The Company's cash and cash equivalents are considered sufficient to support working capital and investment needs for at least the next twelve months. Sales of medical products were lower due primarily to lower shipments of stereo endoscopes and cameras. The decrease in the gross profit percentage was due primarily to reduced sales of higher-margin medical products and higher fixed manufacturing costs such as depreciation, equipment rental, supplies and indirect labor. The increase was due to more resources being devoted to the DWDM filter project in the current year. The increase was due primarily to higher costs of professional services, insurance and depreciation.
Interest expense relates primarily to capital lease obligations.
The increase was due to the higher base of cash and cash equivalents related primarily to net proceeds received from private placements of common stock in August 1999 and March 2000 and from exercise of stock options and warrants. No income tax provision was recorded in the first quarter of fiscal year 2001 or 2000 because of the losses generated in those periods. The Company continues to aggressively pursue sales, marketing, and technology development efforts for DWDM filters in the rapidly growing telecommunications industry. The success of these products depends upon a number of factors, including the Company's timely completion of development efforts, ability to meet a set of rigorous customer specifications, and ability to reliably manufacture such products in sufficient quantity at acceptable yields to meet anticipated demand. A new high volume coating system and ancillary equipment were installed in the month of July 2000.