McGUIREWOODS LLP MEMORANDUM
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TO: Tim Buchmiller
FROM: Patrick Zabatta
CC: William A. Newman, David B. Swank, Christopher Geberth
DATE: January 25, 2007
RE: Diomed Holdings, Inc. SB-2 -- Supplemental Information
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Thank you again, Tim, for the opportunity to provide supplemental information to
assist in your consideration of our January 9, 2007 response to the Commission's
comment letter dated December 21, 2006.
Pursuant to our conversation and to reiterate that information that I provided
to you yesterday evening, I enclose a table setting forth certain information
regarding those selling stockholders in Diomed's originally filed SB-2
comprising groups of affiliates of one another, including the percentage of
outstanding shares underlying derivative securities held, being registered in
the SB-2 and previously registered, by each group, as compared to the total
outstanding shares of Diomed's common stock that are held by non-affiliates of
Diomed.
Thank you again for your continued assistance.
Patrick G.Zabatta
McGuireWoods LLP
GROUP (NOT INDIVIDUAL) SELLING STOCKHOLDERS IN DIOMED 2006 FINANCING
Common Shares Common Shares Percent of Outstanding Percent of Outstanding
underlying Being Registered Common Shares Common Shares
Name of Selling Derivative and Offered under underlying Derivative underlying Derivative
Stockholder Group Securities(1) This Prospectus(2) Securities(4),(5) Securities(4),(6)
- ----------------- ------------- ------------------ ----------------- -----------------
"Westfield Group" 1,740,000.00 2,175,000 0.090464487 0.08295959
"New England/Nexus Group" 1,304,348.00 1,630,435 0.067814467 0.063507724
"ProMed Group" 3,568,693.00 4,460,866 0.185540219 0.156502678
"Advantage Group" 455,760.00 569,700 0.023695457 0.023146978
"Gruber & McBain Group" 1,823,040.00 2,278,801 0.094781826 0.086575995
"North Sound Group" (A) 4,566,299.00 5,707,874 0.237406837 0.191858352
TOTAL 13,458,140 16,822,676 0.699703292 0.411662021
Common Shares Registered Total Common Shares
and Offered under Prior Registered under
Registration Statements this Prospectus and
Name of Selling but not Covered under Prior
Stockholder Group by this Prospectus(3) Registration Statements
- ----------------- --------------------- -----------------------
"Westfield Group" 0 2,175,000
"New England/Nexus Group" 0 1,630,435
"ProMed Group" 320,000 4,780,866
"Advantage Group" 130,000 699,700
"Gruber & McBain Group" 320,000 2,598,801
"North Sound Group" (A) 800,000 6,507,874
TOTAL 1,570,000 18,392,676
Percent of Outstanding Percent of Outstanding
Common Shares Total Common Common Shares Total
Shares Registered under this Shares Registered under this
Name of Selling Prospectus and under Prior Prospectus and under Prior
Stockholder Group Registration Statements(4),(5) Registration Statements(4),(6)
- ----------------- ------------------------------ ------------------------------
"Westfield Group" 0.113080608 0.10159247
"New England/Nexus Group" 0.084768084 0.078143969
"ProMed Group" 0.248562408 0.185753839
"Advantage Group" 0.036378162 0.028579646
"Gruber & McBain Group" 0.135114482 0.104374789
"North Sound Group" (A) 0.338351426 0.221734406
TOTAL 0.9563 0.7202
NOTES
(*) For purposes of this presentation, ownership of shares constitutes
"beneficial ownership" calculated pursuant to Rule 13d-3 of the Rules and
Regulations under the Securities Exchange Act of 1934, as amended. Accordingly,
for purposes of setting forth ownership, we have given effect to the limitations
on ownership applicable to the selling stockholders under the terms of the
preferred stock the Company issued on September 29, 2006 and warrants we issued
in the September 30, 2005 financing transaction (described under "Liquidity and
Capital Resources," in the registration statement). Ownership figures also
assume that the selling stockholders do not acquire or dispose of any shares of
common stock and that the selling stockholders sell all shares of common stock
we are registering hereunder on their behalf.
(1) Amounts reflect the number of shares of common stock issuable upon
conversion or exercise of the derivative securities held by the respective
selling stockholders (consisting of (i) preferred stock issued September 29,
2006, (ii) additional shares issuable under the antidilution provisions of
warrants outstanding that were issued September 30, 2005 and/or (iii) additional
shares issuable under the antidilution provisions of convertible debentures
issued October 25, 2004, as the case may be), without giving effect to any
additional shares the Company is registering as a 25% "allowance" for possible
future antidilution adjustments, pursuant to its contractual obligations to the
holders of the derivative securities. No events have occurred to date which
would trigger an antidilution adjustment to the derivative securities beyond the
amounts referenced in this column.
