002. If the Company,  over the life of the Warrants,  issues Common Stock
      or Common  Stock  equivalents  at a price  per  share  less than the $0.26
      exercise  price of the  Warrants,  the number of Warrants and the exercise
      price of the Warrants are adjustable to the lower price per share.  In the
      event of a merger or reorganization, the Warrants are convertible into the
      kind and number of shares of Common  Stock,  other  securities or property
      into which the Warrants would have been converted into if the Warrants had
      been  converted into Common Stock based on the provisions of the merger or
      reorganization.

               The Notes are  convertible  into Common  Stock at the election of
      the Note Holder (s) upon the  occurrence of : i) a financing  transaction,
      ii) a liquidity event, iii) in a merger or  reorganization,  or iv) at any
      time  during the life of the Notes at the  election of at least 66 2/3% of
      the  outstanding  principal  amount  by  the  Note  Holders.  A  financing
      transaction  is  defined  as a debt or equity  financing  under  which the
      Company issues Common Stock or equity  securities  convertible into Common
      Stock, and raises gross proceeds of at least $50,000 in any rolling 30-day
      period.  A liquidity event is defined as i) any person or group other than
      a shareholder at the Closing Date that shall become the beneficial  owner,
      either directly or indirectly, of capital stock representing 51% of voting
      control of the Company,  ii) the sale of all or  substantially  all of the
      assets of the  Company  to one or more  persons  not an  affiliate  of the
      Company,  or iii)  the  sale of the  stock of PDT Co or the sale of all or
      substantially  all  of  the  business  relating  to  photodynamic  therapy
      products.

               The  Notes,   including  principal  and  accrued  interest,   are
      convertible  into Common Stock at 80% of the Common Stock price,  which is
      defined  as : i) in the  event of a  financing  transaction  in which  the
      Company  issues  Common Stock or Common Stock  equivalents - the price per
      share of Common Stock or Common Stock  equivalent (the weighted average if
      multiple  financing  transaction in a rolling 30-day  period),  ii) in the
      event of a  financing  transaction  in which  the  Company  does not issue
      Common Stock or Common Stock equivalents - the lower of the average of the
      closing  price of the Common  Stock for the  fifteen day  business  period
      preceding the date of the public announcement of the financing transaction
      or the  average of the closing  price of the Common  Stock for the fifteen
      day  business  period  commencing  the date  after the date of the  public
      announcement  of  the  financing  transaction,  iii)  in  the  event  of a
      liquidity  event in which any person or group other than a shareholder  at
      the  Closing  Date  becomes  the  beneficial  owner,  either  directly  or
      indirectly,  of capital stock  representing  51% of voting  control of the
      Company - the price per share  allocated  to each share of Common Stock or
      Common Stock equivalent,  iv) in the event of all other liquidity events -
      the lower of the average of the closing  price of the Common Stock for the
      fifteen day business period preceding the date of the public  announcement
      of the  liquidity  event or the average of the closing price of the Common
      Stock for the fifteen day business  period  commencing  the date after the
      date of the public announcement of the liquidity event.

               In the event of a merger or reorganization,  the Notes, including
      principal and accrued  interest,  are convertible into the kind and number
      of shares of Common  Stock,  other  securities  or property into which the
      Notes would have been  converted into if the Notes had been converted into
      Common Stock on the business day preceding the merger or reorganization.

               Under the Registration  Rights  agreement,  the Company agreed to
      notify the Lender  (s) if the  Company  proposes  to file  certain  future
      registration  statements.  The Company  agreed to use its best  efforts to
      include  the  registrable  securities  held  by  the  Lender  (s)  in the
      registration  statement,  subject to certain  defined  limitations,  if so
      requested  by the Lender (s) within 30 days after  receipt of said notice.
      The Lender (s) agreed to become subject to a "holdback  period",  by which
      it does not  effect a public  sale of stock for a period of up to 180 days
      following  the  effective  date  of  the  registration  statement,  if  so
      requested by a managing  underwriter  of the offering which is the subject
      of that registration statement.



                                      F-15
<PAGE>



                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

               The Notes and  Warrants,  on a pro rata basis to the  Notes,  are
      transferable  in part  or in  whole  by the  Lender  to one or more  third
      parties,  in  accordance  with all of the same terms granted the Lender by
      the Company.  The Lender (s) may designate a member to the Company's Board
      of Directors while the Notes are  outstanding.  The Company is required to
      obtain  the  advance  approval  by the  Lender  (s) for  future  financing
      transactions during the life of the Notes.

               The Company may at its option call for  redemption in whole or in
      part any of the Class A secured  Notes,  including  principal  and accrued
      interest,  prior to the maturity of the Notes on January 1, 2004. No Class
      A Notes  may be  redeemed  while any of the  Class B  unsecured  Notes are
      outstanding.  If fewer than all of the outstanding Class A Notes are to be
      redeemed, then all Class A Notes shall be partially redeemed on a pro-rata
      basis.  If fewer than all  outstanding  Class B Notes are to be  redeemed,
      then all Class A Notes shall be partially redeemed on a pro rata basis.

               The Company will be in default if any of the following occurs: i)
      the Company fails to make payment of the principal and accrued interest by
      January 1, 2004 and the same  continues for a period of two days,  ii) any
      of the  representations  or  warranties  made by the Company in the Bridge
      Financing  Agreements  shall have been false or misleading in any material
      respect,  iii) the  Company  fails to perform  or observe in any  material
      respect terms under the Bridge  Financing  Agreements  and such failure is
      not cured  within  thirty days after  written  notice from the Lender (s),
      iii) the voluntary or judicial  dissolution of the Company,  iv) admission
      by the Company of its  inability  to pay its debts as they become due, iv)
      any default by the Company under any  institutional  indebtedness,  and v)
      commencement of bankruptcy proceedings.

               In  accordance  with  Emerging  Issues Task Force  (EITF)  00-27,
      "Application  of EITF  No.98-5 to Certain  Convertible  Instruments",  the
      Company  recorded a  beneficial  conversion  feature in the amount of $2.0
      million, which has been recorded as a debt discount to the Notes. The debt
      discount will be amortized  over the term of the Notes through  January 1,
      2004,  with full  amortization  of any remaining  discount to occur if the
      Notes are converted to equity prior to the January 1, 2004 maturity  date.
      Accordingly,  the Notes were  recorded at zero as of December 31, 2002 and
      zero  amortization  of the debt discount was  recognized in the year ended
      December 31, 2002 as the  corresponding  amortization  since  December 27,
      2002 was  immaterial.  In the three month period ended March 31, 2003, the
      Company  recognized  $500,000 in non-cash  interest expense  pertaining to
      this  amortization of the debt discount,  and accordingly,  the Notes were
      recorded at  $500,000.  As of March 31,  2003,  the Notes became a current
      liability as they are due on January 1, 2004.

               In connection  with the bridge  financing,  the Company  incurred
      $80,000 in related legal fees.  As of December 31, 2002,  these costs were
      capitalized as deferred  financing costs and will be amortized to non-cash
      interest expense over the life of the Notes,  such that the full amount of
      costs are amortized by the earlier of the maturity date of the Notes or by
      the month the Notes are converted  into equity.  In the three month period
      ended March 31, 2003, the Company  recognized $20,000 in non-cash interest
      expense  pertaining to this amortization of the deferred  financing costs,
      and accordingly, the balance of the deferred financing costs was $60,000.

               On March 18, 2003, Gibralt US, Inc. sold and transferred to three
      investors in a private transaction (i) $500,000 aggregate principal amount
      of Notes  ($250,000  of which are Class A Notes and  $250,000 of which are
      Class B Notes), and (ii) 2,083,334 warrants. Accordingly, after the taking
      effect  of  this  transfer,  Mr.  Belzberg  beneficially  owned  6,249,999
      warrants and $1,500,000  aggregate  principal  amount of Note ($750,000 of
      which are Class A Notes and $750,000 of which are Class B Notes).



