NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001

Atlantic Data Services, Inc. ("ADS" or the "Company"), provides information technology ("IT") strategy consulting and systems integration services to customers exclusively in the financial services industry, primarily banks. The Company offers IT solutions to the business challenges faced by financial services companies through our in-depth financial services experience, technological expertise and project management skills. The Company’s service offerings are organized around four practice areas: e-Business, Customer Relationship Management ("CRM"), IT Strategy and Consulting, and Conversions and Consolidations.

The consolidated financial statements include the accounts of Atlantic Data Services, Inc. and its wholly owned subsidiary, ADS Securities Corp. (collectively "the Company"). All intercompany accounts and transactions have been eliminated in consolidation.

The Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents. Cash equivalents consist of money market accounts and repurchase agreements, which are collateralized by U.S. Treasury Securities and controlled by major financial institutions. These investments are subject to minimal credit and market risk.

At March 31, 2001 and 2000, cash equivalents were comprised of money market funds totaling approximately $31,993,000 and $31,586,000, respectively, and repurchase agreements totaling approximately $4,268,000 and $6,627,000, respectively. At March 31, 2001 and 2000, cash equivalents are classified as available-for-sale and recorded at cost, which approximates fair value.

Financial instruments that potentially subject the Company to credit risk consist primarily of cash equivalents and accounts receivable. The risk with respect to cash equivalents is minimized by the Company’s policies in which investments have relatively short maturities and are only placed with highly rated issuers. A significant portion of the Company’s revenues and accounts receivable are derived from services provided to banks and other financial institutions. The risk with respect to accounts receivable is minimized by creditworthiness of the Company’s customers and the Company’s credit and collection policies. The Company performs ongoing credit evaluations of its customers, generally does not require collateral, and maintains allowances for potential credit losses which, when realized, have been within the range of management’s expectations.