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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---



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 March 31, 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 April 29, 2005 was 52,564,360.



 ̈



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##### Table of Contents

iGATE CORPORATION



QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 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 Month Periods Ended March 31, 2005 and 2004                                  |  | 3   
|        |  |                                                                                       | 
|        |  | (b)                                                                                   |  | Condensed Consolidated Balance Sheets as of March 31, 2005 (Unaudited) and December 31, 2004                                                         |  | 4   
|        |  |                                                                                       | 
|        |  | (c)                                                                                   |  | Unaudited Consolidated Statements of Shareholders Equity and Comprehensive Income (Loss) for the Three Month Periods Ended March 31, 2005 and 2004. |  | 5   
|        |  |                                                                                       | 
|        |  | (d)                                                                                   |  | Unaudited Condensed Consolidated Statements of Cash Flows for the Three Month Periods Ended March 31, 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 |  | 16                                                                                                                                                  
|        |  |                                                                                      
|Item 3. |  | Quantitative and Qualitative Disclosure About Market Risk                             |  | 25                                                                                                                                                  
|        |  |                                                                                      
|Item 4. |  | Controls and Procedures                                                               |  | 26                                                                                                                                                  
|        |  |                                                                                      
|PART II |  | OTHER INFORMATION                                                                     |  | 27                                                                                                                                                  
|        |  |                                                                                      
|Item 6. |  | Exhibits                                                                              |  | 27                                                                                                                                                  
|        |  |                                                                                      
|        |  | SIGNATURES                                                                            |  | 28                                                                                                                                                  



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##### Table of Contents

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 EndedMarch 31, |       
|                                                              |  | 2005                        |        |   | 2004 |  
|Revenues                                                      |  | $                           | 69,601 |   |      | $ | 64,063 |  
|Cost of revenues                                              |  |                             | 52,404 |   |      |   | 47,026 |  
|                                                              |  |                             |        |   |      |   |        |  
|Gross margin                                                  |  |                             | 17,197 |   |      |   | 17,037 |  
|                                                              |  |                            
|Selling, general and administrative                           |  |                             | 17,229 |   |      |   | 19,280 |  
|                                                              |  |                             |        |   |      |   |        |  
|Loss from operations                                          |  |                             | (32    | ) |      |   | (2,243 | )
|                                                              |  |                            
|Other (expense) income, net                                   |  |                             | (286   | ) |      |   | 756    |  
|Minority interest                                             |  |                             | (84    | ) |      |   | (23    | )
|Equity in losses of affiliated companies                      |  |                             | (117   | ) |      |   | (100   | )
|                                                              |  |                             |        |   |      |   |        |  
|                                                              |  |                            
|Loss before income taxes                                      |  |                             | (519   | ) |      |   | (1,610 | )
|Income tax (benefit) expense                                  |  |                             | (1,863 | ) |      |   | 312    |  
|                                                              |  |                             |        |   |      |   |        |  
|                                                              |  |                            
|Income (loss) from continuing operations                      |  |                             | 1,344  |   |      |   | (1,922 | )
|Income from discontinued operations, net of income taxes      |  |                             |       |   |      |   | 170    |  
|                                                              |  |                             |        |   |      |   |        |  
|Net income (loss)                                             |  | $                           | 1,344  |   |      | $ | (1,752 | )
|                                                              |  |                             |        |   |      |   |        |  
|                                                              |  |                            
|Net earnings (loss) per common share, Basic:                  |  |                             |        |   |      |   |        |  
|Earnings (loss) from continuing operations                    |  | $                           | 0.03   |   |      | $ | (0.04  | )
|Earnings from discontinued operations                         |  |                             |       |   |      |   | 0.01   |  
|                                                              |  |                             |        |   |      |   |        |  
|Net earnings (loss)  Basic                                   |  | $                           | 0.03   |   |      | $ | (0.03  | )
|                                                              |  |                             |        |   |      |   |        |  
|                                                              |  |                            
|Net earnings (loss) per common share, Diluted:                |  |                             |        |   |      |   |        |  
|Earnings (loss) from continuing operations                    |  | $                           | 0.03   |   |      | $ | (0.04  | )
|Earnings from discontinued operations                         |  |                             |       |   |      |   | 0.01   |  
|                                                              |  |                             |        |   |      |   |        |  
|Net earnings (loss)  Diluted                                 |  | $                           | 0.03   |   |      | $ | (0.03  | )
|                                                              |  |                             |        |   |      |   |        |  
|                                                              |  |                            
|Weighted average common shares, Basic                         |  |                             | 52,479 |   |      |   | 52,226 |  
|                                                              |  |                             |        |   |      |   |        |  
|                                                              |  |                            
|Weighted average diluted common equivalent shares outstanding |  |                             | 52,723 |   |      |   | 52,226 |  
|                                                              |  |                             |        |   |      |   |        |  



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



3



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(b)

