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, 2005

                                       OR

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

                        COMMISSION FILE NUMBER 000-32045

                              DIOMED HOLDINGS, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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

              1 DUNDEE PARK
               ANDOVER, MA                                 01810
(Address of principal executive offices)                (Zip Code)

                                 (978) 475-7771
                         (Registrant's telephone number)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO __

AS OF MAY 12, 2005, THERE WERE 19,423,728 SHARES OF COMMON STOCK, PAR VALUE
$0.001, OUTSTANDING.

<PAGE>

                     DIOMED HOLDINGS, INC. AND SUBSIDIARIES

                         QUARTERLY REPORT ON FORM 10-QSB
                    FOR THE THREE MONTHS ENDED MARCH 31, 2005

                                TABLE OF CONTENTS

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

             Part I - Financial Information

     1       Condensed Consolidated Balance Sheets -                        F-1
             March 31, 2005 (Unaudited) and December 31, 2004

             Unaudited Condensed Consolidated Statements of Operations -    F-2
             Three Months Ended March 31, 2005 and 2004

             Unaudited Consolidated Statements of Cash Flows -              F-3
             Three Months Ended March 30, 2005 and 2004

             Notes to Consolidated Financial Statements                     F-4

     2       Management's Discussion and Analysis of Operations              1

     3       Controls and Procedures                                         6

             Part II - Other Information                                     6

     1       Legal Proceedings                                               6

     6       Exhibits and Reports on Form 8-K                                8

             Signatures                                                      9

<PAGE>

Diomed Holdings, Inc.
Condensed Consolidated Balance Sheets
As of March 31, 2005 (unaudited) and December 31, 2004

<TABLE>
<CAPTION>
Assets                                                          March 31, 2005     December 31, 2004
                                                                --------------     -----------------
<S>                                                               <C>                 <C>
Current assets:
        Cash and cash equivalents                                 $11,562,156         $14,436,053
        Accounts receivable, net                                    2,380,844           2,074,393
        Inventories                                                 2,360,325           2,204,385
        Prepaid expenses and other current assets                     556,892             348,586
                                                                  -------------------------------

                Total current assets                               16,860,217          19,063,417

Property, plant and equipment, net                                    849,736             901,569
Intangible assets, net                                              4,359,551           4,482,091
Other assets                                                          533,836             896,320
                                                                  -------------------------------

Total assets                                                      $22,603,340         $25,343,397
                                                                  ===============================
Liabilities and stockholders' equity
Current liabilities:
        Accounts payable                                          $ 2,267,716         $ 2,092,562
        Accrued expenses and other                                  1,781,199           1,894,908
        Deferred revenue                                              154,159             359,749
EVLT(R) technology payable ($1,000,000 face value,
        net of $48,068 and $66,733 debt discount at
        March 31, 2005 and December 31, 2004)                         951,932             933,267
                                                                  -------------------------------

                Total current liabilities                           5,155,006           5,280,486
                                                                  -------------------------------

Deferred revenue                                                      196,454                  --
Convertible debt ($3,712,000 face value, net of
        $1,070,158 debt discount at March 31, 2005 and
        $7,000,000 face value, net of $2,183,151
        debt discount at December 31, 2004)                         2,641,842           4,816,849
EVLT(R) technology payable ($250,000 face value,
        net of $4,902 debt discount at December 31, 2004)                  --             245,098
                                                                  -------------------------------
                                                                    2,838,296           5,061,947

        Total liabilities                                           7,993,302          10,342,433
                                                                  -------------------------------
        Commitments and contingencies

Stockholders' equity                                               14,610,038          15,000,964
                                                                  -------------------------------

Total liabilities and stockholders' equity                        $22,603,340         $25,343,397
                                                                  ===============================
</TABLE>

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

                                       F-1
<PAGE>

Diomed Holdings, Inc.
Unaudited Condensed Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                                         Three Months Ended March 31,
                                                                          2005                   2004
                                                                     ----------------------------------
<S>                                                                  <C>                   <C>
Revenues                                                             $  4,132,250          $  2,949,597

Cost of revenues                                                        2,292,961             1,944,370
                                                                     ----------------------------------

Gross profit                                                            1,839,289             1,005,227
                                                                     ----------------------------------
Operating expenses:
        Research and development                                          390,738               296,154
        Selling and marketing                                           2,307,308             1,605,962
        General and administrative                                      1,570,845             1,399,265
                                                                     ----------------------------------

                Total operating expenses                                4,268,891             3,301,381
                                                                     ----------------------------------

                Loss from operations                                   (2,429,602)           (2,296,154)
                                                                     ----------------------------------