                                      F-16
<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003


      A summary of the current and long term debt at December 31, 2002 is
as follows :
<TABLE>
<CAPTION>


                                                  DECEMBER 31, 2002   DECEMBER 31, 2002
                                                         CURRENT         LONG-TERM
<S>      <C>                                              <C>                 <C>

         Promissory notes payable                      $ 445,208       $        -

         Non-convertible debt                                  -          936,000
         Related party convertible debt (face value)           -        2,000,000
         Capital equipment leases                         33,993           10,018
                                                       -----------     ----------
                                                       $ 479,201       $2,946,018
                                                       ===========     ==========

      A summary of the current and long term debt at March 31, 2003 is as follows :

                                                      MARCH 31, 2003    MARCH 31, 2003
                                                          CURRENT         LONG-TERM


         Promissory notes payable                      $ 439,462        $       -

         Non-convertible debt                            936,000                -
         Related party convertible debt (face value)   2,000,000                -
         Capital equipment leases                         34,606                -
                                                      -----------       -----------
                                                     $ 3,410,068        $       -
                                                      ===========       ===========
</TABLE>

      (7)    STOCK OPTIONS

            In November  1998 and May 2001,  the  Company's  Board of  Directors
      approved the 1998 Incentive Plan (the 1998 Plan) and the 2001 Stock Option
      Plan (the 2001 Plan) (collectively,  the Plans), respectively,  permitting
      the granting of stock options to  employees,  directors,  consultants  and
      advisors,  which may be either  incentive  stock  options or  nonqualified
      options and stock  awards.  The Board has reserved  750,000 and  1,750,000
      shares of Common Stock for issuance under the 1998 Plan and the 2001 Plan,
      respectively.

            The  exercise  price  and  vesting  are  determined  by the Board of
      Directors at the date of grant.  Options  generally vest over two and 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.


                                      F-17
<PAGE>

<TABLE>
<CAPTION>

                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003


       A summary of stock option activity is as follows:

                                                                            WEIGHTED
                                            RANGE OF                         AVERAGE
                                            EXERCISE        NUMBER OF       EXERCISE
                                              PRICE          SHARES          PRICE

<S>             <C>                             <C>              <C>              <C>

         Outstanding, December 31, 2000      2.24-8.23         840,640             4.37
            Granted                          1.25-2.25       1,056,653             1.33
            Forfeited                        3.50-6.36        (123,553)            2.75
                                         -------------   -------------    -------------

         Outstanding, December 31, 2001      1.25-8.23       1,773,740             2.65
                                         -------------   -------------    -------------

            Granted                          2.00-4.18         450,200             2.35
            Forfeited                        1.25-5.76        (620,655)            2.87
                                         -------------   -------------    -------------

         Outstanding, December 31, 2002  $   0.34-8.23       1,603,285    $        2.90
                                         =============   =============    =============


            Granted                          0.25-0.34        894,930              0.27

            Forfeited                        1.25-5.51       (176,737)             3.00
                                         -------------   -------------    -------------

         Outstanding, March 31, 2003     $   0.34-8.23       2,321,478    $        1.87
                                         =============   =============    =============


         Exercisable, December 31, 2001  $   1.25-8.23         911,537    $        3.83
                                         =============   =============    =============


         Exercisable, December 31, 2002  $  0.34-8.23       1,150,115    $        3.49
                                         =============   =============    =============



         Exercisable, March 31, 2003     $  0.34-8.23       1,318,652    $        2.67
                                         =============   =============    =============

</TABLE>


As  of  March 31, 2003, 1,046,901 options were available for future grants under
the  Plans,  including  610,671  options under the 1998 Plan and 436,230 options
under the 2001 Plan. However, in the years ended December 31, 2001 and 2002, and
the three month period ended March 31, 2003 the Company has granted options only
under  the 2001 Plan and does not intend to grant options under the 1998 Plan in
the  foreseeable  future.


                                      F-18
<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003


The following table summarizes information relating to currently outstanding and
exercisable options as of March 31, 2003.

<TABLE>
<CAPTION>


                  OUTSTANDING                                           EXERCISABLE

                                 WEIGHTED
                                  AVERAGE
                                 REMAINING        WEIGHTED                WEIGHTED
                NUMBER OF       CONTRACTUAL        AVERAGE      NUMBER    AVERAGE
 EXERCISE PRICE   SHARES      LIFE (IN YEARS)   EXERCISE PRICE  SHARES EXERCISE PRICE
<S>                   <C>           <C>                   <C>                  <C>            <C>

$ 0.34-2.00         1,587,810     8.9           $   0.67       694,932      $ 0.83
  2.25-3.54           310,468     3.7               2.58       267,083        2.56
  4.00-6.56           407,200     4.0               5.74       388,450        5.81
  8.05-8.23            16,000     2.9               8.06        16,000        8.06
                  -----------                   -----------   ---------   --------

                    2,321,478                   $   1.87      1,366,465     $ 2.67
                  ===========                   ===========  ==========   ========
</TABLE>




         The fair value of each option  grant is  estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions used
for grants during the applicable period:


                                   DECEMBER 31     MARCH 31,
                                      2002          2003

Risk-free interest rate            1.84-4.74%    1.63-3.05%
Expected dividend yield                    -%            -%
Expected lives                        5 years       5 years
Expected volatility                       75%           75%
Weighted average grant date
   fair value per share           $     1.05   $       0.17
Weighted average remaining
   contractual life of options
   outstanding                      6.9 YEARS     7.9 YEARS



                                      F-19
<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003



            ISSUANCE OF STOCK OPTIONS TO CONSULTANTS

            In August 2001,  the Company  granted fully  exercisable  options to
      purchase  60,000  shares of common  stock at an  exercise  price per share
      equal to $2.25 to two consultants in exchange for marketing services.  The
      Company   recorded  the  fair  value  of  such   options,   based  on  the
      Black-Scholes  option pricing model, as stock-based  compensation  expense
      totaling  $55,000 in the  accompanying  statement of  operations  for year
      ended December 31, 2001.

            In fiscal 2002,  the Company  granted fully  exercisable  options to
      purchase 2,700 shares of common stock at exercise  prices per share in the
      range of $0.55 to $2.87 to the above-mentioned consultants in exchange for
      marketing  services.  The Company recorded the fair value of such options,
      based  on  the   Black-Scholes   option  pricing  model,   as  stock-based
      compensation  expense  totaling  $1,743 in the statement of operations for
      year ended December 31, 2002.

            In January 2003, the Company  granted fully  exercisable  options to
      purchase  60,930  shares of common  stock at  exercise  price per share of
      $0.34  to  the  above-mentioned  consultants  in  exchange  for  marketing
      services.  The Company  recorded the fair value of such options,  based on
      the  Black-Scholes  option  pricing  model,  as  stock-based  compensation
      expense totaling $8,600 in the statement of operations for the three month
      period ended March 31, 2003.

          In April 2002, the Company entered into an agreement with The Investor
     Relations  Group,  Inc.,  referred  to  as  IRG, for investor relations and
     public  relations services. In connection therewith, the Company granted to
     IRG  Options  to  purchase  up  to  150,000  shares  of Class A Stock at an
     exercise price of $5.35 per share. These Options were not granted under the
     2001  Plan, but are subject to the terms and conditions of the 2001 Plan as
     if  granted  thereunder.  Any  unvested  Options will be cancelled upon the
     termination  of the IRG agreement. The Company calculated the fair value of
     these  stock  options,  based  on  the  Black-Scholes option pricing model.

            In November 2002, the Company  terminated its agreement with IRG and
      accordingly,  IRG has 43,750  stock  options  that are  exercisable  until
      November  2004. In the statement of operations for the year ended December
      31, 2002, the Company  recorded  stock-based  compensation  expense in the
      amount of $80,586 related to the vested options.