iGATE CORPORATION



CONDENSED
CONSOLIDATED BALANCE SHEETS

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



|                                                                                                              |  |               |         |   |                   |   |         |  
|------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                                              |  | March 31,2005 |         |   | December 31,2004* |  
|ASSETS                                                                                                        |  | (Unaudited)   |         |   |                   |  
|Current assets:                                                                                               |  |               |         |   |                   |   |         |  
|Cash and cash equivalents                                                                                     |  | $             | 21,688  |   |                   | $ | 28,201  |  
|Short-term investments                                                                                        |  |               | 32,332  |   |                   |   | 35,863  |  
|Accounts receivable, net                                                                                      |  |               | 63,480  |   |                   |   | 61,363  |  
|Prepaid and other current assets                                                                              |  |               | 5,878   |   |                   |   | 6,985   |  
|Prepaid income taxes                                                                                          |  |               | 1,153   |   |                   |   | 435     |  
|Deferred income taxes                                                                                         |  |               | 2,858   |   |                   |   | 2,304   |  
|                                                                                                              |  |               |         |   |                   |   |         |  
|Total current assets                                                                                          |  |               | 127,389 |   |                   |   | 135,151 |  
|                                                                                                              |  |               |         |   |                   |   |         |  
|Investments in unconsolidated affiliates                                                                      |  |               | 3,938   |   |                   |   | 3,951   |  
|Land, building, equipment and leasehold improvements, net                                                     |  |               | 29,443  |   |                   |   | 25,814  |  
|Goodwill                                                                                                      |  |               | 9,283   |   |                   |   | 9,398   |  
|Intangible assets, net                                                                                        |  |               | 5,319   |   |                   |   | 5,918   |  
|                                                                                                              |  |               |         |   |                   |   |         |  
|Total assets                                                                                                  |  | $             | 175,372 |   |                   | $ | 180,232 |  
|                                                                                                              |  |               |         |   |                   |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                          |  |               |         |   |                   |   |         |  
|Current liabilities:                                                                                          |  |               |         |   |                   |   |         |  
|Accounts payable                                                                                              |  | $             | 9,891   |   |                   | $ | 8,636   |  
|Accrued payroll and related costs                                                                             |  |               | 14,071  |   |                   |   | 16,662  |  
|Accrued income taxes                                                                                          |  |               |        |   |                   |   | 2,019   |  
|Other accrued liabilities                                                                                     |  |               | 7,725   |   |                   |   | 9,555   |  
|Restructuring reserve                                                                                         |  |               | 2,933   |   |                   |   | 3,692   |  
|Deferred revenue                                                                                              |  |               | 510     |   |                   |   | 653     |  
|Current liabilities of discontinued operations                                                                |  |               | 87      |   |                   |   | 88      |  
|                                                                                                              |  |               |         |   |                   |   |         |  
|Total current liabilities                                                                                     |  |               | 35,217  |   |                   |   | 41,305  |  
|Restructuring reserve                                                                                         |  |               | 3,517   |   |                   |   | 3,777   |  
|Other long-term liabilities                                                                                   |  |               | 520     |   |                   |   | 564     |  
|Deferred income taxes                                                                                         |  |               | 9,399   |   |                   |   | 9,520   |  
|                                                                                                              |  |               |         |   |                   |   |         |  
|Total liabilities                                                                                             |  |               | 48,653  |   |                   |   | 55,166  |  
|                                                                                                              |  |               |         |   |                   |   |         |  
|Minority interest                                                                                             |  |               | 13,574  |   |                   |   | 13,366  |  
|Commitments and contingencies                                                                                 |  |               |         |   |                   |   |         |  
|                                                                                                              |  |              
|Shareholders equity:                                                                                         |  |               |         |   |                   |   |         |  
|Preferred stock, without par value: 20,000,000 shares authorized, 1 share of Preferred Stock held in treasury |  |               |        |   |                   |   |        |  
|Common stock, par value $0.01 per share:                                                                      |  |               |         |   |                   |   |         |  
|100,000,000 shares authorized, 53,554,462 and 53,502,448 shares issued, respectively                          |  |               | 535     |   |                   |   | 535     |  
|Additional paid-in capital                                                                                    |  |               | 161,510 |   |                   |   | 161,345 |  
|Accumulated deficit                                                                                           |  |               | (35,366 | ) |                   |   | (36,710 | )
|Deferred compensation                                                                                         |  |               | (1,731  | ) |                   |   | (1,934  | )
|Common stock held in treasury, at cost, 990,102 shares                                                        |  |               | (14,714 | ) |                   |   | (14,714 | )
|Accumulated other comprehensive income                                                                        |  |               | 2,911   |   |                   |   | 3,178   |  
|                                                                                                              |  |               |         |   |                   |   |         |  
|Total shareholders equity                                                                                    |  |               | 113,145 |   |                   |   | 111,700 |  
|                                                                                                              |  |               |         |   |                   |   |         |  
|Total liabilities and shareholders equity                                                                    |  | $             | 175,372 |   |                   | $ | 180,232 |  
|                                                                                                              |  |               |         |   |                   |   |         |  



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



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



4



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(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 |  | 52,014       |   |                            |          |                     |  |   | 165                   |  |   |               |   |  |                                               |       |   |                          |   |         |                              |  |   |      |   |  |   | 165     |   |  |   |        |  
|Amortization of deferred compensation                                    |  |             |   |                            |          |                     |  |   |                      |  |   |               |   |  |                                               | 203    |   |                          |   |        |                              |  |   |      |   |  |   | 203     |   |  |   |        |  
|Comprehensive income:                                                    |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |       |   |  |   |         |   |  |   |        |  
|Unrealized loss on investments, net of tax                               |  |             |   |                            |          |                     |  |   |                      |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   | (40   | ) |  |   | (40     | ) |  | $ | (40    | )
|Currency translation adjustment                                          |  |             |   |                            |          |                     |  |   |                      |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   | (227  | ) |  |   | (227    | ) |  |   | (227   | )
|Net income                                                               |  |             |   |                            |          |                     |  |   |                      |  |   | 1,344          |   |  |                                               |       |   |                          |   |        |                              |  |   |      |   |  |   | 1,344   |   |  |   | 1,344  |  
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |       |   |  |   |         |   |  |   |        |  
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |       |   |  |   |         |   |  | $ | 1,077  |  
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |       |   |  |   |         |   |  |   |        |  
|Balance, March 31, 2005                                                  |  | 52,564,360   |   |                            | $        | 535                  |  | $ | 161,510               |  | $ | (35,366        | ) |  | $                                             | (1,731 | ) |                          | $ | (14,714 | )                            |  | $ | 2,911 |   |  | $ | 113,145 |   |  |   |        |  
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |       |   |  |   |         |   |  |   |        |  
|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 |  | 114,891      |   |                            |          | 1                    |  |   | 594                   |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   |      |   |  |   | 595     |   |  |   |        |  
|Treasury stock transactions                                              |  | (25,659      | ) |                            |          |                     |  |   |                      |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   |      |   |  |   |         |   |  |   |        |  
|Amortization of deferred compensation                                    |  |             |   |                            |          |                     |  |   |                      |  |   |               |   |  |                                               | 814    |   |                          |   |        |                              |  |   |      |   |  |   | 814     |   |  |   |        |  
|Comprehensive income:                                                    |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |       |   |  |   |         |   |  |   |        |  
|Unrealized loss on investments, net of tax                               |  |             |   |                            |          |                     |  |   |                      |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   | (24   | ) |  |   | (24     | ) |  |   | (24    | )
|Reclassification adjustment for gains realized in net loss               |  |             |   |                            |          |                     |  |   |                      |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   | 20    |   |  |   | 20      |   |  |   | 20     |  
|Currency translation adjustment                                          |  |             |   |                            |          |                     |  |   |                      |  |   |               |   |  |                                               |       |   |                          |   |        |                              |  |   | 1,564 |   |  |   | 1,564   |   |  |   | 1,564  |  
|Net loss                                                                 |  |             |   |                            |          |                     |  |   |                      |  |   | (1,752         | ) |  |                                               |       |   |                          |   |        |                              |  |   |      |   |  |   | (1,752  | ) |  |   | (1,752 | )
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |       |   |  |   |         |   |  |   |        |  
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |       |   |  |   |         |   |  | $ | (192   | )
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |       |   |  |   |         |   |  |   |        |  
|Balance, March 31, 2004                                                  |  | 51,913,140   |   |                            | $        | 530                  |  | $ | 160,930               |  | $ | (20,251        | ) |  | $                                             | (8,119 | ) |                          | $ | (14,714 | )                            |  | $ | 4,976 |   |  | $ | 123,352 |   |  |   |        |  
|                                                                         |  |              |   |                            |          |                      |  |   |                       |  |   |                |   |  |                                               |        |   |                          |   |         |                              |  |   |       |   |  |   |         |   |  |   |        |  