Interest expense, non-cash                                              1,304,952                    --
Interest expense, net, cash-based                                         101,306                12,005
                                                                     ----------------------------------
                Total interest expense                                  1,406,258                12,005
                                                                     ----------------------------------

Net loss                                                             $ (3,835,860)         $ (2,308,159)
                                                                     ==================================

Basic and diluted net loss per share                                 $      (0.21)         $      (0.18)
                                                                     ==================================

Basic and diluted weighted average common shares outstanding           18,573,024            13,154,770
                                                                     ==================================
</TABLE>

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

                                       F-2
<PAGE>

DIOMED HOLDINGS, INC.
Unaudited Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                        Three Months Ended March 31,
                                                                         2005                  2004
                                                                    ------------          ------------
<S>                                                                 <C>                   <C>
Cash flows from operating activities:
          Net loss                                                  $ (3,835,860)         $ (2,308,159)
          Adjustments to reconcile net loss
          to net cash used in operating activities:
                   Depreciation and amortization                         213,606               204,290
                   Amortization of EVLT(R) discount                       23,567                    --
                   Fair value of stock options for services               20,263                62,231
                   Non-cash interest expense                           1,304,952                    --
                   Changes in operating assets
                         and liabilities:
                         Accounts receivable                            (306,451)             (611,111)
                         Inventories                                    (155,940)             (372,124)
                         Prepaid expenses and other
                            current assets                              (208,306)             (443,312)
                         Deposits                                          8,980                    --
                         Accounts payable                                175,155               458,522
                         Accrued expenses and deferred revenue          (100,528)             (315,581)
                                                                    ----------------------------------

Net cash used in operating activities                                 (2,860,562)           (3,325,244)
                                                                    ----------------------------------

Cash Flows from investing activities:
                   Purchases of property and equipment                   (70,232)             (116,884)
                                                                    ----------------------------------

Net cash used in investing activities                                    (70,232)             (116,884)
                                                                    ----------------------------------

Cash Flows from financing activities:
                   Payments on promissory notes                               --              (936,000)
                   Payments on bank borrowings                                --              (261,676)
                   Payments on EVLT(R) purchase obligation              (250,000)             (219,391)
                   Increase in deferred offering costs                        --              (194,489)
                   Proceeds from exercise of warrants                    404,903                    --
                   Payments on capital lease obligations                 (22,318)               (5,636)
                                                                    ----------------------------------

Net cash provided by (used in) financing activities                      132,585            (1,617,192)
                                                                    ----------------------------------

Effect of exchange rate changes                                          (75,688)              (24,035)
                                                                    ----------------------------------

Net decrease in cash and cash equivalents                             (2,873,897)           (5,083,355)

Cash and cash equivalents, beginning of period                        14,436,053            13,398,075
                                                                    ----------------------------------

Cash and cash equivalents, end of period                            $ 11,562,156          $  8,314,720
                                                                    ==================================

Supplemental disclosure of cash flow information:
          Cash paid for interest                                    $     56,177          $        148
                                                                    ==================================
</TABLE>

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

                                       F-3
<PAGE>

                              DIOMED HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005
                                   (UNAUDITED)

(1) OPERATIONS

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

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

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

(2) BASIS OF PRESENTATION

In the opinion of management, these unaudited consolidated financial statements
contain all adjustments considered normal and recurring and necessary for their
fair presentation. Interim results are not necessarily indicative of results to
be expected for the year. These interim financial statements have been prepared
in accordance with the instructions for Form 10-QSB, and therefore, do not
include all information and footnotes necessary for a complete presentation of
operations, financial position, and cash flows of the Company in conformity with
accounting principles generally accepted in the United States. The Company filed
with the Securities and Exchange Commission its 2004 annual report on Form
10-KSB on March 30, 2005, which included audited consolidated financial
statements for the year ended December 31, 2004 and information and footnotes
necessary for such presentation. These unaudited consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and the notes thereto included in our annual report on Form 10-KSB
for the year ended December 31, 2004.

(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our Annual Report on Form 10-KSB for the year ended December 31, 2004 includes a
comprehensive summary of the significant accounting policies and methods used in
the preparation of our consolidated financial statements. The application of
these policies has a significant impact on our reported results. In addition,
the application of some of these policies depends on management's judgment, with
financial reporting results relying on estimations and assumptions about the
effect of matters that are inherently uncertain. For all of these policies,
management cautions that future events rarely develop exactly as forecast and
the best estimates routinely require adjustment.