                                      F-20
<PAGE>

                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003



      WARRANTS
<TABLE>
<CAPTION>

       A summary of warrant activity is as follows:

                                                                                             WEIGHTED
                                                                                             AVERAGE
                                                                                            REMAINING
                                                                             WEIGHTED     CONTRACTUAL
                                            RANGE OF        NUMBER OF         AVERAGE        LIFE (IN
                                         EXERCISE PRICE      SHARES       EXERCISE PRICE      YEARS)
<S>                                            <C>              <C>            <C>              <C>


         Outstanding, December 31, 2001      2.00-3.50        111,924             2.56        1.6

            Granted to stockholders               2.00         10,000             2.00        0.5

            Granted to related party              0.26      8,333,333             0.26        5.5

            Forfeited                                -              -                -          -
                                         -------------   -------------    -------------

Outstanding, December 31, 2002             $ 0.26-3.50      8,455,257      $      0.29        5.4
                                        ==============   =============    =============

             Granted to stockholders                 -              -                -
             Granted to related  party               -              -                -
             Forfeited                               -              -                -
                                         -------------   -------------    -------------

Outstanding, March 31, 2003                $ 0.26-3.50      8,455,257     $       0.29        5.2
                                         =============   =============    =============


</TABLE>


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  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.



                                      F-21
<PAGE>

                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

            This table presents revenues by reportable segment:

                                          THREE MONTH PERIOD ENDED MARCH 31,

                                                   2003              2002

Laser systems                                 $ 1,405,744      $   518,242
Fibers, accessories and service                   718,066          438,395
                                              -----------      -----------

Total                                         $ 2,123,810      $   956,637
                                              ===========      ===========









                                      F-22
<PAGE>

                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003


The following table represents percentage of revenues by geographic destination:


                                  THREE MONTH PERIOD ENDED MARCH 31,
                                       2003            2002


North America                              61%             48%

Asia/Pacific                               26%             25%

Europe                                     11%             23%

Other                                       2%              4%
                                  ------------    ------------

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



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


                                   MARCH 31, 2003   DECEMBER 31, 2002

North America                     $      899,374    $    1,175,410
Europe                                   951,842         1,131,437
                                  --------------    --------------

     Total                        $    1,851,216    $    2,306,846
                                  ==============    ==============


(9)      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 the 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 were
      not subject to refund,  redemption or rescission  and,  accordingly,  were
      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 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 Old Class A Stock  were
      converted in the Merger and were thereafter automatically convertible into


                                      F-23
<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003


      Parent's  common stock in  installments  beginning 60 days after  Parent's
      registration  statement  was to become  effective and  continuing,  unless
      interrupted under certain  circumstances,  until the second anniversary of
      the Merger, at which time all such shares were  automatically  convertible
      into shares of Parent's common stock.

            The Merger was 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
      Diomed prior to the Merger.

            Costs of  approximately  $2.1  million  related to the  issuance  of
      Parent's shares in the offering and its preparation and negotiation of the
      documentation  for the Merger  were paid by the  Company at the closing of
      the Merger and subsequent to the Merger.




(10)     DECEMBER 2002 BRIDGE FINANCING


                  On  December  27,  2002  (the  "Closing  Date"),  the  Company
         completed a $2.0  million  bridge  financing  with Gibralt US, Inc (the
         "Lender"), whose Principal Samuel Belzberg is a member of the Company's
         Board of Directors.  The  financing is in the form of Notes,  including
         $1.0 in Class A secured  Notes and $1.0  million  in Class B  unsecured
         Notes (collectively known as the "Notes"),  which are due on January 1,
         2004. The Notes accrue interest, at an annual rate of 8%, over the life
         of the Notes and is payable upon  maturity.  The Company and the Lender
         entered into a Note Agreement,  Class A Secured Note Agreement, Class B
         Unsecured  Note  Agreement,   Security  Agreement,   Pledge  Agreement,
         Registration Rights Agreement and Warrant Agreement.
         (collectively known as the "Bridge Financing Agreements")

               As  security  for  the Notes, the Company formed a new subsidiary
          company  ("PDT  Co"),  transferred its assets for photodynamic therapy
          ("PDT")  to  PDT  Co,  including  intellectual property, manufacturing
          rights  and  trademarks for lasers and disposable Optiguide(R) fibers,
          and  pledged  100%  of the shares of stock in PDT Co to the Lender. As
          additional  security,  the  Company  granted  a  lien on the following
          unencumbered  assets  of  Diomed  Inc.  to  the  Lender:  equipment,
          inventory,  accounts  receivable,  intellectual  property,  and  cash
          deposit  accounts.  The  Lender's  lien on the inventory is junior and
          subordinate  to Axcan Pharma's lien on inventory as collateral for the
          September  2001  Promissory Note in the amount of $936,000, so long as
          Axcan  Pharma's  Promissory  Note  is  outstanding.

                  The  Company  issued  the  Lender  100%  warrant  coverage  or
         8,333,333  Warrants based upon the $0.24 closing price of the Company's
         Common Stock on December 26, 2002. The warrants are  exercisable  for a
         period of five years, beginning six months from the Closing Date, at an
         exercise price of $0.26. If the Company, over the life of the Warrants,
         issues  Common Stock or Common Stock  equivalents  at a price per share
         less than the  $0.26  exercise  price of the  Warrants,  the  number of
         Warrants and the exercise  price of the Warrants are  adjustable to the
         lower price per share. In the event of a merger or reorganization,  the
         Warrants are  convertible  into the kind and number of shares of Common
         Stock,  other securities or property into which the Warrants would have
         been  converted  into if the  Warrants had been  converted  into Common
         Stock based on the provisions of the merger or reorganization.

                  The Notes are convertible into Common Stock at the election of
         the  Note  Holder  (s)  upon  the   occurrence  of  :  i)  a  financing
         transaction, ii) a liquidity event, iii) in a merger or reorganization,
         or iv) at any time  during the life of the Notes at the  election of at
         least 66 2/3% of the outstanding  principal amount by the Note Holders.
         A financing  transaction is defined as a debt or equity financing under
         which the Company issues Common Stock or equity securities  convertible
         into Common Stock, and raises gross proceeds of at least $50,000 in any
         rolling 30-day period. A liquidity event is defined as i) any person or
         group other than a  shareholder  at the Closing  Date that shall become
         the beneficial owner,  either directly or indirectly,  of capital stock
         representing 51% of voting control of the Company,  ii) the sale of all
         or  substantially  all of the  assets  of the  Company  to one or  more
         persons not an affiliate of the Company,  or iii) the sale of the stock
         of PDT Co or the  sale  of  all or  substantially  all of the  business
         relating to photodynamic therapy products.

                  The Notes,  including  principal  and  accrued  interest,  are
         convertible  into Common Stock at 80% of the Common Stock price,  which


                                      F-24
<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

         is defined as : i) in the event of a financing transaction in which the
         Company issues Common Stock or Common Stock equivalents - the price per
         share of Common Stock or Common Stock  equivalent (the weighted average
         if multiple financing  transaction in a rolling 30-day period),  ii) in
         the event of a  financing  transaction  in which the  Company  does not
         issue  Common  Stock or  Common  Stock  equivalents  - the lower of the
         average of the  closing  price of the Common  Stock for the fifteen day
         business  period  preceding the date of the public  announcement of the
         financing transaction or the average of the closing price of the Common
         Stock for the fifteen day business period commencing the date after the
         date of the public announcement of the financing  transaction,  iii) in
         the event of a liquidity  event in which any person or group other than
         a shareholder at the Closing Date becomes the beneficial owner,  either
         directly or  indirectly,  of capital stock  representing  51% of voting
         control of the Company - the price per share allocated to each share of
         Common Stock or Common Stock equivalent,  iv) in the event of all other
         liquidity events - the lower of the average of the closing price of the
         Common Stock for the fifteen day business period  preceding the date of
         the public  announcement  of the liquidity  event or the average of the
         closing  price of the Common Stock for the fifteen day business  period
         commencing  the date after the date of the public  announcement  of the
         liquidity event

                  In  the  event  of a  merger  or  reorganization,  the  Notes,
         including principal and accrued interest, are convertible into the kind
         and number of shares of Common Stock, other securities or property into
         which the Notes  would have been  converted  into if the Notes had been
         converted into Common Stock on the business day preceding the merger or
         reorganization.

