IGATE CAPITAL CORP - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
[X]Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934

For the fiscal year ended December 31, 2000

[_]Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

Commission File Number 000-21755

iGATE CAPITAL CORPORATION
(formerly Mastech Corporation)
(Exact name of registrant as specified in its charter)

PENNSYLVANIA 25-1802235
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

10 Foster Plaza, 5th Floor
680 Andersen Drive
Pittsburgh, Pennsylvania 15220
(Address of principal executive (Zip Code)
offices)

Registrant's telephone number, including area code: (412) 503-4450

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01
par value

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of February 28, 2001 (based on the closing price of such stock as
reported by NASDAQ on such date) was $61,024,268.

The number of shares of the registrant's Common Stock, par value $.01 per
share, outstanding as of February 28, 2001 was 51,235,814 shares.

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in a definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement, prepared for the Annual
Meeting of Shareholders scheduled for June 8, 2001, to be filed with the
Commission are incorporated by reference into Part III of this report.

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iGATE CAPITAL CORPORATION
2000 FORM 10-K

TABLE OF CONTENTS

Page
----

PART I

ITEM 1. BUSINESS...................................................... 1

ITEM 2. PROPERTIES.................................................... 14

ITEM 3. LEGAL PROCEEDINGS............................................. 14

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 14

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS....................................................... 15

ITEM 6. SELECTED FINANCIAL DATA....................................... 16

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS..................................... 17

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.... 25

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... 25

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE...................................... 56

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT................ 56

ITEM 11. EXECUTIVE COMPENSATION........................................ 56

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................... 56

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 56

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-
K............................................................. 56

SIGNATURES.............................................................. 62

PART I

ITEM 1. BUSINESS

Overview

This Annual Report on Form 10-K ("Form 10-K") contains statements that are
not historical facts and that constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. These
statements can be identified by the use of words such as "believes," "expects,"
"may," "will," "should," "intends," "continue," "anticipates" or by similar
expressions, and can also be found in discussions of our strategy and our
plans. These statements are based on information currently available to us, and
we assume no obligation to update these statements as circumstances change.
Among other forward-looking statements, certain information related to the
reorganization, name change, change of strategy, and change in segmentation of
our business that we effected in 2000, including statements contained in the
sections of this Form 10-K entitled "Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" ("MD&A") is forward-
looking. Such forward-looking information involves important risks and
uncertainties that could cause our actual results to differ materially from
those expressed in any forward-looking statements. While we cannot predict all
of these risks and uncertainties, important risk factors that could cause
actual results to differ materially from our current beliefs and expectations
are discussed in the section of this Form 10-K entitled "Risk Factors" and in
other sections of this Form 10-K, including MD&A.

iGate Capital Corporation, formerly named Mastech Corporation, was
incorporated in Pennsylvania on November 12, 1996 and, through operating
subsidiaries, is a worldwide provider of information technology ("IT") services
and eServices to large and medium-sized organizations. For the first two months
of 2000, we conducted business through Mastech Systems Corporation, a
subsidiary of Mastech Corporation.

In March 2000, we announced an internal reorganization, changed our name to
iGate Capital Corporation and transferred substantially all of the assets of
Mastech Systems Corporation to subsidiary operating companies. This
reorganization enabled us to identify and penetrate emerging IT and eServices
markets quickly and effectively. In addition, this strategy enabled us to
expand our existing portfolio of services as well as create new service
offerings. We also acquired majority interests or made strategic investments in
a number of companies in the eServices market sector.

Our operating subsidiaries provide clients with a source for a broad range
of IT applications solutions and eServices, including: client/server design and
development, conversion/migration services, enterprise resource planning (ERP),
package implementation services, electronic business systems and applications
maintenance outsourcing. These services are provided in a variety of computing
environments and use leading technologies, including client/server
architecture, object-oriented programming languages and tools, distributed
database management systems and the latest networking and communications
technologies.

Reportable Financial Segments

In the third quarter of 2000, we reevaluated the way we managed our
operations, and recast our business into seven segments. The new segmentation
reflects the way we manage our operating businesses. Previously, we had
operated in two segments: "Solutions" and "Staffing," and we had classified
"Staffing" as a discontinued operation that we had intended to sell. In
connection with the reevaluation of our business, we have decided not to sell
our Staffing business, and we are no longer presenting it as a discontinued
operation. Our seven segments consist of Emplifi, Mascot, eJIVA, Staffing
Services, Value Services, Emerging eServices, and iGate Corporate. For
information about each segment's revenues and profits or losses, see MD&A and
Note 14 to our consolidated financial statements for the year ended December
31, 2000 included elsewhere in this Form 10-K.

1

Emplifi

The Emplifi segment consists of Emplifi, Inc., the Company's wholly-owned
subsidiary. Emplifi provides custom application development and design services
and package implementation and application support services to large and
medium-sized client organizations. Emplifi's capabilities include client
directed software design and customization; web-focused strategic consulting;
domain expertise in a variety of industries; and enterprise application
integration services. Most of Emplifi's client engagements involve the
development of customized software solutions.

Emplifi markets its services to application development managers and
information technology directors within prospective client companies. Emplifi
also responds to requests for proposals for preferred vendor status to win
long-term engagement relationships. Emplifi typically enters into an initial
client contract with a relatively short duration. This contract is often
extended, and the average duration of a client project is approximately nine to
ten months. Emplifi's contracts generally provide for payment on a time-and-
materials basis, based on the number of consultant hours worked on the project.
Clients typically have the right to cancel contracts with minimal notice.

Emplifi serves large and medium-sized client organizations in a wide variety
of industries. During the year ended December 31, 2000, Emplifi's top five
clients accounted for approximately 18% of its revenues. Emplifi did not have a
client that accounted for more than 10% of revenues.

Emplifi is headquartered in Pittsburgh, Pennsylvania, and maintains offices
in San Francisco, California; Dallas, Texas; and Raleigh, North Carolina.
Emplifi has over 1,100 employees.

Mascot

The Mascot segment consists of Mascot Systems Ltd. ("Mascot Systems"), the
Company's majority-owned Indian subsidiary. Mascot Systems effected an initial
public offering of its Common Stock on several stock exchanges in India in June
2000. Mascot provides custom and package application development, application
maintenance outsourcing, business intelligence services, and application re-
engineering. Mascot utilizes an Offshore Development Center ("ODC") model,
which offers clients certain advantages compared to domestic development,
including significant cost savings and faster "around the clock" delivery.
Mascot provides many of its service offerings through its ODCs in Bangalore,
Pune, and Chennai, India. In 2000, approximately 18% of Mascot's revenues were
generated utilizing this ODC model.

Mascot markets its services to chief financial officers and chief
information officers within prospective client companies. Mascot typically
enters into an initial client contract with an average duration of
approximately nine to ten months. Mascot's fixed price contracts generally
provide for payment based upon deliverables and project milestones reached.
Mascot's other contracts provide for payment on a time-and-materials basis,
based on the number of consultant hours worked on the project. Clients
typically have the right to cancel contracts with minimal notice. Contracts
with deliverables or project milestones can provide for certain penalties if
the deliverables or project milestones are not met within a contract timeline.

Mascot serves large and medium-sized client organizations in a wide variety
of industries. Mascot is a Global Preferred Partner of General Electric. During
the year ended December 31, 2000, Mascot derived approximately 57% of its
revenues from its top five clients. General Electric Co. accounted for
approximately 34% of Mascot's 2000 revenues.

Mascot is headquartered in Bangalore, India and has offices in the Indian
cities of Chennai, Pune, and Mumbai. Mascot's U.S. headquarters is in
Pittsburgh, Pennsylvania. Mascot also has offices in Singapore, the
Netherlands, England, Japan, Sweden and Canada. Mascot has over 1,200 employees
worldwide.

2

eJIVA

The eJIVA segment consists of eJIVA, Inc., a wholly-owned subsidiary of the
Company. eJIVA provides custom enterprise application implementation, customer
relationship management applications implementation, supply chain management
applications implementation and business process consulting. eJIVA's
capabilities include software design and customization; strategic consulting;
domain expertise in a variety of industries; and enterprise application
integration services. Most of eJIVA's client engagements involve the
development of customized software solutions.

eJIVA markets its services to information technology directors and chief
information officers within prospective client companies. eJIVA typically
enters into an initial client contract with an average duration of
approximately nine to ten months. eJIVA's fixed price contracts generally
provide for payment based upon deliverables and project milestones reached.
Some of eJIVA's contracts provide for payment based on a time-and-materials
basis, based on the number of consultant hours worked on the project. Clients
typically have the right to cancel contracts with minimal notice.

eJIVA serves large and medium-sized client organizations in a wide variety
of industries. During the year ended December 31, 2000, approximately 37% of
eJIVA's revenues were derived from its top five clients. General Electric Co.
accounted for approximately 18% of eJIVA's 2000 revenues.

eJIVA is headquartered in Pittsburgh, Pennsylvania, and maintains offices in
Atlanta, Georgia; Cincinnati, Ohio; Columbus, Ohio; Pleasanton, California; and
Washington, D.C. eJIVA has more than 650 employees.

Emerging eServices

The Emerging eServices segment consists of RedBrigade Ltd. and its European
subsidiaries ("RedBrigade"), itiliti, Inc. ("itiliti"), Innovative Resource
Group, Inc. ("IRG"), Symphoni Interactive, LLC ("Symphoni"), MobileHelix, Inc.
("MobileHelix"), and jobcurry.com, Inc. ("jobcurry.com"). RedBrigade,
MobileHelix, and jobcurry.com are wholly-owned subsidiaries of the Company.
itiliti, IRG, and Symphoni are majority-owned subsidiaries of the Company. The
companies within the Emerging eServices segment are younger, less mature
entities which are individually involved in separate niches in and related to
the eServices market. RedBrigade provides web integration services in the
European market. MobileHelix is in the process of developing wireless
applications for the financial services market. itiliti develops and markets
software for the management of outside vendors. IRG is developing business
intelligence software, and also provides services in the data
warehousing/business intelligence space. Symphoni provides application
development services to the financial services industry. jobcurry.com provides
recruiting and placement services for iGate companies and outside customers.

The Emerging eServices companies market their services to chief financial
officers, and chief technology officers within prospective client companies.
The companies' fixed price contracts generally provide for payment based upon
deliverables and the achievement of project milestones. A portion of the
contracts provide for payment based on a time-and-materials basis, based on the
number of consultant hours worked on the project. Clients typically have the
right to cancel contracts with minimal notice. jobcurry.com's contracts
generally provide for the payment of a fee upon the placement of a candidate.
Companies in the Emerging eServices segment serve large and medium-sized client
organizations in a wide variety of industries. The Emerging eServices segment
did not have a customer accounting for 10% of its sales.

RedBrigade is headquartered in Bracknell, England, and has offices in
Ireland, Scotland, and South Africa. itiliti is headquartered in Minneapolis,
Minnesota. IRG is headquartered in Pittsburgh, Pennsylvania. Symphoni is
headquartered in San Francisco, California and has offices in Pittsburgh,
Pennsylvania; New York, New York; and Charlotte, North Carolina. MobileHelix is
headquartered in Chantilly, Virginia. jobcurry.com is headquartered in Pune,
India. The companies in the Emerging eServices segment collectively have more
than 400 employees.

3

Value Services

The Value Services segment consists of Chen & McGinley, Inc. ("CMI"), Global
Financial Services of Nevada, Inc. ("GFS"), and Direct Resources (Scotland)
Ltd. ("Direct Resources"), all wholly-owned subsidiaries of the Company. The
Value Services companies provide IT services that are solely managed by the
client to large and medium-sized organizations, with a concentration in the
financial services industry. The capabilities of the companies in the Value
Services segment include IT consulting services and application solutions.