(a) REVERSE STOCK SPLIT

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


                                       F-4
<PAGE>

                              DIOMED HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005
                                   (UNAUDITED)

(b) INVENTORIES

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

                                     March 31,          December 31,
                                      2005                 2004
                                    ----------          ----------
Raw Materials                       $ 953,489           $  838,390
Work-in-Process                       760,508              502,905
Finished Goods                        646,328              863,090
                                    ----------          ----------
                                    $2,360,325          $2,204,385
                                    ==========          ==========

(c) ACCOUNTING FOR STOCK-BASED COMPENSATION

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

<TABLE>
<CAPTION>
                                                         Three Months Ended March 31,
                                                        --------------------------------
                                                           2005                  2004
                                                           ----                  ----
<S>                                                     <C>                  <C>
Net loss as reported:                                   $(3,835,860)         $(2,308,159)
Deduct : total stock-based employee compensation;
         expense determined under the fair value-based
         method for all awards, net of tax                 (408,325)            (247,125)
                                                        --------------------------------

   Pro forma net loss                                   $(4,244,185)         $(2,555,284)
                                                        ================================

   Loss per share:
         Basic and diluted - as reported                $     (0.21)         $     (0.18)
                                                        ================================

         Basic and diluted - pro forma                  $     (0.23)         $     (0.19)
                                                        ================================
</TABLE>


                                       F-5
<PAGE>

(d) COMPREHENSIVE INCOME

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

                                                 Three Months Ended March 31,
                                                ------------------------------
                                                  2005               2004
                                                -----------       -----------
   Net loss                                     $(3,835,860)      $(2,308,159)
   Foreign currency translation adjustment         (137,796)          (50,775)
                                                -----------       -----------
   Comprehensive loss                           $(3,973,656)      $(2,358,934)
                                                ===========       ===========

(e) NET LOSS PER SHARE

Net loss per share is computed based on the guidance of SFAS No. 128, Earnings
per Share. SFAS No. 128 requires companies to report both basic loss per share,
which is based on the weighted average number of common shares outstanding, and
diluted loss per share, which is based on the weighted average number of common
shares outstanding and the weighted average dilutive potential common shares
outstanding using the treasury stock method. As a result of the losses incurred
by the Company for the three-month periods ended March 31, 2005 and 2004,
respectively, all potential common shares were antidilutive and were excluded
from the diluted net loss per share calculations. The following table summarizes
securities outstanding as of each of the three-month periods, which were not
included in the calculation of diluted net loss per share since their inclusion
would be antidilutive.
                                                Three Months Ended March 31,
                                                ----------------------------
                                                  2005               2004
                                                  ----               ----

      Common Stock Options                      1,692,347           999,590
                                                ===========================

      Common Stock Warrants                     2,798,452           887,836
                                                ===========================

      Convertible Debt                          1,620,961                --
                                                ===========================

(4) LINE OF CREDIT ARRANGEMENTS

Diomed, Ltd., the Company's United Kingdom-based subsidiary, utilizes a line of
credit with Barclays Bank, limited to the lesser of (GBP)100,000 ($188,880 at
March 31, 2005) or 80% of eligible accounts receivable. The credit line bears
interest at a rate of 3% above Barclays base rate of 4.75% at March 31, 2005 and
borrowings are due upon collection of receivables from customers. As security
for the line of credit, Barclays Bank has a lien on all of the assets of Diomed
Ltd., excluding certain intellectual property. As of March 31, 2005 and 2004,
there were no amounts outstanding under this line of credit. As of March 31,
2005, there was approximately $188,880 available under this line.


                                       F-6
<PAGE>

                              DIOMED HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005
                                   (UNAUDITED)

(5) STOCK OPTIONS

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

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

As of March 31, 2005, 66,766 options and other incentive stock awards were
available for future grants under the 2003 Omnibus Plan. In addition, 2,542
options were available under the 2001 Plan as of March 31, 2005.

A summary of stock option activity for the 2003 Omnibus Plan, the 2001 Plan and
the 1998 Plan is as follows:

<TABLE>
<CAPTION>
                                 Range of Exercise                       Weighted Average
                                       Price         Number of Shares     Exercise Price
                                 --------------------------------------------------------
<S>                               <C>                    <C>                  <C>
Outstanding, December 31, 2004    $2.00 - $205.75        1,076,318            $  8.25

        Granted                    4.19 -    4.30          627,871               4.20
        Forfeited                  2.19 -    8.25          (11,842)              4.79
                                 --------------------------------------------------------

Outstanding, March 31, 2005       $2.00 - $205.75        1,692,347            $  6.76
                                 ========================================================

Exercisable, March 31, 2005       $2.00 - $205.75          548,909            $ 11.35
                                 ========================================================
</TABLE>


                                       F-7
<PAGE>

                              DIOMED HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005
                                   (UNAUDITED)

The following table summarizes currently outstanding and exercisable options as
of March 31, 2005.