                   Under the Registration  Rights agreement,  the Company agreed
         to notify the Lender (s) if the Company proposes to file certain future
         registration statements.  The Company agreed to use its best efforts to
         include  the  registerable  securities  held by the  Lender  (s) in the
         registration statement,  subject to certain defined limitations,  if so
         requested  by the  Lender  (s)  within 30 days  after  receipt  of said
         notice. The Lender (s) agreed to become subject to a "holdback period",
         by which it does not  effect a public  sale of stock for a period of up
         to 180 days following the effective date of the registration statement,
         if so requested by a managing  underwriter of the offering which is the
         subject of that registration statement.

                    The Notes and  Warrants,  on a pro rata  basis to the Notes,
         are transferable in part or in whole by the Lender to one or more third
         parties, in accordance with all of the same terms granted the Lender by
         the  Company.  The Lender (s) may  designate a member to the  Company's
         Board of  Directors  while the Notes are  outstanding.  The  Company is
         required  to obtain the  advance  approval by the Lender (s) for future
         financing transactions during the life of the Notes.

                   The Company may at its option call for redemption in whole or
         in part any of the  Class A  secured  Notes,  including  principal  and
         accrued  interest,  prior to the  maturity  of the Notes on  January 1,
         2004.  No  Class A  Notes  may be  redeemed  while  any of the  Class B
         unsecured Notes are  outstanding.  If fewer than all of the outstanding
         Class A Notes  are to be  redeemed,  then  all  Class A Notes  shall be
         partially  redeemed on a pro-rata  basis. If fewer than all outstanding
         Class B Notes  are to be  redeemed,  then  all  Class A Notes  shall be
         partially redeemed on a pro rata basis.

                   The Company will be in default if any of the following occurs
         : i) the Company  fails to make  payment of the  principal  and accrued
         interest by January 1, 2004 and the same  continues for a period of two
         days, ii) any of the  representations or warranties made by the Company
         in the Bridge Financing  Agreements shall have been false or misleading
         in any material  respect,  iii) the Company fails to perform or observe
         in any material respect terms under the Bridge Financing Agreements and
         such failure is not cured within thirty days after written  notice from
         the Lender  (s),  iii) the  voluntary  or judicial  dissolution  of the
         Company, iv) admission by the Company of its inability to pay its debts
         as  they  become  due,  iv)  any  default  by  the  Company  under  any
         institutional   indebtedness,   and  v)   commencement   of  bankruptcy
         proceedings.

                   In  connection  with the bridge  financing,  a debt  discount
         valued at $2.0  million  was  incurred  as a result of the  issuance of
         warrants and the beneficial conversion feature related to the immediate
         convertibility  of the  Notes to  equity.  The  value  ascribed  to the
         warrants  was  approximately  $1.2  million,  as  calculated  using the
         Black-Scholes  option  pricing  model,  and the value  ascribed  to the
         beneficial  conversion  feature was $0.8  million.  As of December  31,


                                      F-25
<PAGE>


                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003

         2002,  the $2.0  million was  recorded as a debt  discount  and will be
         amortized  ratably to interest expense over the life of the Notes, such
         that the full  principal  amount of $2.0 million is  recognized  by the
         earlier of the  maturity  date or by the month the Notes are  converted
         into  equity.  In the three  month  period  ended March 31,  2003,  the
         Company recognized  $500,000 in non-cash interest expense pertaining to
         this amortization of the debt discount, and accordingly, the Notes were
         recorded at $500,000.

                   In connection with the bridge financing, the Company incurred
         $80,000 in related  legal fees.  As of December 31,  2002,  these costs
         were  capitalized  as deferred  offering costs and will be amortized to
         non-cash  interest  expense  over the life of the Notes,  such that the
         full amount of costs are  amortized by the earlier of the maturity date
         of the Notes or by the month the Notes are  converted  into equity.  In
         the three month  period ended March 31,  2003,  the Company  recognized
         $20,000 in non-cash interest expense pertaining to this amortization of
         the  deferred  financing  costs,  and  accordingly,  the balance of the
         deferred financing costs was $60,000.


 (11)    CAPITAL RESTRUCTURING AND INTERIM FINANCING

               On May 7, 2003 we entered into certain transactions with three of
          our  directors  and four of our existing securityholders. One of these
          existing  securityholders,  Gibralt  US,  Inc., was, together with its
          affiliates,  the  beneficial  owner  of  approximately  6.6%  of  our
          outstanding  shares  prior  to  these  transactions.  Gibralt US is an
          affiliate  of  one of our directors, Samuel Belzberg. As part of these
          transactions,  we  issued preferred shares convertible into 30,138,792
          shares  of  our  Common  Stock,  representing  in  the  aggregate
          approximately  50.36% of our Common Stock and common stock equivalents
          outstanding  after  the  transactions,  to  these  directors  and
          securityholders.  The securityholders exchanged both their contractual
          rights to convert into shares of Common Stock the $2,000,000 principal
          amount of notes that they purchased from us in December 2002 and their
          warrants  to  purchase  8,333,333  shares  of  Common  Stock that they
          purchased  together  with  the notes, all for 27,117,240 of the common
          share  equivalents  that  we issued. We issued the remaining 3,021,552
          common  share  equivalents  on  May  7,  2003  as  part  of an interim
          financing  in  which  Gibralt  US  and  two of our directors, James A.
          Wylie,  Jr.  and Peter Norris, committed to provide financing of up to
          $1,200,000  in  the  form  of  short-term  secured  notes.

               By  way of background, in December 2002, we had issued $2,000,000
          in  aggregate principal amount of short term convertible secured notes
          and  warrants  to purchase 8,333,333 shares of Common Stock to Gibralt
          US.  In  March  2003  Gibralt  US  transferred  $500,000  in aggregate
          principal  amount  of  the  notes  and  2,083,334  of  the warrants to
          unaffiliated  third  parties.

               During  the  first  quarter  of  2003,  it  became clear that the
          successful  operations of the company would require additional working
          capital.  In  April  2003  we began discussions with Gibralt US with a
          view  to  its  providing  early  in  the  quarter interim financing in
          addition  to  that  it had provided in December 2002. We also began to
          consider a subsequent financing expected to begin later in the quarter
          that  would  address  our  longer term capital needs. In late April we
          elected  to  obtain  interim  financing  from  Gibralt  and two of our
          directors.  At  the  same  time  we  proposed  a  restructuring of the
          securities  issued  in  December  2002  to  improve  our access to the
          financial  markets  and  enhance  the  likelihood  of  a  subsequent
          financing.  Therefore, we offered to repurchase from the December 2002
          securityholders  certain  of  their  rights  that, in light of current
          market  conditions,  might  make  it  more  difficult  to successfully
          complete  a  subsequent  financing  in  the  current  market.

               Using  the Black Scholes valuation methodology, we calculated the
          monetary  value of the rights of holders of our December 2002 notes to
          convert  their  notes into shares of our Common Stock and the monetary
          value of the Common Stock purchase warrants that we issued in December
          2002  in  connection with the notes. We further engaged a professional
          valuation  firm to provide a professional opinion as to the valuations
          that  we  had  utilized.  The  price  per  share  that  we employed to
          calculate  the  number of shares to equal to the monetary value of the
          rights that the securityholders would be surrendering was the presumed
          price  per  share  of  our  Common  Stock  after  giving effect to the
          issuance  of  those  shares.

