We announced the successful delivery of the 12.1 inch full color field emission displays to U.S. Army on August 14, 2000. Research and development expenses include also the cost of staffing and operating our pilot manufacturing facility and the cost of supporting the transfer and adaptation of our field emission displays technology to Unipac. This variation in sales and marketing expenses reflects a change in the reallocation of expenses to sales and marketing from other departments. However, we believe sales and marketing expenses may increase in the future, reflecting the expansion of our sales and marketing organization both in the United States and in Europe. This decrease was attributable to a reduction in legal fees, consulting fees and other miscellaneous expenses from the previous year.
Interest expense is comprised of interest payable on long-term obligations.
Although a significant portion of our revenues are denominated in U.S. dollars, a substantial portion of our operating expenses are denominated in Euros. Gains and losses on the conversion to U.S. dollars of assets and liabilities denominated in Euros may contribute to fluctuations in our results of operations, which are reported in U.S. dollars. Most of our capital lease obligations are expressed in Taiwanese dollars. In the past, fluctuations of the parity of the Taiwanese dollar versus the Euro caused significant foreign exchange gains or losses and may continue to do so in the future. We cannot predict the effect of exchange rate fluctuations on future operating results.