<TABLE>
<CAPTION>
                                                         OUTSTANDING                                   EXERCISABLE
                                          -------------------------------------------      -------------------------------------
                                                                     Weighted Average                            Weighted Average
    Exercise Price              Shares       Remaining Life*           Exercise Price             Shares           Exercise Price
    --------------              ------       ---------------         ----------------            ------          ----------------
<S>                              <C>               <C>                     <C>                   <C>                   <C>
     $ 2.00 - $11.50             1,652,412         9.98                    $    4.66             511,339               $   5.02
      26.00 - 50.00                 18,256         6.57                        35.32              16,016                  35.91
      56.25 - 88.50                  4,531         1.30                        69.48               4,406                  66.87
     100.00 - 164.00                16,508         2.24                       158.74              16,508                 153.05
    $201.25 - $205.75                  640         0.91                       205.75                 640                 205.75
                            --------------                           ---------------      -------------------------------------
                                 1,692,347                                 $    6.76             548,909               $  11.35
                            ==============                           ===============      =====================================
</TABLE>

* Weighted average remaining contractual life (in years).

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

<TABLE>
<CAPTION>
                                                                                                            Weighted Average
                                             Range of Exercise                         Weighted Average   Remaining Contractual
                                                  Price            Number of Shares     Exercise Price       Life (In Years)
                                           ----------------------------------------------------------------------------------
<S>                                         <C>                     <C>                    <C>                       <C>
Outstanding, December 31, 2004              $0.025 - $87.50         2,991,263              $ 2.18                    4.80

        Exercised                            2.10                    (192,811)               2.10                      --
                                           ---------------------------------------------------------------------------------

Outstanding, March 31, 2005                 $0.025 - $87.50         2,798,452              $ 2.18                    4.48
                                           =================================================================================

Exercisable, March 31, 2005                 $0.025 - $87.50         2,798,452              $ 2.18                    4.48
                                           =================================================================================
</TABLE>


                                       F-8
<PAGE>

                              DIOMED HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005
                                   (UNAUDITED)

(6) SEGMENT REPORTING

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, accessories and service. The Executive Management Committee
evaluates segment performance based on revenue. Accordingly, all expenses are
considered corporate level activities and are not allocated to segments. Also,
the Executive Management Committee does not assign assets to its segments.

This table presents revenues by reportable segment:

                                        Three Month Period Ended
                                              March 31,
                                       ---------------------------
                                         2005              2004
                                       ----------       ----------
 Laser systems                         $2,117,401       $1,803,514
 Fibers, accessories, and service       2,014,849        1,146,083
                                       ----------       ----------
 Total                                 $4,132,250       $2,949,597
                                       ==========       ==========

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

<TABLE>
<CAPTION>
                                              % of Revenue                   Long-lived Assets
                                      ---------------------------       --------------------------
                                    Three Months Ended March 31,
                                      ---------------------------      March 31,    December 31,
                                        2005              2004             2005            2004
                                      ----------       ----------       ----------      ----------
<S>                                          <C>              <C>       <C>             <C>
North America                                 78%              62%      $5,237,817      $5,769,521
Asia/Pacific                                  10%              25%              --              --
Europe                                        10%              10%         505,306         510,459
Other                                          2%               3%              --              --
                                      ----------       ----------       ----------      ----------
Total                                        100%             100%      $5,743,123      $6,279,980
                                      ==========       ==========       ==========      ==========
</TABLE>


                                       F-9
<PAGE>

(7) COMMITMENTS AND CONTINGENCIES

From time to time the Company is involved in legal and administrative
proceedings and claims of various types. While any litigation contains an
element of uncertainty, management, in consultation with the Company's general
counsel, presently believes that the outcome of each such other proceedings or
claims which are pending or known to be threatened, or all of them combined,
will not have a material adverse effect on the Company.

During 2004, the Company filed lawsuits in the United States Federal District
Court for the District of Massachusetts against four competitors seeking
injunctive relief and damages for infringement of the Company's U.S. Patent
Number 6,398,777 covering the endovascular laser treatment of varicose veins
which the Company uses in its EVLT(R) product line. If the Company's EVLT(R)
patent is judicially determined to be invalid, the Company will not prevail in
the infringement actions and will not be able to exclude third parties from
using the Company's EVLT(R) technology. As a result, the EVLT(R) patent may be
determined to be impaired and the Company's EVLT(R) revenue stream may be
adversely affected.

                                      F-10
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS

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

This section contains forward-looking statements, which involve known and
unknown risks and uncertainties. These statements relate to our future plans,
objectives, expectations and intentions. These statements may be identified by
the use of words such as "may," "will," "should," "potential," "expects,"
"anticipates," "intends," "plans," "believes" and similar expressions. These
statements are based on our current beliefs, expectations and assumptions and
are subject to a number of risks and uncertainties. Our actual results could
differ materially from those discussed in these statements. Our 2004 Annual
Report on Form 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 22 through 37 of the Annual Report for a discussion of certain
risks, including those relating to our business as a medical device company
without a significant operating record and with operating losses, our risks
relating to the commercialization of our current and future products and
applications, and risks relating to our common stock and its market value.