Companies in the Value Services segment market their services to project
managers and IT directors within prospective client companies and respond to
requests for proposals for preferred vendor status to win long-term engagement
relationships. The Value Services companies typically enter into an initial
client contract with a relatively short duration. This contract is often
extended, and the average duration of a client project is approximately six
months. All Value Services contracts provide for payment on a time-and
materials basis, based on the number of consultant hours worked on the project.
Clients typically have the right to cancel contracts with minimal notice.
Intelligent Finance accounted for approximately 11% of the 2000 revenues of the
Value Services segment.

CMI is headquartered in San Francisco, California. GFS is headquartered in
San Francisco, California and has offices in New York, New York. Direct
Resources is headquartered in Scotland. The companies in the Value Services
segment collectively have more than 200 employees.

Staffing Services

The Staffing Services segment consists of Mastech Application Services, Inc.
("MAS"), Quantum Information Resources, Ltd. ("Quantum"), and Mastech Asia
Pacific Ltd. ("MAP"), all wholly-owned subsidiaries of the Company. MAS
provides staff augmentation services to large integrators in the United States.
Quantum provides IT and staff augmentation services to large and medium-sized
companies in Canada. MAP provides IT and staff augmentation services to large
and medium-sized companies in Australia. All consultants in Staffing Services
are supervised and instructed by onsite client personnel. Capabilities of the
companies in the Staffing Services segment include data processing and IT
maintenance and support.

The companies in the Staffing Services segment market their services to
project managers and IT directors within prospective client companies and
respond to requests for proposals for preferred vendor status to win long-term
engagement relationships. Staffing Services companies typically enter into an
initial client contract with a relatively short duration. This contract is
often extended, and the average duration of a client project is approximately
six months. All Staffing Services' contracts provide for payment on a time-and-
materials basis, based on the number of consultant hours worked on the project.
Clients typically have the right to cancel contracts with minimal notice.

Electronic Data Systems Corp. accounted for approximately 12% of the
Staffing Services segment's 2000 revenues.

MAS is headquartered in Pittsburgh, Pennsylvania. Quantum is headquartered
in Mississauga, Canada. MAP is headquartered in Canberra, Australia, and has
offices in Melbourne, Sydney, and Brisbane, Australia. The companies in the
Staffing Services segment collectively have more than 650 employees.

The Staffing Services segment was reported as a discontinued operation from
the first through the third quarters of 2000, when the Company was actively
seeking buyers for the segment. The Company has since reevaluated its business
and has decided to retain the segment.

4

iGate Corporate

The iGate Corporate segment is a non-revenue-producing segment that captures
corporate costs, joint ventures, other strategic investment activity, and other
unallocated charges.

Competition

The IT services and eServices industries are highly competitive, and are
served by numerous national, regional, and local firms. Primary competitors
include participants from a variety of market segments, including the "Big
Five" accounting firms, systems consulting and implementation firms, Internet
services and consulting companies, applications software firms, service groups
of computer equipment companies, general management consulting firms,
programming companies, and temporary staffing firms. We believe that the
principal competitive factors in the IT services and eServices markets include
the range of services offered, technical expertise, responsiveness to client
needs, speed in delivery of IT solutions, and quality of service and perceived
value. We believe that we compete favorably with our principal competitors with
respect to these factors. In addition to facing competition for clients, we may
also face competition from capital providers (including publicly-traded
Internet companies, venture capital companies, and large corporations) should
we seek to strategically acquire and invest in new eServices companies and
businesses. Competition for acquisition candidates, as well as for clients and
strategic relationships, may also develop among subsidiaries of iGate or
between iGate and one or more of our operating subsidiaries or other companies
in which we have equity investments.

Our Partner Companies and Venture Fund

In February 2000, we formed Highgate Ventures I, L.P., (formerly, iGate
Ventures I, L.P.), a venture fund ("Highgate" or the "Venture Fund"). The
Venture Fund invests in eServices companies ranging from speech recognition to
web-based education and web-based professional certification. iGate has funded
100% of the cost of the operations of the Venture Fund, and 100% of the costs
of the Venture Fund's investments. We are entitled to a preferred return upon
the liquidation of these investments equal to our investments in the Venture
Fund plus 80% of the net capital gains of the Venture Fund. To date we have
invested approximately $20 million in Highgate. In February 2001, we ceased
funding future investments in Highgate in order to focus on our portfolio of
operating subsidiaries. The Venture Fund is currently attempting to obtain
additional financing outside of iGate. If the Venture Fund is unable to raise
the required funds by mid-2001, then the Venture Fund will cease operations.

The Venture Fund accounts for its investments in Versata, Inc. and
Speechworks, Inc. as available-for-sale securities under appropriate
guidelines. The investments are marked to market on a monthly basis. The
Venture Fund recognizes its proportionate share of income or loss in its
investment in VCampus, Inc. under the equity method of accounting. The Venture
Fund accounts for its investments in Brainbench, Inc., Bluewater Information
Convergence, Inc., Escend Technologies, Inc., and OrderCare Corporation at
cost, until either a public offering or an additional round of financing causes
us to account for our investment in a different way.

In March 2000, we acquired a 25% ownership in Air2Web, Inc. ("Air2Web"), a
startup company providing wireless application services that is incorporated in
Georgia. The investment has since been diluted to 22%. Our investment in
Air2Web is accounted for under the equity method of accounting. Our
proportionate share of Air2Web's profit or loss and any goodwill associated
with the purchase, is accounted for as part of Other Income in our Consolidated
Statement of Operations.

As part of our initial investment in Air2Web, we were issued warrants to
purchase 1,872,660 shares of Air2Web Series "B" Preferred stock at $2.67 per
share ("Series B Warrants"), which were to expire on December 31, 2000. In
December 2000, we made a decision not to exercise the Series B Warrants, in
order to conserve our cash, and we requested an extension of the time period
for exercise of the warrants. Air2Web agreed to extend the time period for
exercise of a portion of the warrants until June 30, 2001, provided that we

5

assigned the remaining warrants to Sunil Wadhwani, our Co-Chairman and Chief
Executive Officer, Ashok Trivedi, our Co-Chairman and President and two
executive officers of Air2Web and provided further that these individuals
immediately exercised the warrants. In December 2000, iGate assigned 749,063
Series B Warrants to these individuals, and they exercised their warrants. As a
result of these transactions, we now hold warrants to purchase 1,123,597 shares
of Air2Web Series "B" Preferred Stock at $2.67 per share, exercisable until
June 30, 2001.

In April 2000, we acquired an approximate 50% ownership in Planning
Technologies Inc. ("PTI"), an Atlanta-based corporation, with a combination of
cash and the merger of our existing ENS, Inc. operating subsidiary. Our
investment in PTI is accounted for under the equity method of accounting. Our
proportionate share of PTI's profit or loss is accounted for as part of Other
Income in our Consolidated Statement of Operations. In February 2001, we sold
our interest in PTI as discussed in "Recent Developments".

Synerge, LLC, which conducts business under the name iProcess ("iProcess"),
is our web-based business process outsourcing partnership with GE Capital
Equity Investments, Inc. ("GE Capital"). We have a 50% ownership interest in
iProcess and account for our investment under the equity method of accounting.
Our proportionate share of profit or loss is reported as part of Other Income
in our Consolidated Statement of Operations.

The following is a listing as of March 1, 2001 of all of our principal
operating subsidiaries and joint ventures investments during 2000, including
the percentage of our ownership in each of these companies:

Subsidiary/Company Percentage
www.igatecapital.com Business Description Owned by iGate
-------------------- -------------------- --------------

Emplifi, Inc. Custom application and design services 100%
www.emplifi.com

Mascot Systems Ltd. Web-focused offshore services 89%
www.mascotsystems.com

Red Brigade, Ltd. Web integration services for the European marketplace 100%
www.redbrigade.com

Chen & McGinley, Inc. Consulting and application solutions 100%
www.chen-mcginley.com

eJIVA, Inc. Customer care solutions/Internet trading solutions 100%
www.ejiva.com

itiliti, Inc. e-Vendor management 89%
www.ex-tra-net.com

Innovative Resource Business intelligence data management 70%
Group, Inc.
www.irgcorp.com

jobcurry.com. Worldwide recruiting 100%
www.jobcurry.com

Mobilehelix, Inc. Wireless application service provider 100%
www.mobilehelix.com

Direct Resources Co-managed projects--Scotland 100%
(Scotland) Ltd.

Global Financial Co-managed projects--U.S. 100%
Services of
Nevada, Inc.

Mastech Application Client-managed projects--U.S. 100%
Services, Inc.

Quantum Information Client-managed projects--Canada 100%
Resources, Ltd.

6

Subsidiary/Company Percentage
www.igatecapital.com Business Description Owned by iGate
-------------------- -------------------- --------------

Mastech Asia Pacific, Client-Managed Projects--Australia 100%
Pty Ltd.

Symphoni Interactive, Application development for financial services industry 90%
LLC
www.symphoni.com

IProcess Web-based business process outsourcing 50%
www.iprocessintl.com

Air2Web Wireless applications service provider 22%
www.air2web.com

All of our ownership positions set forth in the charts in this Item 1 have
been calculated based on the issued and outstanding common stock or membership
interests, as the case may be, of each company/entity, assuming the issuance of
common stock on the conversion or exercise of preferred stock and convertible
notes, but excluding the effect of unexercised options and warrants.

Recent Developments

On February 28, 2001, the Company announced that it had sold its approximate
50% interest in Planning Technologies, Inc. to Red Hat, Inc. ("Red Hat") in
exchange for approximately 3.2 million shares of Red Hat Common Stock. The
closing price of Red Hat's Common Stock on February 28, 2001 was $6.4375 per
share. We will be able to sell approximately 2.8 million of these shares
commencing in the third quarter of 2001 upon the expiration of certain
contractual restrictions. The balance of 0.4 million Red Hat shares is
currently held in escrow as an indemnity fund in accordance with the contract
of sale.

Speechworks International, Inc. ("Speechworks"), one of our Venture Fund
holdings, effected an initial public offering on August 4, 2000. iGate owns
approximately 415,000 shares of Speechworks Common Stock, and in February 2001,
entered into a forward contract for the sale of 300,000 shares at $31.13 per
share. The forward contract will mature in mid-April, 2001.

Bruce E. Haney, Managing Director and Chief Financial Officer of iGate,
announced his resignation effective April 2, 2001 to pursue other business
opportunities. Michael Zugay, the Company's Managing Director of Corporate
Development, has been appointed Senior Vice President and Chief Financial
Officer of iGate effective April 2, 2001.

Intellectual Property Rights

We rely upon a combination of nondisclosure and other contractual
arrangements and trade secret, copyright and trademark laws to protect our
proprietary rights and the proprietary rights of third parties from whom we
license intellectual property. We enter into confidentiality agreements with
our employees and limit the distribution of proprietary information. There can
be no assurance that the steps we take in this regard will be adequate to deter
misappropriation of proprietary information or that we will be able to detect
unauthorized use and take appropriate steps to enforce our intellectual
property rights.

Generally, all software that we develop in connection with a client
engagement is typically assigned to the client. In limited situations, we may
retain ownership or obtain a license from our client, which permits us or a
third party to market the software for the joint benefit of the client and
iGate or for our sole benefit.

Human Resources

Our success depends in large part on our ability to attract, develop,
motivate and retain highly skilled IT and eServices professionals. We recruit
in a number of countries, including India, the United States, Canada, the
United Kingdom, Singapore, Australia, the Philippines, Russia, Bulgaria,
Brazil, Pakistan, Nigeria, Ukraine,

7

Sri Lanka and South Africa. We advertise in leading newspapers and trade
magazines. In addition, our employees are a valuable recruiting tool and are
actively involved in referring new employees and screening candidates for new
positions. iGate uses a standardized global selection process that includes
interviews, tests and reference checks.

