Item 5. Other Events

        1. Bond Conversion. Effective January 7, 2002, Galen Partners III, L.P., Galen Partners International III, L.P. and Galen Employee Fund III, L.P. (“Bondholders”), holders of all of the Registrant’s issued and outstanding series C convertible bonds (“Series C Bonds”) and series D convertible bonds (“Series D Bonds”) (collectively, the “Bonds”), entered into an agreement (the “Agreement”) with the Registrant whereby the Bondholders converted the entirety of the $475,000 principal and $120,200 accrued interest outstanding under the Bonds at January 7, 2002 into equity securities of the Registrant as described below. The principal and accrued interest owed to, and converted by, each of the Bondholders is set forth in the table below:

Principal and Accrued Interest
Series C and Series D Convertible Bonds
January 7, 2002

                           Series C     Series C     Series C     Series D      Series D     Series D
Bondholder                 Principal    Interest       Total      Principal     Interest      Total
----------                 ---------    --------       -----      ---------     --------      -----

Galen Partners III, L.P.  $22,839.00   $31,543.00   $54,382.00   $411,104.00   $78,268.00   $489,372.00

Galen Partners
 International III, L.P.   $2,067.00    $2,855.00    $4,922.00    $37,212.00    $7,085.00    $44,297.00

Galen Employee
 Fund III, L.P.               $94.00      $129.00      $223.00     $1,684.00      $320.00     $2,004.00

        The Agreement provides that the principal and accrued interest under the Bonds shall be converted into units (“Units”) at the rate of one Unit for each $0.50 of principal and interest owed at January 7, 2002 under the Bonds (“Unit Conversion Rate”). Each Unit consists of one share of the Registrant’s common stock, par value $0.01 (“Common Stock”), and one and one tenth warrants to purchase one share of Common Stock (“Warrants”) at a per share exercise price of $0.57 (“Warrant Exercise Price”). The ratio of one share of Common Stock to one and one tenth Warrants per Unit is referred to herein as the “Warrant Coverage Ratio.”

        2. Reset Provisions. The Agreement provides that if, prior to July 1, 2003, the Registrant offers for sale its Common Stock at a per share price of below $0.50 (such price, the “Post Conversion Rate”), then the Registrant shall issue to each of the Bondholders such additional shares of its Common Stock and Warrants as, when added to the Common Stock and Warrants theretofore issued to each Bondholder, equal the Common Stock and Warrants that would have been issued to each Bondholder had the Post Conversion Rate been substituted for the Unit Conversion Rate.

        The Agreement further provides that if, prior to July 1, 2003, the Registrant offers for sale warrants with a per share exercise price of less than $0.57 (such price, the “Post Conversion Exercise Price”), then the exercise price of the Warrants shall be reduced to the Post Conversion Exercise Price.

2