In view of our relatively limited operating history, we have limited experience
forecasting our revenues and operating costs. Therefore, we believe that
period-to-period comparisons of financial results are not necessarily meaningful
and should not be relied upon as an indication of future performance. To date,
the Company has incurred substantial costs to create or acquire our products. As
of March 31, 2005, we had an accumulated deficit of approximately $73 million
including $17.3 million in non-cash interest expense. We may continue to incur
operating losses due to spending on research and development programs, clinical
trials, regulatory activities, and sales, marketing and administrative
activities. This spending may not correspond with any meaningful increases in
revenues in the near term, if at all. As such, these costs may result in losses
until such time as the Company generates sufficient revenue to offset such
costs.

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

(1) OVERVIEW

We develop and commercialize minimally invasive medical procedures that employ
our laser technologies and associated disposable products. Using our proprietary
technology, including our exclusive rights to U.S. Patent No. 6,398,777, we
currently focus on endovenous laser treatment (EVLT(R)) of varicose veins. We
also develop and market lasers and disposable products for photodynamic therapy
(PDT) cancer procedures and products for other clinical applications, including
dental and general surgical procedures.

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

Our high power semiconductor diode lasers combine clinical efficacy, operational
efficiency and cost effectiveness in a versatile, compact, lightweight,
easy-to-use and easy-to-maintain system. Along with lasers and single-use
procedure kits for EVLT(R), we provide our customers with state-of-the-art
physician training and practice development support.


                                        1
<PAGE>

In 2001, we pioneered the commercialization of endovenous laser treatment
(EVLT(R)), an innovative minimally invasive laser procedure for the treatment of
varicose veins caused by greater saphenous vein reflux. In September 2001, we
were the first company to receive the CE mark of the European Economic Union for
approval for endovenous laser treatment with respect to marketing EVLT(R) in
Europe. In January 2002, we were the first company to receive FDA clearance for
endovenous laser treatment of the greater saphenous vein. In December 2004, we
were the first to receive FDA clearance to expand the application of EVLT(R) to
other superficial veins in the lower extremities.

EVLT(R) was a primary source of revenue in the first quarter of 2005, and will
continue to be our primary source of revenue in 2005. We believe that EVLT(R)
will achieve a high level of commercial acceptance due to its relative short
recovery period, immediate return to the patient's normal routine barring
vigorous physical activities, reduced pain and minimal scarring, and reduced
costs compared to other treatments for varicose veins. We developed our EVLT(R)
product line as a complete clinical solution and marketing model, including a
laser, disposable kit, clinical training and customized marketing programs, to
assist office-based and hospital-based physicians in responding to the growing
demand for treatment of varicose veins in a minimally invasive manner. We have
also published a health insurance reimbursement guide to assist physicians in
the reimbursement submission process. We believe that these products and
programs, in addition to EVLT(R)'s superior clinical trial results, favorable
peer reviews, and comparatively larger and longer follow-up data reports provide
EVLT(R) with a competitive advantage over competing traditional and minimally
invasive varicose vein treatment products.

We expect that as the number of EVLT(R) procedures increases, so will our sales
of associated disposable items. We believe that the U.S. represents the single
largest market for EVLT(R). We target our sales and marketing efforts at
hospitals, private physician practices and clinics and focus on specialists in
vascular surgery, interventional-radiology, general surgery, phlebology,
interventional-cardiology, gynecology and dermatology.

We utilize a direct sales force to market our products in the United States and
a network of more than 30 distributors to market our products abroad. We
increased our number of sales representatives to 20 during 2004. This represents
a significant investment in sales staff. Our current clinical support
organization has three clinical specialists, including one training manager, who
support our field sales efforts. These clinical specialists assist in physician
training and post-sales support, freeing our sales representatives to focus on
new sales opportunities.

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

Although we have continued to focus on the development and growth of EVLT(R)
sales both domestically and internationally, we will continue to support the
development and approval of new applications for PDT products and the
development of enhancements to our products in order to further improve their
quality, effectiveness and manufacturability. Our management team focuses on
developing and marketing solutions that address serious medical problems that
have significant markets. Our determinations are based upon the number of
procedures that may be conducted in a market and projections of the associated
revenue. Currently, EVLT(R) applications fall within this guideline, and we
believe that photodynamic therapy may have the potential to do so at some time
in the future. However, EVLT(R), and not PDT, is the emphasis of our current
business plan.


