---



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended June 30, 2005



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



Commission File Number 000-21755



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iGATE CORPORATION

(Exact name of registrant as specified in its charter)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|PENNSYLVANIA                                                   |  | 25-1802235                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|1000 Commerce Drive Suite 500 Pittsburgh, PA                   |  | 15275                               
|(Address of principal executive offices)                       |  | (Zip Code)                          



(412) 506-1131

(Registrants Telephone Number, Including Area Code)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes ̈No  x



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes  x    No ̈



The number of shares of the registrants Common Stock, par value $0.01
per share, outstanding as July 29, 2005 was 52,571,125.



 ̈



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iGATE CORPORATION



QUARTERLY REPORT ON
FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2005



TABLE OF CONTENTS



|        |  |                                                                                       |  |                                                                                                                                                   |  |     
|------- |  | ------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|        |  |                                                                                       |  |                                                                                                                                                   |  | Page
|PART I  |  | FINANCIAL INFORMATION                                                                 |  | 3                                                                                                                                                
|        |  |                                                                                      
|Item 1. |  | Unaudited Condensed Consolidated Financial Statements                                 |  |                                                                                                                                                  
|        |  |                                                                                       | 
|        |  | (a)                                                                                   |  | Unaudited Condensed Consolidated Statements of Operations for the Three and Six Month Periods Ended June 30, 2005 and 2004                        |  | 3   
|        |  |                                                                                       | 
|        |  | (b)                                                                                   |  | Condensed Consolidated Balance Sheets as of June 30, 2005 (Unaudited) and December 31, 2004                                                       |  | 4   
|        |  |                                                                                       | 
|        |  | (c)                                                                                   |  | Unaudited Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss) for the Six Month Periods Ended June 30, 2005 and 2004. |  | 5   
|        |  |                                                                                       | 
|        |  | (d)                                                                                   |  | Unaudited Condensed Consolidated Statements of Cash Flows for the Six Month Periods Ended June 30, 2005 and 2004                                  |  | 6   
|        |  |                                                                                       | 
|        |  | (e)                                                                                   |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                                                    |  | 7   
|        |  |                                                                                      
|Item 2. |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 18                                                                                                                                               
|        |  |                                                                                      
|Item 3. |  | Quantitative and Qualitative Disclosure About Market Risk                             |  | 26                                                                                                                                               
|        |  |                                                                                      
|Item 4. |  | Controls and Procedures                                                               |  | 29                                                                                                                                               
|        |  |                                                                                      
|PART II |  | OTHER INFORMATION                                                                     |  | 32                                                                                                                                               
|        |  |                                                                                      
|Item 4. |  | Submission of Matters to a Vote of Security Holders                                   |  | 32                                                                                                                                               
|        |  |                                                                                      
|Item 6. |  | Exhibits                                                                              |  | 32                                                                                                                                               
|        |  |                                                                                      
|        |  | SIGNATURES                                                                            |  | 33                                                                                                                                               



2



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PART I.    FINANCIAL INFORMATION



ITEM 1.    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



(a)



iGATE CORPORATION



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share data)

(Unaudited)



|                                                               |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|-------------------------------------------------------------- |  | --------------------------- | ------ | - | ------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                                               |  | Three Months Ended June 30, |        |   | Six Months Ended June 30, |  
|                                                               |  | 2005                        |        |   | 2004                      |   |        | 2005 |  |   | 2004    |  
|Revenues                                                       |  | $                           | 67,896 |   |                           | $ | 65,868 |      |  | $ | 137,497 |   |  | $ | 129,931 |  
|Cost of revenues                                               |  |                             | 51,098 |   |                           |   | 49,482 |      |  |   | 103,502 |   |  |   | 96,508  |  
|                                                               |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Gross margin                                                   |  |                             | 16,798 |   |                           |   | 16,386 |      |  |   | 33,995  |   |  |   | 33,423  |  
|                                                               |  |                             |        |  
|Selling, general and administrative                            |  |                             | 17,374 |   |                           |   | 16,974 |      |  |   | 34,603  |   |  |   | 36,254  |  
|Restructuring charges                                          |  |                             |       |   |                           |   | 4,896  |      |  |   |        |   |  |   | 4,896   |  
|                                                               |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Loss from operations                                           |  |                             | (576   | ) |                           |   | (5,484 | )    |  |   | (608    | ) |  |   | (7,727  | )
|                                                               |  |                             |        |  
|Other income (expense), net                                    |  |                             | 520    |   |                           |   | (500   | )    |  |   | 234     |   |  |   | 256     |  
|Minority interest                                              |  |                             | (59    | ) |                           |   | 152    |      |  |   | (143    | ) |  |   | 129     |  
|Equity in income (losses) of affiliated companies              |  |                             | 88     |   |                           |   | (87    | )    |  |   | (29     | ) |  |   | (187    | )
|                                                               |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|                                                               |  |                             |        |  
|Loss before income taxes                                       |  |                             | (27    | ) |                           |   | (5,919 | )    |  |   | (546    | ) |  |   | (7,529  | )
|Income tax expense (benefit)                                   |  |                             | 259    |   |                           |   | 3,428  |      |  |   | (1,604  | ) |  |   | 3,740   |  
|                                                               |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|                                                               |  |                             |        |  
|(Loss) income from continuing operations                       |  |                             | (286   | ) |                           |   | (9,347 | )    |  |   | 1,058   |   |  |   | (11,269 | )
|Income from discontinued operations, net of income taxes       |  |                             |       |   |                           |   | 3,645  |      |  |   |        |   |  |   | 3,815   |  
|                                                               |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Net (loss) income                                              |  | $                           | (286   | ) |                           | $ | (5,702 | )    |  | $ | 1,058   |   |  | $ | (7,454  | )
|                                                               |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|                                                               |  |                             |        |  
|Net (loss) earnings per common share, Basic:                   |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|(Loss) earnings from continuing operations                     |  | $                           | (0.01  | ) |                           | $ | (0.18  | )    |  | $ | 0.02    |   |  | $ | (0.21   | )
|Earnings from discontinued operations                          |  |                             |       |   |                           |   | 0.07   |      |  |   |        |   |  |   | 0.07    |  
|                                                               |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Net (loss) earnings  Basic                                    |  | $                           | (0.01  | ) |                           | $ | (0.11  | )    |  | $ | 0.02    |   |  | $ | (0.14   | )
|                                                               |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|                                                               |  |                             |        |  
|Net (loss) earnings per common share, Diluted:                 |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|(Loss) earnings from continuing operations                     |  | $                           | (0.01  | ) |                           | $ | (0.18  | )    |  | $ | 0.02    |   |  | $ | (0.21   | )
|Earnings from discontinued operations                          |  |                             |       |   |                           |   | 0.07   |      |  |   |        |   |  |   | 0.07    |  
|                                                               |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Net (loss) earnings  Diluted                                  |  | $                           | (0.01  | ) |                           | $ | (0.11  | )    |  | $ | 0.02    |   |  | $ | (0.14   | )
|                                                               |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|                                                               |  |                             |        |  
|Weighted average common shares, Basic                          |  |                             | 52,512 |   |                           |   | 52,599 |      |  |   | 52,494  |   |  |   | 52,460  |  
|                                                               |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|                                                               |  |                             |        |  
|Weighted average dilutive common equivalent shares outstanding |  |                             | 52,512 |   |                           |   | 52,599 |      |  |   | 52,718  |   |  |   | 52,460  |  
|                                                               |  |                             |        |   |                           |   |        |      |  |   |         |   |  |   |         |  



The accompanying notes
are an integral part of these Condensed Consolidated Financial Statements.



3



---

(b)

iGATE CORPORATION



CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share and share data)



|                                                                                                                       |  |               |         |   |                    |   |         |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------------ | - | ------- | -
|                                                                                                                       |  | June 30, 2005 |         |   | December 31, 2004* |  
|ASSETS                                                                                                                 |  | (Unaudited)   |         |   |                    |  
|Current assets:                                                                                                        |  |               |         |   |                    |   |         |  
|Cash and cash equivalents                                                                                              |  | $             | 31,475  |   |                    | $ | 28,201  |  
|Short-term investments                                                                                                 |  |               | 28,765  |   |                    |   | 35,863  |  
|Accounts receivable, net                                                                                               |  |               | 54,958  |   |                    |   | 61,363  |  
|Prepaid and other current assets                                                                                       |  |               | 7,081   |   |                    |   | 6,985   |  
|Prepaid income taxes                                                                                                   |  |               | 2,086   |   |                    |   | 435     |  
|Deferred income taxes                                                                                                  |  |               | 1,955   |   |                    |   | 2,304   |  
|                                                                                                                       |  |               |         |   |                    |   |         |  
|Total current assets                                                                                                   |  |               | 126,320 |   |                    |   | 135,151 |  
|                                                                                                                       |  |               |         |   |                    |   |         |  
|Investments in unconsolidated affiliates                                                                               |  |               | 4,051   |   |                    |   | 3,951   |  
|Land, building, equipment and leasehold improvements, net                                                              |  |               | 29,726  |   |                    |   | 25,814  |  
|Goodwill                                                                                                               |  |               | 9,354   |   |                    |   | 9,398   |  
|Intangible assets, net                                                                                                 |  |               | 4,727   |   |                    |   | 5,918   |  
|                                                                                                                       |  |               |         |   |                    |   |         |  
|Total assets                                                                                                           |  | $             | 174,178 |   |                    | $ | 180,232 |  
|                                                                                                                       |  |               |         |   |                    |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                   |  |               |         |   |                    |   |         |  
|Current liabilities:                                                                                                   |  |               |         |   |                    |   |         |  
|Accounts payable                                                                                                       |  | $             | 7,771   |   |                    | $ | 8,636   |  
|Accrued payroll and related costs                                                                                      |  |               | 16,699  |   |                    |   | 16,662  |  
|Accrued income taxes                                                                                                   |  |               |        |   |                    |   | 2,019   |  
|Other accrued liabilities                                                                                              |  |               | 6,534   |   |                    |   | 9,555   |  
|Restructuring reserve                                                                                                  |  |               | 2,489   |   |                    |   | 3,692   |  
|Deferred revenue                                                                                                       |  |               | 365     |   |                    |   | 653     |  
|Current liabilities of discontinued operations                                                                         |  |               | 83      |   |                    |   | 88      |  
|                                                                                                                       |  |               |         |   |                    |   |         |  
|Total current liabilities                                                                                              |  |               | 33,941  |   |                    |   | 41,305  |  
|Restructuring reserve                                                                                                  |  |               | 3,116   |   |                    |   | 3,777   |  
|Other long-term liabilities                                                                                            |  |               | 586     |   |                    |   | 564     |  
|Deferred income taxes                                                                                                  |  |               | 9,521   |   |                    |   | 9,520   |  
|                                                                                                                       |  |               |         |   |                    |   |         |  
|Total liabilities                                                                                                      |  |               | 47,164  |   |                    |   | 55,166  |  
|                                                                                                                       |  |               |         |   |                    |   |         |  
|Minority interest                                                                                                      |  |               | 14,002  |   |                    |   | 13,366  |  
|Commitments and contingencies                                                                                          |  |               |        |   |                    |   |        |  
|Shareholders equity:                                                                                                  |  |               |         |   |                    |   |         |  
|Preferred stock, without par value: 20,000,000 shares authorized, 1 share of Series A Preferred Stock held in treasury |  |               |        |   |                    |   |        |  
|Common stock, par value $0.01 per share:                                                                               |  |               |         |   |                    |   |         |  
|100,000,000 shares authorized, 53,559,650 and 53,502,448 shares issued, respectively                                   |  |               | 536     |   |                    |   | 535     |  
|Additional paid-in capital                                                                                             |  |               | 161,541 |   |                    |   | 161,345 |  
|Accumulated deficit                                                                                                    |  |               | (35,652 | ) |                    |   | (36,710 | )
|Deferred compensation                                                                                                  |  |               | (1,527  | ) |                    |   | (1,934  | )
|Common stock held in treasury, at cost, 990,102 shares                                                                 |  |               | (14,714 | ) |                    |   | (14,714 | )
|Accumulated other comprehensive income                                                                                 |  |               | 2,828   |   |                    |   | 3,178   |  
|                                                                                                                       |  |               |         |   |                    |   |         |  
|Total shareholders equity                                                                                             |  |               | 113,012 |   |                    |   | 111,700 |  
|                                                                                                                       |  |               |         |   |                    |   |         |  
|Total liabilities and shareholders equity                                                                             |  | $             | 174,178 |   |                    | $ | 180,232 |  
|                                                                                                                       |  |               |         |   |                    |   |         |  



|* | Condensed from audited Consolidated Financial Statements.
|- | ---------------------------------------------------------



The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.