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



5



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##### Table of Contents

(d)

iGATE CORPORATION



CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)



|                                                                       |  |                             |        |   |      |   |         |  
|---------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------- | -
|                                                                       |  | Three Months EndedMarch 31, |       
|                                                                       |  | 2005                        |        |   | 2004 |  
|Cash Flows From Operating Activities:                                  |  |                             |        |   |      |   |         |  
|Net income (loss)                                                      |  | $                           | 1,344  |   |      | $ | (1,752  | )
|Adjustments to reconcile net income (loss) to cash used by operations: |  |                             |        |   |      |   |         |  
|Income from discontinued operations, net of taxes                      |  |                             |       |   |      |   | (170    | )
|Depreciation and amortization                                          |  |                             | 2,554  |   |      |   | 1,919   |  
|Realized loss (gain) on investments                                    |  |                             | 58     |   |      |   | (20     | )
|Allowance for uncollectible accounts                                   |  |                             | 290    |   |      |   | 311     |  
|Deferred income taxes, net                                             |  |                             | (655   | ) |      |   | 366     |  
|Equity in losses of affiliated companies                               |  |                             | 117    |   |      |   | 100     |  
|Minority interest                                                      |  |                             | 84     |   |      |   | 23      |  
|Amortization of deferred compensation                                  |  |                             | 203    |   |      |   | 814     |  
|Working capital items:                                                 |  |                             |        |   |      |   |         |  
|Accounts receivable and unbilled receivables                           |  |                             | (2,493 | ) |      |   | (12,422 | )
|Prepaid and other assets                                               |  |                             | 206    |   |      |   | 1,144   |  
|Accounts payable                                                       |  |                             | 1,289  |   |      |   | 2,245   |  
|Accrued and other current liabilities                                  |  |                             | (6,517 | ) |      |   | 2,496   |  
|Deferred revenue                                                       |  |                             | (138   | ) |      |   | (397    | )
|Restructuring reserve                                                  |  |                             | (874   | ) |      |   | (514    | )
|Cash flows provided by discontinued operations                         |  |                             |       |   |      |   | 166     |  
|                                                                       |  |                             |        |   |      |   |         |  
|Net cash flows used by operating activities                            |  |                             | (4,532 | ) |      |   | (5,691  | )
|                                                                       |  |                             |        |   |      |   |         |  
|                                                                       |  |                            
|Cash Flows From Investing Activities:                                  |  |                             |        |   |      |   |         |  
|Additions to land, building, equipment and leasehold improvements, net |  |                             | (5,798 | ) |      |   | (6,001  | )
|Sales of investments, net                                              |  |                             | 3,516  |   |      |   | 6,793   |  
|Acquisitions, net of cash acquired                                     |  |                             |       |   |      |   | (488    | )
|Investments in unconsolidated affiliates                               |  |                             | (273   | ) |      |   | (113    | )
|                                                                       |  |                             |        |   |      |   |         |  
|Net cash flows (used) provided by investing activities                 |  |                             | (2,555 | ) |      |   | 191     |  
|                                                                       |  |                             |        |   |      |   |         |  
|                                                                       |  |                            
|Cash Flows From Financing Activities:                                  |  |                             |        |   |      |   |         |  
|Net proceeds from exercise of stock options                            |  |                             | 164    |   |      |   | 355     |  
|                                                                       |  |                             |        |   |      |   |         |  
|Net cash flows provided by financing activities                        |  |                             | 164    |   |      |   | 355     |  
|                                                                       |  |                             |        |   |      |   |         |  
|Effect of currency translation                                         |  |                             | 410    |   |      |   | 1,160   |  
|                                                                       |  |                             |        |   |      |   |         |  
|Net change in cash and cash equivalents                                |  |                             | (6,513 | ) |      |   | (3,985  | )
|Cash and cash equivalents, beginning of period                         |  |                             | 28,201 |   |      |   | 36,133  |  
|                                                                       |  |                             |        |   |      |   |         |  
|Cash and cash equivalents, end of period                               |  | $                           | 21,688 |   |      | $ | 32,148  |  
|                                                                       |  |                             |        |   |      |   |         |  



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



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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 months ended March 31, 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 months ended March 31, 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 Based Opinion No. 25, Accounting for Stock Issued for Employees,and related interpretations using the intrinsic value method.



The following table illustrates the effect on net income (loss) and 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.



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iGATE CORPORATION



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                                                                                                                                              |  |                                      |        |   |      |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ------ | - | ---- | - | ------ | -
|                                                                                                                                                              |  | Three Months EndedMarch 31,          |       
|                                                                                                                                                              |  | (in thousands, exceptper share data) |       
|                                                                                                                                                              |  | 2005                                 |        |   | 2004 |  
|Net income (loss), as reported                                                                                                                                |  | $                                    | 1,344  |   |      | $ | (1,752 | )
|Add: Deferred compensation expense reported in earnings                                                                                                       |  |                                      | 203    |   |      |   | 814    |  
|Less: Total stock-based employee compensation expense determined under fair value method for all awards and deferred compensation expense, net
of tax effects |  |                                      | (515   | ) |      |   | (1,249 | )
|                                                                                                                                                              |  |                                      |        |   |      |   |        |  
|Proforma net income (loss)                                                                                                                                    |  | $                                    | 1,032  |   |      | $ | (2,187 | )
|                                                                                                                                                              |  |                                      |        |   |      |   |        |  
|Earnings (loss) per share:                                                                                                                                    |  |                                      |        |   |      |   |        |  
|Basic  as reported                                                                                                                                           |  | $                                    | 0.03   |   |      | $ | (0.03  | )
|                                                                                                                                                              |  |                                      |        |   |      |   |        |  
|Basic  Proforma                                                                                                                                              |  | $                                    | 0.02   |   |      | $ | (0.04  | )
|                                                                                                                                                              |  |                                      |        |   |      |   |        |  
|Diluted  as reported                                                                                                                                         |  | $                                    | 0.03   |   |      | $ | (0.03  | )
|                                                                                                                                                              |  |                                      |        |   |      |   |        |  
|Diluted  Proforma                                                                                                                                            |  | $                                    | 0.02   |   |      | $ | (0.04  | )
|                                                                                                                                                              |  |                                      |        |   |      |   |        |  
|Divided by:                                                                                                                                                   |  |                                      |        |   |      |   |        |  
|Weighted Average Common Shares outstanding, Basic                                                                                                             |  |                                      | 52,479 |   |      |   | 52,226 |  
|                                                                                                                                                              |  |                                      |        |   |      |   |        |  
|Weighted Average Common Shares outstanding, Diluted                                                                                                           |  |                                      | 52,723 |   |      |   | 52,226 |  
|                                                                                                                                                              |  |                                      |        |   |      |   |        |  





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 March 31, 2005. Fair values are based on quoted market prices at prevailing exchange rates and other available market information.



|                                            |  |                        |      |   |               |   |      |  
|------------------------------------------- |  | ---------------------- | ---- | - | ------------- | - | ---- | -
|                                            |  | March 31, 2005         |     
|                                            |  | USDCarrying Value      |      |   | USDFair Value |  
|                                            |  | (dollars in thousands) |     
|Foreign Exchange Contracts:                 |  |                        |      |   |               |   |      |  
|Forwards:                                   |  |                        |      |   |               |   |      |  
|$USD/India Rupee                            |  | $                      | 58   |   |               | $ | 58   |  
|                                            |  |                       
|Options:                                    |  |                        |      |   |               |   |      |  
|$USD/India Rupee                            |  | $                      | (34  | ) |               | $ | (34  | )
|                                            |  |                       
|Strips:                                     |  |                        |      |   |               |   |      |  
|$USD                                        |  | $                      | 18   |   |               | $ | 18   |  
|                                            |  |                       
|Principal Only SWAP:                        |  |                        |      |   |               |   |      |  
|Mumbai Interbank Forward Offered Rates      |  | $                      | (200 | ) |               | $ | (200 | )
|                                            |  |                        |      |   |               |   |      |  
|Market to market net loss at March 31, 2005 |  | $                      | (158 | ) |               | $ | (158 | )
|                                            |  |                        |      |   |               |   |      |  