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<PAGE>

(2) RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2005 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 2004

REVENUE

Diomed delivered revenue for the three months ended March 31, 2005 of
$4,132,000, increasing approximately $1,182,000, or 40%, from $2,950,000 for the
same period in 2004. Revenue from the EVLT(R) product line increased 79% over
the same period last year, including growth of 122% in revenue from disposable
products, demonstrating the continued and growing acceptance of EVLT(R) by the
medical community and patients alike.

In the three months ended March 31, 2005, approximately $2,117,000, or 51%, of
our total revenue was derived from laser sales, as compared to approximately
$1,804,000, or 61%, in the same period in 2004. In the three months ended March
31, 2005, approximately $2,015,000, or 49%, of our total revenues were derived
from sales of disposable fibers and kits, accessories and service, as compared
to approximately $1,146,000, or 39%, in the same period in 2004. We expect the
proportion of revenue derived from disposables to increase as we establish a
larger base of installed lasers and the number of EVLT(R) procedures performed
grows.

The increase in revenue is attributable primarily to:

      -     increased penetration of EVLT(R) in the market for treating varicose
            veins by minimally invasive means,

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

      -     the impact of new sales management and development of our sales
            team, and

      -     the impact of increased acceptance of the EVLT(R) procedure and
            expanded reimbursement coverage by health care insurers, including
            the recent establishment of reimbursement codes for EVLT(R) by the
            American Medical Association and the Center for Medicare and
            Medicaid Services, effective January 1, 2005.

COST OF REVENUE AND GROSS PROFIT

Cost of revenue for the three months ended March 31, 2005 was $2,293,000,
increasing approximately $349,000, or 18%, from $1,944,000 for the same period
in 2004. The increase in cost of revenue in 2005 was driven by the corresponding
increase in the number of lasers and disposable products sold, offset, on a
percentage of sales basis, by the leverage of fixed manufacturing costs across a
greater number of units, and improved materials costs, partially offset by
foreign exchange impact. Cost of revenue, as a percentage of sales, decreased
from 66% to 55% on a year-to-year basis.

Gross profit for the year ended March 31, 2005 was $1,839,000, increasing
approximately $834,000 from $1,005,000 from the same period in 2004. On a
percent-of-sales-basis, the gross margin increased from 34% to 45%. The increase
in gross profit in the first quarter of 2005 was driven by fixed cost leverage
of the incremental sales volume as well as improvements in material costs. The
Company believes that gross profit as a percentage of sales may reach 60%,
assuming increases in sales volume that may occur after completion of the patent
litigation.

OPERATING EXPENSES

RESEARCH AND DEVELOPMENT EXPENSES for the three months ended March 31, 2005 were
$391,000, an increase of $95,000, or 32%, from the same period in 2004. R&D
expenditures are expected to remain at this elevated level as we continue to
improve the feature-function of our products and continue to reduce product
costs.

SELLING AND MARKETING EXPENSES for the three months ended March 31, 2005 were
$2,307,000, an increase of $701,000, or 44%, over 2004. The increase was driven
by a significant expansion in the size of the sales force ($280,000), higher
sales commissions resulting from the increased sales volume ($120,000), and
increased marketing expenditures in support of the sales efforts to drive the
growing commercialization of EVLT(R) ($160,000). The Company anticipates
increased spending in sales and marketing programs to support the continued
commercialization of EVLT(R).


                                        3
<PAGE>

GENERAL AND ADMINISTRATIVE EXPENSES for the three months ended March 31, 2005
were $1,571,000, an increase of $172,000, or 12%, from the same period in 2004.
The increase was primarily attributable to incremental patent legal fees of
$124,000 as well as salaries, incentive compensation and other administrative
costs of $68,000. Legal expenses included the continuing cost of patent
litigation against four competitors commenced during 2004. General and
administrative costs are expected to remain at these levels as we continue to
assert our intellectual property rights.

LOSS FROM OPERATIONS

Loss from operations for the three months ended March 31, 2005 was $2,430,000,
an increase of approximately $133,000 from the same period in 2004, as
incremental volume gains were partially offset by increased sales, marketing and
general and administrative expenses.

INTEREST EXPENSE, NET

Interest expense for the three months ended March 31, 2005 was $1,406,000,
compared to $12,000 for the same period in 2004. Interest expense in the three
months ended March 31, 2005 included non-cash charges totaling $1,305,000
related to the amortization and acceleration of the corresponding discount,
deferred costs and beneficial conversion feature related to the 1st quarter 2005
conversion of debt obtained in the September 28, 2004 equity and debt financing.