4



---

(c)

iGATE CORPORATION



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME (LOSS)

(Dollars in thousands)

(Unaudited)



|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |        |   |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------ |  | ------------ | - | -------------------------- | -------- | -------------------- |  | - | --------------------- |  | - | -------------- | - |  | --------------------------------------------- | ------ | - | ------------------------ | - | ------- | ---------------------------- |  | - | ------ | - |  | - | ------- | - |  | - | ------- | -
|                                                                         |  | Common Stock |   | Additional Paid-in Capital |          | Accumulated(Deficit) |  |   | Deferred Compensation |  |   | TreasuryShares |   |  | Accumulated Other Comprehensive Income (Loss) |        |   | TotalShareholdersEquity |   |         | Comprehensive Income/ (Loss) | 
|                                                                         |  | Shares       |   |                            | ParValue |                      |  |   |                       |  |   |               
|Balance, December 31, 2004                                               |  | 52,512,346   |   |                            | $        | 535                  |  | $ | 161,345               |  | $ | (36,710        | ) |  | $                                             | (1,934 | ) |                          | $ | (14,714 | )                            |  | $ | 3,178  |   |  | $ | 111,700 |   |  |   |         |  
|Exercise of stock options, includes the effect of tax benefit recognized |  | 57,202       |   |                            |          | 1                    |  |   | 196                   |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   |       |   |  |   | 197     |   |  |   |         |  
|Amortization of deferred compensation                                    |  |             |   |                            |          |                     |  |   |                      |  |   |               |   |  |                                               | 407    |   |                          |   |        |                              |  |   |       |   |  |   | 407     |   |  |   |         |  
|Comprehensive income:                                                    |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |        |   |  |   |         |   |  |   |         |  
|Unrealized loss on investments, net of tax                               |  |             |   |                            |          |                     |  |   |                      |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   | (29    | ) |  |   | (29     | ) |  | $ | (29     | )
|Currency translation adjustment                                          |  |             |   |                            |          |                     |  |   |                      |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   | (321   | ) |  |   | (321    | ) |  |   | (321    | )
|Net income                                                               |  |             |   |                            |          |                     |  |   |                      |  |   | 1,058          |   |  |                                               |       |   |                          |   |        |                              |  |   |       |   |  |   | 1,058   |   |  |   | 1,058   |  
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |        |   |  |   |         |   |  |   |         |  
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |        |   |  |   |         |   |  | $ | 708     |  
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |        |   |  |   |         |   |  |   |         |  
|Balance, June 30, 2005                                                   |  | 52,569,548   |   |                            | $        | 536                  |  | $ | 161,541               |  | $ | (35,652        | ) |  | $                                             | (1,527 | ) |                          | $ | (14,714 | )                            |  | $ | 2,828  |   |  | $ | 113,012 |   |  |   |         |  
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |        |   |  |   |         |   |  |   |         |  
|Balance, December 31, 2003                                               |  | 51,823,908   |   |                            | $        | 529                  |  | $ | 160,336               |  | $ | (18,499        | ) |  | $                                             | (8,933 | ) |                          | $ | (14,714 | )                            |  | $ | 3,416  |   |  | $ | 122,135 |   |  |   |         |  
|Exercise of stock options, includes the effect of tax benefit recognized |  | 152,840      |   |                            |          | 2                    |  |   | 789                   |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   |       |   |  |   | 791     |   |  |   |         |  
|Treasury stock transactions                                              |  | (25,659      | ) |                            |          |                     |  |   |                      |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   |       |   |  |   |        |   |  |   |         |  
|Amortization of deferred compensation                                    |  |             |   |                            |          |                     |  |   |                      |  |   |               |   |  |                                               | 1,409  |   |                          |   |        |                              |  |   |       |   |  |   | 1,409   |   |  |   |         |  
|Comprehensive income:                                                    |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |        |   |  |   |         |   |  |   |         |  
|Unrealized loss on investments, net of tax                               |  |             |   |                            |          |                     |  |   |                      |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   | (70    | ) |  |   | (70     | ) |  |   | (70     | )
|Reclassification adjustment for gains realized in net loss               |  |             |   |                            |          |                     |  |   |                      |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   | 20     |   |  |   | 20      |   |  |   | 20      |  
|Currency translation adjustment                                          |  |             |   |                            |          |                     |  |   |                      |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   | (2,841 | ) |  |   | (2,841  | ) |  |   | (2,841  | )
|Net loss                                                                 |  |             |   |                            |          |                     |  |   |                      |  |   | (7,454         | ) |  |                                               |       |   |                          |   |        |                              |  |   |       |   |  |   | (7,454  | ) |  |   | (7,454  | )
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |        |   |  |   |         |   |  |   |         |  
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |        |   |  |   |         |   |  | $ | (10,345 | )
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |        |   |  |   |         |   |  |   |         |  
|Balance, June 30, 2004                                                   |  | 51,951,089   |   |                            | $        | 531                  |  | $ | 161,125               |  | $ | (25,953        | ) |  | $                                             | (7,524 | ) |                          | $ | (14,714 | )                            |  | $ | 525    |   |  | $ | 113,990 |   |  |   |         |  
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |        |   |  |   |         |   |  |   |         |  



The accompanying notes
are an integral part of these Condensed Consolidated Financial Statements.



5



---

(d)



iGATE CORPORATION



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)



|                                                                                  |  |                          |        |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------- | -
|                                                                                  |  | Six Months EndedJune 30, |       
|                                                                                  |  | 2005                     |        |   | 2004 |  
|Cash Flows From Operating Activities:                                             |  |                          |        |   |      |   |         |  
|Net income (loss)                                                                 |  | $                        | 1,058  |   |      | $ | (7,454  | )
|Adjustments to reconcile net income (loss) to cash provided (used) by operations: |  |                          |        |   |      |   |         |  
|(Income) from discontinued operations, net of taxes                               |  |                          |       |   |      |   | (3,815  | )
|Depreciation and amortization                                                     |  |                          | 5,317  |   |      |   | 4,138   |  
|Realized gain on investments                                                      |  |                          | (46    | ) |      |   | (25     | )
|Allowance for (recovery of) uncollectible accounts                                |  |                          | 261    |   |      |   | (191    | )
|Deferred income taxes, net                                                        |  |                          | 369    |   |      |   | 1,103   |  
|Equity in losses of affiliated companies                                          |  |                          | 29     |   |      |   | 187     |  
|Loss on impairment of property and equipment                                      |  |                          |       |   |      |   | 342     |  
|Minority interest                                                                 |  |                          | 143    |   |      |   | (129    | )
|Amortization of deferred compensation                                             |  |                          | 407    |   |      |   | 1,409   |  
|Working capital items:                                                            |  |                          |        |   |      |   |         |  
|Accounts receivable and unbilled receivables                                      |  |                          | 6,070  |   |      |   | (15,430 | )
|Prepaid and other assets                                                          |  |                          | (1,490 | ) |      |   | (694    | )
|Accounts payable                                                                  |  |                          | (844   | ) |      |   | (260    | )
|Accrued and other current liabilities                                             |  |                          | (5,395 | ) |      |   | 9,434   |  
|Deferred revenue                                                                  |  |                          | (284   | ) |      |   | (124    | )
|Restructuring reserve                                                             |  |                          | (1,549 | ) |      |   | (1,429  | )
|Cash flows (used) provided by discontinued operations                             |  |                          | (5     | ) |      |   | 646     |  
|                                                                                  |  |                          |        |   |      |   |         |  
|Net cash flows provided (used) by operating activities                            |  |                          | 4,041  |   |      |   | (12,292 | )
|                                                                                  |  |                          |        |   |      |   |         |  
|                                                                                  |  |                         
|Cash Flows From Investing Activities:                                             |  |                          |        |   |      |   |         |  
|Additions to land, building, equipment and leasehold improvements, net            |  |                          | (8,149 | ) |      |   | (8,495  | )
|Sales of investments, net                                                         |  |                          | 7,174  |   |      |   | 5,962   |  
|Acquisitions, net of cash acquired                                                |  |                          |       |   |      |   | (488    | )
|Investments in unconsolidated affiliates                                          |  |                          | (194   | ) |      |   | (1,575  | )
|Deposit on land                                                                   |  |                          |       |   |      |   | 2,433   |  
|Proceeds from the sale of subsidiaries                                            |  |                          |       |   |      |   | 9,799   |  
|                                                                                  |  |                          |        |   |      |   |         |  
|Net cash flows (used) provided by investing activities                            |  |                          | (1,169 | ) |      |   | 7,636   |  
|                                                                                  |  |                          |        |   |      |   |         |  
|                                                                                  |  |                         
|Cash Flows From Financing Activities:                                             |  |                          |        |   |      |   |         |  
|Net proceeds from exercise of stock options                                       |  |                          | 600    |   |      |   | 1,087   |  
|                                                                                  |  |                          |        |   |      |   |         |  
|Net cash flows provided by financing activities                                   |  |                          | 600    |   |      |   | 1,087   |  
|                                                                                  |  |                          |        |   |      |   |         |  
|Effect of currency translation                                                    |  |                          | (198   | ) |      |   | (1,285  | )
|                                                                                  |  |                          |        |   |      |   |         |  
|Net change in cash and cash equivalents                                           |  |                          | 3,274  |   |      |   | (4,854  | )
|Cash and cash equivalents, beginning of period                                    |  |                          | 28,201 |   |      |   | 36,133  |  
|                                                                                  |  |                          |        |   |      |   |         |  
|Cash and cash equivalents, end of period                                          |  | $                        | 31,475 |   |      | $ | 31,279  |  
|                                                                                  |  |                          |        |   |      |   |         |  



The accompanying notes
are an integral part of these Condensed Consolidated Financial Statements.



6



---

iGATE CORPORATION



(e)     NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1.     Basis of Presentation



The Unaudited Condensed Consolidated Financial Statements included herein
have been prepared by iGate Corporation (the Company) in accordance with generally accepted accounting principles for interim financial information and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as
amended. Accordingly, the accompanying Unaudited Condensed Consolidated Financial Statements do not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial
statements. The accompanying Unaudited Condensed Consolidated Financial Statements as of and for the three and six months ended June 30, 2005 and 2004 should be read in conjunction with the Companys Consolidated Financial Statements (and
notes thereto) included in the Companys Annual Report filed on Form 10-K (as amended) (Form 10K/A) for the year ended December 31, 2004. In the opinion of the Companys management, all adjustments considered necessary for
a fair statement of the accompanying Unaudited Condensed Consolidated Financial Statements have been included, and all adjustments, unless otherwise discussed in the Notes to the Unaudited Condensed Consolidated Financial Statements, are of a normal
and recurring nature. All significant intercompany accounts and transactions have been eliminated in consolidation. Operating results for the three and six months ended June 30, 2005 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2005.



The use
of accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.



Recently Issued Accounting Pronouncements



In December 2004, the Financial Accounting Standards Board (FASB) issued FASB No. 123 (R), Share-Based Payment.FASB No. 123
(R) requires employers to value share-based payments using the fair value method, eliminating the option to use the intrinsic method to value such payments. FASB No. 123 (R) is effective for the first quarter of 2006. The Company is
currently evaluating the effect of the provisions of this statement on the Companys Consolidated Financial Statements.



2.     Stock Based Compensation



Stock options granted under the Companys stock incentive plans are generally granted at market prices on the date of grant. Stock options granted
have a maximum life of ten years from date of grant. Options granted generally vest ratably over a four year period.



The Company accounts for its stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued
for Employees,and related interpretations using the intrinsic value method.



7



---

iGATE CORPORATION



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following table illustrates the effect on net (loss) income and (loss) earnings per share if the
Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock based employee compensation.



|                                                                                                                                          |  |                                       |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                                          |  | Three Months Ended June 30,           |        |   | Six Months EndedJune 30, |  
|                                                                                                                                          |  | 2005                                  |        |   | 2004                     |   |        | 2005 |  |   | 2004   |  
|                                                                                                                                          |  | (in thousands, except per share data) |       
|Net (loss) income, as reported                                                                                                            |  | $                                     | (286   | ) |                          | $ | (5,702 | )    |  | $ | 1,058  |   |  | $ | (7,454 | )
|Add: Deferred compensation expense reported in earnings                                                                                   |  |                                       | 204    |   |                          |   | 596    |      |  |   | 407    |   |  |   | 1,409  |  
|Less: Total stock-based employee compensation expense determined under fair value method for all awards and deferred compensation
expense |  |                                       | (641   | ) |                          |   | (287   | )    |  |   | (1,156 | ) |  |   | (1,603 | )
|                                                                                                                                          |  |                                       |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Proforma net (loss) income                                                                                                                |  | $                                     | (723   | ) |                          | $ | (5,393 | )    |  | $ | 309    |   |  | $ | (7,648 | )
|                                                                                                                                          |  |                                       |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|(Loss) earnings per share:                                                                                                                |  |                                       |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Basic  as reported                                                                                                                       |  | $                                     | (0.01  | ) |                          | $ | (0.11  | )    |  | $ | 0.02   |   |  | $ | (0.14  | )
|                                                                                                                                          |  |                                       |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Basic  Pro forma                                                                                                                         |  | $                                     | (0.01  | ) |                          | $ | (0.10  | )    |  | $ | 0.01   |   |  | $ | (0.15  | )
|                                                                                                                                          |  |                                       |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Diluted  as reported                                                                                                                     |  | $                                     | (0.01  | ) |                          | $ | (0.11  | )    |  | $ | 0.02   |   |  | $ | (0.14  | )
|                                                                                                                                          |  |                                       |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Diluted  Pro forma                                                                                                                       |  | $                                     | (0.01  | ) |                          | $ | (0.10  | )    |  | $ | 0.01   |   |  | $ | (0.15  | )
|                                                                                                                                          |  |                                       |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Divided by:                                                                                                                               |  |                                       |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Weighted Average Common Shares outstanding, Basic                                                                                         |  |                                       | 52,512 |   |                          |   | 52,599 |      |  |   | 52,494 |   |  |   | 52,460 |  
|                                                                                                                                          |  |                                       |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Weighted Average Common Shares outstanding, Diluted                                                                                       |  |                                       | 52,512 |   |                          |   | 52,599 |      |  |   | 52,718 |   |  |   | 52,460 |  
|                                                                                                                                          |  |                                       |        |   |                          |   |        |      |  |   |        |   |  |   |        |  



3.     Derivative Instruments and Hedging Activities



Summarized below are derivatives instruments consisting of foreign exchange contracts and a principal only SWAP agreement whose carrying values are adjusted to their fair value at June 30, 2005. Fair values are
based on quoted market prices at prevailing exchange rates and other available market information.



|                                           |  |                                 |      |   |               |   |      |  
|------------------------------------------ |  | ------------------------------- | ---- | - | ------------- | - | ---- | -
|                                           |  | Three Months EndedJune 30, 2005 |     
|                                           |  | USDCarrying Value               |      |   | USDFair Value |  
|                                           |  | (dollars in thousands)          |     
|Foreign Exchange Contracts:                |  |                                 |      |   |               |   |      |  
|Forwards:                                  |  |                                 |      |   |               |   |      |  
|$USD/India Rupee                           |  | $                               | 96   |   |               | $ | 96   |  
|Options:                                   |  |                                 |      |   |               |   |      |  
|$USD/India Rupee                           |  | $                               | (74  | ) |               | $ | (74  | )
|Strips:                                    |  |                                 |      |   |               |   |      |  
|$USD                                       |  | $                               | 26   |   |               | $ | 26   |  
|Principal Only SWAP:                       |  |                                 |      |   |               |   |      |  
|Mumbai Interbank Forward Offered Rates     |  | $                               | (156 | ) |               | $ | (156 | )
|                                           |  |                                 |      |   |               |   |      |  
|Market to market net loss at June 30, 2005 |  | $                               | (108 | ) |               | $ | (108 | )
|                                           |  |                                 |      |   |               |   |      |  



The forwards, options
and strips are utilized to hedge foreign currency risk related to the U.S. Dollar (USD) and Indian Rupee. The principal only SWAP hedges foreign currency risk on iGS intercompany debt, denominated in USD, to the Company.