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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):



|                                    |  |                |       |   |                           |   |                |  |              |     |  |   |       |  
|----------------------------------- |  | -------------- | ----- | - | ------------------------- | - | -------------- |  | ------------ | --- |  | - | ----- | -
|                                    |  | iGateSolutions |       |   | iGateProfessionalServices |   | iGateCorporate |  | Consolidated |    
|Goodwill at December 31, 2004       |  | $              | 8,609 |   |                           | $ | 216            |  | $            | 573 |  | $ | 9,398 |  
|Foreign currency translation effect |  |                | (115  | ) |                           |   |               |  |              |    |  |   | (115  | )
|                                    |  |                |       |   |                           |   |                |  |              |     |  |   |       |  
|Goodwill at March 31, 2005          |  | $              | 8,494 |   |                           | $ | 216            |  | $            | 573 |  | $ | 9,283 |  
|                                    |  |                |       |   |                           |   |                |  |              |     |  |   |       |  



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



|                               |  |                |       |                         |   |             |  |                         |       |  |   |      
|------------------------------ |  | -------------- | ----- | ----------------------- | - | ----------- |  | ----------------------- | ----- |  | - | -----
|                               |  | March 31, 2005 |       | December 31, 2004      
|                               |  | GrossAmount    |       | AccumulatedAmortization |   | GrossAmount |  | AccumulatedAmortization
|                               |  | (unaudited)    |       |                         |   |            
|Amortizable intangible assets: |  |                |       |                         |   |             |  |                         |       |  |   |      
|Intellectual property          |  | $              | 570   |                         | $ | 293         |  | $                       | 570   |  | $ | 245  
|Customer relationships         |  |                | 6,642 |                         |   | 2,673       |  |                         | 6,642 |  |   | 2,270
|Employment contracts           |  |                | 1,720 |                         |   | 783         |  |                         | 1,720 |  |   | 661  
|Other                          |  |                | 314   |                         |   | 178         |  |                         | 314   |  |   | 152  
|                               |  |                |       |                         |   |             |  |                         |       |  |   |      
|Total                          |  | $              | 9,246 |                         | $ | 3,927       |  | $                       | 9,246 |  | $ | 3,328
|                               |  |                |       |                         |   |             |  |                         |       |  |   |      



Amortization expense
related to identifiable intangibles assets was $0.6 million for each of the three months ended March 31, 2005 and 2004. Estimated annual amortization expense for the years ended December 31, 2005 through December 31, 2009 is shown below:



|                  |  |   |      
|----------------- |  | - | -----
|Remainder of 2005 |  | $ | 1,754
|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 $32.3 million and $35.9 million at March 31, 2005 and December 31, 2004, respectively. Approximately $7.3 million and $10.9 million of these funds at March 31,
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 March 31, 2005 and December 31, 2004. The availability of short-term lines of credit is dependent upon maintenance of such compensating balances.



Equity in Losses of Affiliated Companies



The Company recorded $0.1 million in losses related to its joint ventures in
CIBER India Pvt. Ltd. and Software AG (India) Private Ltd. for each of the three months ended March 31, 2005 and 2004.





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iGATE CORPORATION



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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 March 31, 2005 are as follows (in thousands):



|                                        |  |                         |       |                  |   |                  |  |                                  |   |  |                  |      |   |                      |   |      |   |  |   |      
|--------------------------------------- |  | ----------------------- | ----- | ---------------- | - | ---------------- |  | -------------------------------- | - |  | ---------------- | ---- | - | -------------------- | - | ---- | - |  | - | -----
|                                        |  | AccruedDecember 31,2004 |       | ChargedtoExpense |   | AssetWrite-downs |  | ForeignCurrencyTranslationEffect |   |  | CashExpenditures |      |   | AccruedMarch 31,2005
|2004 lease costs of office closure      |  | $                       | 5,354 |                  | $ |                 |  | $                                |  |  | $                | (141 | ) |                      | $ | (218 | ) |  | $ | 4,995
|2002 lease costs of office closure      |  |                         | 382   |                  |   |                 |  |                                  |  |  |                  |     |   |                      |   | (226 | ) |  |   | 156  
|2001 severance, bonus and related items |  |                         | 610   |                  |   |                 |  |                                  |  |  |                  | (1   | ) |                      |   | (344 | ) |  |   | 265  
|2001 lease costs of office closure      |  |                         | 1,123 |                  |   |                 |  |                                  |  |  |                  | (3   | ) |                      |   | (86  | ) |  |   | 1,034
|                                        |  |                         |       |                  |   |                  |  |                                  |   |  |                  |      |   |                      |   |      |   |  |   |      
|Total                                   |  | $                       | 7,469 |                  | $ |                 |  | $                                |  |  | $                | (145 | ) |                      | $ | (874 | ) |  | $ | 6,450
|                                        |  |                         |       |                  |   |                  |  |                                  |   |  |                  |      |   |                      |   |      |   |  |   |      



7.     PNC
Credit Facility



On September 15, 2004, the Company
renewed its credit facility (Renewed Facility) with PNC Bank N.A. (PNC). 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 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 March 31, 2005 and 2004, respectively.



|8.    Income | Taxes
|------------ | -----



Loss before income taxes, as shown in the accompanying condensed consolidated statements of operations, consisted of the following for the three months
ended March 31, 2005 and 2004:



|                                   |  |                              |        |   |      |   |        |  
|---------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ------ | -
|                                   |  | Three Months Ended March 31, |       
|                                   |  | 2005                         |        |   | 2004 |  
|                                   |  | (Dollars in Thousands)       |       
|(Loss) income before income taxes: |  |                              |        |   |      |   |        |  
|Domestic                           |  | $                            | (1,225 | ) |      | $ | (2,180 | )
|Foreign                            |  |                              | 706    |   |      |   | 570    |  
|                                   |  |                              |        |   |      |   |        |  
|Loss before income taxes           |  | $                            | (519   | ) |      | $ | (1,610 | )
|                                   |  |                              |        |   |      |   |        |  



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iGATE CORPORATION



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                                                                                                                                                              |  |                              |        |   |      |   |      |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | ---- | - | ---- | -
|Taxes on income, as shown in the accompanying condensed consolidated statements of operations, consisted of the
following for the three months ended March 31, 2005 and 2004: | 
|                                                                                                                                                                              |  | Three Months Ended March 31, |       
|                                                                                                                                                                              |  | 2005                         |        |   | 2004 |  
|                                                                                                                                                                              |  | (Dollars in Thousands)       |       
|Current (benefit) provision:                                                                                                                                                  |  |                              |        |   |      |   |      |  
|Federal                                                                                                                                                                       |  | $                            | (1,861 | ) |      | $ | 265  |  
|State                                                                                                                                                                         |  |                              | 107    |   |      |   | 132  |  
|Foreign                                                                                                                                                                       |  |                              | 546    |   |      |   | (451 | )
|                                                                                                                                                                              |  |                              |        |   |      |   |      |  
|Total current (benefit)                                                                                                                                                       |  |                              | (1,208 | ) |      |   | (54  | )
|                                                                                                                                                                              |  |                              |        |   |      |   |      |  
|Deferred (benefit) provision:                                                                                                                                                 |  |                              |        |   |      |   |      |  
|Federal                                                                                                                                                                       |  |                              | (538   | ) |      |   | (517 | )
|State                                                                                                                                                                         |  |                              | (77    | ) |      |   | (74  | )
|Foreign                                                                                                                                                                       |  |                              | (130   | ) |      |   | 957  |  
|Valuation allowance                                                                                                                                                           |  |                              | 90     |   |      |   |     |  
|                                                                                                                                                                              |  |                              |        |   |      |   |      |  
|Total deferred (benefit) provision                                                                                                                                            |  |                              | (655   | ) |      |   | 366  |  
|                                                                                                                                                                              |  |                              |        |   |      |   |      |  
|Total (benefit) provision for income taxes                                                                                                                                    |  | $                            | (1,863 | ) |      | $ | 312  |  
|                                                                                                                                                                              |  |                              |        |   |      |   |      |  

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.