(2) Amount reflects a 25% allowance for possible future antidilution adjustments
to derivative securities held, which the Company is contractually obligated to
register on behalf of the selling stockholders. For example, the North Sound
group owns derivative securities representing 4,566,299 shares of common stock
(4,356,521 shares underlying 2006 preferred stock and 209,778 shares underlying
antidilution warrants issued due to the antidilution adjustment to the 800,000
warrants issued to North Sound in the 2005 financing transaction triggered by
the 2006 financing (which is in addition to the 800,000 warrants issued in the
2005 financing transaction and covered by the prior registration statement), but
the Company is registering 125% of the foregoing, or, 5,707,874 shares of common
stock, on behalf of the North Sound group. No events have occurred to date which
would trigger an antidilution adjustment to the derivative securities referenced
under the preceding column.
(3) Includes base amount (without regard to allowances for antidilution) of
shares registered (x) in 2005 in respect of warrants but not shares of preferred
stock as to which the pending registration relates as it pertains to preferred
stock registered in 2005 but subsequently cancelled in exchange for 2006
preferred stock being registered presently and (y) in 2004 in respect of
convertible debentures and warrants.
(4) Percentages based on the 19,234,067 shares of common stock issued and
outstanding as of September 30, 2006 that were held by non-affiliates,
determined as follows:
Total Common Shares outstanding as of 9/30/06: 19,448,728
Common Shares held by affiliates as of 9/30/06: 214,661
Directors and Officers
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James A. Wylie (CEO): 165,961
David Swank (CFO): 15,000
Christopher Geberth (VP): 4,000
Ed Snape (Director): 9,000
Peter Klein (Director): 9,100
Geoffrey Jenkins (Director): 6,600
Joseph Harris (Director): 2,000
Gary Brooks (Director): 3,000
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TOTAL 214,661
Common Shares held by non-affiliates as of 9/30/06: 19,234,067
Only those stockholders who are directors and officers of the Company are
included in shares owned by affiliates for purposes of the above because, on the
basis of the analysis set forth in pages 8 and 9 of our letter dated December 6,
2006 responding to the SEC's comment letter dated November 29, 2006 as to those
persons who ought to be considered "affiliates" of the Company. Accordingly,
those shares held by other stockholders whose shares are included in the table
of beneficial ownership included in the Registration Statement are not included
in the 19,234,067 figure noted above.
(5) Percentages based on 19,234,067 shares outstanding and held by
non-affiliates.
(6) For purposes of determining percentages held, those shares being registered
that underly derivative securities issued September 29, 2006 are not outstanding
but are added into the denominator for each respective selling stockholder, such
that the percentage equals a fraction, the numerator of which is the number of
shares beneficially owned before or after the offering (as the case may be,
denoted by the column heading) and the denominator of which is the sum of
19,234,067 plus the number of underlying shares beneficially owned before or
after the offering (as the case may be).
(A) The North Sound Group acquired the securities being registered pursuant to
the financing transaction that the Company completed on September 30, 2005,
wherein the North Sound investors, in the aggregate, paid $5,000,000 to the
Company and received (i) 2,000,000 shares of 2005 preferred stock (convertible
into common stock at $2.50 per share) with a liquidation preference of $3.00 per
share and (ii) 800,000 common stock purchase warrants. The common shares
underlying the foregoing (including a 25% "allowance" for possible future
antidilution adjustments) were registered in 2005 (File No. 333-129584). To
date, North Sound has not sold any securities it purchased from the Company in
the 2005 financing transaction and continues to hold all common shares
underlying derivative securities acquired from its $5,000,000 investment in the
2005 financing transaction. The 2005 preferred stock initially issued to North
Sound and all other investors in the 2005 financing transaction was tendered by
the holders thereof and cancelled by the Company in exchange for shares of 2006
preferred stock issued September 29, 2006. North Sound did not pay any cash
consideration to the Company when it exchanged its 2005 preferred stock for
shares of 2006 preferred stock. The 2006 preferred stock has a number of
different features from the 2005 preferred shares, including an effective
conversion price of $1.15 per share and an effective liquidation preference of
$1.38 per share. The 2006 financing transaction also triggered antidilution
provisions of the warrants issued in the 2005 financing transaction, resulting
in a decrease of the warrant exercise price from $2.50 to $1.98 per share and an
increase in the number of underlying warrants from an aggregate of 1,800,000
(800,000 of which are held by the North Sound Group) to 2,272,000 (1,000,000 of
which are held by the North Sound Group). This amount is slightly higher than
the 25% allowance included in the 2005 registration statement, and accordingly,
we determined to register the entire amount of antidilution warrants (not just
the excess of the previously registered allowance) under the current
registration statement.