NET LOSS

Net loss for the three months ended March 31, 2005 was $3,836,000, or ($0.21)
per share, compared to $2,308,000, or ($0.18) per share, for the same period in
2004. As a result of the 2004 equity and debt financing and the April 2004
Targeted Offering, basic weighted average common shares outstanding increased
from approximately 13.2 million shares for the three months ended March 31, 2004
to 18.6 million shares for the three months ended March 31, 2005. The foregoing
share numbers give effect to the 1 for 25 reverse split effective June 17, 2004.

(3) LIQUIDITY, CAPITAL RESOURCES AND CAPITAL TRANSACTIONS

CASH POSITION AND CASH FLOW

The Company has financed its operations primarily through private placements of
common stock and preferred stock, and private placements of convertible notes
and short-term notes and credit arrangements. The Company raised gross proceeds
of $10.6 million in the September 28, 2004 equity and debt financing. The
Company had cash balances of approximately $11,562,000 and $14,436,000 at March
31, 2005 and December 31, 2004, respectively.

CASH USED IN OPERATIONS

Cash used in operations for the three months ended March 31, 2005 was
$2,861,000. The cash used in operations reflects the net loss of $3,836,000
reduced by the non-cash interest expense of $1,305,000, working capital changes
including $300,000 in 2004 incentive compensation payments, payments of $240,000
for 2004 patent litigation expenses in excess of the 2005 first quarter run
rate, $100,000 in payments related to the September 28, 2004 equity and debt
financing and $100,000 in payments related to the 2004 reorganization and
expansion of our sales management team.

CASH USED IN INVESTING

Cash used in investing activities for the three months ended March 31, 2005 was
approximately $70,000, primarily related to computer and demonstration
equipment.

CASH PROVIDED BY FINANCING

Cash provided by financing activities for the three months ended March 31, 2005
was $133,000. This primarily includes $405,000 which we received from the
exercise of warrants issued in the 2004 equity and debt financing, offset by
$250,000 in payments related the current maturities of the EVLT(R) technology
acquisition obligation.


                                        4
<PAGE>

BANK LINES OF CREDIT

Diomed, Ltd., the Company's United Kingdom-based subsidiary, utilizes a line of
credit with Barclays Bank, limited to the lesser of (GBP)100,000 ($188,880 at
March 31, 2005) or 80% of eligible accounts receivable. The credit line bears
interest at a rate of 3% above Barclays base rate of 4.75% at March 31, 2005 and
borrowings are due upon collection of receivables from customers. As security
for the line of credit, Barclays Bank has a lien on all of the assets of Diomed
Ltd., excluding certain intellectual property. As of March 31, 2005 and 2004,
there were no amounts outstanding under this line of credit. As of March 31,
2005, there was approximately $188,880 available under this line.

(4) CRITICAL ACCOUNTING POLICIES

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

(5) RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB revised SFAS No. 123, Share Based Payment, or SFAS
No. 123R. SFAS No. 123R supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees, and amends Statement No. 95, Statement of Cash Flows. Under
SFAS No. 123R, companies must calculate and record in the income statement the
cost of equity instruments, such as stock options, awarded to employees for
services received. The cost of the equity instruments is to be measured based on
the fair value of the instruments on the date they are granted and is required
to be recognized over the period during which the employees are required to
provide services in exchange for the equity instruments. SFAS No. 123R has been
deferred and is now effective for the Company in the first fiscal year beginning
after December 15, 2005.

The adoption of SFAS No. 123R is expected to have a significant impact on the
Company's financial statements. The impact of adopting SFAS No. 123R cannot be
accurately estimated at this time, as it will depend on the market value and the
amount of share-based awards granted in future periods.


                                        5
<PAGE>

ITEM 3. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

The Company's principal executive officer and its principal financial officer
have carried out an evaluation of the effectiveness of our disclosure controls
and procedures (as defined in Rules 13a -15(e) and 15d-15(e) under the
Securities Exchange Act of 1934) as of March 31, 2005 and have concluded that,
as of such date, the Company's disclosure controls and procedures in place are
adequate to ensure material information and other information requiring
disclosure is identified and communicated on a timely basis.

(b) Changes in internal control over financial reporting.

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

                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

      -     infringing our registered EVLT(R) mark;

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

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

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

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

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

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

On April 28, 2004, Vascular Solutions answered the complaint and filed a
counterclaim for declaratory judgment that the EVLT(R) patent is invalid and not
infringed. Vascular Solutions has amended its answer and counterclaims to
further allege patent unenforceability. We are now proceeding with the discovery
phase of this litigation, which has been consolidated with another case for
pretrial purposes as discussed below.

