Revenues decreased 3.0% for the year ended March 31, 2001 compared to the year ended March 31, 2000, to $34.1 million from $35.2 million. This decrease was due to an approximate 11% decrease in the number of billable hours for fiscal year 2001 versus fiscal year 2000, offset by an approximate 8.0% increase in the average billing rate from $112 per hour for fiscal 2000 to $121 per hour for fiscal 2001.

Cost of revenues decreased 8.8% to $23.9 million in fiscal 2001 compared to $26.2 million in fiscal 2000, representing 70.0% and 74.5% of revenues, respectively. The dollar decrease in cost of revenues was primarily due to a decrease in the average number of billable personnel from 189 for fiscal 2000 to 150 for fiscal 2001. The decrease in cost of revenues as a percentage of revenues is due to the aforementioned increase in the average billing rate and a 12.3% increase in the average utilization rate from 66.7% for fiscal 2000 to 74.9% for fiscal 2001.

Sales and marketing expenses increased 50.2% to $4.9 million in fiscal 2001 compared to $3.2 million in fiscal 2000, representing 14.2% and 9.2% of revenues, respectively. The overall dollar increase was primarily due to an increase in the average number of sales and marketing personnel from 15 for fiscal 2000 to 21 for fiscal 2001, increased travel related expenses, and increased investments in marketing initiatives.

General and administrative expenses decreased 7.0% to $6.9 million in fiscal 2001 compared to $7.4 million in fiscal 2000, representing 20.3% and 21.1% of revenues, respectively. The dollar decrease is primarily due to a decrease in recruiting efforts for new employees and a decrease in the average number of general and administrative personnel from 30 employees for fiscal 2000 to 28 for fiscal 2001.

In January of fiscal 2001, we reduced our headcount by 28 employees, resulting in a pre-tax restructuring expense of $337,000.

Interest income, net increased $322,000 to $2.1 million in fiscal 2001 compared to $1.8 million for fiscal 2000. This increase was primarily due to the increase in interest rates.

The provision for income taxes increased $141,000 to $250,000 in fiscal 2001 compared to $109,000 in fiscal 2000, resulting in effective tax rates of 91.0% and 85.2%, respectively. Our tax rate may vary from period to period based on our expansion into areas with varying state and local statutory income tax rates. The increase in the effective tax rate percentage, and the fact that the effective rates are so much higher than the statutory rates, is primarily due to permanent differences relating to meals and entertainment expenses.