8



---

iGATE CORPORATION



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



4.     Goodwill and Other Intangible Assets



Changes in the carrying value of goodwill and intangible assets by
reportable segment are as follows (in thousands):



|                                    |  |                 |       |   |                             |   |                 |  |              |     |  |   |       |  
|----------------------------------- |  | --------------- | ----- | - | --------------------------- | - | --------------- |  | ------------ | --- |  | - | ----- | -
|                                    |  | iGate Solutions |       |   | iGate Professional Services |   | iGate Corporate |  | Consolidated |    
|Goodwill at December 31, 2003       |  | $               | 7,857 |   |                             | $ | 216             |  | $            | 551 |  | $ | 8,624 |  
|Adjustments                         |  |                 |      |   |                             |   |                |  |              | 22  |  |   | 22    |  
|Foreign currency translation effect |  |                 | 752   |   |                             |   |                |  |              |    |  |   | 752   |  
|                                    |  |                 |       |   |                             |   |                 |  |              |     |  |   |       |  
|Goodwill at December 31, 2004       |  | $               | 8,609 |   |                             | $ | 216             |  | $            | 573 |  | $ | 9,398 |  
|Foreign currency translation effect |  |                 | (44   | ) |                             |   |                |  |              |    |  |   | (44   | )
|                                    |  |                 |       |   |                             |   |                 |  |              |     |  |   |       |  
|Goodwill at June 30, 2005           |  | $               | 8,565 |   |                             | $ | 216             |  | $            | 573 |  | $ | 9,354 |  
|                                    |  |                 |       |   |                             |   |                 |  |              |     |  |   |       |  



The gross amounts and
accumulated amortization of intangibles assets are as follows:



|                               |  |               |       |                         |   |             |  |                         |       |  |   |      
|------------------------------ |  | ------------- | ----- | ----------------------- | - | ----------- |  | ----------------------- | ----- |  | - | -----
|                               |  | June 30, 2005 |       | December 31, 2004      
|                               |  | GrossAmount   |       | AccumulatedAmortization |   | GrossAmount |  | AccumulatedAmortization
|                               |  | (unaudited)   |       |                         |   |            
|Amortizable intangible assets: |  |               |       |                         |   |             |  |                         |       |  |   |      
|Intellectual property          |  | $             | 570   |                         | $ | 341         |  | $                       | 570   |  | $ | 245  
|Customer relationships         |  |               | 6,642 |                         |   | 3,076       |  |                         | 6,642 |  |   | 2,270
|Employment contracts           |  |               | 1,720 |                         |   | 897         |  |                         | 1,720 |  |   | 661  
|Other                          |  |               | 314   |                         |   | 205         |  |                         | 314   |  |   | 152  
|                               |  |               |       |                         |   |             |  |                         |       |  |   |      
|Total                          |  | $             | 9,246 |                         | $ | 4,519       |  | $                       | 9,246 |  | $ | 3,328
|                               |  |               |       |                         |   |             |  |                         |       |  |   |      



Amortization expense
related to identifiable intangibles assets was $0.6 million for the three month periods and $1.2 million and $1.1 million for the six month periods ended June 30, 2005 and 2004, respectively. Estimated annual amortization expense for the years
ended December 31, 2005 through December 31, 2009 is shown below:



|                  |  |   |      
|----------------- |  | - | -----
|Remainder of 2005 |  | $ | 1,162
|2006              |  | $ | 1,619
|2007              |  | $ | 943  
|2008              |  | $ | 694  
|2009              |  | $ | 309  



5.     Investments and Restricted Investments



The Company has short-term investments consisting of money market funds and corporate bonds that totaled $28.8 million and $35.9 million at June 30, 2005 and December 31, 2004, respectively. Approximately
$3.8 million and $10.9 million of these funds at June 30, 2005 and December 31, 2004, respectively, are to be used exclusively by iGS due to Indian governmental restrictions. The Company had compensating balances classified on the
Condensed Consolidated Balance Sheet as short-term investments, which consisted of money market funds totaling $25.0 million at June 30, 2005 and December 31, 2004. The availability of short-term lines of credit is dependent upon
maintenance of such compensating balances.



9



---

iGATE CORPORATION



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Equity in Income/Losses of Affiliated Companies



For the three and six months ended June 30, 2005, the Company recorded
a gain of $0.1 million and a loss of less than $0.1 million, respectively related to its joint ventures in CIBER India Pvt. Ltd. and Software AG (India) Private Ltd. For the three and six months ended June 30, 2004, the Company recorded a loss
of $0.1 million and $0.2 million, respectively, for these joint ventures.



6.     Restructuring and Merger Charges



In 2004, the Company restructured its Canadian and United Kingdom operations. The Company incurred $0.9 million of early exit costs associated with its Toronto, Canada office. The Company incurred approximately $4.9
million related to the closing of its Red Brigade Ltd. office in Bracknell, UK, which was comprised of $4.6 million of early exit costs associated with the closing and $0.3 million of non-cash charges related to write-offs of leasehold improvements
associated with the leased property. As part of the restructuring six employees were eliminated. These employees were executive level, administrative and back office support.



The following table details restructuring by year implemented. Please refer to Note 6 in the Companys Form 10K/A for
further discussion of its restructurings. The Company implemented restructuring plans during 2004, 2003, 2002 and 2001, and incurred related restructuring costs. The components of the restructurings and the related charges and restructuring accrual
at December 31, 2004 and June 30, 2005 are as follows (in thousands):



|                                        |  |                         |       |                  |   |                  |  |                                  |   |  |                  |      |   |                     |   |        |   |  |   |      
|--------------------------------------- |  | ----------------------- | ----- | ---------------- | - | ---------------- |  | -------------------------------- | - |  | ---------------- | ---- | - | ------------------- | - | ------ | - |  | - | -----
|                                        |  | AccruedDecember 31,2004 |       | ChargedtoExpense |   | AssetWrite-downs |  | ForeignCurrencyTranslationEffect |   |  | CashExpenditures |      |   | AccruedJune 30,2005
|2004 lease costs of office closure      |  | $                       | 5,354 |                  | $ |                 |  | $                                |  |  | $                | (307 | ) |                     | $ | (491   | ) |  | $ | 4,556
|2002 lease costs of office closure      |  |                         | 382   |                  |   |                 |  |                                  |  |  |                  |     |   |                     |   | (339   | ) |  |   | 43   
|2001 severance, bonus and related items |  |                         | 610   |                  |   |                 |  |                                  |  |  |                  | (2   | ) |                     |   | (606   | ) |  |   | 2    
|2001 lease costs of office closure      |  |                         | 1,123 |                  |   |                 |  |                                  |  |  |                  | (6   | ) |                     |   | (113   | ) |  |   | 1,004
|                                        |  |                         |       |                  |   |                  |  |                                  |   |  |                  |      |   |                     |   |        |   |  |   |      
|Total                                   |  | $                       | 7,469 |                  | $ |                 |  | $                                |  |  | $                | (315 | ) |                     | $ | (1,549 | ) |  | $ | 5,605
|                                        |  |                         |       |                  |   |                  |  |                                  |   |  |                  |      |   |                     |   |        |   |  |   |      



7.     PNC
Credit Facility



On September 15, 2004, the Company
renewed its credit facility (Renewed Facility) with PNC Bank N.A. (PNC) for 365 days. The Renewed Facility provides a maximum loan amount of $25.0 million and is secured entirely by the Companys cash, cash equivalents
and short-term investments. The availability of borrowings under the Renewed Facility has a one-to-one relationship with available cash secured by the Company. The provisions of the Renewed Facility requires the Company to maintain unrestricted cash
and cash equivalents of at least $30.0 million and maintain tangible net worth of at least $88.0 million. The Company had no outstanding borrowings under the credit facility. The Company had one letter of credit outstanding in the amount of $0.3
million on the Renewed Facility as of June 30, 2005 and 2004, respectively.



10



---

iGATE CORPORATION



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



8.     Income Taxes



Loss before income taxes, as shown in the accompanying Condensed Consolidated Statements of Operations, consisted of the
following for the three and six months ended June 30, 2005 and 2004:



|                                   |  |                            |      |   |      |   |                          |   |  |      |  |   |        |   |  |   |        |  
|---------------------------------- |  | -------------------------- | ---- | - | ---- | - | ------------------------ | - |  | ---- |  | - | ------ | - |  | - | ------ | -
|                                   |  | Three Months EndedJune 30, |      |   |      |   | Six Months EndedJune 30, |  
|                                   |  | 2005                       |      |   | 2004 |   |                          |   |  | 2005 |  |   | 2004   |  
|                                   |  | (Dollars in Thousands)     |      |   |      |   | (Dollars in Thousands)   |  
|(Loss) income before income taxes: |  |                            |      |   |      |   |                          |   |  |      |  |   |        |   |  |   |        |  
|Domestic                           |  | $                          | (599 | ) |      | $ | (518                     | ) |  |      |  | $ | (1,824 | ) |  | $ | (2,698 | )
|Foreign                            |  |                            | 572  |   |      |   | (5,401                   | ) |  |      |  |   | 1,278  |   |  |   | (4,831 | )
|                                   |  |                            |      |   |      |   |                          |   |  |      |  |   |        |   |  |   |        |  
|Loss before income taxes           |  | $                          | (27  | ) |      | $ | (5,919                   | ) |  |      |  | $ | (546   | ) |  | $ | (7,529 | )
|                                   |  |                            |      |   |      |   |                          |   |  |      |  |   |        |   |  |   |        |  



Taxes on income, as
shown in the accompanying Consolidated Financial Statements, consisted of the following for the three and six month periods ended June 30, 2005 and 2004, respectively:



|                                           |  |                            |       |   |      |   |                          |   |  |      |  |   |        |   |  |   |       |  
|------------------------------------------ |  | -------------------------- | ----- | - | ---- | - | ------------------------ | - |  | ---- |  | - | ------ | - |  | - | ----- | -
|                                           |  | Three MonthsEnded June 30, |       |   |      |   | Six Months EndedJune 30, |  
|                                           |  | 2005                       |       |   | 2004 |   |                          |   |  | 2005 |  |   | 2004   |  
|                                           |  | (Dollars in Thousands)     |       |   |      |   | (Dollars in Thousands)   |  
|Current (benefit) provision:               |  |                            |       |   |      |   |                          |   |  |      |  |   |        |   |  |   |       |  
|Federal                                    |  | $                          | (917  | ) |      | $ | 128                      |   |  |      |  | $ | (2,778 | ) |  | $ | 393   |  
|State                                      |  |                            | (66   | ) |      |   | 60                       |   |  |      |  |   | 41     |   |  |   | 192   |  
|Foreign                                    |  |                            | 218   |   |      |   | 3,796                    |   |  |      |  |   | 764    |   |  |   | 3,345 |  
|                                           |  |                            |       |   |      |   |                          |   |  |      |  |   |        |   |  |   |       |  
|Total current (benefit) provision          |  |                            | (765  | ) |      |   | 3,984                    |   |  |      |  |   | (1,973 | ) |  |   | 3,930 |  
|                                           |  |                            |       |   |      |   |                          |   |  |      |  |   |        |   |  |   |       |  
|Deferred provision (benefit):              |  |                            |       |   |      |   |                          |   |  |      |  |   |        |   |  |   |       |  
|Federal                                    |  |                            | 959   |   |      |   | 23                       |   |  |      |  |   | 421    |   |  |   | (494  | )
|State                                      |  |                            | 137   |   |      |   | 3                        |   |  |      |  |   | 60     |   |  |   | (71   | )
|Foreign                                    |  |                            | 174   |   |      |   | (582                     | ) |  |      |  |   | 44     |   |  |   | 375   |  
|Valuation allowance                        |  |                            | (246  | ) |      |   |                         |   |  |      |  |   | (156   | ) |  |   |      |  
|                                           |  |                            |       |   |      |   |                          |   |  |      |  |   |        |   |  |   |       |  
|Total deferred provision (benefit)         |  |                            | 1,024 |   |      |   | (556                     | ) |  |      |  |   | 369    |   |  |   | (190  | )
|                                           |  |                            |       |   |      |   |                          |   |  |      |  |   |        |   |  |   |       |  
|Total provision (benefit) for income taxes |  | $                          | 259   |   |      | $ | 3,428                    |   |  |      |  | $ | (1,604 | ) |  | $ | 3,740 |  
|                                           |  |                            |       |   |      |   |                          |   |  |      |  |   |        |   |  |   |       |  