We have a focused retention strategy that includes career planning,
training, benefits and an incentive plan. Our benefits package includes
subsidized health insurance, a corporate 401(k) match, group life insurance,
and a long-term disability plan. We intend to continue to use stock options as
part of our recruitment and retention strategy. We also have an extensive
training infrastructure. We train employees on a variety of platforms and help
them transition from legacy to advanced architecture skills by providing cross-
platform training in new technologies. We have implemented an intranet to allow
our employees to access our courseware and computer-based training modules via
the Internet so that the training is available to all employees worldwide at
their individual convenience and pace.

At December 31, 2000, iGate (including its operating subsidiaries) had
approximately 5,800 employees comprised of approximately 4,700 IT and eServices
professionals (including subcontractors) and approximately 1,100 individuals
working in sales, recruiting, general and administrative roles. As of December
31, 2000, approximately 40% of our worldwide workforce was working under H-1B
temporary work permits in the United States. We believe that our relationships
with our employees are good.

8

RISK FACTORS

Our New Business Model is Unproven

We have significantly reorganized our business, and there is no guarantee
that this reorganization will be successful. We have adopted this new business
model based on the belief that decentralizing our business among specialized
operating subsidiaries and other companies in which we have equity interests
(collectively, the "iGate Companies") will enable us to be more responsive to
the evolving IT and eServices markets. The success of our new business model
depends in part on the ability of the iGate Companies to work collaboratively,
share information and leverage their collective resources to optimize strategic
opportunities. We cannot be certain that this reorganization will improve our
performance, and it is possible that the reorganization will detract from our
performance. In addition, if we cannot convince potential strategic partners
and acquisitions of the value of our business model, our ability to acquire new
companies and businesses may be adversely affected and our strategy for
continued growth may not succeed.

Recruitment and Retention of IT and eServices Professionals

Our business involves the delivery of professional services and is labor-
intensive. Our success depends upon our ability to attract, develop, motivate
and retain highly skilled IT and eServices professionals and project managers,
who possess the technical skills and experience necessary to deliver our
services. Qualified IT and eServices professionals are in great demand
worldwide and are likely to remain a limited resource for the foreseeable
future. There can be no assurance that qualified IT and eServices professionals
will continue to be available to us in sufficient numbers, or that we will be
successful in retaining current or future employees. Failure to attract or
retain qualified IT and eServices professionals in sufficient numbers could
have a material adverse effect on our business, operating results and financial
condition. Historically, we have done most of our recruiting outside of the
countries where the client work is performed. Accordingly, any perception among
our IT and eServices professionals, whether or not well founded, that our
ability to assist them in obtaining temporary work visas and permanent
residency status has been diminished, could lead to significant employee
attrition.

Government Regulation of Immigration

We recruit IT and eServices professionals on a global basis and, therefore,
must comply with the immigration laws in the countries in which we operate,
particularly the United States. As of December 31, 2000, approximately 40% of
our worldwide workforce were working under H-1B temporary work permits in the
United States. Statutory law limits the number of new H-1B petitions that may
be approved in a fiscal year, and if we are unable to obtain H-1B visas for our
employees in sufficient quantities or at a sufficient rate for a significant
period of time, our business, operating results and financial condition could
be adversely affected. On October 17, 2000, the "American Competitiveness in
the Twenty-First Century Act" (the "American Competitiveness Act") was signed
into law, and the annual H-1B visa quota for each of 2001, 2002 and 2003 was
increased to 195,000. The annual quota reverts to 65,000 in fiscal year 2004.
In addition, certain provisions of the American Competitiveness Act make it
likely that there will not be any H-1B "black out periods" as there have been
in the past. We note that a companion bill increased the special H-1B training
filing fee from $500 to $1,100, and that the American Competitiveness Act now
permits permanent resident applicants to change employers under certain
conditions, which could adversely impact employee retention rates among the
Company's non-citizen/non-permanent resident consultants.

Variability of Quarterly Operating Results

The revenues and operating results of many of the iGate Companies are
subject to significant variations from quarter to quarter depending on a number
of factors, including the timing and number of client projects commenced and
completed during the quarter, the number of working days in a quarter, employee
hiring, attrition and utilization rates and the mix of time-and-materials
projects versus proportional performance

9

projects during the quarter. Certain of the iGate Companies recognize revenues
on time-and-materials projects as the services are performed, while revenues on
proportional performance projects are recognized using the proportional
performance method. Although proportional performance projects have not
contributed significantly to revenues and profitability to date, operating
results may be adversely affected in the future by cost overruns on
proportional performance projects. Because a high percentage of the expenses of
many of the iGate Companies are relatively fixed, variations in revenues may
cause significant variations in operating results. Additionally, the iGate
Companies periodically incur cost increases due to both the hiring of new
employees and strategic investments in infrastructure in anticipation of future
opportunities for revenue growth.

Increasing Significance of Non-U.S. Operations and Risks of International
Operations

Our international consulting and offshore software development depend
greatly upon business, immigration and technology transfer laws in those
countries, and upon the continued development of technology infrastructure.
There can be no assurance that our international operations will be profitable
or support our growth strategy. The risks inherent in our international
business activities include:

. unexpected changes in regulatory environments;

. foreign currency fluctuations;

. tariffs and other trade barriers;

. difficulties in managing international operations; and

. the burden of complying with a wide variety of foreign laws and
regulations.

Our failure to manage growth, attract and retain personnel, manage major
development efforts, profitably deliver services, or a significant interruption
of our ability to transmit data via satellite, could have a material adverse
impact on our ability to successfully maintain and develop our international
operations and could have a material adverse effect on our business, operating
results and financial condition.

Exposure to Regulatory and General Economic Conditions in India

Our subsidiary Mascot Systems utilizes an offshore software development
center based in Bangalore with additional offices in Pune and Chennai, India.
Mascot Systems also operates recruiting and training centers in India. The
Indian government exerts significant influence over its economy. In the recent
past, the Indian government has provided significant tax incentives and relaxed
certain regulatory restrictions in order to encourage foreign investment in
certain sectors of the economy, including the technology industry. Certain of
these benefits that directly affect us include, among others, tax holidays
(temporary exemptions from taxation on operating income), liberalized import
and export duties and preferential rules on foreign investment and
repatriation. To be eligible for certain of these tax benefits, we must
continue to meet certain conditions. A failure to meet such conditions in the
future could result in the cancellation of the benefits. There can be no
assurance that such tax benefits will be continued in the future at their
current levels. Changes in the business or regulatory climate of India could
have a material adverse effect on our business, operating results and financial
condition.

Although wage costs in India are significantly lower than in the U.S. and
elsewhere for comparably skilled IT and eServices professionals, wages in India
are increasing at a faster rate than in the U.S. In the past, India has
experienced significant inflation and shortages of foreign exchange, and has
been subject to civil unrest and acts of terrorism. Changes in inflation,
interest rates, taxation or other social, political, economic or diplomatic
developments affecting India in the future could have a material adverse effect
on our business, operating results and financial condition.

Risks Associated with Covenants in Certain Financing Instruments

The Company has entered into a $50.0 million secured credit facility (as
amended, the "PNC Facility") with PNC Bank, N.A. ("PNC"), and a $30.0 million
Convertible Promissory Note (as amended, the "GE

10

Note") with GE Capital Equity Investments, Inc. ("GE Capital"). Each of the PNC
Facility and the GE Note contain restrictive covenants that require us to meet
certain financial criteria on a rolling quarterly basis. We may not be able to
continue to satisfy the financial covenants in these documents. If we are not
able to renegotiate the terms and conditions of these financial covenants and
if we cannot satisfy such covenants, each of PNC and GE Capital will have the
option of making the full amount of our outstanding debt under these
instruments immediately due and payable; and, with respect to the GE Note, GE
Capital will have the option of converting any amounts we owe to GE Capital
into iGate Common Stock. In addition, the PNC Facility requires that we
maintain an aggregate of $30 million in cash and equivalents at all times
during the term of the PNC Facility, of which cash and cash equivalents in the
amount of $25 million have been pledged to PNC for the term of the PNC
Facility. These restrictions on our cash and cash equivalents may restrict our
ability to make investments in new and existing businesses.

Intense Competition in the IT Services and eServices Industries

The IT services and eServices industries are highly competitive and served
by numerous national, regional and local firms. Primary competitors include
participants from a variety of market segments, including "Big Five" accounting
firms, systems consulting and implementation firms, applications software
firms, service groups of computer equipment companies, specialized interest
consulting firms, programming companies and temporary staffing firms. Many of
these competitors have substantially greater financial, technical and marketing
resources and greater name recognition than we have. There are relatively few
barriers to entry into our markets and we may face additional competition from
new entrants into our markets. In addition, there is a risk that clients may
elect to increase their internal resources to satisfy their applications
solutions and eServices needs. Further, the IT services industry is undergoing
consolidation, which may result in increasing pressure on margins. These
factors may limit our ability to increase prices commensurate with increases in
compensation. There can be no assurance that we will compete successfully with
existing or new competitors in the IT services and eServices markets.

iGate Companies May Compete with Each Other

iGate Companies may compete with each other for customers, talented
employees and strategic relationships. In addition, iGate Capital Corporation
may compete with the various iGate Companies for acquisition opportunities in
the IT services and eServices industries. Such competition may make it more
difficult or costly for iGate Capital Corporation or other iGate Companies to
enter into strategic relationships, negotiate acquisitions or conduct business.

Risks Related to Inability to Acquire Additional Businesses

We plan to gradually continue to expand our operations through the
acquisition of, or investment in, additional businesses and companies. We may
be unable to identify businesses that complement our strategy for growth, and
even if we succeed in identifying a company with such a business, we may not be
able to proceed to acquire the company, its relevant business or an interest in
the company for many reasons, including:

. a failure to agree on the terms of the acquisition or investment;

. incompatibility between iGate Capital and the management of the company
which we wish to acquire or in which we wish to invest;

. competition from other potential acquirors (including publicly-traded
Internet companies, venture capital companies and large corporations,
many of which have greater financial resources and brand name
recognition than we do);

. a lack of capital to make the acquisition or investment; and

. the unwillingness of the company to partner with us.

If we are unable to continue acquiring and investing in attractive
businesses, our strategy for growth may not succeed.

11

Risks Related to Completed Acquisitions

There can be no assurance that we will be able to profitably manage
additional businesses or successfully integrate any acquired businesses without
substantial expenses, delays or other operational or financial problems.
Further, acquisitions may involve a number of special risks, including
diversion of management's attention, failure to retain key acquired personnel,
unanticipated events or circumstances and legal liabilities and amortization of
acquired intangible assets, some or all of which could have a material adverse
effect on our business, operating results and financial condition. Client
satisfaction or performance problems at a single acquired firm could have a
material adverse impact on our reputation as a whole. In addition, there can be
no assurance that acquired businesses, if any, will achieve anticipated
revenues and earnings. Our failure to manage our acquisition strategy
successfully could have a material adverse effect on our business, operating
results and financial condition.

Risks Associated with Capital Markets

We currently hold, and plan to increase holdings of, significant interests
in non-wholly-owned companies and joint ventures. While we generally do not
anticipate selling such interests, if we were to divest all or part of them, we
might not receive maximum value for these positions. With respect to such
entities with publicly traded stock, we may be unable to sell our interest at
then-quoted market prices. Furthermore, for those entities that do not have
publicly traded stock, the realizable value of our interest may ultimately
prove to be lower than the carrying value currently reflected in our
Consolidated Financial Statements. Due to market conditions, it may be
difficult for private companies in which we have invested to undertake public
offerings.