               The  lenders  in our May 2003 interim financing have the right to
          participate  in  our  contemplated  subsequent  financing.  Their
          participation rights require that if they elect to participate in this
          contemplated  financing,  they  will  do  so  on  the  same  terms and
          conditions  as  the  investors  that  participate  in the contemplated
          financing  by  redeeming  their  notes  upon  our  completion  of  the
          contemplated financing on an equivalent basis into the securities that
          we  sell  in that financing. In determining the price at which we sold
          our  notes to our lenders in May 2003, an independent committee of our
          board of directors considered the added risk that the lenders would be
          accepting  in  light  of  the  uncertainty  of  the  completion of the
          contemplated  financing.  The notes issued to Gibralt US and the other
          securityholders in December 2002 provided that the noteholders had the
          right to participate in the next following financing of the Company at
          a  discount  of  20% to the price to be paid by investors in that next
          financing.  Using  this  discount  factor,  among  other  things, as a
          benchmark  for  arriving  at  a  value  for  the risk that our interim
          financing  lenders would be assuming, the independent committee agreed
          to  issue  to  the lenders preferred shares convertible into 3,021,552
          shares  of  our  Common  Stock,  allocated  according  to the lenders'
          respective  loan  commitments  to  the  Company.

               Although  we have closed the exchange transaction and the interim
          financing, we are in discussions with the holders of the December 2002
          notes  and  the  holders  of  the  May  2003  notes  regarding further
          modifications  that  may  be  necessary  to  commence the contemplated
          financing.




                                      F-26
<PAGE>



                              DIOMED HOLDINGS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003





                                      F-27
<PAGE>



ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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
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, 2003, we had an accumulated deficit of approximately $41.5 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, the Descriptive Memorandum and our 2002 Annual Report on Form 10-KSB (as
amended).



OVERVIEW

         Diomed  specializes  in  developing  and  commercializing  minimal  and
micro-invasive medical procedures that use its laser technologies and disposable
products.  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  clinical  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 seek to  develop
medical  applications  for  our  laser  technology,  to  incorporate  disposable
products  into these  applications  and to sell our products to  physicians  who
perform  medical  procedures  using  our  products  and the  techniques  that we
develop. 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, gynecology and dermatology.

                                       1
<PAGE>

         Using our proprietary  technology in certain  methods of  synchronizing
diode  light  sources  and in certain  optical  fibers,  we  currently  focus on
endovenous  laser treatment (our EVLT(TM) product line) for use in varicose vein
treatments,  photodynamic  therapy  (our PDT  product  line)  for use in  cancer
treatments,  and other  clinical  applications.  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.

         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.

         EVLT(TM) was a primary  source of revenue in 2002.  Diomed expects that
EVLT(TM)  will  continue  to be a primary  source  of  revenue  in 2003.  Diomed
believes that EVLT(TM) will result in a high level of commercial  acceptance due
to its quick recovery  period,  immediate return to one's normal routine barring
vigorous physical  activities,  reduced pain and minimal  scarring,  and reduced
costs compared to vein stripping,  the current prevalent  clinical treatment for
varicose  veins. We developed our EVLT(TM)  product line as a complete  clinical
solution  and  marketing  model,  including a laser,  disposable  kit,  clinical
training  and  marketing  plan,  to  assist   office-based  and   hospital-based
physicians  in  responding  to the demand for  treatment of varicose  veins in a
minimally   invasive   manner.   Diomed  also   published  a  health   insurance
reimbursement  guide as a sales and marketing  tool to assist  physicians in the
reimbursement submission process. We believe that these attributes,  in addition
to  EVLT(TM)'s  superior  clinical  trial  results,  favorable  peer reviews and
comparatively  larger and longer  follow-up  data reports also provide  EVLT(TM)
with a competitive  advantage over competing  traditional and minimally invasive
varicose vein treatment products.

         Diomed  expects  that as the number of  EVLT(TM)  procedures  performed
increases so will its sales of associated disposable items. Diomed believes that
the U.S. represents the single largest market for EVLT(TM).  Diomed is targeting
its sales and marketing efforts at hospitals,  private  physician  practices and
clinics, and focuses on leading hospitals.

         Diomed has developed a website - WWW.EVLT.COM - to implement its push /
pull strategy to attract the interest of both patients and physicians.  EVLT.com
provides  patients  with  education  about  treatment  options  and  benefits of
EVLT(TM) and provides  physicians with education  about the EVLT(TM)  procedure.
Also,  patients can inquire  about the nearest  physician  performing  EVLTTM by
inputting their city and state.

         The sales cycle for selling capital equipment,  such as medical lasers,
is a dynamic one that can be prolonged by several factors, including:

     o    the customer's internal approval process;

     o    hospital  determinations as to the speciality of physician  performing
          the  EVLT(TM)procedure and the facility where these procedures will be
          performed;

     o    the physician's desire to observe an EVLT(TM)procedure prior to making
          a purchase decision; and

     o    budget constraints for capital equipment.


                                       2
<PAGE>

The length of the sales cycle may vary  according to the type of  customer.  For
example,  a sale to a  private  physician  may  take as  little  as two to three
months,  whereas a sale to a hospital  may take six months or longer.  Diomed is
providing  hospital-based and office-based physicians with marketing guidance as
to how they can  build an  EVLT(TM)  business,  which can  facilitate  the sales
closing process and reduce the sales cycle. Also, Diomed is directing interested
patients to the nearest performing physician via its website WWW.EVLT.COM.

      Based on the  dynamics of the selling  process,  in late March 2002 Diomed
made the decision to hire a direct sales force to commercialize EVLT(TM). At the
end of May 2002,  Diomed had hired,  trained and deployed eight new direct sales
representatives  in key  strategic  markets  across the U.S. to  supplement  its
existing sales infrastructure of independent sales  representatives.  In October
2002, based on the positive sales performance in the third quarter,  the Company
nearly  doubled  the size of its direct  sales force to 17  representatives.  In
addition, in September 2002, Diomed engaged Sigmacon Health Products Corporation
of Toronto,  Ontario as its distributor in the Canadian market. The Company will
continue to monitor sales activities and sales strategies, and adjust the number
of direct sales  representatives  and indirect sales  representatives to address
market needs and opportunities in the future.


      Diomed's sales of its PDT product line are dependent to an extent upon the
clinical development process and the  commercialization of PDT drugs by PDT drug
companies. As a result, our sales may fluctuate in relation to the timing of PDT
drug companies  achieving their strategic  initiatives.  In 2002, we changed our
sales  strategy  with  respect to sales of our PDT product  line.  In 2001,  our
collaborative   partner,  Axcan  Pharma,  lead  the  sales  effort  for  PDT  in
conjunction  with Axcan  Pharma's  drug,  Photofrin.  In 2002,  Diomed and Axcan
Pharma  decided to use  Diomed's  sales staff in addition to Axcan  Pharma's own
efforts to sell  Photofrin  and our  related PDT  products.  We have not yet had
sufficient  time to discern what affect this change in sales  strategy will have
on future  sales of our PDT  product  line and  whether  this change will have a
material impact on our revenues. We are unable to predict any probable impact on
our revenues because EVLT(TM), and not PDT, is our primary source of revenue for
2002  and  because   Photofrin   is  the  first  PDT  drug  that  Axcan   Pharma
commercialized.  Consequently,  there is no relevant historical data on which to
base sales assumptions.

      Diomed  works  jointly and early on with  photodynamic  therapy drug (PDT)
companies in their clinical  development process in order to design a laser that
optimizes the most effective  wavelength in combination with their PDT 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 December 2002, the FDA issued an approvable letter regarding this
application.  An FDA approvable letter typically  indicates that the FDA intends
to approve the application. In its approvable letter, the FDA states that it has
reviewed  the  application  and requests  further  clinical  information  mostly
relating  to  24-month  follow-up  data.  Axcan  Pharma  anticipates  that final
approval may be issued by the end of the second quarter in 2003.

      In the U.S.,  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 line is a  delivery  system  of laser  technology,  services  and  fiber
disposables to the global photodynamic therapy industry. The FDA considers PDT a
modality that requires a combination  PMA approval,  where the PDT 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


                                       3
<PAGE>

applications.   In  addition  we  have  a  long-term   partnership  with  Dentek
Lasersystems  Vertriebs  GmbH,  which is  using  our  laser  module  for  dental
applications.