11



---

iGATE CORPORATION



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The reconciliation of income taxes computed using the statutory U.S. income tax rate and the
provision for income taxes for the three and six month periods ended June 30, 2005 and 2004, respectively, were as follows:



|                                                    |  |                                 |      |   |                                 |         |    |  |   |        |   |  |       |   
|--------------------------------------------------- |  | ------------------------------- | ---- | - | ------------------------------- | ------- | -- |  | - | ------ | - |  | ----- | --
|                                                    |  | Three Months EndedJune 30, 2005 |      |   | Three Months EndedJune 30, 2004 |        
|Income taxes computed at the federal statutory rate |  | $                               | (9   | ) |                                 | 35.0    | %  |  | $ | (2,072 | ) |  | 35.0  | % 
|State income taxes, net of federal tax benefit      |  |                                 | 91   |   |                                 | (337.9  | )  |  |   | 89     |   |  | (1.5  | ) 
|Foreign taxes at other than U.S. statutory rate     |  |                                 | 23   |   |                                 | (85.8   | )  |  |   | 2,208  |   |  | (37.3 | ) 
|Reversal of prior year accrued taxes                |  |                                 |     |   |                                 |        |    |  |   | 2,896  |   |  | (48.9 | ) 
|Nondeductible goodwill                              |  |                                 | 240  |   |                                 | (887.8  | )  |  |   | 200    |   |  | (3.4  | ) 
|Deferred compensation                               |  |                                 | 82   |   |                                 | (303.9  | )  |  |   |       |   |  |      |   
|Capital losses in investments                       |  |                                 | 93   |   |                                 | (346.2  | )  |  |   |       |   |  |      |   
|Othernet                                           |  |                                 | 75   |   |                                 | (278.0  | )  |  |   | 107    |   |  | (1.8  | ) 
|Valuation allowance                                 |  |                                 | (336 | ) |                                 | 1,244.9 |    |  |   |       |   |  |      |   
|                                                    |  |                                 |      |   |                                 |         |    |  |   |        |   |  |       |   
|                                                    |  | $                               | 259  |   |                                 | (959.6  | )% |  | $ | 3,428  |   |  | (57.9 | )%
|                                                    |  |                                 |      |   |                                 |         |    |  |   |        |   |  |       |   



|                                                    |  |                               |        |   |                               |       |   |  |   |        |   |  |       |   
|--------------------------------------------------- |  | ----------------------------- | ------ | - | ----------------------------- | ----- | - |  | - | ------ | - |  | ----- | --
|                                                    |  | Six Months EndedJune 30, 2005 |        |   | Six Months EndedJune 30, 2004 |      
|Income taxes computed at the federal statutory rate |  | $                             | (191   | ) |                               | 35.0  | % |  | $ | (2,635 | ) |  | 35.0  | % 
|State income taxes, net of federal tax benefit      |  |                               | 173    |   |                               | (31.7 | ) |  |   | 256    |   |  | (3.4  | ) 
|Foreign taxes at other than U.S. statutory rate     |  |                               | 361    |   |                               | (66.1 | ) |  |   | 2,515  |   |  | (33.4 | ) 
|Reversal of prior year accrued taxes                |  |                               | (2,200 | ) |                               | 402.9 |   |  |   | 2,896  |   |  | (38.5 | ) 
|Nondeductible goodwill                              |  |                               | 240    |   |                               | (43.9 | ) |  |   | 200    |   |  | (2.7  | ) 
|Deferred compensation                               |  |                               | 82     |   |                               | (15.0 | ) |  |   |       |   |  |      |   
|Capital losses in investments                       |  |                               | 93     |   |                               | (17.1 | ) |  |   |       |   |  |      |   
|Othernet                                           |  |                               | 84     |   |                               | (15.3 | ) |  |   | 508    |   |  | (6.7  | ) 
|Valuation allowance                                 |  |                               | (246   | ) |                               | 45.0  |   |  |   |       |   |  |      |   
|                                                    |  |                               |        |   |                               |       |   |  |   |        |   |  |       |   
|                                                    |  | $                             | (1,604 | ) |                               | 293.8 | % |  | $ | 3,740  |   |  | (49.7 | )%
|                                                    |  |                               |        |   |                               |       |   |  |   |        |   |  |       |   



Under the Indian
Income Tax Act, 1961, the Companys Indian subsidiary, Gate Global Solutions, Ltd. is eligible to claim a tax holiday for 10 consecutive assessment years on profits derived from the export of software services from divisions registered under
the Software Technology Parks at Bangalore, Chennai, and Pune. For the three months ended June 30, 2005 and 2004 the tax holiday resulted in benefits of $0.1 million and $0.1 million, respectively, when calculated at the U.S. statutory rate.
For the six months ended June 30, 2005 and 2004 the corresponding benefits were $0.3 million and $0.2 million, respectively. The benefits of the holiday will expire for certain of the units beginning in 2005.



12



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iGATE CORPORATION



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



9.     Earnings (Loss) Per Share



The following table sets forth the computation of earnings
(loss) per share (in thousands, except per share data):



|                                                           |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|---------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | ---- | ------ |  | - | ------- | -
|                                                           |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                                           |  | 2005                       |        |   | 2004                     |   |        | 2005 |  | 2004 |       
|Basic (loss) income per share:                             |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|(Loss) income from continuing operations                   |  | $                          | (286   | ) |                          | $ | (9,347 | )    |  | $    | 1,058  |  | $ | (11,269 | )
|Income from discontinued operations net of income taxes    |  |                            |       |   |                          |   | 3,645  |      |  |      |       |  |   | 3,815   |  
|                                                           |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|Net (loss) income                                          |  | $                          | (286   | ) |                          | $ | (5,702 | )    |  | $    | 1,058  |  | $ | (7,454  | )
|                                                           |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|Divided by:                                                |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|Weighted average common shares                             |  |                            | 52,512 |   |                          |   | 52,599 |      |  |      | 52,494 |  |   | 52,460  |  
|                                                           |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|Net (loss) earnings per common share, Basic:               |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|(Loss) earnings from continuing operations                 |  | $                          | (0.01  | ) |                          | $ | (0.18  | )    |  | $    | 0.02   |  | $ | (0.21   | )
|Earnings from discontinued operations                      |  |                            |       |   |                          |   | 0.07   |      |  |      |       |  |   | 0.07    |  
|                                                           |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|Basic (loss) earnings per share                            |  | $                          | (0.01  | ) |                          | $ | (0.11  | )    |  | $    | 0.02   |  | $ | (0.14   | )
|                                                           |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|Diluted (loss) income per share:                           |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|(Loss) income from continuing operations                   |  | $                          | (286   | ) |                          | $ | (9,347 | )    |  | $    | 1,058  |  | $ | (11,269 | )
|Income from discontinued operations net of income taxes    |  |                            |       |   |                          |   | 3,645  |      |  |      |       |  |   | 3,815   |  
|                                                           |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|Net (loss) income                                          |  | $                          | (286   | ) |                          | $ | (5,702 | )    |  | $    | 1,058  |  | $ | (7,454  | )
|                                                           |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|Divided by:                                                |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|Weighted average common shares                             |  |                            | 52,512 |   |                          |   | 52,599 |      |  |      | 52,494 |  |   | 52,460  |  
|Dilutive effect of restricted and common stock equivalents |  |                            |       |   |                          |   |       |      |  |      | 224    |  |   |        |  
|                                                           |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|Diluted average common shares                              |  |                            | 52,512 |   |                          |   | 52,599 |      |  |      | 52,718 |  |   | 52,460  |  
|                                                           |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|Net (loss) earnings per common share, Diluted:             |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|(Loss) earnings from continuing operations                 |  | $                          | (0.01  | ) |                          | $ | (0.18  | )    |  | $    | 0.02   |  | $ | (0.21   | )
|Earnings from discontinued operations                      |  |                            |       |   |                          |   | 0.07   |      |  |      |       |  |   | 0.07    |  
|                                                           |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  
|Net (loss) earnings per share, Diluted                     |  | $                          | (0.01  | ) |                          | $ | (0.11  | )    |  | $    | 0.02   |  | $ | (0.14   | )
|                                                           |  |                            |        |   |                          |   |        |      |  |      |        |  |   |         |  



The number of
outstanding options to purchase common shares for which the option exercise prices exceeded the average market price of the common shares aggregated 1.1 million and 1.4 million for the three months ended June 30, 2005 and 2004,
respectively and 1.1 million and 1.1 million for the six months ended June 30, 2005 and 2004, respectively. These options were excluded from the computation of diluted earnings per share under the treasury stock method.



The calculation of diluted earnings per share would have included
0.2 million and 0.3 million shares, respectively for the three month periods ended June 30, 2005 and 2004 and 0.4 million shares for the six month period ended June 30, 2004 for assumed exercise of options under the
Companys share incentive plans. The Company was in a net loss position and no anti-dilution is permitted under SFAS No. 128.



10.     Segment Information



The Companys reportable segments are iGate Solutions, iGate Professional Services (IPS) and iGate Corporate. No operating segments have
been aggregated. Effective April 1, 2004, the Company recast its



13



---

iGATE CORPORATION



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



segments to include the operations of Global Financial Services (GFS) as part of the IPS segment. Previously, GFS was included in the iGate
Solutions segment. All prior periods have been reclassified to reflect the change to the Companys segment reporting. The following discussion also compares the Companys operating segments without the operations of iGate Australia Pty
Ltd. (Australia) and Direct Resources Ltd. (DRI), which were sold in the second quarter of 2004. As a result, the Company restated its first quarter 2004 Condensed Consolidated Financial Statements to reflect the sale of
Australia and DRI as discontinued operations. Prior to their sale in 2004, both entities were part of the Companys IPS operating segment.



iGate Solutions



The iGate Solutions segments services offerings include offshore outsourcing of IT and BPO service and IT systems maintenance. Other offerings
include enterprise applications implementation and related custom development of applications such as Oracle, SAP and PeopleSoft. The segment also offers application maintenance outsourcing, business intelligence services and data management and
application re-engineering through its offshore development centers (ODCs), which deliver services offshore in India.



iGate Solutions has ODCs located in Bangalore, Hyderabad, Chennai, Delhi, and Pune, India and Wuxi, China. iGS has global development centers
(GDCs) located in Canada and the U.S. The GDCs can deliver both near shore (work performed primarily at the client site) and offshore services (work performed primarily in India) dependent upon customer location
and expectations. iGate Solutions operates in India, Canada, the U.S., Europe, Singapore, Malaysia, Japan, China and Australia.



iGate Professional Services (IPS)



The IPS segments service offerings include a variety of client-managed and supervised IT staffing service offerings, which include enterprise
resource package implementation and integration, application support services and client directed software design and customization.



The IPS segment services the U.S. and Canada.



iGate Corporate



In 2005 and 2004, iGate Corporate includes the operations of jobcurry Systems Private Limited, iGate Clinical Research International and DiagnoSearch,
corporate and other unallocated costs.



The accounting policies
of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates segment performance based upon profit or loss from operations. The Company does not allocate income taxes, other income or
expense and non-recurring charges to segments. In addition, the Company accounts for inter-segment sales and transfers at current market prices. All inter-segment sales have been eliminated in consolidation.