Concentration of Revenues; Risk of Termination

We have in the past derived, and may in the future derive, a significant
portion of our revenues from a relatively limited number of clients. Our five
largest clients represented approximately 20%, 22% and 23% of revenues for the
years ended December 31, 2000, 1999 and 1998, respectively. In the years ended
December 31, 2000 and 1999, there were no customers accounting for more than
10% of our revenues. EDS accounted for approximately 11% of our revenues for
the year ended December 31, 1998. Most of our projects are terminable by the
client without penalty. An unanticipated termination of a major project could
result in the loss of substantial anticipated revenues and could require us to
maintain or terminate a significant number of unassigned IT professionals,
resulting in a higher number of unassigned IT professionals and/or significant
termination expenses. The loss of any significant client or project could have
a material adverse effect on our business, operating results and financial
condition.

Rapid Technological Change; Dependence on New Solutions

The IT services and eServices industries are characterized by rapid
technological change, evolving industry standards, changing client preferences
and new product introductions. Our success will depend in part on our ability
to develop IT and eServices solutions that keep pace with industry
developments. There can be no assurance that we will be successful in
addressing these developments on a timely basis or that, if these developments
are addressed, we will be successful in the marketplace. In addition, there can
be no assurance that products or technologies developed by others will not
render our services noncompetitive or obsolete. Our failure to address these
developments could have a material adverse effect on our business, operating
results and financial condition.

A significant number of organizations are attempting to migrate business
applications from a mainframe environment to advanced technologies. As a
result, our ability to remain competitive will be dependent on several factors,
including our ability to help existing employees maintain or develop mainframe
skills and to train and hire employees with skills in advanced technologies.
Our failure to hire, train and retain employees with such skills could have a
material adverse impact on our business. Our ability to remain competitive will
also be dependent on our ability to design and implement, in a timely and cost-
effective manner, effective transition strategies for clients moving from
legacy systems to advanced architectures. Our failure to design and implement
such transition strategies in a timely and cost-effective manner could have a
material adverse effect on our business, operating results and financial
condition.

12

Dependence on Principals

Our success is highly dependent on the efforts and abilities of Sunil
Wadhwani and Ashok Trivedi, the Co-Chairman and Chief Executive Officer of
iGate Capital Corporation and the Co-Chairman and President of iGate Capital
Corporation, respectively. Although Messrs. Wadhwani and Trivedi have entered
into employment agreements containing noncompetition, nondisclosure and
nonsolicitation covenants, these contracts do not guarantee that they will
continue their employment with us or that such covenants will be enforceable.
The loss of the services of either of these key executives for any reason could
have a material adverse effect on our business, operating results and financial
condition.

Risk of Preferred Vendor Contracts

We are party to several "preferred vendor" contracts and we are seeking
additional similar contracts in order to obtain new or additional business from
large or medium-sized clients. Clients enter into these contracts to reduce the
number of vendors and obtain better pricing in return for a potential increase
in the volume of business to the preferred vendor. While these contracts are
expected to generate higher volumes, they generally result in lower margins.
Although we attempt to lower costs to maintain margins, there can be no
assurance that we will be able to sustain margins on such contracts. In
addition, the failure to be designated a preferred vendor, or the loss of such
status, may preclude us from providing services to existing or potential
clients, except as a subcontractor, which could have a material adverse effect
on our business, operating results and financial condition.

Risks Associated with Intellectual Property Rights

Our success depends in part upon certain methodologies and tools we use in
designing, developing and implementing applications systems and other
proprietary intellectual property rights. We rely upon a combination of
nondisclosure and other contractual arrangements and trade secret, copyright
and trademark laws to protect our proprietary rights and the proprietary rights
of third parties from whom we license intellectual property. We enter into
confidentiality agreements with our employees and limit distribution of
proprietary information. There can be no assurance that the steps we take in
this regard will be adequate to deter misappropriation of proprietary
information or that we will be able to detect unauthorized use and take
appropriate steps to enforce our intellectual property rights.

Although we believe that our services do not infringe on the intellectual
property rights of others and that we have all rights necessary to utilize the
intellectual property employed in our business, we are subject to the risk of
litigation alleging infringement of third-party intellectual property rights.
Any claims, whether or not meritorious, could:

. be expensive and time-consuming to defend;

. cause significant and material product shipment and installation delays;

. divert management's attention and resources; and/or

. require us to enter into royalty or licensing arrangements, which may
not be available on acceptable terms, or may not be available at all.

A successful claim of product infringement against us or our failure or
inability to license the infringed or similar technology could have a material
adverse effect on our business, financial condition and results of operations.

Fixed-Price Projects

We undertake certain projects billed on a fixed-price basis. We recognize
revenue from these contracts on a proportional performance basis, which is
different from our principal method of billing, the time-and-materials basis.
Failure to complete such projects within budget would expose us to risks
associated with cost overruns, which could have a material adverse effect on
our business, operating results and financial condition.

13

Potential Liability to Clients

Many of our engagements involve projects that are critical to the operations
of our clients' businesses and provide benefits that may be difficult to
quantify. Although we attempt to contractually limit our liability for damages
arising from errors, mistakes, omissions or negligent acts in rendering our
services, there can be no assurance that our attempts to limit liability will
be successful. Our failure or inability to meet a clients' expectations in the
performance of our services could result in a material adverse change to the
client's operations and therefore could give rise to claims against us or
damage our reputation, adversely affecting our business, operating results and
financial condition.

ITEM 2. PROPERTIES

Information regarding the properties leased by the Company and its
subsidiaries is set forth below. All properties are leased offices. The Company
and its subsidiaries do not own any real property.

Location Principal Use Square Footage
- -------- ------------- --------------

Pittsburgh, Corporate headquarters, management 13,000
Pennsylvania administration, human resources, sales, and marketing.

Oakdale, Former corporate headquarters. 59,000
Pennsylvania Vacating in May 2001.

Pittsburgh, Emplifi headquarters, management, 32,000
Pennsylvania administration, human resources, sales, and marketing.

Pittsburgh, Symphoni headquarters, management, 25,000
Pennsylvania* administration, human resources, sales, and marketing.

Pittsburgh, Mascot U.S. headquarters, 11,000
Pennsylvania* administration, human resources, sales, and marketing.

Pittsburgh, eJIVA headquarters, management, 32,000
Pennsylvania* administration, human resources, sales, and marketing.

Minneapolis, itiliti headquarters, management, 11,000
Minnesota administration, human resources, sales, and marketing.

Chennai, India Mascot offshore development center 55,000

Bangalore, Mascot offshore development center 33,000
India

Pune, India Mascot offshore development center 35,000

- --------
* Lease obligations of subsidiary are guaranteed by iGate.

In addition to the properties listed above, the Company and its subsidiaries
lease sales offices in many IT services markets in the United States and
throughout the world. These locations allow the Company to respond quickly to
the needs of its clients and to recruit qualified IT professionals in these
markets.

Mascot leases approximately 142,000 square feet (including 123,000 square
feet listed above) of office space in the Indian cities of Chennai, Bangalore,
Pune, and Mumbai from the principal shareholders of iGate.

ITEM 3. LEGAL PROCEEDINGS

Neither the Company nor any of its subsidiaries is a party to any litigation
that is expected to have a material adverse effect on the Company or its
business.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of shareholders during the fourth
quarter of 2000.

14

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

(a) The Common Stock of the Company was traded on the Nasdaq National
Market under the ticker symbol "MAST" from December 17, 1996 to March 6, 2000.
On March 7, 2000, the Company changed its ticker symbol to "IGTE". The
following table sets forth, for the periods indicated, the range of high and
low closing sale prices for iGate Capital Corporation Common Stock as reported
on the Nasdaq National Market.

High Low
-------- --------

2000
First Quarter.............................................. 67 1/16 21 11/16
Second Quarter............................................. 39 15/16 13 3/4
Third Quarter.............................................. 14 1/2 4 7/8
Fourth Quarter............................................. 6 29/32 2 7/8

1999
First Quarter.............................................. 29 1/8 11 9/16
Second Quarter............................................. 21 1/2 11 9/16
Third Quarter.............................................. 20 5/8 12 3/16
Fourth Quarter............................................. 25 1/8 11 3/4

On February 28, 2001, the Company had 174 registered holders of record of
the Common Stock.

The Company intends to retain earnings to fund growth and the operation of
its business, and therefore has not declared dividends during 2000 and 1999.
Additionally, the Company does not anticipate paying any cash dividends in the
foreseeable future. Future cash dividends, if any, will be at the discretion of
the Company's Board of Directors and will depend upon, among other things, the
Company's future operations and earnings, capital requirements and surplus,
general financial condition, contractual restrictions and such other factors as
the Board of Directors may deem relevant. The Company is prohibited from paying
dividends under its credit facilities.

(b) On November 9, 2000, Sunil Wadhwani, Co-Chairman and Chief Executive
Officer of iGate, and Ashok Trivedi, Co-Chairman and President of iGate, each
paid an aggregate of $2,500,000 to purchase 421,052 newly-issued shares of
Common Stock at a price of $5.9375 per share, the closing price per share as
quoted on the Nasdaq National Market. This transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as
amended, as no public offering was involved.

15

ITEM 6. SELECTED FINANCIAL DATA

Year Ended December 31,
-----------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
(In thousands, except per share data)

Income Statement Data (1):
Revenues..................... $477,287 $471,739 $401,371 $247,176 $165,682
Gross profit................. 164,662 172,803 142,121 79,929 48,034
Special items (2)............ 6,840 2,316 -- -- --
Income (loss) from
operations (3).............. (21,554) 55,252 52,915 26,167 14,176
Other income (expense)....... (4,727) 2,983 3,312 1,212 (328)
Equity in losses of
affiliated companies........ (13,639) (310) -- -- --
Minority interest............ 794 210 -- -- --
Gain on issuance of stock by
subsidiary.................. 26,853 -- -- -- --
Merger-related expenses (4).. -- (1,727) (3,212) -- --
Income (loss) before income
taxes....................... (12,273) 56,408 53,015 27,379 13,848
Income tax provision
(benefit)................... (2,465) 20,197 20,459 11,231 4,136
-------- -------- -------- -------- --------
Net income (loss)............ $ (9,808) $ 36,211 $ 32,556 $ 16,148 9,712
======== ======== ======== ========
Net income per common share,
basic....................... $ (0.19) $ 0.72 $ 0.65 $ 0.35
======== ======== ======== ========
Net income per common share,
diluted..................... $ (0.19) $ 0.71 $ 0.64 $ 0.34
======== ======== ======== ========
Pro forma income taxes (5)... 5,291
========
Pro forma net income (5)..... $ 4,421
========
Pro forma basic and diluted
income per common share..... $ 0.11
========
Weighted average common
shares outstanding (6)...... 50,437 50,280 50,100 46,346 40,289
======== ======== ======== ======== ========
Weighted average common and
common equivalent shares
outstanding (6)............. 51,056 51,510 50,925 46,816 40,295
======== ======== ======== ======== ========
Balance Sheet Data (1):
Cash and cash equivalents.... $ 22,773 $ 23,596 $ 35,493 $ 83,152 $ 46,566
Investments.................. 42,660 75,358 47,153 -- --
Working capital.............. 120,320 159,541 130,111 111,813 49,670
Total assets................. 364,151 278,188 217,458 164,007 90,551
Long-term debt............... 20,000 30,000 -- -- --
Total shareholders' equity... 210,587 184,162 158,535 120,630 50,691

- --------
(1) 1999 amounts have been restated to consolidate Symphoni Interactive, LLC,
which was previously accounted for under the equity method of accounting
as our ownership increased to 90% in 2000. In 2000, we reclassified
expenses related to consultants' non-billable time from cost of revenues
to selling, general, and administrative expenses. Prior periods have been
restated for the change.

