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To: Suresh who wrote (24833)	1/19/2000 3:51:00 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 68364

Suresh, What they are suggesting as a products sound interesting. I am having a hard time liking the company though. It appears they currently don't have any patents in the area ( I have not checked carefully) and their manufacturing capabilities seems limited. That doesn't mean it won't go up, it just means I don't have confidence in management at this point. I don't see any indication that they could get Bellcore certified. From the 10Q: In connection with the construction of the manufacturing facility in Aberdeen, the Company took advantage of certain economic incentive programs offered by the State of South Dakota and the City of Aberdeen. At September 30, 1999, the total principal outstanding on the several loans obtained in connection with these financing packages was $3,109,521. Interest on the loans ranges from 0% to 6.75%, and the loans are due between 2003 and 2016. These loans require that the Company maintain certain levels of net worth and income to outstanding debt ratios. The Company was out of compliance with these covenants in fiscal 1999. Such noncompliance does not constitute an event of default but triggers further covenants under the loan agreement, with which the Company was in compliance at September 30, 1999. The Company anticipates approximately $250,000 in capital expenditures in fiscal 2000, primarily for equipment. The funds for these purchases will come from funds available under the financing packages with the State of South Dakota and the City of Aberdeen. The Company also expects to receive reimbursement from certain bond funds for purchases of equipment made in fiscal 1999. The Company's use of net cash in operating activities during fiscal 1999 and the first two quarters of fiscal 2000 and the related decrease in its cash balance emphasize the Company's need to increase sales in order to maintain operations. The auditor's report on the fiscal 1999 financial statements contained a qualification as to the Company's ability to continue as a going concern in light of its low sales and high costs. For the past several years, the Company has been working on the design and development of new optoelectronic products, in particular a dense wavelength division multiplexer and products based on Gallium Nitride technology. In order to focus on these efforts, beginning in fiscal 1998 the Company reduced its emphasis on contract research and development, resulting in significantly reduced revenues. This shift in emphasis was necessary to utilize the Company's personnel and facilities in the product development effort. The Company believes that design of the new products and the manufacturing process is now essentially complete, and it has stepped up its efforts to market these products. During September and October 1999, the Company raised approximately $1,800,000 in a private placement of its common stock. These funds should enable the Company to keep operating through fiscal year 2000. There can be no assurance, that the Company will be successful in increasing sales of its new products, or obtaining additional financing, if needed.