14



---

iGATE CORPORATION



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following tables present selected financial information for the Companys reporting segments
for the three and six months ended June 30, 2005 and 2004:



|                                         |  |                                  |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|---------------------------------------- |  | -------------------------------- | ------ | - | ------------------------- | - | ------------------ |  | - | ------ | - |  | - | ------- | -
|                                         |  | Three Months Ended June 30, 2005 |       
|                                         |  | iGateSolutions                   |        |   | iGateProfessionalServices |   | iGate Corporate(1) |  |   | Total  |  
|                                         |  | (Dollars in thousands)           |       
|External revenues                        |  | $                                | 34,071 |   |                           | $ | 33,056             |  | $ | 769    |   |  | $ | 67,896  |  
|                                         |  |                                  |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|(Loss) income from operations            |  | $                                | (511   | ) |                           | $ | 2,797              |  |   | (2,862 | ) |  |   | (576    | )
|                                         |  |                                  |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|Other income, net                        |  |                                  |        |   |                           |   |                    |  |   | 520    |   |  |   | 520     |  
|Minority interest                        |  |                                  |        |   |                           |   |                    |  |   | (59    | ) |  |   | (59     | )
|Equity in income of affiliated companies |  |                                  |        |   |                           |   |                    |  |   | 88     |   |  |   | 88      |  
|                                         |  |                                  |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|Loss before income taxes                 |  |                                  |        |   |                           |   |                    |  | $ | (2,313 | ) |  | $ | (27     | )
|                                         |  |                                  |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|                                         | 
|                                         |  | Three Months Ended June 30, 2004 |       
|                                         |  | iGateSolutions                   |        |   | iGateProfessionalServices |   | iGateCorporate(1)  |  |   | Total  |  
|                                         |  | (Dollars in thousands)           |       
|External revenues                        |  | $                                | 34,124 |   |                           | $ | 31,273             |  | $ | 471    |   |  | $ | 65,868  |  
|                                         |  |                                  |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|(Loss) income from operations            |  | $                                | (6,416 | ) |                           | $ | 3,301              |  |   | (2,369 | ) |  |   | (5,484  | )
|                                         |  |                                  |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|Other expense, net                       |  |                                  |        |   |                           |   |                    |  |   | (500   | ) |  |   | (500    | )
|Minority interest                        |  |                                  |        |   |                           |   |                    |  |   | 152    |   |  |   | 152     |  
|Equity in losses of affiliated companies |  |                                  |        |   |                           |   |                    |  |   | (87    | ) |  |   | (87     | )
|                                         |  |                                  |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|Loss before income taxes                 |  |                                  |        |   |                           |   |                    |  | $ | (2,804 | ) |  | $ | (5,919  | )
|                                         |  |                                  |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|                                         | 
|                                         |  | Six Months Ended June 30, 2005   |       
|                                         |  | iGateSolutions                   |        |   | iGateProfessionalServices |   | iGate Corporate(1) |  |   | Total  |  
|                                         |  | (Dollars in thousands)           |       
|External revenues                        |  | $                                | 66,782 |   |                           | $ | 69,513             |  | $ | 1,202  |   |  | $ | 137,497 |  
|                                         |  |                                  |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|(Loss) income from operations            |  | $                                | (270   | ) |                           | $ | 5,746              |  |   | (6,084 | ) |  |   | (608    | )
|                                         |  |                                  |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|Other income, net                        |  |                                  |        |   |                           |   |                    |  |   | 234    |   |  |   | 234     |  
|Minority interest                        |  |                                  |        |   |                           |   |                    |  |   | (143   | ) |  |   | (143    | )
|Equity in losses of affiliated companies |  |                                  |        |   |                           |   |                    |  |   | (29    | ) |  |   | (29     | )
|                                         |  |                                  |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|Loss before income taxes                 |  |                                  |        |   |                           |   |                    |  | $ | (6,022 | ) |  | $ | (546    | )
|                                         |  |                                  |        |   |                           |   |                    |  |   |        |   |  |   |         |  



15



---

iGATE CORPORATION



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                         |  |                                |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|---------------------------------------- |  | ------------------------------ | ------ | - | ------------------------- | - | ------------------ |  | - | ------ | - |  | - | ------- | -
|                                         |  | Six Months Ended June 30, 2004 |       
|                                         |  | iGateSolutions                 |        |   | iGateProfessionalServices |   | iGate Corporate(1) |  |   | Total  |  
|                                         |  | (Dollars in thousands)         |       
|External revenues                        |  | $                              | 68,675 |   |                           | $ | 60,131             |  | $ | 1,125  |   |  | $ | 129,931 |  
|                                         |  |                                |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|(Loss) income from operations            |  | $                              | (7,954 | ) |                           | $ | 5,332              |  |   | (5,105 | ) |  |   | (7,727  | )
|                                         |  |                                |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|Other income, net                        |  |                                |        |   |                           |   |                    |  |   | 256    |   |  |   | 256     |  
|Minority interest                        |  |                                |        |   |                           |   |                    |  |   | 129    |   |  |   | 129     |  
|Equity in losses of affiliated companies |  |                                |        |   |                           |   |                    |  |   | (187   | ) |  |   | (187    | )
|                                         |  |                                |        |   |                           |   |                    |  |   |        |   |  |   |         |  
|Loss before income taxes                 |  |                                |        |   |                           |   |                    |  | $ | (4,907 | ) |  | $ | (7,529  | )
|                                         |  |                                |        |   |                           |   |                    |  |   |        |   |  |   |         |  

---

|(1) | Corporate activities include general corporate expenses, interest income and expense, equity in losses of unconsolidated affiliates, minority interest, loss from joint ventures,
restructuring charges and merger related expenses not identified to a specific segment, and other unallocated charges. The Company evaluates segments based on income (loss) from operations. Since certain administrative and other operating expenses
or income sources have not been allocated to the operating business segments, this basis is not necessarily a measure computed in accordance with generally accepted accounting principles and it may not be comparable to other companies.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Assets by segment were as follows:



|                                                   |  |                        |         |                  |   |        
|-------------------------------------------------- |  | ---------------------- | ------- | ---------------- | - | -------
|                                                   |  | June 30,2005           |         | December 31,2004
|                                                   |  | (Dollars in thousands)
|iGate Solutions                                    |  | $                      | 96,581  |                  | $ | 101,439
|iGate Professional Services                        |  |                        | 30,229  |                  |   | 40,978 
|iGate Corporate, including discontinued operations |  |                        | 47,368  |                  |   | 37,815 
|                                                   |  |                        |         |                  |   |        
|Total assets                                       |  | $                      | 174,178 |                  | $ | 180,232
|                                                   |  |                        |         |                  |   |        



Revenue and assets by
geographic area consisted of the following:



|                                |  |                             |          |                           |   |                        |  |                  |         |  |   |        
|------------------------------- |  | --------------------------- | -------- | ------------------------- | - | ---------------------- |  | ---------------- | ------- |  | - | -------
|                                |  | Three Months Ended June 30, |          | Six Months Ended June 30,
|                                |  | 2005                        |          | 2004                      |   | 2005                   |  | 2004            
|                                |  | (Dollars in thousands)     
|Revenues:                       |  |                             |          |                           |   |                        |  |                  |         |  |   |        
|North America, principally U.S. |  | $                           | 57,776   |                           | $ | 49,179                 |  | $                | 117,103 |  | $ | 96,579 
|Europe                          |  |                             | 4,846    |                           |   | 5,988                  |  |                  | 10,054  |  |   | 11,909 
|Pacific Rim, principally India  |  |                             | 5,274    |                           |   | 10,701                 |  |                  | 10,340  |  |   | 21,443 
|                                |  |                             |          |                           |   |                        |  |                  |         |  |   |        
|Total revenues.                 |  | $                           | 67,896   |                           | $ | 65,868                 |  | $                | 137,497 |  | $ | 129,931
|                                |  |                             |          |                           |   |                        |  |                  |         |  |   |        
|                                |  |                             |          |                          
|                                |  |                             |          |                           |   | June 30,2005           |  | December 31,2004
|                                |  |                             |          |                           |   | (Dollars in thousands)
|Tangible long-term assets:      |  |                             |          |                           |   |                       
|North America, principally U.S. |  |                             | $  2,079 |                           |   | $  2,511              
|Europe                          |  |                             | 76       |                           |   | 106                   
|Pacific Rim, principally India  |  |                             | 27,571   |                           |   | 23,197                
|                                |  |                             |          |                           |   |                        |  |                  |         |  |   |        
|Total revenues.                 |  |                             | $29,726  |                           |   | $25,814               
|                                |  |                             |          |                           |   |                        |  |                  |         |  |   |        



16



---

The following is a concentration of revenues greater than 10% for the periods shown:



|                                      |  |                            |   |  |                          |   |  |      |   |  |      |  
|------------------------------------- |  | -------------------------- | - |  | ------------------------ | - |  | ---- | - |  | ---- | -
|                                      |  | Three Months EndedJune 30, |   |  | Six Months EndedJune 30, |  
|                                      |  | 2005                       |   |  | 2004                     |   |  | 2005 |   |  | 2004 |  
|General Electric Company              |  |                            |   |  |                          |   |  |      |   |  |      |  
|iGate Solutions                       |  | 34                         | % |  | 34                       | % |  | 34   | % |  | 35   | %
|iGate Consolidated                    |  | 17                         | % |  | 18                       | % |  | 17   | % |  | 19   | %
|International Business Machines Corp. |  |                            |   |  |                          |   |  |      |   |  |      |  
|iGate Professional Services           |  | 22                         | % |  | 24                       | % |  | 22   | % |  | 22   | %
|iGate Consolidated                    |  | 11                         | % |  | 12                       | % |  | 11   | % |  | 11   | %
|Wachovia Corporation                  |  |                            |   |  |                          |   |  |      |   |  |      |  
|iGate Professional Services           |  | 11                         | % |  | 15                       | % |  | 14   | % |  | 15   | %
|iGate Consolidated                    |  |                           |   |  |                         |   |  |     |   |  |     |  



17



---

|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



Some of the statements in this Form 10-Q (Form 10-Q) that are not historical facts are forward-looking
statements. These forward-looking statements include our financial, growth and liquidity projections as well as statements concerning our plans, strategies, intentions and beliefs concerning our business, cash flows, costs and the markets in which
we operate. Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to identify certain forward-looking statements. These statements are
based on information currently available to us, and we assume no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual events to differ materially from these forward-looking
statements. These risks include, but are not limited to, our ability to predict our financial performance, the level of market demand for our services, the highly-competitive market for the types of services that we offer, the impact of competitive
factors on profit margins, market conditions that could cause our customers to reduce their spending for our services, our ability to create, acquire and build new businesses and to grow our existing businesses, our ability to attract and retain
qualified personnel, our ability to reduce costs and conserve cash, currency fluctuations and market conditions in India and elsewhere around the world, political and military tensions in India and South Asia, changes in generally accepted
accounting principles and/or their interpretation and other risks that are described in more detail in our filings with the Securities and Exchange Commission, including our Form 10-K (as amended) (Form 10K/A) for the year ended
December 31, 2004.



Unless otherwise indicated or the
context otherwise requires, all references in this report to iGate, the Company, us, our, or we are to iGate Corporation, a Pennsylvania corporation, and its consolidated subsidiaries.
iGate Corporation, formerly named iGate Capital Corporation, through its operating subsidiaries, is a worldwide provider of information technology (IT) and Offshore Outsourcing Services to large and medium-sized organizations. These
services include client/server design and development, conversion/migration services, enterprise resource planning (ERP) package implementation and integration services, software development and applications maintenance outsourcing. The
iGate Solutions segments service offerings also include off-shore outsourcing of IT and BPO services and IT maintenance.



Website Access to SEC Reports



The Companys website is http://www.igatecorp.com. The Companys annual report on Form 10-K, quarterly reports on Form 10-Q, current
reports on Form 8-K and any amendments to these reports are available free of charge on the Investors page of the Companys website as soon as reasonably practicable after the reports are filed electronically with the Securities and Exchange
Commission.



Business Overview



The use of Offshore Outsourcing Services for IT and Business Process
Outsourcing Services (BPO) has emerged as a global trend in numerous countries and industries. Our clients recognize that offshore outsourcing is a very effective way to provide high quality, timely and cost-effective IT and BPO
services.



IT Services which we deliver using our offshore
centers include software application development and maintenance, implementation and support of enterprise applications, data management and integration and business intelligence. We believe that we deliver to our clients high quality solutions at a
substantial savings by using our global pool of highly talented people.



Going forward, our principal strategy is to increase the revenue derived from the delivery of offshore-based BPO services to our clients in various industries. We will continue to expand our BPO service offerings through acquisitions and
strategic relationships and internal initiatives. We believe that such services can be or are being performed offshore, at significant savings as high as 50% over US/European labor and infrastructure costs.



Reportable Financial Segments



We segment our business according to our service offerings. Our approach
reflects the way we and our chief operating decision makers analyze and manage our businesses. The Company has three reportable operating



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segments. The composition of segments and measure of segment profitability is consistent with that used by our management. Please refer to Note 10 in this
Form 10-Q which details the financial results of each principal business segment as well as revenues and assets by geographic region.



The following are brief descriptions of each of our segments.



iGate Solutions



The iGate Solutions segments service offerings include outsourcing of IT and BPO services using an onsite/offshore delivery model. This delivery
model helps clients achieve greater cost effectiveness through labor arbitrage.



The iGate Solutions segment revenues are derived through iGS, our publicly held Indian subsidiary. Our iGate Solutions segment has approximately 4,280 employees.



IT services offered include enterprise data management and data warehousing,
business intelligence and analytics, design, development, system integration, package evaluation and implementation, re-engineering and maintenance. BPO services offered include contact center services and transaction processing services. The
contact center services are offered to clients across all industries and are not industry specifics. The transaction processing services offered are focused on the mortgage banking, insurance and capital market industries, except for the delivery of
finance and accounting functions such as accounts payable, which can be performed for clients across all industries.



iGS also recently started to offer a combination of IT and BPO services through its innovative Integrated Technology and Operations (ITOPs)
service offering. These services consist in optimizing a clients process and technology, through the use of iGSs proprietary tools and business accelerators and finally deliver the process from offshore. Clients are expected
to benefit from this innovative business model through more efficient processes and labor arbitrage.



iGate Solutions has ODCs located in Bangalore, Hyderabad, Chennai, Delhi, and Pune, India and Wuxi, China. iGate Solutions has GDCs located in Canada and
the U.S. The centers can deliver both near shore and offshore services, dependent upon customer location and expectations. iGate Solutions operates in India, Canada, the U.S., Europe, Singapore, Malaysia, Japan and Australia.



The majority of our clients in the iGate Solutions segment have headquarters
in the U.S. and operations throughout the world. We believe our ODCs and GDCs are strategically located in order to service any client regardless of size, scale or geographic location.