(2) In 2000, we incurred $4.4 million in connection with our restructuring,
and $2.4 million to write off impaired goodwill of a subsidiary that
ceased operations in 2000. In 1999, we incurred $2.3 million of net
special charges related to a winding down of an existing relationship with
a large integrator client offset by $1.8 million in favorable settlements
of outstanding claims that had been reserved. The charges related to the
winding down of the relationship consisted of salary, travel and
relocation expenses associated with the consultants who had been assigned
to the client's various projects.

(3) Income from operations for the year ended December 31, 1996 reflects a
non-recurring charge of $875,000 incurred pursuant to an agreement with an
executive to pay, as compensation for past services, an amount equal to
the value of 109,200 shares of Common Stock at the initial public offering
price of $7.50 per

16

share. We have reflected this payment along with the applicable tax
withholdings as a non-recurring charge. For the years ended December 31,
1997 and 1998, income from operations reflect nonrecurring charges of
$518,000 and $258,000, respectively, relating to the amortization of
deferred compensation for this same executive.

(4) We incurred merger-related costs related to the acquisition of the Amber
Group. We also incurred merger-related costs related to the acquisition of
Quantum and charged these costs to expense during the second quarter of
1998.

(5) Our S-corporation status terminated on December 16, 1996 in connection
with our initial public offering of Common Stock, thereby subjecting our
income to federal and state taxes at the corporate level. Pro forma net
income and pro forma net income per share reflect federal and state taxes
(assuming an approximate 40% effective tax rate) as if we had been taxed
as a C-corporation for 1996.

(6) In the fourth quarter of 1997, we adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share". Earnings per share for
the pro forma periods were not impacted by the adoption of this Statement.
See Note 12 to the Consolidated Financial Statements for information
concerning the computation of basic and diluted earnings per common share.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Overview

iGate Capital Corporation, formerly named Mastech Corporation, was
incorporated in the Commonwealth of Pennsylvania on November 12, 1996 and,
through operating subsidiaries, is a worldwide provider of IT services and
eServices to large and medium-sized organizations. From inception and through
February 2000, we conducted the majority of our business through our wholly
owned subsidiary Mastech Systems Corporation, a Pennsylvania corporation that
was formed in July 1986.

In March 2000, we announced an internal reorganization, changed our name to
iGate Capital Corporation, and we transferred substantially all of the assets
of Mastech Systems Corporation to subsidiary operating companies. This
reorganization enabled us to identify and penetrate emerging IT and eServices
markets quickly and effectively. In addition, this strategy enabled us to
expand our existing portfolio of services as well as to create new service
offerings. We also acquired majority interests or made strategic investments in
a number of companies in the eServices market sector.

Our operating subsidiaries provide clients with a source for a broad range
of IT applications solutions and eServices, including: client/server design and
development, conversion/migration services, ERP package implementation
services, electronic business systems and applications maintenance outsourcing.
These services are provided in a variety of computing environments and use
leading technologies, including client/server architecture, object oriented
programming languages and tools, distributed database management systems and
the latest networking and communications technologies.

The companies in the Emplifi, eJIVA, Mascot, Value Services and Staffing
Services segments earn a substantial portion of their revenues on a time-and-
materials basis as services are performed. Mascot and eJIVA also earn revenue
on a proportional performance basis, based upon a fixed price. Companies in the
Emerging eServices segment primarily recognize revenues on both a time-and-
materials and proportional performance basis, with itiliti recognizing revenues
upon implementation and client acceptance of an application and through monthly
service fees, in accordance with SOP 97-2, "Software Revenue Recognition".

All historical financial results have been restated to consolidate Symphoni,
in which the Company acquired a controlling interest during 2000. The Company
had previously accounted for its investment in

17

Symphoni under the equity method of accounting. The Company has also
reclassified expenses related to consultants' non-billable time from cost of
revenues to selling, general, and administrative expenses.

Results of Operations

The following table sets forth, for the periods indicated, selected
Consolidated Statements of Operations data as a percentage of revenues:

Year Ended
December 31,
--------------------
2000 1999 1998
----- ----- -----

Revenues.................................................. 100.0% 100.0% 100.0%
Cost of revenues.......................................... 65.5 63.4 64.6
----- ----- -----
Gross profit.............................................. 34.5 36.6 35.4
Selling, general and administrative....................... 37.6 24.4 22.2
Special items............................................. 1.4 0.5 0.0
----- ----- -----
Income (loss) from operations............................. (4.5) 11.7 13.2
Other income (expense), net............................... (1.0) 0.6 0.8
Equity in losses of affiliated companies.................. (2.9) (0.1) 0.0
Minority interest......................................... 0.2 0.0 0.0
Gain on issuance of stock by subsidiary................... 5.6 0.0 0.0
Merger-related expenses................................... 0.0 (0.4) (0.8)
----- ----- -----
Income (loss) before income taxes......................... (2.6) 12.0 13.2
Income tax provision (benefit) (0.5) 4.3 5.1
----- ----- -----
Net income (loss)......................................... (2.1)% 7.7% 8.1%
===== ===== =====

- --------
Note: Percentages may not add or calculate due to rounding.

18

2000 Compared to 1999

The following tables present selected financial information for the
Company's reporting segments for the years ended December 31, 2000 and 1999:

Year Ended December 31, 2000
------------------------------------------------------------------------------
Emerging Value Staffing iGate
Emplifi Mascot eJIVA eServices Services Services Corporate(1) Total
-------- ------- ------- --------- -------- -------- ------------ --------
(Dollars in thousands)

Revenues................ $112,977 $71,206 $78,571 $ 60,331 $68,426 $ 85,776 $ -- $477,287
Direct costs............ 73,146 41,800 42,318 35,822 53,245 66,294 -- 312,625
-------- ------- ------- -------- ------- -------- -------- --------
Gross margin............ 39,831 29,406 36,253 24,509 15,181 19,482 -- 164,662
Operating expenses...... 22,960 20,621 43,270 36,390 11,398 19,992 24,745 179,376
-------- ------- ------- -------- ------- -------- -------- --------
Operating margin before
special items.......... 16,871 8,785 (7,017) (11,881) 3,783 (510) (24,745) (14,714)
Special items........... (1,043) -- (565) (536) -- (2,455) (2,241) (6,840)
-------- ------- ------- -------- ------- -------- -------- --------
Operating margin........ $ 15,828 $ 8,785 $(7,582) $(12,417) $ 3,783 $ (2,965) (26,986) (21,554)
======== ======= ======= ======== ======= ========
Other expenses, net.......................................................... (4,727) (4,727)
Equity in losses of unconsolidated affiliates................................ (13,639) (13,639)
Minority interest............................................................ 794 794
Gain on issuance of stock by subsidiary...................................... 26,853 26,853
-------- --------
Income (loss) before income taxes............................................ $(17,705) $(12,273)
======== ========

Year Ended December 31, 1999
------------------------------------------------------------------------------
Emerging Value Staffing iGate
Emplifi Mascot eJIVA eServices Services Services Corporate(1) Total
-------- ------- ------- --------- -------- -------- ------------ --------
(Dollars in thousands)

Revenues................ $ 93,462 $63,363 $62,661 $ 43,793 $35,521 $172,939 $ -- $471,739
Direct costs............ 56,100 36,164 31,714 26,459 26,253 122,246 -- 298,936
-------- ------- ------- -------- ------- -------- -------- --------
Gross margin............ 37,362 27,199 30,947 17,334 9,268 50,693 -- 172,803
Operating expenses...... 11,661 18,217 19,756 13,369 6,206 31,728 14,298 115,235
-------- ------- ------- -------- ------- -------- -------- --------
Operating margin before
special items.......... 25,701 8,982 11,191 3,965 3,062 18,965 (14,298) 57,568
Special items........... -- -- -- -- -- (2,316) -- (2,316)
-------- ------- ------- -------- ------- -------- -------- --------
Operating margin........ $ 25,701 $ 8,982 $11,191 $ 3,965 $ 3,062 $ 16,649 (14,298) 55,252
======== ======= ======= ======== ======= ========
Other income, net 2,983 2,983
Equity in losses of unconsolidated affiliates................................ (310) (310)
Minority interest............................................................ 210 210
Merger-related expenses...................................................... (1,727) (1,727)
-------- --------
Income (loss) before income taxes............................................ $(13,142) $ 56,408
======== ========

- --------
(1) Corporate activities include general corporate expenses, eliminations of
intersegment margins, interest income and expense, income or loss from
joint ventures, and other unallocated charges. The Company evaluates
segments based on income from operations. Since certain administrative and
other operating expenses, income or loss from joint ventures, 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.

The following discussion compares our results of operations for the years
ended December 31, 2000 and December 31, 1999, with our recast reporting
segments, including our previously-discontinued Staffing Services segment.

Our revenues for 2000 increased $5.5 million or 1.2% to $477.3 million from
$471.7 million for 1999. Emplifi and eJIVA revenues increased $19.5 million and
$16.0 million, respectively, due to increased demand

19

for their services. Mascot's revenues increased $7.8 million due to increased
demand for offshore services and the acquisition of certain contracts from
Emplifi. Our Emerging eServices segment revenue increased $16.5 million due to
the acquisitions of IRG, itiliti, and majority ownership interest in Symphoni,
as well as increased demand for these services. Revenues from the Value
Services segment increased $32.9 million, primarily due to the acquisition of
CMI, which was purchased in November 1999. Due to current market conditions
surrounding the IT services sector, we do not expect that 2001 Value Services
revenues will increase. Our Staffing Services segment revenues decreased by
$87.2 million due to a slowdown in demand for our services within the segment.

Our cost of revenues for 2000 increased $13.7 million or 4.6% to $312.6
million from $298.9 million for 1999. Gross margin decreased to 34.5% in 2000
from 36.6% in 1999. All segments, with the exception of Emerging eServices
experienced a decline in gross margins during 2000. This decrease in gross
margins are directly attributable to several factors including the
implementation of a up to a four percent (4%) employee match feature in 401(k)
retirement plan and increased payroll costs not offset by increased bill rates.
Our Emerging eServices segment's increased bill rates offset the payroll costs
mentioned above resulting in an increase in gross margins.

Selling, general, and administrative ("SG&A") expenses include all overhead
costs that we incur that are not directly associated with our revenue-
generating consultants. Beginning in 2000, we include expenses related to
consultants' non-billable time as part of SG&A expense, and have retroactively
restated all prior periods to reflect this change. SG&A expenses include
salaries, rent, recruiting costs, depreciation and amortization, legal and
accounting fees, as well as communications and facilities costs. Our SG&A
expenses for 2000 increased $64.1 million to $179.4 million from $115.2 million
for 1999. Our SG&A expenses as a percentage of revenue increased to 37.6% from
24.4% a year ago. We incurred significant legal and accounting costs related to
our reorganization effort. We built management infrastructure at each of our
operating companies and incurred additional salary and recruiting costs. During
2000, bad debt expense increased $3.0 million from the prior year as a result
of the write-offs of several large amounts that were deemed uncollectible. Our
facilities costs also increased due to the expansion of our operating companies
into new offices and locations. We anticipate that our SG&A expenses will
decrease as a percentage of revenue in future periods. We believe that we have
the management structure in each segment necessary to sustain our growth in
future periods.