The reconciliation of income taxes computed using the statutory U.S. income
tax rate and the provision for income taxes for the three months ended March 31, 2005 and 2004 were as follows:



|                                                    |  |                                  |        |   |                                  |       |   |  |   |      |   |  |       |   
|--------------------------------------------------- |  | -------------------------------- | ------ | - | -------------------------------- | ----- | - |  | - | ---- | - |  | ----- | --
|                                                    |  | Three Months EndedMarch 31, 2005 |        |   | Three Months EndedMarch 31, 2004 |      
|Income taxes computed at the federal statutory rate |  | $                                | (182   | ) |                                  | 35.0  | % |  | $ | (564 | ) |  | 35.0  | % 
|State income taxes, net of federal tax benefit      |  |                                  | 82     |   |                                  | (15.8 | ) |  |   | 167  |   |  | (10.4 | ) 
|Foreign taxes at other than U.S. Statutory rate     |  |                                  | 338    |   |                                  | (65.1 | ) |  |   | 307  |   |  | (19.1 | ) 
|Reversal of prior year accrued taxes                |  |                                  | (2,200 | ) |                                  | 423.9 |   |  |   |     |   |  |      |   
|Othernet                                           |  |                                  | 9      |   |                                  | (1.7  | ) |  |   | 402  |   |  | (24.9 | ) 
|Valuation allowance                                 |  |                                  | 90     |   |                                  | (17.3 | ) |  |   |     |   |  |      |   
|                                                    |  |                                  |        |   |                                  |       |   |  |   |      |   |  |       |   
|                                                    |  | $                                | (1,863 | ) |                                  | 359.0 | % |  | $ | 312  |   |  | (19.4 | )%
|                                                    |  |                                  |        |   |                                  |       |   |  |   |      |   |  |       |   



Under the Indian
Income Tax Act, 1961, the Company's Indian subsidiary is eligible to claim a tax holiday for ten 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 March 31, 2005 and 2004, the tax holiday resulted in benefits of $0.2 when calculated at the statutory US rate. The benefits of the holiday will expire for certain of the units beginning in
2005.



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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 EndedMarch 31, |       
|                                                           |  | 2005                        |        | 2004 |  
|                                                           |  | (unaudited)                 |       
|Basic earnings (loss) per share:                           |  |                             |        |      |   |        |  
|Income (loss) from continuing operations                   |  | $                           | 1,344  |      | $ | (1,922 | )
|Income from discontinued operations, net of income taxes   |  |                             |       |      |   | 170    |  
|                                                           |  |                             |        |      |   |        |  
|Net income (loss)                                          |  | $                           | 1,344  |      | $ | (1,752 | )
|                                                           |  |                             |        |      |   |        |  
|Divided by:                                                |  |                             |        |      |   |        |  
|Weighted average common shares                             |  |                             | 52,479 |      |   | 52,226 |  
|                                                           |  |                             |        |      |   |        |  
|Net earnings (loss) per common share, Basic:               |  |                             |        |      |   |        |  
|Earnings (loss) from continuing operations                 |  | $                           | 0.03   |      | $ | (0.04  | )
|Earnings from discontinued operations                      |  |                             |       |      |   | 0.01   |  
|                                                           |  |                             |        |      |   |        |  
|Basic earnings (loss) per share                            |  | $                           | 0.03   |      | $ | (0.03  | )
|                                                           |  |                             |        |      |   |        |  
|Diluted earnings (loss) per share:                         |  |                             |        |      |   |        |  
|Income (loss) from continuing operations                   |  | $                           | 1,344  |      | $ | (1,922 | )
|Income from discontinued operations net of income taxes    |  |                             |       |      |   | 170    |  
|                                                           |  |                             |        |      |   |        |  
|Net income (loss)                                          |  | $                           | 1,344  |      | $ | (1,752 | )
|                                                           |  |                             |        |      |   |        |  
|Divided by:                                                |  |                             |        |      |   |        |  
|Weighted average common shares                             |  |                             | 52,479 |      |   | 52,226 |  
|Dilutive effect of restricted and common stock equivalents |  |                             | 244    |      |   |       |  
|                                                           |  |                             |        |      |   |        |  
|Dilutive average common shares                             |  |                             | 52,723 |      |   | 52,226 |  
|                                                           |  |                             |        |      |   |        |  
|Net earnings (loss) per common share, Diluted:             |  |                             |        |      |   |        |  
|Earnings (loss) from continuing operations                 |  | $                           | 0.03   |      | $ | (0.04  | )
|Earnings from discontinued operations                      |  |                             |       |      |   | 0.01   |  
|                                                           |  |                             |        |      |   |        |  
|Net earnings (loss)  Diluted                              |  | $                           | 0.03   |      | $ | (0.03  | )
|                                                           |  |                             |        |      |   |        |  



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 0.9 million for the three months ended March 31, 2005 and 2004, respectively. These
options were excluded from the computation of diluted earnings per share under the treasury stock method.



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 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



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iGATE CORPORATION



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



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, Hydrabad, 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 also offers training as a service to its customers.



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.



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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 quarters ended March 31, 2005 and 2004:



|                                         |  |                                   |        |                           |   |                    |  |   |        |   |  |   |        |  
|---------------------------------------- |  | --------------------------------- | ------ | ------------------------- | - | ------------------ |  | - | ------ | - |  | - | ------ | -
|                                         |  | Three Months Ended March 31, 2005 |       
|                                         |  | iGateSolutions                    |        | iGateProfessionalServices |   | iGate Corporate(1) |  |   | Total  |  
|                                         |  | (Dollars in thousands)            |       
|External revenues                        |  | $                                 | 32,711 |                           | $ | 36,457             |  | $ | 433    |   |  | $ | 69,601 |  
|                                         |  |                                   |        |                           |   |                    |  |   |        |   |  |   |        |  
|Income (loss) from operations            |  | $                                 | 241    |                           | $ | 2,949              |  |   | (3,222 | ) |  |   | (32    | )
|                                         |  |                                   |        |                           |   |                    |  |   |        |   |  |   |        |  
|Other expense, net                       |  |                                   |        |                           |   |                    |  |   | (286   | ) |  |   | (286   | )
|Minority interest                        |  |                                   |        |                           |   |                    |  |   | (84    | ) |  |   | (84    | )
|Equity in losses of affiliated companies |  |                                   |        |                           |   |                    |  |   | (117   | ) |  |   | (117   | )
|                                         |  |                                   |        |                           |   |                    |  |   |        |   |  |   |        |  
|Loss before income taxes                 |  |                                   |        |                           |   |                    |  | $ | (3,709 | ) |  | $ | (519   | )
|                                         |  |                                   |        |                           |   |                    |  |   |        |   |  |   |        |  