The iGate Solutions segment markets its service offerings to large and medium-sized organizations. Certain contracts are
based upon a fixed price with payment based upon deliverables and/or project milestones reached. Contracts with deliverables or project milestones can provide for certain penalties if the deliverables or project milestones are not met within
contract timelines. Certain contracts are time-and-materials based which contract payments are based on the number of consultant hours worked on the project. Customers typically have the right to cancel contracts with minimal notice. Certain
contracts with no stated deliverables, with a designated workforce assigned, recognize revenues on a straight-line basis over the life of the contract, which are typically one year in duration.



The iGate Solutions segment services customers in a wide range of industries.
The segments largest customer is General Electric Company (GE) which accounted for 34% of revenues for the three months and for the six months ended June 30, 2005. iGS is a Global Preferred Partner of GE. Its Global Preferred
Partnership status extends through the end of 2006.



19



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iGate Professional Services (IPS)



The IPS segment provides a variety of client-managed and supervised IT
staffing services. These service offerings include design, development and maintenance of custom applications as well as implementation, integration and support of enterprise packaged applications such as ERP and CRM software provided by third party
vendors such as SAP, Oracle, PeopleSoft and Siebel.



The IPS
segment markets its services to application development managers and information technology directors within prospective customers companies. The IPS segment also responds to requests for proposals in order to obtain preferred vendor status to
secure long-term engagement relationships. IPS contracts provide for payments on a time-and-materials basis, based on the number of consultant hours worked on the project. Certain contracts are based upon a fixed price with payment based upon
deliverables and/or project milestones recorded. Clients typically have the right to cancel contracts with minimal notice.



The IPS segment serves a wide variety of customers in numerous industries in the U.S. and Canada. The segments largest customers are International
Business Machine Corporation and Wachovia Bank, which account for approximately 22% and 11% of IPS revenues for the three months ended June 30, 2005 and 22% and 14% for the six months ended June 30, 2005. IPS has approximately 1,060
employees.



iGate Corporate (iGate)



Our iGate Corporate segment includes the operations of
jobcurry Systems Private Ltd. (jobcurry), iGate Clinical Research International (ICRI), DiagnoSearch and corporate and other unallocated costs. jobcurry continues to provide recruiting and placement services for iGate and
outside customers. ICRI and DiagnoSearch contract with pharmaceutical companies to conduct clinical trials on their behalf. DiagnoSearch performs offshore clinical trials using a facility located in Mumbai. These entities are excluded from the above
segments largely due to their dissimilar service offerings and certain economic characteristics. This segment has approximately 190 employees.



The accounting policies of the segments are the same as those described in the summary of significant accounting policies as discussed in Note 1 of our
Form 10K/A. We evaluate segment performance based upon profit or loss from operations. We do not allocate income taxes, other income or expense, equity in losses of affiliated companies, minority interest, loss on venture investments and affiliated
companies, gain on sale of stock of subsidiaries and gain on deconsolidation of subsidiaries to segments. In addition, we account for inter-segment sales and transfers at current market prices. All inter-segment sales have been eliminated in
consolidation.



Results of Operations of Our Operating Segments: iGate
Solutions, IPS and iGate Corporate for the Three Months Ended June 30, 2005 as Compared to the Three Months Ended June 30, 2004:



iGate Solutions



Revenues for iGate Solutions for the three months ended June 30, 2005 were $34.1 million, which was consistent with revenues of $34.1 million for the
three months ended June 30, 2004. The lack of revenue growth is largely the result of increased competition for business both in India and the U.S.



The gross margin as a percentage of sales (gross margin percentage) for iGate Solutions was 26.9% for the three months ended June 30,
2005, as compared to 28.2% for the three months ended June 30, 2004. The factor contributing to the decline in gross margins was wage increases in India due to increased competition for IT consultants.



Selling, general and administrative expenses (S,G&A) include
all costs that are not directly associated with our iGate Solutions segments revenue generating consultants. S,G&A expenses include non-consultant



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salaries and employee benefits, recruiting and training costs, rent, depreciation and amortization of intangible assets, certain deferred compensation
charges as well as communications and facilities costs. S,G&A costs for the three months ended June 30, 2005 were $9.7 million or 28.4 % of revenues, as compared to $16.1 million or 47.0% of revenues for the three months ended
June 30, 2004. The $6.4 million decrease in S,G&A was a result of a few factors. In June 2004, we restructured our U.K. operations resulting in an expense of $5.5 million in the second quarter of 2004. In addition, we modified the Quintant
transaction in the fourth quarter of 2004, which saved us deferred compensation of approximately $0.5 million during the second quarter of 2005. We have also begun to realize cost savings on our prior years acquisitions of approximately $0.4
million, through employee attrition and consolidation of operations.



Operating loss as a percentage of sales (operating loss percentage) for the three months ended June 30, 2005 was 1.5%, as compared to an operating loss as a percentage of sales of 18.8% for the three months ended
June 30, 2004. Our operating loss for the current period was mainly due to decreases in gross margin.



iGate Professional Services (IPS)



Revenues for IPS for the three months ended June 30, 2005 were $33.1 million, an increase of $1.8 million or 5.7%, as compared to $31.3 million for
the three months ended June 30, 2004. This increase is primarily due to overall demand for our staffing services as well as a large project for a financial services client that began in the second quarter of 2004.



Gross margin percentage for IPS was 21.7% for the three months ended
June 30, 2005, as compared to 21.0% for the three months ended June 30, 2004. The contributing factors to the increase in gross margin were a combination of slight increases in bill rates and decreases in the use of subcontractor versus
salaried consultants. The minimal profit margins on our preferred vendor pass-through arrangements in our U.S. and Canadian staffing operations did not significantly impact our gross margins when compared to the same period in 2004.



S,G&A costs for the three months ended June 30, 2005 were $4.4
million or 13.2% of revenues, as compared to $3.3 million or 10.5% of revenues for the three months ended June 30, 2004. S,G&A costs increased by $1.1 million due to increases in headcount in the sales, marketing and recruiting areas,
higher legal fees incurred related to H1-B Visa processing and additions to the finance and accounting department related to relocating the billings and collections functions back to Pittsburgh.



Operating income as a percentage of sales (operating income
percentage) was 8.5% for the three months ended June 30, 2005 and 10.6% for the three months ended June 30, 2004. Operating income decreased by $0.5 million for the three months ended June 30, 2005, primarily due to increases in
S,G&A costs.



iGate Corporate (iGate)



Revenues for iGate for the three months ended
June 30, 2005 were $0.8 million, an increase of $0.3 million or 60.0% from revenues of $0.5 million for the comparable three months ended June 30, 2004. Our revenues for DiagnoSearch, ICRI and jobcurry have increased for the quarter due to
several new clinical studies and a slight improvement in recruiting and training.



Gross margin percentage was 62.7% for the three months ended June 30, 2005, as compared to 36.3% for the three months ended June 30, 2004. Increase in the revenues for DiagnoSearch and ICRI have positively
impacted our gross margin percentage.



S,G&A costs were
$3.3 million for the three months ended June 30, 2005, as compared to $2.5 million for the three months ended June 30, 2004. Our S,G&A costs increased mainly due to our compliance efforts related to Section 404 of the
Sarbanes-Oxley Act.



21



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Our operating loss for the quarter ended June 30, 2005 was $2.9 million, as compared to $2.4 million
for the quarter ended June 30, 2004. The primary reason for the increase in operating loss was the additional costs related to our Sarbanes-Oxley compliance effort.



Other Income (Expense) Components



Other income increased approximately $1.0 million for the three months ended June 30, 2005 as compared to the three months ended June 30, 2004. Components
of other income for the three months ended June 30, 2005 include interest income on short-term investments of $0.3 million and favorable foreign currency translation gains of $0.2 million offset by other expense of less than $0.1 million.
Components of other income for the three months ended June 30, 2004 include interest income on short-term investments of $0.2 million offset by unfavorable foreign currency translation losses of $0.6 million and interest expense on certain
discounted liabilities of $0.1 million.



We recognized
income from affiliated companies of $0.1 million for the three months ended June 30, 2005. We recognized losses from affiliated companies of $0.1 million for the three months ended June 30, 2004. Both the income and the losses were related
to our investments in joint ventures with CIBER and Software AG.



Minority interest expense was $0.1 million for the three months ended June 30, 2005 as compared to income of $0.2 million for the three months ended June 30, 2004. This is due to our less than 100% ownership in iGS.



Our income tax expense was $0.3 million for the three months ended
June 30, 2005. Significant items affecting the effective tax rate were nondeductible goodwill and valuation allowances recorded against certain deferred assets, and the continuation of the Indian tax holiday related to the iGS Whitefield
campus. The tax holiday extends through 2009. Our income tax expense was $3.4 million for the three months ended June 30, 2004. The significant items comprising our effective tax rate was the gain on the sale of Australia and valuation
allowances recorded against certain deferred tax assets. As a result of the asset sale of Red Brigade to iGS, deferred tax assets of approximately $2.9 million that were generated by prior years net operating losses of Red Brigade expired and
could not be utilized.



In the second quarter of 2004, we sold
our Australian and DRI entities. As a result, we have reflected the sale of the Australian and DRI entities as discontinued operations on our income statement for the three months ended June 30, 2004. For the three months ended June 30,
2004, our discontinued operations, which are comprised of our Australian and DRI entities, had after tax income of $3.6 million. We had no discontinued operations activity for the three months ended June 30, 2005.



Results of Operations of Our Operating Segments: iGate Solutions, IPS and iGate Corporate
for the Six Months Ended June 30, 2005 as Compared to the Six Months Ended June 30, 2004:



iGate Solutions



Revenues for iGate Solutions for the six months ended June 30, 2005 were $66.8 million, a decrease of $1.9 million or 2.8%, as compared to $68.7
million for the six months ended June 30, 2004. The decrease in revenue is a result of a continued shift of revenues offshore and the winding down of certain customer relationships that do not have an offshore focus. We have also experienced
increased competition for business both in India and the U.S.



Gross margin percentage for iGate Solutions was 28.0% for the six months ended June 30, 2005, as compared to 29.1% for the six months ended June 30, 2004. The factors contributing to the decline in gross margins were wage
increases in India due to increased competition for IT consultants.



S,G&A includes all costs that are not directly associated with our iGate Solutions segments revenue generating consultants. S,G&A expenses include non-consultant salaries and employee benefits, recruiting and



22



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training costs, rent, depreciation and amortization of intangible assets, certain deferred compensation charges as well as communications and facilities
costs. S,G&A costs for the six months ended June 30, 2005 were $18.9 million or 28.4% of revenues, as compared to $27.9 million or 40.7% of revenues for the six months ended June 30, 2004. The $9.0 million decrease in S,G&A was a
result of a few factors. In June 2004, we restructured our U.K. operations resulting in a savings of approximately $6.0 million for the six months ended June 30, 2005. In addition, our modification of the Quintant transaction resulted in
deferred compensation savings of approximately $1.1 million. We have also begun to realize cost savings on our prior acquisitions of approximately $1.6 million, through employee attrition and consolidations of operations.



Operating loss as a percentage of sales for the six months ended
June 30, 2005 was 0.4 %, as compared to an operating loss as a percentage of sales of 11.6% for the six months ended June 30, 2004. Our operating loss decrease for the current period was due to reductions in S,G&A costs
attributable to the modification of the Quintant deal and the restructuring of the UK business.



iGate Professional Services (IPS)



Revenues for IPS for the six months ended June 30, 2005 were $69.5 million, an increase of $9.4 million or 15.6%, as compared to $60.1 million for
the six months ended June 30, 2004. This increase is primarily due to overall demand for our staffing services as well as a large project for a financial services client that began in the second quarter of 2004.



Gross margin percentage for IPS was 21.1% for the six months ended
June 30, 2005, as compared to 21.5% for the six months ended June 30, 2004. The contributing factors to the decline in gross margin were a combination of pricing pressures, increases in subcontractor versus salaried consultants and
increases in business from the preferred vendor pass-through arrangement in our Canadian staffing operations. Pass-through arrangements allow for minimal profit margins on services rendered.



S,G&A costs for the six months ended June 30, 2005 were $8.9 million
or 12.8% of revenues, as compared to $7.6 million or 12.6% of revenues for the six months ended June 30, 2004. S,G&A costs have increased due to headcount increases in the sales, marketing, recruiting and finance and accounting departments.



Operating income percentage was 8.3% for the six months ended
June 30, 2005 and 8.9% for the six months ended June 30, 2004. Operating income increased by $0.4 million for the six months ended June 30, 2005, primarily due to increases in revenue.



iGate Corporate (iGate)



Revenues for iGate for the six months ended June 30, 2005 were $1.2
million, an increase of $0.1 million or 6.8% from revenues of $1.1 million for the comparable six months ended June 30, 2004. Our revenues for DiagnoSearch, ICRI and jobcurry have increased due to several new clinical studies and a slight
improvement in recruiting and training.



Gross margin
percentage was 55.0% for the six months ended June 30, 2005, as compared to 45.5% for the six months ended June 30, 2004. Increases in the revenues for DiagnoSearch and ICRI have positively impacted our gross margin percentage.



S,G&A costs were $6.7 million for the six months ended June 30,
2005, as compared to $5.6 million for the six months ended June 30, 2004. Our S,G&A costs increased mainly due to our compliance efforts related to Section 404 of the Sarbanes-Oxley Act.



Our operating loss for the quarter ended June 30, 2005 was $6.1 million,
as compared to $5.1 million for the quarter ended June 30, 2004. The primary reason for the increase in operating loss was the additional costs related to our Sarbanes-Oxley compliance efforts.



