Non-medical sales were higher year to date due primarily to higher sales of DWDM filters. The decrease in the gross profit percentage was due primarily to higher fixed manufacturing costs such as depreciation, insurance, operating supplies, equipment and building rent and indirect labor and benefits. During both years, internal research and development expenses consisted primarily of development efforts related to DWDM filters used in telecommunications systems. The increase was due to more resources being devoted to the DWDM filter project in the current year. The year to date increase is due primarily to higher employee recruiting, insurance and depreciation expenses.
Interest expense relates primarily to capital lease obligations.
No income tax provision was recorded in the first or second quarter of fiscal year 2001 or 2000 because of the losses generated in those periods. The Company has continued to invest aggressively in research, development and capital equipment to support increased participation in the long-term opportunities the telecommunications industry offers. In particular, work has accelerated on improved, higher-capacity manufacturing processes for 200 GHz filter production, and development and commercialization of 100 GHz filters. One of these is a proprietary high volume production system currently under development for both 100 GHz and 200 GHz DWDM filters. In January 2001, the first customer shipment of 100 GHz DWDM filters was achieved.