|                                         |  |                                   |        |   |                           |   |                    |  |   |        |   |  |   |        |  
|---------------------------------------- |  | --------------------------------- | ------ | - | ------------------------- | - | ------------------ |  | - | ------ | - |  | - | ------ | -
|                                         |  | Three Months Ended March 31, 2004 |       
|                                         |  | iGateSolutions                    |        |   | iGateProfessionalServices |   | iGate Corporate(1) |  |   | Total  |  
|                                         |  | (Dollars in thousands)            |       
|External revenues                        |  | $                                 | 34,551 |   |                           | $ | 28,858             |  | $ | 654    |   |  | $ | 64,063 |  
|                                         |  |                                   |        |   |                           |   |                    |  |   |        |   |  |   |        |  
|(Loss) income from operations            |  | $                                 | (1,538 | ) |                           | $ | 2,031              |  |   | (2,736 | ) |  |   | (2,243 | )
|                                         |  |                                   |        |   |                           |   |                    |  |   |        |   |  |   |        |  
|Other income, net                        |  |                                   |        |   |                           |   |                    |  |   | 756    |   |  |   | 756    |  
|Minority interest                        |  |                                   |        |   |                           |   |                    |  |   | (23    | ) |  |   | (23    | )
|Equity in losses of affiliated companies |  |                                   |        |   |                           |   |                    |  |   | (100   | ) |  |   | (100   | )
|                                         |  |                                   |        |   |                           |   |                    |  |   |        |   |  |   |        |  
|Loss before income taxes                 |  |                                   |        |   |                           |   |                    |  | $ | (2,103 | ) |  | $ | (1,610 | )
|                                         |  |                                   |        |   |                           |   |                    |  |   |        |   |  |   |        |  

---

|(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:



|                                                   |  |                        |         |                  |   |        
|-------------------------------------------------- |  | ---------------------- | ------- | ---------------- | - | -------
|                                                   |  | March 31,2005          |         | December 31,2004
|                                                   |  | (Dollars in thousands)
|iGate Solutions                                    |  | $                      | 97,787  |                  | $ | 101,439
|iGate Professional Services                        |  |                        | 37,470  |                  |   | 40,978 
|iGate Corporate, including discontinued operations |  |                        | 40,115  |                  |   | 37,815 
|                                                   |  |                        |         |                  |   |        
|Total assets                                       |  | $                      | 175,372 |                  | $ | 180,232
|                                                   |  |                        |         |                  |   |        



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##### Table of Contents

iGATE CORPORATION



NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Revenue and assets by geographic area consisted of the following:



|                                |  |                             |        |                  |   |       
|------------------------------- |  | --------------------------- | ------ | ---------------- | - | ------
|                                |  | Three Months EndedMarch 31,
|                                |  | 2005                        |        | 2004            
|                                |  | (Dollars in thousands)     
|Revenues:                       |  |                             |        |                  |   |       
|North America, principally U.S. |  | $                           | 59,326 |                  | $ | 53,210
|Europe                          |  |                             | 5,208  |                  |   | 5,920 
|Pacific Rim, principally India  |  |                             | 5,067  |                  |   | 4,933 
|                                |  |                             |        |                  |   |       
|Total revenues.                 |  | $                           | 69,601 |                  | $ | 64,063
|                                |  |                             |        |                  |   |       
|                                |  |                            
|                                |  | March 31,2005               |        | December 31,2004
|                                |  | (Dollars in thousands)     
|Tangible long-term assets:      |  |                             |        |                  |   |       
|North America, principally U.S. |  | $                           | 2,341  |                  | $ | 2,511 
|Europe                          |  |                             | 92     |                  |   | 106   
|Pacific Rim, principally India  |  |                             | 27,010 |                  |   | 23,197
|                                |  |                             |        |                  |   |       
|Total revenues.                 |  | $                           | 29,443 |                  | $ | 25,814
|                                |  |                             |        |                  |   |       



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



|                                      |  |                             |   |  |      |  
|------------------------------------- |  | --------------------------- | - |  | ---- | -
|                                      |  | Three Months EndedMarch 31, |  
|                                      |  | 2005                        |   |  | 2004 |  
|General Electric Company              |  |                             |   |  |      |  
|iGate Solutions                       |  | 35                          | % |  | 37   | %
|iGate Consolidated                    |  | 17                          | % |  | 21   | %
|International Business Machines Corp. |  |                             |   |  |      |  
|iGate Professional Services           |  | 23                          | % |  | 20   | %
|iGate Consolidated                    |  | 12                          | % |  |     |  
|Wachovia Corporation                  |  |                             |   |  |      |  
|iGate Professional Services           |  | 17                          | % |  | 15   | %
|iGate Consolidated                    |  |                            |   |  |     |  



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##### Table of Contents

|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, offshore outsourcing, enterprise resource planning (ERP) package implementation and integration services, software development and applications maintenance
outsourcing.



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, business intelligence and embedded
systems development. 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 offer offshore-based BPO services to our clients in various industries. Some of
our current service offerings are non-IT related and include services as diverse as call centers, clinical trials management and mortgage and claims processing. 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 savings as high as 50% over US/European labor and infrastructure costs.



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##### Table of Contents

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 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.



Effective April 1, 2004, we recast our segments to include the operations of Global Financial Services (GFS) as part of the iGate Professional
Services (IPS) segment. Previously, GFS was included in the iGate Solutions segment. All prior periods have been reclassified to reflect the change to our segment reporting. The following discussion also compares our operating segments
without the operations of iGate Australia Pty Ltd. and Direct Resources Ltd., which are being treated as discontinued operations. Prior to their sale, both entities were part of our IPS operating segment.



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 (business process outsourcing) services using an onsite/offshore delivery model. This delivery model helps clients achieve greater cost effectiveness through labor arbitrage.



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 global development centers (GDCs) located in Canada and the U.S. The centers can deliver both near shore (work performed
primarily at the client site) 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 iGate Solutions segment revenues are derived through iGS, our publicly
held Indian subsidiary. Our iGate Solutions segment has approximately 3,950 employees.



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.



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Certain contracts are time-and-materials based where 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 accounts for 35% of its revenues. iGS is a Global Preferred Partner of GE. Its Global Preferred Partnership status extends through the
end of 2006.



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 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 23% and 17% of IPS revenues, respectively. IPS has approximately 1,100 employees.



iGate Corporate (iGate)



Our iGate Corporate segment includes the operations of jobcurry Systems Private Ltd. (jobcurry), 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. These entities are excluded from the above segments due largely to their dissimilar service offerings and certain economic characteristics. This segment has approximately 170 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 March 31, 2005 as Compared to the Three Months Ended March 31, 2004:



iGate Solutions



Revenues for iGate Solutions for the three months ended March 31, 2005 were
$32.7 million, a decrease of $1.8 million or 5.2%, as compared to $34.6 million for the three months ended March 31, 2004. Our customers



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continue to move portions of the work we used to do for them in the U.S. to India, at much lower billing rates, negatively affecting our revenue base. We
have also been unable to increase our non-GE revenues as rapidly as we expected.



The gross margin as a percentage of sales (gross margin percentage) for iGate Solutions was 29.1% for the three months ended March 31, 2005, as compared to 30.0% for the three months ended March 31, 2004.
The factors contributing to the decline in gross margins were a combination of pricing pressures from customers, higher utilization of subcontracted labor versus salaried consultants, wage increases and project cost overruns related to direct labor
on certain projects.