During 2000, we incurred costs of $6.8 million for special items related to
restructuring costs and goodwill impairment charges. Restructuring charges of
$4.4 million affected the majority of our reporting segments and consisted
mainly of employee severance, lease breakage costs and certain business
licensing fees that were no longer being utilized due to our restructuring. We
incurred charges of $2.4 million for the write-off of impaired goodwill
relating to the acquisition of Global Resource Management, Inc. in 1999. In
1999, we incurred $2.3 million of net special charges related to a winding down
of an existing relationship with a large integrator client, partially offset by
$1.8 million in favorable settlements of outstanding claims that had been
reserved. The charges related to the winding down of the relationship consisted
of salary, travel and relocation expenses associated with the consultants who
had been assigned to the client's various projects.

Equity in losses of affiliated companies for 2000 totaled $13.6 million as
compared to $0.3 million in 1999, and consisted of our share of net losses in
our joint ventures, iProcess and PTI, and our equity investments in Air2Web and
VCampus. The majority of our joint ventures and equity investments involve
entities in the early stages of development, and we expect to incur losses in
these companies until they are able to move beyond their respective start-up
phases. We expect this income statement line item and income classification to
be volatile, as we continue to invest in, and participate in joint ventures
involving eServices companies.

Minority interest, net increased to income of $0.8 million in 2000
reflecting minority interest in the five majority-owned operating subsidiaries
(Mascot Systems, itiliti, IRG, Symphoni and Highgate Ventures). In 1999,
minority interest was income of $0.2 million. The increase was primarily
attributable to the initial public offering of a minority interest in Mascot
Systems during 2000.

20

Other expense, net of other income, totaled $4.7 million in 2000, a $7.6
million increase from other income, net of other expense, of $3.0 million in
1999. Significant changes included $2.2 million of foreign currency translation
adjustments on intercompany advances to our foreign subsidiaries, and interest
expense in excess of interest earned in the amount of $2.5 million related to
the borrowings under our New PNC Facility.

We recognized a pretax gain of $26.9 million on the Mascot Systems initial
public offering during 2000. We had no similar activity for 1999.

Our effective tax benefit for 2000 was 20.1%, primarily due to the tax
effect of non-deductible goodwill amortization on our acquired subsidiaries and
certain of our joint ventures. In 1999, our effective tax rate was 35.8%,
mainly due to our tax holiday in India and our tax-exempt investment portfolio.

1999 Compared to 1998

The following tables present selected financial information for the
Company's reporting segments for the years ended December 31, 1999 and 1998:

Year Ended December 31, 1999
--------------------------------------------------------------------------
Emerging Value Staffing iGate
Emplifi Mascot eJIVA eServices Services Services Corporate(1) Total
------- ------- ------- --------- -------- -------- ------------ --------
(Dollars in thousands)

Revenues................ $93,462 $63,363 $62,661 $43,793 $35,521 $172,939 $ -- $471,739
Direct costs............ 56,100 36,164 31,714 26,459 26,253 122,246 -- 298,936
------- ------- ------- ------- ------- -------- -------- --------
Gross margin............ 37,362 27,199 30,947 17,334 9,268 50,693 -- 172,803
Operating expenses...... 11,661 18,217 19,756 13,369 6,206 31,728 14,298 115,235
------- ------- ------- ------- ------- -------- -------- --------
Operating margin before
special items.......... 25,701 8,982 11,191 3,965 3,062 18,965 (14,298) 57,568
Special items........... -- -- -- -- -- (2,316) -- (2,316)
------- ------- ------- ------- ------- -------- -------- --------
Operating margin........ $25,701 $ 8,982 $11,191 $ 3,965 $ 3,062 $ 16,649 (14,298) 55,252
======= ======= ======= ======= ======= ========
Other income, net........................................................... 2,983 2,983
Equity in losses of unconsolidated affiliates............................... (310) (310)
Minority interest........................................................... 210 210
Merger-related expenses..................................................... (1,727) (1,727)
-------- --------
Income (loss) before income taxes........................................... $(13,142) $ 56,408
======== ========

Year Ended December 31, 1998
--------------------------------------------------------------------------
Emerging Value Staffing iGate
Emplifi Mascot eJIVA eServices Services Services Corporate(1) Total
------- ------- ------- --------- -------- -------- ------------ --------
(Dollars in thousands)

Revenues................ $71,281 $47,544 $50,292 $27,047 $ 5,686 $199,521 $ -- $401,371
Direct costs............ 46,133 28,408 27,807 17,472 3,849 135,581 -- 259,250
------- ------- ------- ------- ------- -------- -------- --------
Gross margin............ 25,148 19,136 22,485 9,575 1,837 63,940 -- 142,121
Operating expenses...... 15,666 13,079 9,109 6,794 732 33,236 10,590 89,206
------- ------- ------- ------- ------- -------- -------- --------
Operating margin........ $ 9,482 $ 6,057 $13,376 $ 2,781 $ 1,105 $ 30,704 (10,590) 52,915
======= ======= ======= ======= ======= ========
Other income, net........................................................... 3,312 3,312
Merger-related expenses..................................................... (3,212) (3,212)
-------- --------
Income (loss) before income taxes........................................... $(10,490) $ 53,015
======== ========

- --------
(1) Corporate activities include general corporate expenses, eliminations of
intersegment margins, interest income and expense, income or loss from
joint ventures, and other unallocated charges. The Company evaluates
segments based on income from operations. Since certain administrative and
other operating expenses, income or loss from joint ventures, have not
been allocated to the 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.

21

As part of our reorganization announced in March 2000, all existing
contracts and business relationships that were owned by Mastech Systems
Corporation in 1999 and 1998, respectively, were contributed to Emplifi, eJIVA,
Mascot Systems, MAS, or Symphoni. The following discussion compares the years
ended December 31, 1999 and December 31, 1998, recasting our revenues and
reporting segment in accordance with our reorganization. We will provide a
trend analysis and revenue discussion of each segment as to how they would have
reported their respective revenues.

Our revenues for 1999 increased $70.3 million or 17.5% to $471.7 million
from $401.4 million for 1998. Revenues from the Emplifi and eJIVA segments
increased $22.1 million and $12.4 million, respectively. Mascot's revenue
increased $15.9 million due to increased demand for its services. Revenues of
the Emerging eServices segment increased $16.7 million, which is attributable
to the growth of RedBrigade Ltd., our European subsidiary. Revenue for our
Value Services segment increased $29.8 million, primarily due to acquisitions
of all of the companies within the segment from late 1998 through November
1999. Revenues of the Staffing Services segment decreased $26.6 million
primarily due to decreased demand for the services offered within this segment.

Our cost of revenues for 1999 increased $39.7 million or 15.3% to $299.0
million from $259.2 million for 1998. Gross margins increased to 36.6% in 1999
from 35.4% in 1998. Emplifi, Mascot eJIVA and Emerging eServices, experienced
increases in gross margins mainly attributable to increases in bill rates not
offset by increases in payroll and related costs. Values Services and Staffing
Services experienced declines in gross margins mainly attributable to increases
in payroll costs not offset by increases in bill rates.

Selling, general and administrative ("SG&A") expenses include all overhead
costs that we incur that are not directly associated with our revenue-
generating consultants. Beginning in 2000, we include expenses related to
consultants' non-billable time as part of SG&A expense, and have retroactively
restated all prior periods to reflect this change. SG&A costs include salaries,
rent, recruiting costs, depreciation and amortization, legal and accounting
fees, as well as communications and facilities costs. Our SG&A expenses for
1999 increased $26.0 million to $115.2 million as compared to $89.2 million for
1998 primarily resulting from increased bench costs, payroll, depreciation and
amortization. Our SG&A expenses as a percentage of revenue increased to 24.4%
in 1999 from 22.2% in 1998.

During 1999, we incurred $2.3 million of net special charges related to a
winding down of an existing relationship with a large integrator client offset
by $1.8 million in favorable settlements of outstanding claims that had been
reserved. The charges related to the winding down of the relationship consisted
of salary, travel and relocation expenses associated with the consultants who
had been assigned to the client's various projects.

Other income, net of other expense, was $3.0 million in 1999 compared to
$3.3 million in 1998. The decrease was a result of $0.9 million in interest
expense related to a convertible debt instrument issued in 1999 to GE Capital
Equity Investments, Inc. ("GE Capital"), in addition to losses incurred by the
Company's joint ventures.

We incurred $1.7 million and $3.2 million of merger-related costs and
expenses in connection with our acquisitions of Amber and Quantum that occurred
during 1999 and 1998, respectively. The expenses were related to employee
costs, office closures and legal and accounting expenses incurred in connection
with these acquisitions.

Our effective tax rates were 35.8% and 36.6% for 1999 and 1998,
respectively. In both years, we benefited from a tax holiday in India, and tax-
exempt earnings on our investment portfolio.

Liquidity and Capital Resources

Our working capital position decreased $39.2 million from December 31, 1999
to December 31, 2000. During the year, we used a combination of cash,
investment balances and proceeds from our revolving credit

22

facility for general operating purposes, acquisitions, investments, and funding
of our joint ventures and certain operating subsidiaries in their start-up
phases. Our accounts receivable increased by $11.1 million from period to
period and our days sales outstanding ("DSO") increased from 81 days at
December 31, 1999 to 88 days at December 31, 2000. The increase in DSO can be
attributed to delays in payment due to customer confusion related to our March
2000 reorganization.

At December 31, 2000, we had cash and short-term investments of $22.8
million and $42.7 million, respectively, as compared to cash and short-term
investments of $23.6 million and $75.4 million, respectively, at December 31,
1999. Short-term investments at December 31, 1999 consisted mainly of tax-
exempt bonds, as compared to our current portfolio, which has a higher
concentration of short-term commercial paper and other short-term investments
that provide us with a more liquid portfolio.

During the year ended December 31, 2000, we used $9.2 million for
acquisitions of majority interests in IRG, itiliti, and Symphoni, $11.0 million
for earnout payments related to prior acquisitions and $42.5 million for our
investment in Air2Web, capital contributions to our existing joint ventures
iProcess and PTI, and investments in eServices companies through the Venture
Fund. The Venture Fund made investments in VCampus, Inc., Versata, Inc.,
Brainbench, Inc., Xpede, Inc., Bluewater Information Convergence, Inc.,
Speechworks International, Inc., and OrderCare Corporation.

Mascot Systems, our Indian subsidiary, successfully completed an initial
public offering in India in June 2000, which generated $30.9 million of
proceeds, net of offering costs. As part of Indian governmental regulations,
all proceeds from the offering must remain in India, thus we do not have direct
access to these funds. However, we believe that it is also in our best business
interests that the funds stay in India as it is likely that Mascot Systems will
have the ability to grow its business internally and through acquisitions
without drawing on funds from iGate Capital Corporation.

Effective August 1, 2000 we entered into a new, $50.0 million secured credit
facility (as amended, the "New PNC Facility") with PNC Bank, N.A. ("PNC"). The
New PNC Facility replaced an existing $75.0 million unsecured line of credit
with PNC. The New PNC Facility provides a maximum loan amount of $50.0 million,
subject to the balance of our accounts receivable and certain other factors.
The New PNC Facility requires us to maintain an aggregate of $30 million in
cash and cash equivalents, of which cash and cash equivalents in the amount of
$25 million have been pledged to PNC. This facility matures on October 1, 2001.
At December 31, 2000, we had drawn $44.7 million under the New PNC Facility. In
2001, we paid $11 million on the outstanding balance and currently have $33.7
million outstanding under the line. Currently cash in the amount of $16.3
million is available to be drawn under the New PNC Facility.