23



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Other Income (Expense) Components



Other income approximated $0.2 million and $0.3 million for the six months ended June 30, 2005 and 2004, respectively.
Components of other income for the six months ended June 30, 2005 include interest income on short-term investments of $1.1 million offset by unfavorable foreign currency translation losses of $0.4 million, $0.3 million of losses related to our
hedging activities in India and $0.2 million of other expenses. Currently our hedging activities do not meet the minimum requirements for effective hedge accounting treatment under current accounting rules. As a result, we must recognize any
unrealized gains or losses as current period income or loss. Components of other income for the six months ended June 30, 2004 include interest income on short-term investments of $0.4 million offset by unfavorable foreign currency translation
losses of $0.1 million and interest expense on certain discounted liabilities of less than $0.1 million.



Affiliated company income/(loss) was immaterial for the six months ended June 30, 2005. We recognized losses on affiliated companies of $0.2 million
for the six months ended June 30, 2004. All activity is related to our investments in joint ventures with CIBER and Software AG.



Minority interest expense was $0.1 million for the six months ended June 30, 2005 as compared to income of $0.1 million for the six months ended
June 30, 2004. This is due to our less than 100% ownership in iGS.



Our income tax benefit was $1.6 million for the six months ended June 30, 2005. On April 11, 2005, the Joint Committee on Taxation advised that the Internal Revenue Service examination of the Companys income tax returns for
the years 1999, 2000 and 2001 had been completed. As a result, the Company reversed certain tax accruals recorded during the years under review of approximately $2.2 million. Other significant items affecting the effective tax rate were
valuation allowances recorded against certain deferred assets, and the continuation of the Indian tax holiday related to the iGS Whitefield campus. The tax holiday extends through 2009. Our income tax provision was $3.7 million for the six months
ended June 30, 2004. The significant items comprising our effective tax rate was the gain on the sale of Australia and valuation allowances recorded against certain deferred tax assets. As a result of the asset sale of Red Brigade to iGS,
deferred tax assets of approximately $2.9 million that were generated by prior years net operating losses of Red Brigade expired and could not be utilized.



In the second quarter of 2004, we sold our Australian and DRI entities. As a result, we have restated our first quarter 2004
condensed consolidated statement of operations to reflect the sale of the Australian and DRI entities as discontinued operations on our income statement. For the six months ended June 30, 2004, our discontinued operations had after tax income
of $3.8 million. We had no discontinued operations activity for the first half of 2005.



Liquidity and Capital Resources



Our working
capital decreased $1.5 million from December 31, 2004 to June 30, 2005. Our net accounts receivable decreased by $6.4 million from December 31, 2004 to $55.0 million, and our days sales outstanding decreased from 88 days at December
31, 2004 to 79 days at June 30, 2005.



At June 30, 2005,
we had cash and short-term investments of $31.5 million and $28.8 million, respectively, as compared to cash and short-term investments of $28.2 million and $35.9 million, respectively, at December 31, 2004. Short-term investments at
June 30, 2005 and December 31, 2004 consisted mainly of highly liquid short-term investments. At June 30, 2005, approximately $3.8 million of our short-term investments are to be used exclusively by iGS due to Indian governmental
restrictions. We also have compensating balances of $25.0 million classified as short-term investments related to our line of credit with PNC. We continue to focus on liquidity along with the preservation of our principal holdings.



Cash provided from operations is anticipated to be adequate to fund capital
expenditures and other business requirements over the remainder of the year.





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Cash from Operations



Cash provided by operations was $4.0 million for the six months ended June 30, 2005. Factors contributing to our
increase in cash were decreases in accounts receivable of $6.1 million, net income of $1.1 million and noncash items of $6.4 million, partially offset by other working capital items of $9.6 million. Noncash items in the period included depreciation
and amortization, bad debt allowance, minority equity losses, deferred taxes, the release of tax reserves and amortization of deferred compensation.



Cash used by operations for the six months ended June 30, 2004 was $12.3 million. Contributing factors to our use of cash were net losses of $7.5
million and increases in accounts receivable of $15.4 million, partially offset by favorable changes in other working capital items totaling $7.6 million. Noncash items in the six months ended June 30, 2004 $3.0 million and included
depreciation and amortization, bad debt allowance, amortization of deferred compensation, minority interest equity losses and deferred taxes.



Investing Activities



Cash used by investing activities was $1.2 million for the six months ended June 30, 2005, as compared to cash provided of $7.6 million for the same
period of 2004.



Our capital expenditures were $8.1 million and
$8.5 million for the six months ended June 30, 2005 and 2004, respectively. A significant portion of the capital expenditures in both periods were due to the construction and expansion of our Whitefield campus located in India.



We have decreased our short-term investment portfolio by approximately $7.1
million and $6.0 million during the six months ended June 30, 2005 and 2004, respectively, which were used to fund the Whitefield construction project.



Financing Activities



Cash provided by financing activities was $0.6 million in the current six month period and $1.1 million from the same period a year ago. The source of
this cash was due to proceeds received from the exercise of employee stock options.



Restructuring



We
restructured our businesses in 2004, 2003, 2002 and 2001. As a result of these restructurings, we will be required to make cash payments in future years. The nature of the payments and the reasons for the restructurings are discussed more fully in
Note 6 to the Condensed Consolidated Financial Statements. The following table as of June 30, 2005 details the cash payments that we will be required to make in the future years:



|                                   |  |                  |       |      |   |      |  |      |     |      |   |            |  |   |     |  |   |    
|---------------------------------- |  | ---------------- | ----- | ---- | - | ---- |  | ---- | --- | ---- | - | ---------- |  | - | --- |  | - | ---
|(Dollars in thousands)             |  | Remainderof 2005 |       | 2006 |   | 2007 |  | 2008 |     | 2009 |   | Thereafter
|Severance, bonus and related items |  | $                | 2     |      | $ |     |  | $    |    |      | $ |           |  | $ |    |  | $ |   
|Lease costs of office closure      |  |                  | 1,867 |      |   | 840  |  |      | 822 |      |   | 822        |  |   | 742 |  |   | 510
|                                   |  |                  |       |      |   |      |  |      |     |      |   |            |  |   |     |  |   |    
|Total                              |  | $                | 1,869 |      | $ | 840  |  | $    | 822 |      | $ | 822        |  | $ | 742 |  | $ | 510
|                                   |  |                  |       |      |   |      |  |      |     |      |   |            |  |   |     |  |   |    



Other Items



On September 15, 2004, we renewed our secured credit
facility (Renewed Facility) with PNC Bank N.A. (PNC) for 365 days. The Renewed Facility provides a maximum loan amount of $25.0 million and is secured entirely by our cash, cash equivalents and short-term investments. The
availability of borrowings under the Renewed Facility has a one-to-one relationship with available cash secured by the Company. The provisions of the Renewed Facility requires us to maintain unrestricted cash and cash equivalents of at least $30.0
million and



25



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maintain tangible net worth of at least $88.0 million. We had no outstanding borrowings under the credit facility. We had one letter of credit outstanding in
the amount of $0.3 million on the Renewed Facility as of June 30, 2005 and 2004.



Contractual Commitments



As part of our
acquisition of DiagnoSearch for which we have a 95% ownership, we may be required to fund DiagnoSearchs existing operations for an amount of up to $3.0 million, based upon mutually agreed upon operating needs. In 2004, we funded $0.5 million
of this requirement. We funded DiagnoSearch an additional $0.3 million in the first quarter of 2005.



iGate Clinical Research International, Inc. and Quintant, Inc., which are wholly-owned subsidiaries of the Company, are development stage companies. While
both companies have their own cash reserves for operating purposes, we may be required to fund their operations, if cash reserves are not adequate.



We have committed to building a new campus on 14 acres of land located in Bangalore, India. Phase I was completed in February 2004, with Phase II expected
to be completed in 2005. We have funded the project through a combination of available cash reserves and short-term investments.



We also have financial commitments related to future payouts and existing leases on our occupied space. Our commitments are as follows:



|                       |  |      |       |      |   |       |  |      |       |      |   |            |  |   |     |  |   |      
|---------------------- |  | ---- | ----- | ---- | - | ----- |  | ---- | ----- | ---- | - | ---------- |  | - | --- |  | - | -----
|(Dollars in thousands) |  | 2005 |       | 2006 |   | 2007  |  | 2008 |       | 2009 |   | Thereafter
|Leases                 |  | $    | 1,758 |      | $ | 2,513 |  | $    | 1,818 |      | $ | 1,213      |  | $ | 496 |  | $ | 1,037
|                       |  |      |       |      |   |       |  |      |       |      |   |            |  |   |     |  |   |      



Off-Balance Sheet
Arrangements



We do not have any off-balance sheet
arrangements.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------



Market Risk Factors



We are exposed to market risks from adverse changes in foreign exchange rates, interest rates, especially the Indian Rupee (Rupee). We do not
engage in speculative or leveraged transactions, nor do we hold or issue financial instruments for trading purposes.



Foreign Exchange Rate Risk



iGSs cash flow and earnings are subject to fluctuations due to exchange rate variation between the Rupee and USD. This foreign currency risk exists
based upon the nature of iGSs operations. The majority of iGSs customers and revenue are U.S. based, which provides an inherent foreign currency risk between US and Rupee exchange rates.



We attempt to limit our exposure to changing Rupee rates mainly through
financial market transactions. These transactions may include entering into forward or option contracts to hedge existing exposures.



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The instruments are used to reduce risk by essentially creating offsetting currency exposures. The
following table presents information related to foreign currency contracts held by the Company:



LIST OF OUTSTANDING HEDGE TRANSACTIONS ON JUNE 30, 2005



|                         |  |                     |  |                                |  |                                   |               |        |              |                                           |   |      
|------------------------ |  | ------------------- |  | ------------------------------ |  | --------------------------------- | ------------- | ------ | ------------ | ----------------------------------------- | - | -----
|                         |  |                     |  |                                |  | (Dollars and Rupees in Thousands)
|                         |  | Maturity Date Range |  | Strike PriceRangeat Rupee Rate |  | Amount                            |               | Option |              | Net UnrealizedGains/(Losses)June 30, 2005
|FORWARDCONTRACTS         |  |                     |  |                                |  |                                   |               |        |              |                                           |   |      
|From:                    |  | August 31,2005      |  | 44.06                          |  |                                   |               |        |              |                                           |   |      
|To:                      |  | April 28, 2006      |  | 44.325                         |  |                                   |               |        |              |                                           |   |      
|                         |  |                     |  |                                |  |                                   |               |        |              |                                           |   |      
|Subtotal                 |  |                     |  |                                |  | $                                 | 7,000         |        |              |                                           | $ | 96   
|                         |  |                     |  |                                |  |                                   |               |        |              |                                           |   |      
|CURRENCY OPTIONCONTRACTS |  |                     |  |                                |  |                                   |               |        |              |                                           |   |      
|From:                    |  | December 28, 2005   |  | 43.00                          |  | $                                 | 26,000        |        | Buy/Sell Put |                                           |   |      
|To:                      |  | June 28, 2006       |  | 44.60                          |  | $                                 | 20,000        |        | Sell Call    |                                           |   |      
|                         |  |                     |  |                                |  |                                   |               |        |              |                                           |   |      
|Subtotal                 |  |                     |  |                                |  | $                                 | 46,000        |        |              |                                           | $ | (74) 
|                         |  |                     |  |                                |  |                                   |               |        |              |                                           |   |      
|STRIPS                   |  |                     |  |                                |  |                                   |               |        |              |                                           |   |      
|                         |  | December 30, 2005   |  |                               |  | $                                 | 750 (USD)     |        |              |                                           | $ | 14   
|                         |  | January 31, 2006    |  |                               |  | $                                 | 750 (USD)     |        |              |                                           | $ | 12   
|                         |  |                     |  |                                |  |                                   |               |        |              |                                           |   |      
|                         |  |                     |  |                                |  | $                                 | 1,500 (USD)   |        |              |                                           | $ | 26   
|                         |  |                     |  |                                |  |                                   |               |        |              |                                           |   |      
|PRINCIPAL                |  |                     |  |                                |  |                                   |               |        |              |                                           |   |      
|                         |  | September 1, 2006   |  |                               |  | $                                 | 2,500 (USD)   |        |              |                                           | $ | (156)
|                         |  |                     |  |                                |  | $                                 | 113,750 (INR) |        |              |                                           |   |      
|                         |  |                     |  |                                |  |                                   |               |        |              |                                           |   |      
|Total                    |  |                     |  |                                |  |                                   |               |        |              |                                           | $ | (108)
|                         |  |                     |  |                                |  |                                   |               |        |              |                                           |   |      



The net unrealized gains/(losses) were
calculated using a Rupee Exchange rate of 43.478 at June 30, 2005.



As of June 30, 2005, our forward contracts to hedge intercompany cash flows mature within one year. As each contract matures, iGS will receive Rupees at the contracted (strike price) rate while delivering the USD equivalent
of Rupees at the prevailing Rupee exchange rate. Contracts that meet qualifying criteria are accounted for as foreign currency cash flow hedges. Accordingly, the effective portion of gains and losses is deferred as a component of other comprehensive
loss and is recognized in earnings at the time the hedged item affects earnings. Any gains and losses due to hedge ineffectiveness or related to contracts which do not qualify for hedge accounting are recorded in current period earnings in other
income and expense. At June 30, 2005, the forward contracts to hedge intercompany cash flows did not meet qualifying criteria to receive hedge accounting and, as such, iGS appropriately recorded the net unrealized gain of $0.1 million as Other
Income.