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 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 March 31, 2005 were $9.3 million or 28.4% of
revenues, as compared to $11.9 million or 34.4% of revenues for the three months ended March 31, 2004. The $2.6 million decrease in S,G&A costs was a result of our recognition of accelerated compensation expense in the fourth quarter due to the
modification of the Quintant deal and the second quarter 2004 restructuring of our UK business. Compensation cost savings during the quarter related to the Quintant Deal were approximately $0.8 million and costs associated with operations prior to
the restructuring of the UK business were approximately $0.8 million. Other S,G&A cost reductions in salary and travel account for the remaining $1.0 million of costs decreases. These decreases in costs were somewhat offset by increases in
depreciation on our Whitefield campus. Until we begin to grow our revenues, we expect our costs to approximate 30% of revenues during the upcoming year.



Operating income as a percentage of sales (operating income percentage) for the three months ended March 31, 2005 was 0.7%, as compared to an
operating loss as a percentage of sales percentage of 4.5% for the three months ended March 31, 2004. Our operating income for the current period was due to decreases in S,G&A costs attributable to the modification of the Quintant deal and the
restructuring of the UK business. We believe we have the necessary cost infrastructure in place and expect to become profitable as revenue grows.



iGate Professional Services (IPS)



Revenues for IPS for the three months ended March 31, 2005 were $36.5 million, an increase of $7.6 million or 26.3%, as compared to $28.9 million for
the three months ended March 31, 2004. Overall demand for our staffing services in the financial services sector has increased for the quarter as we continue to see favorable trends in the IT services market.



Gross margin percentage for IPS was 20.6% for the three months ended March
31, 2005, as compared to 21.9% for the three months ended March 31, 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 three months ended March 31, 2005 were $4.6 million or 12.5% of revenues, as compared to $4.3
million or 14.9% of revenues the three months ended March 31, 2004. S,G&A costs did not increase significantly as we have been able to control our costs through cost management and restructurings in the segment. As our revenues continue to grow,
S,G&A costs as a percentage of revenues should continue to decline.



Operating income percentage was 8.1% for the three months ended March 31, 2005 and 7.0% for the three months ended March 31, 2004. Operating income increased by $1.0 million for the three months ended March 31, 2005, primarily due to
increases in revenue.



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iGate Corporate (iGate)



Revenues for iGate for the three months ended March 31, 2005 were $0.4 million, a decrease of $0.3 million or 33.8% from
revenues of $0.7 million for the comparable three months ended March 31, 2004. Our revenues for DiagnoSearch, ICRI and jobcurry have decreased for the quarter due to the end of certain clinical studies and a slowing in recruiting and training.



Gross margin percentage was 41.3% for the three months ended
March 31, 2005, as compared to 52.1% for the three months ended March 31, 2004. Declines in the revenues for DiagnoSearch and ICRI have had a negative impact on our gross margin percentage.



S,G&A costs were $3.4 million for the three months ended March 31, 2005,
as compared to $3.1 million for the three months ended March 31, 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 March 31, 2005 was $3.2 million, as compared to $2.7 million for the quarter ended
March 31, 2004. The loss increased due to revenue declines in DiagnoSearch and ICRI and an increase in S,G&A costs for the quarter.



Other Income (Expense) Components



Other expense, net for the three months ended March 31, 2005 was $0.3 million, as compared to other income, net of $0.8 million for the three months ended
March 31, 2004. Components of other expense, net for the quarter were $0.6 million of unfavorable foreign currency translation losses on our intercompany debt with India and $0.3 million of losses related to our hedging activities in India. In the
first quarter of 2004, we had favorable foreign currency translation gains of $0.5 million. Currently, our hedging activities do not meet the minimum requirements for effective hedge treatment under current accounting rules. As a result, we are
required to recognize any unrealized gains or losses as current period income or loss. Interest income for the three months ended March 31, 2005 was $0.6 million, an increase of $0.4 million, as compared to $0.2 million for the three months ended
March 31, 2004. The increase was due to increases in investment yields on our available cash and cash equivalents in India.



We recognized a loss on affiliated companies of $0.1 million for each of the three months ended March 31, 2005 and 2004. These losses were related to our
investments in CIBER and Software AG.



Minority interest income
was immaterial for the three months ended March 31, 2005 and 2004.



Our income tax benefit was $1.9 million at an effective rate of 359% for the three months ended March 31, 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 $0.3
million at a negative effective rate of approximately 19% for the three months ended March 31, 2004. The significant items affecting the effective rate were our Indian tax holiday and valuation allowances recorded against certain deferred tax assets
by iGS.



On a consolidated basis, we had net income of $1.3
million for the three months ended March 31, 2005, as compared to a net loss of $1.8 million for the three months ended March 31, 2004. Our net income in 2005 was



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mainly due to reversals of certain income tax accruals recorded in prior years. Our net loss in 2004 was primarily due to our increased investment in
infrastructure costs of our offshore locations and valuation allowances recorded against deferred tax assets.



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 three months ended March 31, 2004, our discontinued operations, which is comprised of our Australian and DRI
entities, had after tax income of $0.2 million. We had no discontinued operations activity for the first quarter of 2005.



Liquidity and Capital Resources



Our working capital decreased $1.7 million from December 31, 2004 to March 31, 2005. Our net accounts receivable increased by $2.1 million from December
31, 2004 to $63.5 million, and our days outstanding remained constant at 87 days.



At March 31, 2005, we had cash and short-term investments of $21.7 million and $32.3 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 March 31, 2005 and December 31, 2004 consisted mainly of highly liquid short-term investments. Our focus over the past two years has been 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.



Cash from Operations



Cash used by operations was $4.5 million for the quarter ended March 31, 2005. Factors contributing to our use of cash were changes in accounts receivable of $2.5 million and other components of working capital of $6.1 million
partially offset by net income of $1.3 million. Significant noncash items in the quarter totaled $2.7 million and included depreciation and amortization, bad debt allowance, minority interest equity losses, deferred taxes, the release of tax
reserves and amortization of deferred compensation.



Cash used
by operations for the quarter ended March 31, 2004 was $5.7 million. Contributing factors to our use of cash were net losses of $1.8 million and changes in accounts receivable of $12.4 million, partially offset by favorable changes in other working
capital items totaling $5.1 million. Noncash items in the quarter ended March 31, 2004 were $3.4 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 $2.6 million for the quarter ended
March 31, 2005, as compared to cash provided of $0.2 million for the same quarter of 2004.



Our capital expenditures were $5.8 million and $6.0 million for the quarters ended March 31, 2005 and 2004, respectively. A significant portion of the capital expenditures in both periods were due to the construction
of our Whitefield campus located in India.



We have decreased
our short-term investment portfolio by approximately $3.5 million and $6.8 million during the three months ended March 31, 2005 and 2004, respectively. Portions of the portfolio liquidated was used to fund the Whitefield construction project.



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Financing Activities



Cash provided by financing activities was $0.2 million in the current quarter and $0.4 million from the same quarter 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 March 31, 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 |  | $                | 265   |      | $ |     |  | $    |    |      | $ |           |  | $ |    |  | $ |   
|Lease costs of office closure      |  |                  | 2,406 |      |   | 853  |  |      | 832 |      |   | 832        |  |   | 742 |  |   | 520
|                                   |  |                  |       |      |   |      |  |      |     |      |   |            |  |   |     |  |   |    
|Total                              |  | $                | 2,671 |      | $ | 853  |  | $    | 832 |      | $ | 832        |  | $ | 742 |  | $ | 520
|                                   |  |                  |       |      |   |      |  |      |     |      |   |            |  |   |     |  |   |    



Other Items



On September 16, 2004, we renewed our secured credit
facility (Renewed Facility) with PNC Bank N.A. (PNC). 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 provisions of
the Renewed Facility requires us to maintain unrestricted cash and cash equivalents of at least $30.0 million and 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 March 31, 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. Total estimated costs of the project will approximate $15.0
million. 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) |  | 2006 |       | 2007 |   | 2008  |  | 2009 |       | Thereafter
|Leases                 |  | $    | 2,494 |      | $ | 1,803 |  | $    | 1,196 |            | $ | 471 |  | $ | 1,013
|                       |  |      |       |      |   |       |  |      |       |            |   |     |  |   |      



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Off-Balance Sheet Arrangements



We do not have any off-balance arrangements.



