Revenues decreased 47.3% for the year ended March 31, 2000 compared to the year ended March 31, 1999, to $35.2 million from $66.8 million. This decrease was primarily due to a decrease in volume of services delivered to customers and a decrease in our utilization rate. We continued to experience lower bookings and our financial results were affected by the slowdown in merger activity within the banking sector. Further, many of our customers had completed their use of external resources for their Year 2000 projects, which negatively impacted revenue generation.

Cost of revenues decreased 36.2% to $26.2 million in fiscal 2000 compared to $41.1 million in fiscal 1999, representing 74.5% and 61.5% of revenues, respectively. The dollar decrease in cost of revenues was primarily due to a decrease in the average number of billable personnel from 301 for fiscal 1999 to 189 for fiscal 2000. The increase in cost of revenues as a percentage of revenues was due primarily to a decrease in the average utilization rates from 83.5% for fiscal 1999 to 66.7% for fiscal 2000.

Sales and marketing expenses decreased 27.7% to $3.2 million in fiscal 2000 compared to $4.5 million in fiscal 1999, representing 9.2% and 6.7% of revenues, respectively. This decrease resulted primarily from a decrease in sales commissions, as well as decreased investments in marketing initiatives.

General and administrative expenses decreased 15.9% to $7.4 million in fiscal 2000 compared to $8.8 million in fiscal 1999, representing 21.1% and 13.3% of revenues, respectively. The dollar decrease was primarily due to decreases in recruiting efforts for new employees and a decrease in the provision for doubtful accounts. The increase in general and administrative expenses as a percentage of revenues reflects the significant decrease in revenues for fiscal year 2000 compared to fiscal year 1999.

Interest income, net increased $560,000 to $1.82 million in fiscal 2000 compared to $1.26 million for fiscal 1999. This increase was primarily due to the increase in the amount of cash and cash equivalents available for investment as well as increases in interest rates.

The provision for income taxes decreased $5.8 million to $109,000 in fiscal 2000 compared to $5.9 million in fiscal 1999, resulting in effective tax rates of 85.2% and 43.0%, 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 was primarily due to permanent differences relating to meals and entertainment expenses.

Liquidity and Capital Resources

During the first quarter of fiscal 1999, we completed our initial public offering. Our net proceeds after deducting underwriting discounts, commissions and offering expenses were approximately $23.4 million.

We have no long-term debt and continue to operate primarily debt-free. Working capital decreased to $37.0 million at March 31, 2001 compared to $39.7 million at March 31, 2000. This decrease was primarily due to a decrease in cash and cash equivalents because of our $3 million preferred stock investment in S2 Systems, Inc., a software solution provider in the banking and diversified financial services market. Our days sales in accounts receivable at March 31, 2001 was 47 compared to 49 days at March 31, 2000. The decrease in days sales outstanding was the result of increased emphasis on collections. While we believe that the risk with respect to collection of accounts receivable is minimized by the creditworthiness of our customers, primarily banks and other financial institutions, and our credit and collection policies, there can be no assurance that we will not encounter collection problems in the future. We attempt to further minimize this risk by performing ongoing credit valuations of our customers and maintaining an allowance for potential credit losses. We believe that our allowance for doubtful accounts and collection policies are adequate.

Capital expenditures were approximately $246,000 and $249,000 for fiscal years 2001 and 2000, respectively, and were used principally for computer and other equipment, software and, to a lesser extent, leasehold improvements. For fiscal 2002, capital expenditures are expected to be approximately $500,000, and will be used principally for computers and other equipment.

We expect that existing cash and cash equivalent balances, together with cash provided from operations, will be sufficient to meet the Company’s working capital and capital expenditure requirements for at least the next twelve months.

To date, inflation has not had a material impact on the Company’s financial results.

In the beginning of the fourth quarter of fiscal 2001, the Company adopted Staff Accounting Bulletin 101 ("SAB 101"), Revenue Recognition, which was issued by the Securities and Exchange Commission ("SEC") in December 1999. SAB 101 outlines the basic criteria that must be met to recognize revenue and it provides guidance for presentation and disclosure of revenue recognition policies in financial statements filed with the SEC. Adoption of SAB 101 had no material impact on ADS’ reported revenues and results of operations.

In June 1998, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Investments and Hedging Activities." This statement establishes new standards for the recognition of gains and losses on derivative instruments and provides guidance as to whether a derivative may be accounted for as a hedging instrument. Gain or loss from hedging transactions may be wholly or partially recorded in earnings or comprehensive income as part of a cumulative translation adjustment, depending upon the classification of the hedge transaction. Gain or loss on a derivative instrument not classified as a hedging instrument is recognized in earnings in the period of change. SFAS No. 133 will be effective for the Company beginning in fiscal 2001. We do not believe the adoption of SFAS No. 133 will have a material impact on our financial position or our results of operations.