         In 2002,  approximately  55% of our sales were  generated  domestically
versus  internationally.  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 - it will have
the  potential  to create  recurring  sales.  Diomed's  plan is that each future
procedure will be accompanied with a disposable component.

      In 2003, Diomed expects to continue to focus on the development and growth
of EVLT(TM) sales in the U.S. while simultaneously  pursuing channels for future
sales worldwide, 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.

      Our historical  revenues primarily consist of sales of our lasers and from
sales of disposable fibers. 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  issued a staff  accounting  bulletin,
referred to as 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.

      Our  historic  domestic and  international  product  sales were  generated
principally through our independent sales representatives,  or ISRs, in the U.S.
and through our  international  distributors.  We also have OEM relationships in
Asia and Europe.  Historically, a relatively small portion of our sales has been
generated  domestically.  Through 2000, over half of our revenues have come from
international  sales.  In 2001,  we  expanded  our  domestic  sales  through the
expansion  of ISRs and our  U.S.  sales  have  increased  as a  result  of their
activities.

      For foreign currency translation  purposes,  the assets and liabilities of
Diomed  Ltd.  are  translated  at the rate of  exchange in effect at the Balance
Sheet date, while  stockholders'  equity,  excluding the current year's loss, is
translated at historical  rates.  Results of operations are translated using the
weighted  average   exchange  rate  in  effect  during  the  period.   Resulting
translation  adjustments are recorded as a separate  component of  stockholders'
equity in our balance sheets.

      Our cost of revenue consists primarily of materials, labor, manufacturing,
overhead  expenses,  warranty and shipping  and handling  costs.  As we grow our
business and realize  manufacturing  efficiencies  and  economies  of scale,  we
expect our cost of revenue to decrease  as a  percentage  of net sales,  thereby
increasing our gross margin.

      Our  operating  expenses  include  selling  and  marketing,  research  and
development  and  general  and  administrative  expenses.  Sales  and  marketing
expenses consist primarily of personnel costs,  commissions,  clinical training,
marketing,  public relations and  participation in selected medical  conferences
and  trade  shows.  Research  and  development  expenses  consist  primarily  of
personnel costs,  clinical and regulatory  costs,  patent  application costs and
supplies.  General and  administrative  expenses consist  primarily of personnel
costs, professional fees, and other general operating expenses.

      We value our  inventories  at the lower of cost  (first-in,  first-out) or
market.  Our   work-in-progress   and  finished  goods  inventories  consist  of
materials, labor and manufacturing overhead.



                                       4
<PAGE>


      We  have  been  unprofitable  since  our  founding  and  have  incurred  a
cumulative net loss of approximately  $41.5 million as of March 31, 2003. We may
continue to incur  substantial and possibly  increasing  operating losses due to
spending on research  and  development  programs,  clinical  trials,  regulatory
activities,  and  the  costs  of  manufacturing,  marketing  and  administrative
activities.


RESULTS OF OPERATIONS

THREE MONTHS  ENDED MARCH 31, 2003  COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2002

REVENUES
         Revenues for the three  months ended March 31, 2003 were $2.1  million,
$1.2  million,  or 122%,  increase  from $0.9 million for the three months ended
March 31, 2002.

         In the three months ended March 31, 2003,  approximately  $1.4 million,
or 66%, of our total  revenues  were derived  from laser  sales,  as compared to
approximately $0.5 million,  or 55% in the three months ended March 31, 2002. In
the three months ended March 31, 2003,  approximately  $0.7 million,  or 34%, of
our total  revenues  were  derived  from  sales of  disposable  fibers and kits,
accessories and service,  as compared to approximately  $0.4 million,  or 45% in
the three months ended March 31, 2002.

         The increase in revenues is principally due to the commercialization of
EVLT(TM)  for the  treatment of varicose  veins,  subsequent  to  receiving  FDA
approval in January 2002. In the first quarter of 2003, the Company  experienced
an  approximate  740% increase in the sale of EVLT related  disposable  kits and
fibers as compared to the first  quarter in 2002.  This  increase  represents  a
strong growth trend in a recurring revenue stream from disposable  sales,  which
is a key element in the Company's business model.


COST OF REVENUES
         Cost of  revenues  for the three  months  ended March 31, 2003 was $1.4
million,  $0.2 million,  or 21%, increase from $1.2 million for the three months
ended March 31, 2002. This is principally due to the cost of revenues associated
with the increase in sales volume from the commercialization of EVLT(TM).

GROSS MARGIN

         Gross margin  for the  three  months  ended  March  31,  2003 was $0.7
million,  a  $0.9  million,  or 465%, increase from $0.2 million in loss for the
three  months  ended  March  31,  2002. This increase was principally due to the
increased  sales volume from the commercialization of EVLT(TM), and as a result,
more  fixed  costs  for production, quality, and service were covered in 2003 as
compared  to  2002.

 RESEARCH AND DEVELOPMENT EXPENSES
         Research and development  expenses for the three months ended March 31,
2003 principally  remained  unchanged at $188,000,  a $17,000,  or 10%, increase
from $171,000 for the three months ended March 31, 2002.

SELLING AND MARKETING EXPENSES
         Selling and  marketing  expenses  for the three  months ended March 31,
2003 were $1.1 million, a $0.8 million,  or 234%, increase from $0.3 million for
the three months ended March 31, 2002. The increase was principally due to staff
costs  associated  with the direct sales force that was hired in the second half
of 2002, including salary, commissions,  payroll taxes, benefits and travel, and
heavy trade show  participation in 2003 in support of the  commercialization  of
EVLT(TM), that were not incurred in the three months ended March 31, 2002.  In
fiscal 2003,  the Company  anticipates
investing  much of its resources in sales and marketing  programs to support the
aggressive commercialization of EVLT(TM).

                                       5
<PAGE>


GENERAL AND ADMINISTRATIVE EXPENSES
         General and  administrative  expenses  for the three months ended March
31, 2003 principally  remained unchanged at $801,000, a $20,000, or 2%, decrease
from  $821,000 for the three months  ended March 31, 2002.  In fiscal 2002,  the
Company implemented the infra-structure to support becoming a public company via
the reverse  merger in February  2002.

INTEREST EXPENSE, NET
         Interest  expense  for the three  months  ended March 31, 2003 was $0.6
million,  a $0.3  million,  or 100%,  increase  from $0.3  million for the three
months ended March 31, 2002.

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

         Interest  expense in the three  months  ended March 31,  2003  includes
non-cash charges totaling  approximately $520,000 related to the $2.0 million in
December 2002 Bridge Notes. In accordance with Emerging Issues Task Force (EITF)
00-27,  "Application of EITF No.98-5 to Certain  Convertible  Instruments",  the
Company recorded a beneficial  conversion feature in the amount of $2.0 million,
which has been recorded as a debt discount to the Notes.  The debt discount will
be  amortized  over the term of the Notes  through  January 1,  2004,  with full
amortization  of any  remaining  discount to occur if the Notes are converted to
equity prior to the January 1, 2004 maturity date.  Accordingly,  the Notes were
recorded  at zero as of  December  31,  2002 and zero  amortization  of the debt
discount was recognized in the year ended December 31, 2002 as the corresponding
amortization  since December 27, 2002 was immaterial.  In the three month period
ended March 31,  2003,  the  Company  recognized  $500,000 in non-cash  interest
expense  pertaining to this amortization of the debt discount,  and accordingly,
the Notes were recorded at $500,000.

         Also,  in connection  with the December 2002 Bridge Notes,  the Company
incurred  $80,000 in related  legal fees.  As of December 31, 2002,  these costs
were  capitalized as deferred  financing costs and will be amortized to non-cash
interest expense over the life of the Notes,  such that the full amount of costs
are  amortized by the earlier of the maturity  date of the Notes or by the month
the Notes are converted  into equity.  In the three month period ended March 31,
2003, the Company  recognized $20,000 in non-cash interest expense pertaining to
this amortization of the deferred financing costs.