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 Sensitivity



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 the 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.



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 MARCH 31, 2005



|                          |  |                    |  |                           |  |                                   |               |        |              |                                               |   |      
|------------------------- |  | ------------------ |  | ------------------------- |  | --------------------------------- | ------------- | ------ | ------------ | --------------------------------------------- | - | -----
|                          |  |                    |  |                           |  | (Dollars and Rupees in Thousands)
|                          |  | Maturity Date      |  | Strike Priceat Rupee Rate |  | Amount                            |               | Option |              | Net UnrealizedGains/(Losses)December 31, 2004
|FORWARD CONTRACTS         |  |                    |  |                           |  |                                   |               |        |              |                                               |   |      
|From:                     |  | June 29, 2005      |  | 43.98                     |  |                                   |               |        |              |                                               |   |      
|To:                       |  | September 29, 2005 |  | 44.80                     |  |                                   |               |        |              |                                               |   |      
|                          |  |                    |  |                           |  |                                   |               |        |              |                                               |   |      
|Subtotal                  |  |                    |  |                           |  | $                                 | 12,000        |        |              |                                               | $ | 58   
|                          |  |                    |  |                           |  |                                   |               |        |              |                                               |   |      
|CURRENCY OPTION CONTRACTS |  |                    |  |                           |  |                                   |               |        |              |                                               |   |      
|From:                     |  | June 27, 2005      |  | 42.80                     |  | $                                 | 15,000        |        | Buy/Sell Put |                                               |   |      
|To:                       |  | January 31, 2006   |  | 45.75                     |  | $                                 | 16,000        |        | Sell Call    |                                               |   |      
|                          |  |                    |  |                           |  |                                   |               |        |              |                                               |   |      
|Subtotal                  |  |                    |  |                           |  | $                                 | 31,000        |        |              |                                               | $ | (34) 
|                          |  |                    |  |                           |  |                                   |               |        |              |                                               |   |      
|STRIPS                    |  |                    |  |                           |  |                                   |               |        |              |                                               |   |      
|                          |  | December 30, 2005  |  |                          |  | $                                 | 750 (USD)     |        |              |                                               | $ | 11   
|                          |  | January 31, 2006   |  |                          |  | $                                 | 750 (USD)     |        |              |                                               | $ | 7    
|                          |  |                    |  |                           |  |                                   |               |        |              |                                               |   |      
|                          |  |                    |  |                           |  | $                                 | 1,500 (USD)   |        |              |                                               | $ | 18   
|                          |  |                    |  |                           |  |                                   |               |        |              |                                               |   |      
|PRINCIPAL                 |  |                    |  |                           |  |                                   |               |        |              |                                               |   |      
|                          |  | September 1, 2006  |  |                          |  | $                                 | 2,500 (USD)   |        |              |                                               | $ | (200)
|                          |  |                    |  |                           |  | $                                 | 113,750 (INR) |        |              |                                               |   |      
|                          |  |                    |  |                           |  |                                   |               |        |              |                                               |   |      
|Total                     |  |                    |  |                           |  |                                   |               |        |              |                                               | $ | (158)
|                          |  |                    |  |                           |  |                                   |               |        |              |                                               |   |      



The net unrealized gains/(losses) were
calculated using a Rupee Exchange rate of 43.6870 at March 31, 2005.



As of March 31, 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



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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 March 31, 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 loss of $0.3 million as Other Income.



As of March 31, 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 March 31, 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 gain of $0.1 million as Other Income.



As of March 31, 2005, our principal swaps to hedge
intercompany debt from iGS to iGate have maturity dates that range from three to eighteen months. 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 December 31, 2004, 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
Sensitivity



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 March 31, 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 March 31, 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



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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 rate exchange 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 March 31, 2005.



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 $5.5 million or 8.6% for the three months ended March 31, 2005, as compared to the three months ended March 31, 2004. We have experienced increases in demand in the financial services solutions and North America staffing businesses. 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.



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. Our ODCs are located in India and China, and as part of the sales process, we encourage potential customers to visit our ODCs, including our
new campus located in Bangalore. As we continue to integrate our 2003 and 2004 acquisitions into iGS and build our global sales force, we expect to see both revenue and profitability improvements in the second half of 2005.



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



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 following analysis presents the hypothetical changes in fair values of
public equity investment that is sensitive to changes in the stock market (in millions):



|                   |  |                                                             |     |                                |   |                                                             |  |   |     |  |     |     |     |   |     |  |   |     |  |   |    
|------------------ |  | ----------------------------------------------------------- | --- | ------------------------------ | - | ----------------------------------------------------------- |  | - | --- |  | --- | --- | --- | - | --- |  | - | --- |  | - | ---
|                   |  | Valuation of securitiesgiven X% decrease ineach stock price |     | Fair Value as ofMarch 31, 2005 |   | Valuation of securitiesgiven X% increase ineach stock price
|                   |  | (75%)                                                       |     | (50%)                          |   | (25%)                                                       |  |   | 25% |  | 50% |     | 75%
|Corporate equities |  | $                                                           | 0.1 |                                | $ | 0.2                                                         |  | $ | 0.3 |  | $   | 0.4 |     | $ | 0.5 |  | $ | 0.6 |  | $ | 0.7
|                   |  |                                                             |     |                                |   |                                                             |  |   |     |  |     |     |     |   |     |  |   |     |  |   |    



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This equity security is held for purposes other than trading. The model technique used measures the
hypothetical change in fair values arising from selected hypothetical changes in the stocks price. Stock price fluctuations of plus or minus 25%, 50% and 75% were selected based on the probability of their occurrence.



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
|------- | -----------------------



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 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



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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



There have been no significant changes in the Companys internal control over financial reporting during the most recently completed fiscal quarter
that have materially affected, or are reasonable likely to materially affect, the Companys internal control over financial reporting.



PART II.    OTHER INFORMATION



|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.



(b)    Reports on
Form 8-K



The Company filed a Form 8-K dated February 28, 2005
disclosing the Companys issuance of 45,000 stock options to its outside directors.



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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
|             |  |                  
|May 10, 2005 |  | By:               |  | /s/    SUNIL
WADHWANI                 
|             |  |                   |  | Sunil Wadhwani                        
|             |  |                   |  | Co-Chairman of the Board of Directors,
|             |  |                   |  | Chief Executive Officer, and Director 
|             |  |                  
|May 10, 2005 |  | By:               |  | /s/    MICHAEL
ZUGAY                  
|             |  |                   |  | Michael Zugay                         
|             |  |                   |  | Senior Vice President and             
|             |  |                   |  | Chief Financial Officer               



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EXHIBIT INDEX





|              |  |                                                                                                                        
|------------- |  | -----------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  |                                                                                                                        
|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.



29