On July 22, 1999, we completed a private placement of a $30.0 million
Convertible Promissory Note (as amended, the "GE Note") to GE Capital Equity
Investments, Inc. ("GE Capital"). The entire principal amount of the GE Note
will mature on July 22, 2004, and interest payments were made on the GE Note on
January 31, 2000, July 31, 2000, and January 31, 2001. The GE Note is
convertible at any time after July 22, 2002 through its maturity, at the option
of the holder, into shares of the Company's Common Stock; provided, however,
that the portion of the GE Note that may be converted into iGate Common Stock
may be limited if the revenues we generate by performing services for GE
Capital and certain of its affiliates fall below certain targets. In
conjunction with entering into the New PNC Facility, we amended the GE Note
effective August 1, 2000 to provide GE Capital with a more favorable conversion
price and to provide for revised revenue targets. As part of this amendment, we
paid down $10.0 million on the GE Note. At December 31, 2000, the GE conversion
price was $14.42 per share, which was above the fair market value of our Common
Stock on that date. The current outstanding principal amount is $20.0 million.

On November 9, 2000, Sunil Wadhwani, Co-Chairman and Chief Executive Officer
of iGate, and Ashok Trivedi, Co-Chairman and President of iGate, each paid $2.5
million to purchase 421,052 newly-issued shares of Common Stock at a price of
$5.9375 per share, the closing price per share as quoted on the Nasdaq National
Market. The $5 million proceeds were used for general corporate purposes.

23

As of December 31, 2000, subject to meeting certain operating requirements,
we are obligated to pay cash earnouts related to prior acquisitions. These
earnout arrangements were agreed upon at the time we acquired our interests in
these entities and will be paid if these companies meet certain performance
benchmarks. We paid approximately $3 million in January 2001 related to one
earnout, and if all of the performance benchmarks are met, our remaining
required payouts in the future will not exceed $14.4 million.

In February 2001, we entered into a forward contract for the sale of 300,000
shares of Speechworks International, Inc. ("Speechworks") Common Stock,
maturing in mid-April 2001 at a price of $31.13 per share. After deducting
associated costs, the Company will yield approximately $9.0 million upon the
sale. The Company will continue to hold approximately 115,000 shares of
Speechworks Common Stock after the maturity of the forward contract.

On February 28, 2001, we announced that we had sold our approximate 50%
interest in Planning Technologies, Inc. to Red Hat, Inc. ("Red Hat") in
exchange for approximately 3.2 million shares of Red Hat Common Stock. The
closing price of Red Hat's Common Stock on February 28, 2001 was $6.4375 per
share. We are contractually prohibited from selling 2.8 million of these Red
Hat shares until the third quarter of 2001, and the balance of approximately
400,000 Red Hat shares is currently held in escrow.

During the past twelve months our focus has been on the eServices market
sector and the implementation of our new business model that was introduced in
March 2000. Using a combination of cash and available borrowings under the New
PNC Facility, we have invested in and acquired eServices companies, funded our
startup companies and joint venture investments, and have built the necessary
management infrastructure in each of our operating subsidiaries.

In the upcoming year, our primary focus will be on our operating companies'
performance and cash flow, and at this time we do not plan to provide
additional funds for investments and acquisitions by the Venture Fund during
2001. We still plan to take advantage of early-stage opportunities in emerging
eServices markets, and we recognize the need to have cash readily available for
such opportunities. We believe our operating expense needs for all of our
existing operations can be met through a combination of operating cash flow,
proceeds from the sale of some of our publicly-traded investments, available
cash balances and unused borrowings under the New PNC Facility. Our ability to
acquire and incubate new companies and to fund new ventures will be entirely
dependent on the amount of excess cash generated from our operating companies,
and the occurrence of any liquidity event. We cannot provide assurances that we
will generate sufficient excess cash from our operating companies or that any
liquidity events will occur.

Our functional currency for financial reporting purposes is the U.S. Dollar.
We generally invoice our clients and pay expenses in the local currency of the
country in which the client is located. Statement of Operations translation
gains and losses arising from differences between the functional and local
currencies are recognized in the consolidated income statements and have not
had a significant impact on the results of operations. Balance sheet gains and
losses as a result of fluctuations in foreign currency exchange rates are
recognized in shareholders' equity as a component of comprehensive income. We
continually evaluate the economic conditions of each country in which we
operate and base our foreign currency accounting policies on those assessments.

Seasonality

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.

Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), effective January 1, 2001.

24

SFAS 133 establishes accounting and reporting standards requiring that all
derivative instruments (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged item in
the Consolidated Statement of Operations, and requires that a company must
formally document, designate, and assess the effectiveness of transactions that
receive hedge accounting. The Company will adopt SFAS 133 on January 1, 2001,
which will result in the recording of current assets of $68,000, and a gain
from the cumulative effect from the change in accounting principle of $41,000
net of tax.

Pursuant to the Securities and Exchange Commission's Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"),
the Company has reviewed its accounting policies for the recognition of
revenue. SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition in financial statements. The Company's
policies for revenue recognition are consistent with the views expressed within
SAB 101.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

On June 30, 1998, the Company entered into a foreign exchange contract with
PNC to hedge its foreign exchange exposure on certain intercompany debt. This
contract matured at each quarter henceforth and has been extended to mature at
March 30, 2001.

The outstanding contract is for the sale by the Company of 7 million
Canadian dollars at 1.528 (U.S. $4,581,152). When the contract matures on March
30, 2001, the Company expects to access the foreign exchange markets at the
then prevailing exchange rates to purchase 7 million Canadian dollars for
delivery to PNC. If the then-prevailing exchange rate is lower than 1.528, the
Company will record a gain for the difference between the spot rate and 1.528.
Conversely, if the spot rate is higher than 1.528, the Company will record a
loss equal to that difference. At December 31, 2000, the exchange rate was
1.499.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements and Supplementary Data required by this item are
filed as part of this Form 10-K. See Index to Consolidated Financial Statements
on page 28 of this Form 10-K.

25

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The accompanying consolidated financial statements of iGate Capital
Corporation and subsidiaries have been prepared by management, which is
responsible for their integrity and objectivity. The statements have been
prepared in conformity with generally accepted accounting principles and
necessarily include amounts based on management's best estimates and judgments.

Management has established and maintains a system of internal controls
designed to provide reasonable assurance that assets are safeguarded and that
the Company's financial records reflect authorized transactions of the Company.
The system of internal controls includes widely communicated statements of
policies and business practices that are designed to require all employees to
maintain high ethical standards in the conduct of Company affairs. The internal
controls are augmented by organizational arrangements that provide for
appropriate delegation of authority and division of responsibility.

The Company's consolidated financial statements have been audited by Arthur
Andersen LLP, independent public accountants, whose report thereon appears on
page 30 of this Form 10-K. As part of its audit of the Company's 2000 financial
statements, Arthur Andersen LLP considered the Company's system of internal
controls to the extent it deemed necessary to determine the nature, timing and
extent of its audit tests. Management has made available to Arthur Andersen LLP
the Company's financial records and related data.

The Board of Directors pursues its responsibility for the Company's
financial reporting and accounting practices through its Audit Committee, all
of the members of which are independent directors. The Audit Committee's duties
include recommending to the Board of Directors the independent public
accountants to audit the Company's financial statements, reviewing the scope
and results of the independent public accountants activities and reporting the
results of the committee's activities to the Board of Directors. The
independent public accountants have met with the Audit Committee in the
presence of management representatives to discuss the results of their audit
work and their comments on the adequacy of internal accounting controls, and
the quality of financial reporting. The independent public accountants have
direct access to the Audit Committee.

Sunil Wadhwani
Co-Chairman, Chief Executive Officer and Director

Bruce E. Haney
Managing Director and Chief Financial Officer

March 27, 2001

26

iGATE CAPITAL CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
----

Report of Independent Public Accountants................................. 28

Consolidated Balance Sheets as of December 31, 2000 and 1999............. 29

Consolidated Statements of Operations for the years ended December 31,
2000, 1999 and 1998..................................................... 30

Consolidated Statements of Shareholders' Equity for the years ended
December 31, 2000, 1999 and 1998........................................ 31

Consolidated Statements of Cash Flows for the years ended December 31,
2000, 1999 and 1998..................................................... 32

Notes to Consolidated Financial Statements............................... 33

27

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders of iGate Capital Corporation:

We have audited the accompanying consolidated balance sheets of iGate
Capital Corporation and subsidiaries (a Pennsylvania Corporation) as of
December 31, 2000 and 1999, and the related consolidated statements of
operations, comprehensive income, shareholders' equity and cash flows for each
of the three years ended December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of iGate Capital Corporation
and subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years ended December 31,
2000, in conformity with accounting principles generally accepted in the United
States.

ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania
February 10, 2001 (Except for the
matter discussed in Note 17, as to
which the date is February 28, 2001)

28

iGATE CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)

As at December
31,
------------------
2000 1999
-------- --------

ASSETS
Current assets:
Cash and cash equivalents................................. $ 22,773 $ 23,596
Investments............................................... 17,660 75,358
Restricted investments.................................... 25,000 --
Accounts receivable, net of allowance for uncollectible
accounts of $1,793 and $2,069, respectively.............. 88,604 77,480
Unbilled receivables...................................... 30,254 17,391
Employee advances and related party advances.............. 7,535 4,421
Prepaid and other assets.................................. 13,376 4,696
Prepaid income taxes...................................... 15,407 6,982
Deferred income taxes..................................... 6,006 1,676
-------- --------
Total current assets.................................... 226,615 211,600
-------- --------
Investments in unconsolidated affiliates................... 61,120 290
-------- --------
Equipment and leasehold improvements, at cost:
Equipment................................................. 35,027 26,022
Leasehold improvements.................................... 5,916 4,816
-------- --------
40,943 30,838
Less--accumulated depreciation............................ (17,265) (10,450)
-------- --------
Net equipment and leasehold improvements................ 23,678 20,388
-------- --------
Intangible assets, net..................................... 52,738 45,910
-------- --------
Total assets............................................... $364,151 $278,188
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit facility................................. $ 44,695 $ --
Accounts payable.......................................... 17,724 10,639
Accrued payroll and related costs......................... 29,646 30,876
Other accrued liabilities................................. 12,700 10,178
Deferred revenue.......................................... 1,530 366
-------- --------
Total current liabilities............................... 106,295 52,059
Convertible promissory note................................ 20,000 30,000
Other long-term liabilities................................ 314 5,370
Deferred income taxes...................................... 20,021 6,307
Minority interest.......................................... 6,934 290
-------- --------
Total liabilities....................................... 153,564 94,026
======== ========
Shareholders' equity:
Preferred Stock, without par value: 20,000,000 shares
authorized,
1 share of Series A Preferred Stock issued and
outstanding.............................................. -- --
Common Stock, par value $0.01 per share: 100,000,000
shares authorized,
52,107,455 and 50,506,141 shares issued at December 31,
2000 and 1999, respectively.............................. 522 505
Additional paid-in capital................................ 142,706 115,722
Retained earnings......................................... 73,499 83,307
Common Stock held in treasury, at cost, 813,500 shares.... (14,095) (14,095)
Accumulated other comprehensive income (loss)............. 7,955 (1,277)
-------- --------
Total shareholders' equity.............................. 210,587 184,162
-------- --------
Total liabilities and shareholders' equity................. $364,151 $278,188
======== ========

The accompanying notes are an integral part of these consolidated financial
statements.