LIQUIDITY, CAPITAL RESOURCES AND CAPITAL TRANSACTIONS

         Since  inception  through March 31, 2003, we have incurred a cumulative
loss of  approximately  $41.5 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.

      In December  2002, the Company  completed a bridge  financing with Gibralt
US,  Inc.  ("Gibralt")  in the form of $2.0  million  in secured  and  unsecured
convertible Notes due January 1, 2004, and issued warrants to purchase 8,333,333
shares of Common Stock.  In order to fund its  operations in 2003, to enable the
Company  to  expand  critical  sales  and  marketing  programs  and  to  further
strengthen  Diomed's  leadership  position in the marketplace,  the Company will
need to complete an additional debt or equity financing or put in place a credit
facility to supplement the Company's  commercialization of EVLT(TM). The Company
anticipates it will have access to additional funding sources.  The Company will


                                       6
<PAGE>

require  the  proceeds of any such  financing,  together  with its current  cash
resources,  to continue as a going concern,  and will use these proceeds to fund
its operations and commercialize its products in 2003.  Additional financing may
not,  however,  be available  on  acceptable  terms or at all. The  inability to
obtain  additional  financing  would  cause  the  Company  to  reduce  or  cease
operations,  sell all or a portion of its assets,  seek a sale of the Company or
enter into a business combination with a third party.

     On May 7, 2003 we entered into certain transactions with three of our
directors and four of our existing securityholders.  One of these existing
securityholders, Gibralt US, Inc., was, together with its affiliates, the
beneficial owner of approximately 6.6% of our outstanding shares prior to these
transactions.  Gibralt US is an affiliate of one of our directors, Samuel
Belzberg.  As part of these transactions, we issued preferred shares convertible
into 30,138,792 shares of our Common Stock, representing in the aggregate
approximately 50.36% of our Common Stock and common stock equivalents
outstanding after the transactions, to these directors and securityholders.  The
securityholders exchanged both their contractual rights to convert into shares
of Common Stock the $2,000,000 principal amount of notes that they purchased
from us in December 2002 and their warrants to purchase 8,333,333 shares of
Common Stock that they purchased together with the notes, all for 27,117,240 of
the common share equivalents that we issued.  We issued the remaining 3,021,552
common share equivalents on May 7, 2003 as part of an interim financing in which
Gibralt US and two of our directors, James A. Wylie, Jr. and Peter Norris,
committed to provide financing of up to $1,200,000 in the form of short-term
secured notes.

     By way of background, in December 2002, we had issued $2,000,000 in
aggregate principal amount of short term convertible secured notes and warrants
to purchase 8,333,333 shares of Common Stock to Gibralt US. In March 2003
Gibralt US transferred $500,000 in aggregate principal amount of the notes and
2,083,334 of the warrants to unaffiliated third parties.

     During the first quarter of 2003, it became clear that the successful
operations of the company would require additional working capital. In April
2003 we began discussions with Gibralt US with a view to its providing early in
the quarter interim financing in addition to that it had provided in December
2002. We also began to consider a subsequent financing expected to begin later
in the quarter that would address our longer term capital needs. In late April
we elected to obtain interim financing from Gibralt and two of our directors. At
the same time we proposed a restructuring of the securities issued in December
2002 to improve our access to the financial markets and enhance the likelihood
of a subsequent financing. Therefore, we offered to repurchase from the December
2002 securityholders certain of their rights that, in light of current market
conditions, might make it more difficult to successfully complete a subsequent
financing in the current market.

     Using the Black Scholes valuation methodology, we calculated the monetary
value of the rights of holders of our December 2002 notes to convert their notes
into shares of our Common Stock and the monetary value of the Common Stock
purchase warrants that we issued in December 2002 in connection with the notes.
We further engaged a professional valuation firm to provide a professional
opinion as to the valuations that we had utilized. The price per share that we
employed to calculate the number of shares to equal to the monetary value of the
rights that the securityholders would be surrendering was the presumed price per
share of our Common Stock after giving effect to the issuance of those shares.

     The lenders in our May 2003 interim financing have the right to participate
in our contemplated subsequent financing. Their participation rights require
that if they elect to participate in this contemplated financing, they will do
so on the same terms and conditions as the investors that participate in the
contemplated financing by redeeming their notes upon our completion of the
contemplated financing on an equivalent basis into the securities that we sell
in that financing. In determining the price at which we sold our notes to our
lenders in May 2003, an independent committee of our board of directors
considered the added risk that the lenders would be accepting in light of the
uncertainty of the completion of the contemplated financing. The notes issued to
Gibralt US and the other securityholders in December 2002 provided that the
noteholders had the right to participate in the next following financing of the
Company at a discount of 20% to the price to be paid by investors in that next
financing. Using this discount factor, among other things, as a benchmark for
arriving at a value for the risk that our interim financing lenders would be
assuming, the independent committee agreed to issue to the lenders preferred
shares convertible into 3,021,552 shares of our Common Stock, allocated
according to the lenders' respective loan commitments to the Company.

     Although we have closed the exchange transaction and the interim financing,
we are in discussions with the holders of the December 2002 notes and the
holders of the May 2003 notes regarding further modifications that may be
necessary to commence the contemplated financing.


                                       7
<PAGE>

         We had cash of approximately  $131,000 at March 31, 2003 and
approximately  $1.9 million as of December 31, 2002.

         Cash used in  operations  for the three months ended March 31, 2003 was
approximately $1.7 million.  This is principally  attributable to the payment of
prepaid annual business insurance premiums ($400,000) and fixed overhead costs,
including rent, salaries, benefits and taxes that was not covered by sales.

         Cash used in investing  activities for the three months ended March 31,
2003 was approximately  $70,000.  The net cash used by investing  activities was
principally related to demo equipment within property,  plant and equipment, for
customer trial programs and for use by the direct sales force in the field.

         Cash used in financing  activities for the three months ended March 31,
2003, was approximately  $82,000. Cash used in financing activities  principally
was for the pay down of the  Barclays  bank line of  credit,  as well as nominal
payments  for  capital  equipment  leases  and  payments  against  a  short-term
promissory note to a service provider.


BANK LINE OF CREDIT

      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
($1,895,000 at March 31, 2003) or 80% of eligible accounts receivable. This line
bears interest at 3% above  Barclays  Bank's base rate (4.00% at March 31, 2003)
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 inventory and certain intellectual property.

      As of March 31, 2003,  there were borrowings of  (pound)94,744  ($149,600)
outstanding  under this line and available  future  borrowings of  approximately
$88,000.








                                       8
<PAGE>

CRITICAL ACCOUNTING POLICIES

      Our discussion and analysis of the Company's financial condition,  results
of  operations,  and cash flows are based upon Diomed's  consolidated  financial
statements,  which have been prepared in accordance with  accounting  principles
generally  accepted in the U.S. 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.

      Our critical accounting policies are as follows:

      o   revenue recognition;

      o   allowance for doubtful accounts;

      o   warranty obligation;

      o   excess and obsolete inventory; and

      o   valuation of long-lived and intangible assets.

      Revenue Recognition.  We derive our revenue from primarily two sources (i)
product revenue which includes lasers,  instrumentation,  and  disposables,  and
(ii) service revenue.  The Company  recognizes  revenue on products and services
when the persuasive  evidence of an arrangement is in place,  the price is fixed
or determinable,  collectibility  is reasonably  assured,  and title and risk of
ownership  has  been  transferred.  Transfer  of  title  and  risk of  ownership
generally  occurs  when the  product  is  shipped  to the  customer  or when the
customer receives the product,  depending on the nature of the arrangement.  The
Company currently  provides for the estimated cost to repair or replace products
under  warranty  at the time of  sale.  Service  revenue  is  recognized  as the
services are performed.


