EXHIBIT 99.2
ATLAS CAPITAL SERVICES, LLC
February 4, 2002
Gerald Mulhall
President
Natexco, Inc.
3255 Norfolk Road
Victoria, British Columbia V8R 6H5
Mr. Joel Dumaresq President
Pashleth Investment Ltd.
#5-4360 Agar Drive
Richmond, B.C.
Canada V7B lA3 I
Gentlemen:
Atlas Capital Services, LLC ("Atlas") has been engaged by Natexco,
Inc., a publicly traded company ("Public Entity") and Pashleth Investment Ltd.
to determine the fair market value of Diomed, Inc. ("Diomed" or the Company), of
Andover, Massachusetts, as of December 31, 2001, in connection with the
anticipated agreement and plan of merger ("Merger") with the Public Entity and
simultaneous sale of 5 million shares of restricted common stock at a price per
share of $2.00 for an aggregate gross proceeds of $10 million. Our evaluation of
the Company was conducted in conformity with the standards of business
appraisal, as outlined by the Uniform Standards of Professional Appraisal
Practice.
The Company is a provider of clinical medical solutions and specializes
in the development and distribution of equipment and disposables used in minimal
and micro-invasive medical procedures. The Company is focused on developing
clinical applications utilizing its proprietary and patented medical diode
lasers and fiber optic technology .The Company has focused its attention
primarily on (i) photodynamic therapy ("PDT") for use in cancerous and
pre-cancerous treatments, (ii) Endo Venous Laser Treatment ("EVLT") for the
treatment of varicose veins caused by greater saphenous vein reflux and (iii)
other surgical applications.
1
Fair market value is defined as the price (cash or equivalent) that a
buyer could reasonably be expected to pay and a seller could reasonably be
expected to accept, if the business were for sale on the open market for a
reasonable period of time, both buyer and seller being in possession of all
pertinent facts, and neither being under any compulsion to act.
In reaching our opinion as to the fair market value of the Company, we
have examined and considered all available information and data which we deemed
relevant, including:
o The growth prospects for the industries Diomed has targeted, the
relationships forged with market leaders and the competitive
landscape in the clinical solutions industry;
o Five year pro forma projected financial statements based on the
underlying potential market size for the Company's products and
the anticipated penetration rates for each product;
o A discounted cash flow ("DCF") analysis of the five year projected
net free cash flows generated by the enterprise;
o A comparative valuation analysis of similar companies within the
Company's industry;
o Consideration of the growth prospects for the world economy and
financial markets; and
o Other studies and investigations we deemed appropriate, including
the analysis of company and industry-specific research reports.
During the course of our investigation and analysis, we were provided
by the Company information regarding the Company, its financial position,
prospects and related facts. Our investigation included discussions with
management and other individuals, who, in our judgment, were most qualified to
provide the information necessary to complete the Valuation. We have assumed
that all information and financial data supplied by the Company's management and
other sources was accurate and reflects the true growth prospects for the
Company. In certain situations, we have relied upon the accuracy and totality of
the information supplied, without independent verification.
Insofar as a business, in its early stages of growth, resembles an
intangible asset, the most common method of valuation is through the Discounted
Cash Flow ("DCF") methodology. This approach attempts to analyze the earning
power of a company and the ability of the company to convert this earning power
into cash flow. The premise behind the model is that the value of a business
today is equal to the amount and timing of future cash flows discounted at the
opportunity cost of capital. In this report, the Company's 5-year
2
discounted free cash flows was computed out to a valuation horizon in 2006, and
was combined with the capitalized terminal value of the business to determine
the fair market value.
This report also employs a market valuation methodology that compares
the Company to certain competitors operating in the same industry ("Competitive
Analysis"). From this comparison, certain reasonable conclusions concerning the
value of the Company viz. a viz. its competitors may be drawn. More
specifically, we have analyzed the ratio of market value to earnings of similar
companies and have applied a discounted ratio to calculate the implied equity
value of the Company. This methodology is useful insofar as it can present a
value for a private company based on public comparables.
The preparation of a fair market value analysis is a complex process
and is not necessarily susceptible to partial analysis or summary description.
Selecting portions of the analysis or of the summary set forth herein without
considering the analysis as a whole could create an incomplete view of the
processes underlying Atlas's fair market valuation analysis. This letter is
prepared solely for the purpose of Atlas providing a brief outline of the
opinion as to the fair market valuation analysis of the subject company and is
not a recommendation to buy and sell the securities of the Company and should
not be used as a basis for investing in or engaging in a transaction with the
Company. This letter only has application as it is employed with reference to
the full written analysis and supporting research and tables.
The two techniques used in reaching our conclusion as to the fair
market value of the Company are based on different concepts and assumptions. As
a result, their application produces a range of possible values. Accordingly,
giving consideration to all of the factors cited above, and particularly the
Company's Executive Summary, its projections and the related discounted cash
flow analysis, and competitive analysis, it is our considered professional
judgment that the fair market value of Diomed based on a DCF analysis is $141.6
million and based on the Competitive Analysis is $108.9 million.
Very truly yours,
ATLAS CAPITAL SERVICES, LLC
3