As of June 30, 2005, our option contracts to
hedge intercompany cash flows mature within one year. As each contract matures and dependent upon prevailing Rupee exchange rates, iGS will have the option to either buy USDs at each contracted put strike price or sell USDs at each
contracted call strike price. Contracts that meet qualifying criteria are accounted for as foreign currency cash flow hedges. Accordingly, the effective portion of gains and losses is deferred as a component of other comprehensive loss
and is recognized in earnings at the time the hedged item affects earnings. Any gains and losses due to hedge ineffectiveness or related to contracts which do not qualify for hedge accounting are recorded in current period earnings in other income
and expense. At June 30, 2005, the option contracts to hedge intercompany cash flows did not meet qualifying criteria to receive hedge accounting and, as such, iGS appropriately recorded the net unrealized loss of $0.1 million as Other Income.



As of June 30, 2005, our principal swaps to hedge
intercompany debt from iGS to iGate have maturity dates that range from three to eighteen months dependent upon principal payment terms. The principal only SWAP hedges foreign currency risk on iGS intercompany debt to us. Their debt to us is
determined in USD. Contracts



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that meet qualifying criteria are accounted for as foreign currency cash flow hedges. Accordingly, the effective portion of gains and losses is deferred as a
component of other comprehensive loss and is recognized in earnings at the time the hedged item affects earnings. Any gains and losses due to hedge ineffectiveness or related to contracts which do not qualify for hedge accounting are recorded in
current period earnings in other income and expense. At June 30, 2005, the principal swaps to hedge intercompany debt did not meet qualifying criteria to receive hedge accounting and iGS appropriately recorded the net unrealized loss of $0.1
million as Other Income.



Substantially all of the
Companys foreign affiliates financial instruments are denominated in their respective functional currencies. Accordingly, exposure to exchange risk on foreign currency financial instruments is not material. (See Note 3 to the Condensed
Consolidated Financial Statements.)



Interest Rate Risk



The Company is exposed to changes in interest rates
primarily as a result of its intercompany debt borrowing and investing activities used to maintain liquidity and fund business operations. The nature and amount of the Companys long-term and short-term debt can be expected to vary as a result
of future business requirements, market conditions and other factors. The Companys net intercompany debt obligation totaled $10.0 million at June 30, 2005.



In order to manage interest rate exposure, iGS utilizes interest rate swaps. These derivatives are primarily accounted for
as fair value hedges. Accordingly, changes in the fair value of these derivatives, along with changes in the fair value of the hedged debt obligations that are attributable to the hedged risk, are recognized as Interest Expense.



Effect of Hypothetical 10% Fluctuation In Market Prices



As of June 30, 2005, assuming a hypothetical 10% fluctuation in
currency rates and swap rates, respectively, the fair value effect would be approximately:



|                           |  |                       |    
|-------------------------- |  | --------------------- | ---
|                           |  | Fair Value Effect    
|                           |  | (Dollars in Millions)
|Foreign currency contracts |  | $                     | 0.1
|Principal swap contracts   |  | $                     | 0.2



However, it should be
noted that any change in the fair value of the contracts, real or hypothetical, would be significantly offset by an inverse change in the value of the underlying hedged items. In relation to currency contracts, this hypothetical calculation assumes
that each exchange rate would change in the same direction relative to the USD.



Inflation



We do not believe that inflation
had a significant impact on our results of operations for the periods presented. On an ongoing basis, we attempt to minimize any effects of inflation on our operating results by controlling operating costs and whenever possible, seeking to ensure
that billing rates reflect increases in costs due to inflation.



For all significant foreign operations, the functional currency is the local currency. Assets and liabilities of these operations are translated at the exchange rate in effect at each period end. Statement of Operations accounts are
translated at the average exchange rate prevailing during the year. Translation adjustments arising from the use of differing exchange rates from period to period are included as a component of other comprehensive income (loss). Realized gains and
losses from foreign currency transactions are included in net loss for the periods presented. Exchange rate translations did not have a significant impact on operations for the quarter ended June 30, 2005.



28



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Our operations are generally not affected by seasonal fluctuations. However, our consultants
billable hours are affected by national holidays and vacation policies, which vary by country and by operating company.



Economic Trends and Outlook



We have experienced a revenue increase of $7.6 million or 5.8% for the six months ended June 30, 2005, as compared to the six months ended
June 30, 2004, due to increases in demand in the North America staffing business. While we have begun to see some stability in the IT services environment, we are still financially impacted by pricing pressures, decreases in IT budgeting and
increases in employees wages and salaries.



Overall demand for
our offshore services is growing because of the cost savings that it provides. However, our solutions offerings are purchased as value added projects by customers and in times of economic slowdown, are the types of projects that are the first to be
delayed or cancelled.



Short-term investments are invested in
highly liquid securities such as money market funds and certain corporate bonds with maturities of one year or less, and marketable equity securities. These securities are generally classified as available-for-sale and consequently, are recorded on
the balance sheet at fair value with unrealized gains or losses reported as a separate component of accumulated other comprehensive income (loss), net of tax. Part of this portfolio includes minority equity investments in one publicly traded
company, the value of which is subject to market price volatility.



The Companys cash flow and earnings are subject to fluctuations due to exchange rate variation. Foreign currency risk exists by the nature of the Companys global operations. The Company sells its services in a number of
locations around the world, and hence foreign currency risk is diversified.



When appropriate, the Company may attempt to limit its exposure to changing foreign exchange rates through both operational and financial market actions. These actions may include entering into forward contracts to
hedge existing exposures. The instrument is used to reduce risk by essentially creating offsetting currency exposure.



Substantially all of the Companys foreign affiliates financial instruments are denominated in their respective functional currencies.
Accordingly, exposure to exchange risk on foreign currency financial instruments is not material.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------



Disclosure Controls and Procedures



The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the
Company files or submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and regulations, and that such information is accumulated and
communicated to the Companys management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosures.



As of the end of the period covered by this report, the Company carried out
an evaluation, under the supervision and with the participation of the Companys management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to the Securities Exchange Act Rule 13a-15. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were not effective for the
reasons more fully described below related to the material weaknesses in our internal control over financial reporting identified during our fiscal 2004 evaluation of internal control over financial



29



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reporting in connection with Section 404 of the Sarbanes-Oxley Act of 2002. Managements assessment identified the following material weaknesses in
the Companys internal control over financial reporting (this section of Item 4. Controls and Procedures should be read in conjunction with Item 9A. Controls and Procedures included in the Companys Form 10-K/A for the fiscal
year ended December 31, 2004, for additional information on Managements Report on Internal Controls Over Financial Reporting):



(1) As of December 31, 2004, the Company did not maintain effective controls over the accounting for customer accounts receivable and the
corresponding revenue. Specifically, the Company had ineffective controls over restricted system access to the accounts receivable module, monitoring of cash payments received from customers and the issuance of customer credit memos and discounts.
This deficiency resulted in an audit adjustment to the 2004 consolidated financial statements. Additionally, this control deficiency could result in a misstatement to customer accounts receivable and the corresponding revenue that could result in a
material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, management has concluded that these control deficiencies constitute a material weakness;



(2) As of December 31, 2004, the Company did not maintain effective
controls over the calculation and review of deferred compensation and the corresponding compensation expense. Specifically, the Companys controls did not identify a computational error in determining the amount of compensation expense to be
recognized from the cancellation of 2.1 million shares of restricted stock and the related cash payments made to the Quintant Inc. founders. This control deficiency resulted in an audit adjustment to the 2004 consolidated financial statements.
Additionally, this deficiency could result in a misstatement to deferred compensation and the corresponding compensation expense that could result in a material misstatement to the annual or interim consolidated financial statements that would not
be prevented or detected. Accordingly, management has concluded that this control deficiency constitutes a material weakness; and



(3) As of December 31, 2004, the Company did not maintain effective controls over the calculation and review of income taxes, including the
determination of income taxes payable, deferred income tax assets and liabilities and the related income tax provision. Specifically, the Company did not perform an effective review of income tax calculations performed by subsidiaries that are
included in the consolidated income tax provision. In addition, the Company did not maintain effective controls over the access and use of the applications used in the computation of the consolidated income tax provision. This control deficiency
resulted in an adjustment to the second quarter 2004 consolidated financial statements. Additionally, this control deficiency could result in a misstatement to income taxes payable, deferred income tax assets and liabilities and the related income
tax provision that could result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, management has determined that these conditions constitute a material
weakness.



These control deficiencies are in the process of
being remediated but were not resolved as of the end of the period covered by this Quarterly Report on Form 10-Q. The findings outlined above were classified as material weaknesses in accordance with the rules and regulations of the Securities and
Exchange Commission, as a more than remote possibility that a material misstatement to the Companys interim or annual financial statements may not be prevented or detected. The material weakness over the accounting for customer accounts
receivable and the corresponding revenue resulted in an adjustment to the interim first quarter 2005 Condensed Consolidated Financial Statements.



Changes in Internal Control Over Financial Reporting



During the second quarter of 2005, the Company has begun its efforts to remediate each of its three (3) material weaknesses discussed above. To date,
the following efforts have been under taken by the Company:



Customer Accounts Receivable and Corresponding Revenue:



In April 2005, the Company began to transition all components of its North American Professional Services segment (IPS) customer accounts receivable and revenue processes from its location in Bangalore,
India to its



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North American Headquarters in Pittsburgh, Pennsylvania in order to directly supervise all accounts receivable and revenue processes. Since the April 2005
transition back to the U.S., all processes related to customer accounts receivable and revenue have been performed by the Companys U.S. accounting and finance staff. The Company hired additional employees at its Headquarters to manage, oversee
and assume individual customer collection and administrative interface responsibility. This process change has improved the understanding of the specific customer terms and the ability to quickly implement corrections to files or individual invoices
if required.



On May 2005, the Company also began a detailed
review and analysis of its functional procedures relative to its customer accounts receivable and revenue processes. This review and remediation project, which will be completed by September 2005, includes updating key control documentation,
developing desktop procedures for each job description, and standardizing business rules, policies and procedures across the organization. A third party consulting firm, which specializes in process control documentation and operating at the
direction of management, was hired on June 1, 2005, and is conducting this review.



The Company also engaged a third party consulting firm, which specializes in Peoplesoft Software Systems, to review access and security issues with our accounting software to ensure the ability to simplify the
addition of specific customer terms and promptly change data files if required to adjust incorrect terms while maintaining strict security access and control of the files. This review was completed in March 2005, and resulted in the identification
of nine system access and security control deficiencies that require improvement. In May 2005, the Company formed a five employee technical team to remediate and tighten the procedures and controls related to the software. This remediation effort is
expected to be completed by September 2005.



Calculation and
Review of Deferred Compensation



The Company views this
weakness as a one-time occurrence related to the accounting for a very complex acquisition. The Company is in the process of revising its policies and procedures regarding the accounting for acquisitions and in the future it will have additional
management personnel review all detailed calculations for significant transactions of this type. The Company has already implemented a detailed Audit Committee Checklist which is reviewed by the Audit Committee at every Committee meeting. The
checklist lists and describes, in detail, all significant accounting and reporting issues that have occurred during the quarter. The checklist was implemented during the Companys second quarter form 10-Q reporting period. The Company intends
to have this internal control process finalized by September 30, 2005.



Calculation and Review of Income Taxes Payable, Deferred Income Taxes and Related Tax Provision



The Company began to formulate its tax control structure in December 2004. The Company will test this structure during the 2005 fiscal year for the second
and third quarters of 2005 to ensure that the control policies and procedures as functioning as intended. The Company has contracted with an independent third party consulting firm that specializes in control processes and documentation to review
the established structure for consistency and then test this structure for compliance.



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PART II.    OTHER INFORMATION



|ITEM 4. | SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDER
|------- | -------------------------------------------------



On May 26, 2005, the Company held its Annual Meeting of Shareholders. The Companys Common Shareholders re-elected Mr. Sunil Wadhwani as a
Class C Director to a three (3) year term expiring in 2008.



|               |  |            |  |         
|-------------- |  | ---------- |  | --------
|Nominee        |  | For        |  | Withheld
|Sunil Wadhwani |  | 50,184,373 |  | 585,442 



52,563,597 Common
Shares were outstanding on March 31, 2005, the record date and the holders of 50,769,815 (96.59%) Common Shares voted in person or by proxy, constituting a quorum.



|ITEM 6. | EXHIBITS
|------- | --------



(a)    Exhibits



|      |  |                                                                                                                        
|----- |  | -----------------------------------------------------------------------------------------------------------------------
|      | 
|31.01 |  | Rule 13a-14(a) Certificate of Chief Executive Officer.                                                                 
|      | 
|31.02 |  | Rule 13a-14(a) Certificate of Chief Financial Officer.                                                                 
|      | 
|32.01 |  | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|      | 
|32.02 |  | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.





32



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SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the under signed thereunto duly authorized.



|               |  |                   |  |                                       
|-------------- |  | ----------------- |  | --------------------------------------
|               |  | iGATE CORPORATION
|               |  |                  
|August 9, 2005 |  | By:               |  | /s/    SUNIL
WADHWANI                 
|               |  |                   |  | Sunil Wadhwani                        
|               |  |                   |  | Co-Chairman of the Board of Directors,
|               |  |                   |  | Chief Executive Officer, and Director 
|               |  |                  
|August 9, 2005 |  | By:               |  | /s/    MICHAEL
ZUGAY                  
|               |  |                   |  | Michael Zugay                         
|               |  |                   |  | Senior Vice President and             
|               |  |                   |  | Chief Financial Officer               



33