                                       9
<PAGE>

      Allowance  for  Doubtful  Accounts.   Accounts   receivable  are  customer
obligations  due under  normal trade  terms.  The Company  sells its products to
private physicians,  hospitals, health clinics,  distributors and OEM customers.
The Company generally requires signed sales agreements,  non-refundable  advance
payments and purchase orders depending upon the type of customer, and letters of
credit may be required in certain  circumstances.  Some customers seek equipment
financing from third party leasing agents.  Accounts receivable is stated at the
amount billed to the customer less a valuation allowance for doubtful accounts.

      Senior  management  reviews  accounts  receivable  on a  monthly  basis to
determine if any receivables  could  potentially be  uncollectible.  The Company
includes  specific  accounts  receivable  balances  that  are  determined  to be
uncollectible,  along  with a general  reserve,  in its  overall  allowance  for
doubtful  accounts.  After all attempts to collect a receivable have failed, the
receivable is written off against the allowance. Based on available information,
the Company believes its allowance for doubtful accounts as of March 31, 2003 is
adequate.

      Warranty  Obligation.  We engage in extensive product quality programs and
processes,  including  actively  monitoring  and  evaluating  the quality of our
component  suppliers.  In addition to these proactive measures,  we also provide
for the estimated cost of product warranties at the time revenue is recognized.

      Excess and Obsolete  Inventory.  We maintain  reserves  for our  estimated
obsolete inventory. The reserves are equal to the difference between the cost of
inventory and the  estimated  market value based upon  assumptions  about future
demand and market  conditions.  If actual market  conditions  are less favorable
than  those  projected  by  management,  additional  inventory  reserves  may be
required.

      Valuation of Long-Lived and Intangible Assets. We assess the impairment of
identifiable  intangibles and long-lived  assets on an annual basis and whenever
events or changes in  circumstances  indicate that the carrying value may not be
recoverable.  When we  determine  that the  carrying  value of  intangibles  and
long-lived  assets may not be recoverable,  we measure any impairment based on a
projected  discounted  cash flow method using a discount rate  determined by our
management to be  commensurate  with the risk  inherent in our current  business
model.  If cash  generated in the future by the acquired asset is different from
current estimates,  or if the appropriate discount rate were to change, then the
net present  value of the asset would be  impacted,  and this could  result in a
charge to earnings.




PART II:  OTHER INFORMATION



ITEM 2.       CHANGES IN SECURITIES AND USE OF PROCEEDS

         During  the first  quarter  of 2003,  the  Company  issued  options  to
purchase up to 800,000 shares of its Class A Stock, and upon conversion of those
shares  800,000  shares of its common  stock,  at a purchase  price of $0.26 per
underlying  share to the new  President  and CEO,  34,000  shares of its Class A
Stock, and upon conversion of those shares 34,000 shares of its common stock, at
a  purchase  price  of  $0.25 to $0.33  per  underlying  share to  non-executive
employees,  and 60,930 shares of its Class A Stock, and upon conversion of those
shares  60,930  shares of its common  stock,  at a  purchase  price of $0.34 per
underlying share to two consultants as follows:




                                       10
<PAGE>

                                                 OPTIONS GRANTED

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

            New President and CEO                      800,000

            Non-Executive Employees                     34,000

            Robert Min (consultant)                     30,775

            Steven Zimmet (consultant)                  30,155


         Diomed issued  options to 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.





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

In the first quarter of 2003,  there were no submissions of matters to a vote of
security holders.



ITEM 5.  OTHER


CEO TRANSITION AND NEW CHAIRMAN OF THE BOARD

         On January 13, 2003,  the Company  announced  that James A. Wylie,
Jr.,  had been  appointed to the  position of  President & CEO  replacing  Peter
Klein, who left to pursue personal  interests.  Mr. Klein will continue to serve
as a member of Diomed's Board of Directors.  Diomed also announced that Geoffrey
H.  Jenkins had been  appointed as Chairman of the Board,  effective  January 1,
2003 upon the  resignation  of James  Arkoosh,  who left the  Company  to pursue
personal  interests.  Mr. Jenkins has been serving as a member of Diomed's Board
of Directors since the Spring of 2001.


NEW BOARD MEMBERS

         On March 13, 2003, the Company  elected Mr. Gary Brooks (CMC,  CTP) and
Mr. David H. Swank to the Board of Directors,  increasing  the size of the Board
to eight  Directors.  Both gentlemen  will serve on the Audit  Committee and Mr.
Swank will assume the position of Chairman, Audit Committee.


                                       11
<PAGE>


REGULATORY APPROVAL OF EVLT IN CANADA

         In February 2003, the Company received  regulatory approval from Health
Canada,  allowing the Company to  immediately  market EVLT for the  treatment of
varicose veins in the Canadian market.




                                       12
<PAGE>


ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

EXHIBITS.

Exhibit  No.  99.1 Statement Under Oath of Principal Financial Officer Regarding
Facts  And  Circumstances  Relating  to  Exchange  Act  Filings.

Exhibit  No.  99.2 Statement Under Oath of Principal Executive Officer Regarding
Facts  And  Circumstances  Relating  to  Exchange  Act  Filings.

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.


            On January 13, 2003,  the Company filed a Current Report on Form 8-K
in  connection  with the  Company's  new  President and CEO, and Chairman of the
Board. Also, included was a copy of James A Wylie Jr.'s employment contract.

            On May 15, 2003,  the Company filed a Current  Report on Form 8-K in
connection with the May 7, 2003 interim  financing and the  restructuring of the
December  2002 bridge  Notes.  Included  was a copy of the  related  documents -
Exchange Agreement,  Class C Notes Agreement,  Class D Notes Agreement,  Secured
Loan  Agreement,  Amended and Restated  Pledge  Agreement,  Amended and Restated
Security  Agreement,  Amended and Restated  Registration  Rights Agreement,  and
Legal Opinion by McGuirewoods, LLP.



                                       13
<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:  May 15, 2003



<PAGE>

                                  /s/ Lisa M. Bruneau
                                   ---------------------------------
                            Name:  Lisa M. Bruneau
                            Title: Principal  Financial  Officer,
                                   Vice  President,
                                   Finance, Secretary and Treasurer






                                       14
<PAGE>

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C 1350, AS
ADOPTED AND THE REQUIREMENTS OF SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James A. Wylie, Jr., Chief Executive Officer and President of Diomed
Holdings, Inc. (the "Company") do hereby certify that:

1.   I have reviewed this quarterly report on Form 10-QSB for the three months
ended March 31, 2003 of the Company;

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

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

4.   The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Company and we have:

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

b) evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.   The Company's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the audit committee of
Company's board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the Company's ability to record, process, summarize
and report financial data and have identified for the Company's auditors any
material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal controls; and

6.   The Company's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

                                 /s/  JAMES A. WYLIE, JR.
                                 James A. Wylie, Jr.
                                 President and Chief Executive Officer
May 15, 2003



<PAGE>

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C 1350, AS
ADOPTED AND THE REQUIREMENTS OF SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Lisa M. Bruneau, Principal Financial Officer of Diomed Holdings, Inc. (the
"Company") do hereby certify that:

1.   I have reviewed this quarterly report on Form 10-QSB for the three months
ended March 31, 2003 of the Company;

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

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

4.   The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the Company and we have:

d) designed such disclosure controls and procedures to ensure that material
information relating to the Company, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period
in which this quarterly report is being prepared;

e) evaluated the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

f) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.   The Company's other certifying officers and I have disclosed, based on our
most recent evaluation, to the Company's auditors and the audit committee of
Company's board of directors (or persons performing the equivalent function):

c) all significant deficiencies in the design or operation of internal controls
which could adversely affect the Company's ability to record, process, summarize
and report financial data and have identified for the Company's auditors any
material weaknesses in internal controls; and

d) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal controls; and

6.   The Company's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

                                     /s/ LISA M. BRUNEAU
                                     Lisa M. Bruneau
                                     Principal Financial Officer
May 15, 2003

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