On January 6, 2004, we filed a lawsuit in the United States Federal District
Court for the District of Massachusetts against AngioDynamics, Inc. seeking
injunctive relief and damages for infringement of our U.S. Patent Number
6,398,777 covering the endovascular laser treatment of varicose veins which we
use in our EVLT(R) product line. AngioDynamics has generally denied our
allegations and has sought a declaratory judgment of invalidity of the EVLT(R)
patent. AngioDynamics has also added certain counterclaims against us, including
antitrust violations, patent misuse and other allegations, all arising from our
obtaining and seeking to enforce our EVLT(R) patent. The court has bifurcated
the case, so that those counterclaims will not be litigated until we resolve our
patent infringement claims against AngioDynamics. We are currently in the
discovery phase of this litigation.


                                        6
<PAGE>

At the parties' joint request, our patent cases involving AngioDynamics and
Vascular Solutions have been consolidated by the court for pretrial purposes. On
April 12, 2005, the Court issued a claim construction ruling, which interprets
certain claim language in the `777 patent. We believe that the evidence we have
developed to date in the course of these lawsuits if admitted and fully credited
will show that AngioDynamics and Vascular Solutions are infringing our patent as
it has now been interpreted by the Court.

On April 2, 2004, we filed a lawsuit in the United States Federal District Court
for the District of Massachusetts against Total Vein Solutions, LLC, seeking
injunctive relief and damages for infringement of our U.S. Patent Number
6,398,777 covering the endovascular laser treatment of varicose veins which we
use in our EVLT(R) product line. On May 21, 2004, Total Vein Solutions answered
the complaint, generally denying our allegations and counterclaiming for
declaratory judgment of non-infringement and invalidity of the EVLT(R) patent.
We are in the discovery phase of this litigation.

On May 26, 2004, we learned that we, our former chairman, our former chief
executive officer and a former director of ours had been named as defendants in
a class action lawsuit commenced on March 3, 2004 in the United States District
Court, District of Massachusetts . On September 3, 2004, plaintiffs filed an
amended complaint in the action that named only us and our former chairman. The
amended complaint alleged violations of Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934, and sought unspecified damages on behalf of a
purported class of plaintiffs consisting of persons who acquired our common
stock from February 1, 2002 through and including March 21, 2002. We were named
only in the count alleging violation of Section 10(b). On October 21, 2004, we
filed a motion to dismiss the amended complaint on the ground that it failed to
state a claim upon which relief could be granted. On February 4, 2005, the Court
ruled in our favor and dismissed the lawsuit with prejudice.

On October 14, 2004, we filed a lawsuit in the United States Federal District
Court for the District of Massachusetts against New Star Lasers, Inc., d/b/a
Cooltouch, Inc., seeking injunctive relief and damages for infringement of our
U.S. Patent Number 6,398,777 covering the endovascular laser treatment of
varicose veins which we use in our EVLT(R) product line. On December 3, 2004,
CoolTouch answered the complaint, generally denying our allegations and
counterclaiming for declaratory judgment of non-infringement and invalidity of
the EVLT(R) patent. We are now proceeding with the discovery phase of this
litigation.


                                        7
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

      (a) Exhibits.

10.1* Letter of Amendment, dated February 15, 2005, to Agreement for Services,
      dated December 28, 2003, between the Company and Global Strategy
      Associates (regarding services of James A. Wylie, Jr.)

10.2* Agreement for Services, dated as of January 1, 2005, between the Company
      and BrookstoneFive, Inc. (regarding services of David A. Swank)

10.3* Letter of Amendment, dated February 15, 2005, to Letter Agreement, dated
      April 13, 2004, between the Company and Christopher Geberth

10.4* Letter of Amendment, dated February 15, 2005, to Letter Agreement, dated
      December 4, 2004, between the Company and Cary Paulette

10.5* Letter of Amendment, dated February 15, 2005, to Letter Agreement, dated
      September 9, 2002, between the Company and John Welch

10.6* Letter of Amendment, dated February 15, 2005, to Agreement, dated
      September 4, 2001, between the Company and Kevin Stearn

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

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

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

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

* Incorporated by reference to our Current Report on Form 8-K filed February 18,
2005.

      (b) Reports on Form 8-K.

During the fiscal quarter ended March 31, 2005, we filed with the Securities and
Exchange Commission Current Reports on Form 8-K as follows:

On February 10, 2005, we filed a Current Report on Form 8-K regarding the
Court's dismissal of Kent Garvey v. James Arkoosh et al., the class action
lawsuit in which we had been named as a defendant.

On February 18, 2005, we filed a Current Report on Form 8-K regarding the
amendment of our employment agreement agreements with our Chief Executive
Officer, Chief Financial Officer and certain other officers.

On February 25, 2005, we filed a Current Report on Form 8-K regarding our
announcement of operating results for fiscal year 2004.


                                        8
<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 13, 2005

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

                Date:  May 13, 2005


                                        9