Enthuware

It will not execute because there is no . (dot) in default classpath.

I don't believe that is true.

$ unset CLASSPATH
$ java Foo
In Foo

That is because you don't have a classpath, in which case Java assumes that default class path is ".".
The question says that the classpath is set to ./classes, in which case "." is not part of the classpath and so it will not look in the current directory.

HTH,
Paul.