29

iGATE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)

Year Ended December 31,
----------------------------
2000 1999 1998
-------- -------- --------

Revenues.......................................... $477,287 $471,739 $401,371
Cost of revenues.................................. 312,625 298,936 259,250
-------- -------- --------
Gross profit...................................... 164,662 172,803 142,121
Selling, general and administrative............... 179,376 115,235 89,206
Special items..................................... 6,840 2,316 --
-------- -------- --------
Income (loss) from operations..................... (21,554) 55,252 52,915
Interest income................................... 3,991 3,764 3,393
Interest expense.................................. (5,043) (859) (147)
Other income (expense), net....................... (3,675) 78 66
Equity in losses of affiliated companies.......... (13,639) (310) --
Minority interest................................. 794 210 --
Gain on issuance of stock by subsidiary........... 26,853 -- --
Merger-related expenses........................... -- (1,727) (3,212)
-------- -------- --------
Income (loss) before income taxes................. (12,273) 56,408 53,015
Income tax provision (benefit).................... (2,465) 20,197 20,459
-------- -------- --------
Net income (loss)................................. $ (9,808) $ 36,211 $ 32,556
======== ======== ========
Net income (loss) per common share, basic......... $ (0.19) $ 0.72 $ 0.65
======== ======== ========
Net income (loss) per common share, diluted....... $ (0.19) $ 0.71 $ 0.64
======== ======== ========

The accompanying notes are an integral part of these consolidated financial
statements.

30

iGATE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(Dollars in thousands)

Common Stock
---------------- Series A Additional
Par Preferred Paid-in Retained Deferred
Shares Value Shares Capital Earnings Compensation
---------- ----- --------- ---------- -------- ------------

Balance, December 31,
1997................... 49,884,801 $263 $ 0 $105,764 $15,526 $(258)
Amortization of deferred
compensation........... -- -- -- -- -- 258
Exercise of stock
options, includes
effect of tax benefit
recognized............. 351,279 2 -- 5,482 -- --
Two-for-one stock split
effected in the form of
a stock dividend paid
on April 10, 1998...... -- 237 -- -- (237) --
Issuance of Preferred
Stock.................. -- -- 1 -- -- --
Non-cash merger costs... -- -- -- 262 -- --
Dividends paid by
Quantum................ -- -- -- -- (749) --
Comprehensive income:
Net unrealized gain on
investments........... -- -- -- -- -- --
Currency translation
adjustment............ -- -- -- -- -- --
Net income............. -- -- -- -- 32,556 --
---------- ---- ---- -------- ------- -----
Balance, December 31,
1998................... 50,236,080 502 1 111,508 47,096 --
Exercise of stock
options, includes
effect of tax benefit
recognized............. 270,061 3 -- 4,214 -- --
Purchase of treasury
shares................. -- -- -- -- -- --
Comprehensive income:
Net unrealized loss on
investments........... -- -- -- -- -- --
Currency translation
adjustment............ -- -- -- -- -- --
Net income............. -- -- -- -- 36,211 --
---------- ---- ---- -------- ------- -----
Balance, December 31,
1999................... 50,506,141 505 1 115,722 83,307 --
Exercise of stock
options, includes
effect of tax benefit
recognized............. 568,267 6 -- 13,587 -- --
Common Stock issued for
acquisition............ 150,943 2 -- 8,260 -- --
Common Stock issued to
officers............... 882,104 9 -- 5,137 -- --
Comprehensive income:
Net unrealized gain on
investments........... -- -- -- -- -- --
Currency translation
adjustment............ -- -- -- -- -- --
Net loss............... -- -- -- -- (9,808) --
---------- ---- ---- -------- ------- -----
Balance, December 31,
2000................... 52,107,455 $522 $ 1 $142,706 $73,499 $ 0
========== ==== ==== ======== ======= =====

Accumulated Total Shareholders'
Other Equity and Comprehensive
Treasury Comprehensive Comprehensive Income
Shares Income (Loss) Income (Loss) (Loss)
-------- ------------- ------------------- -------------

Balance, December 31,
1997................... $ 0 $ (665) $120,630
Amortization of deferred
compensation........... -- -- 258
Exercise of stock
options, includes
effect of tax benefit
recognized............. -- -- 5,484
Two-for-one stock split
effected in the form of
a stock dividend paid
on April 10, 1998...... -- -- --
Issuance of Preferred
Stock.................. -- -- --
Non-cash merger costs... -- -- 262
Dividends paid by
Quantum................ -- -- (749)
Comprehensive income:
Net unrealized gain on
investments........... -- 368 368 $ 368
Currency translation
adjustment............ -- (274) (274) (274)
Net income............. -- -- 32,556 32,556
-------- ------- -------- -------
$32,650
=======
Balance, December 31,
1998................... -- (571) 158,535
Exercise of stock
options, includes
effect of tax benefit
recognized............. -- -- 4,217
Purchase of treasury
shares................. (14,095) -- (14,095)
Comprehensive income:
Net unrealized loss on
investments........... -- (807) (807) $ (807)
Currency translation
adjustment............ -- 101 101 101
Net income............. -- -- 36,211 36,211
-------- ------- -------- -------
$35,505
=======
Balance, December 31,
1999................... (14,095) (1,277) 184,162
Exercise of stock
options, includes
effect of tax benefit
recognized............. -- -- 13,593
Common Stock issued for
acquisition............ -- -- 8,262
Common Stock issued to
officers............... -- -- 5,146
Comprehensive income:
Net unrealized gain on
investments........... -- 10,988 10,988 $10,988
Currency translation
adjustment............ -- (1,756) (1,756) (1,756)
Net loss............... -- -- (9,808) (9,808)
-------- ------- -------- -------
$ (576)
=======
Balance, December 31,
2000................... $(14,095) $ 7,955 $210,587
======== ======= ========

The accompanying notes are an integral part of these consolidated financial
statements.

31

iGATE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

Year Ended December 31,
----------------------------
2000 1999 1998
-------- -------- --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Operations:
Net income (loss)............................... $ (9,808) $ 36,211 $ 32,556
Adjustments to reconcile net income to cash
provided by operations:
Depreciation and amortization................. 13,029 7,102 4,092
Impairment of goodwill........................ 2,455 -- --
Gain on issuance of stock by subsidiary....... (26,853) -- --
Allowance for uncollectible accounts.......... (312) 342 513
Deferred income taxes, net.................... 803 (3,177) 3,160
Non-cash merger costs, net.................... -- -- 262
Equity in losses of affiliated companies...... 13,639 310 --
Minority interest............................. (794) (210) --
Amortization of deferred compensation......... -- -- 258
Amortization of bond premium (discount)....... (670) 819 534
Working capital items:
Accounts receivable and unbilled receivables.. (21,341) (1,487) (16,446)
Employee and related party advances........... (3,069) (848) (994)
Prepaid and other assets...................... (8,611) (1,862) (967)
Accounts payable.............................. 6,711 (687) 2,387
Accrued and other current liabilities......... 1,130 (1,872) 8,813
-------- -------- --------
Net cash flows provided (used) by operating
activities................................. (33,691) 34,641 34,168
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to equipment and leasehold
improvements, net.............................. (13,789) (7,047) (11,594)
Purchases of investments........................ (89,344) (97,311) (74,965)
Sales of investments............................ 116,118 67,480 27,646
Acquisitions, net of cash acquired.............. (9,158) (24,815) (19,218)
Contingent consideration........................ (11,072) (4,969) (749)
Other investments............................... (42,544) (810) --
-------- -------- --------
Net cash flows used by investing
activities................................. (49,789) (67,472) (78,880)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt...................... -- 30,000 --
Payments on long-term debt...................... (10,000) -- --
Borrowings on credit facilities................. 84,395 32,000 --
Payments on credit facilities................... (39,700) (32,000) (8,157)
Acquisition of treasury shares.................. -- (14,095) --
Proceeds from issuance of common stock.......... 5,146 -- --
Proceeds from issuance of stock by subsidiary,
net of offering costs.......................... 30,979 -- --
Cash received for minority interest in joint
venture........................................ -- 711 --
Net proceeds from exercise of stock options..... 13,593 4,217 5,484
-------- -------- --------
Net cash flows provided (used) by financing
activities................................. 84,413 20,833 (2,673)
-------- -------- --------
Effect of currency translation................... (1,756) 101 (274)
-------- -------- --------
Net change in cash and cash equivalents.......... (823) (11,897) (47,659)
Cash and cash equivalents, beginning of period... 23,596 35,493 83,152
-------- -------- --------
Cash and cash equivalents, end of period......... $ 22,773 $ 23,596 $ 35,493
======== ======== ========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Unrealized gain (loss) on investments........... $ 10,988 $ (807) $ 368
======== ======== ========
Common stock issued for acquisition............. $ 8,262 $ -- $ --
======== ======== ========
SUPPLEMENTAL DISCLOSURE:
Cash payments for interest...................... $ 4,713 $ 7 $ 300
======== ======== ========
Cash payments for income taxes.................. $ 2,569 $ 19,300 $ 16,148
======== ======== ========

The accompanying notes are an integral part of these consolidated financial
statements.

32

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies

The accompanying Consolidated Financial Statements reflect the consistent
application of the following significant accounting policies:

(a) Principles of Consolidation

The Consolidated Financial Statements include the accounts of the iGate
Capital Corporation (the "Company") and its wholly-owned and majority-owned
subsidiaries. All material intercompany transactions and balances have been
eliminated in consolidation. The Company accounts for investments in businesses
in which it owns between 20% and 50% of equity or otherwise acquires management
influence using the equity method as prescribed by Accounting Principles Board
Opinion No. 18, "The Equity Method of Accounting for Investments in Common
Stock". Investments in which the Company acquires less than a 20% interest, or
in which the Company does not acquire management influence are accounted for
using the cost method of accounting or, if publicly traded, as available-for-
sale securities.

(b) Cash and Cash Equivalents

Cash and cash equivalents are defined as cash and short-term investments
with maturities of three months or less when purchased.

(c) Short-Term Investments

These investments consist of money market funds and short-term commercial
paper, and are stated at estimated fair value based upon market quotes.

On August 1, 2000, the Company entered into a $50 million Secured Credit
Facility (as amended, the "Facility") as described in Note 7 to the
Consolidated Financial Statements. Pursuant to the Facility, the Company has
pledged $25 million of its cash and investments to the lender. Such assets are
reported on the Company's Consolidated Balance Sheet as restricted investments.

(d) Disclosures about Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to estimate
that fair value:

Cash and short-term investments--The carrying amount approximates market
value.

Short-term debt--The carrying amount approximates market value. The
outstanding balance is reflected at its outstanding face value, excluding
unpaid accrued interest at an interest rate at the lesser of the current LIBOR
rate+2% or the Prime rate, calculated on a per annum basis.

Long-term debt--It is not practicable to estimate the fair value of the
Convertible Promissory Note of the Company. The note is reflected at its
outstanding face value, excluding unpaid accrued interest at an interest rate
of 6.3% per annum.

(e) Accounts Receivable

The Company extends credit to clients based upon management's assessment of
their creditworthiness. Substantially all of the Company's revenues (and the
resulting accounts receivable) are from large companies, major systems
integrators and governmental agencies.

33

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Unbilled receivables represent amounts recognized as revenues for the
periods presented based on services performed in accordance with the terms of
client contracts that will be invoiced in subsequent periods.

(f) Joint ventures

The Company has invested in certain joint ventures, which are accounted for
using the equity method of accounting. All joint ventures were in the early
stages of development during the year.

(g) Goodwill and Intangible Assets

Intangible assets, which include the excess of purchase price and related
costs over the value of the net assets acquired, are amortized using the
straight-line method over periods ranging from five to 30 years. The Company
assesses the recoverability of goodwill by determining whether the amortization
of the goodwill balance over its remaining life can be recovered through
undiscounted future operating cash flows. During the year ended December 31,
2000, Global Resource Management ("GRM"), which was acquired in January 1999,
ceased operations. Accordingly, the Company recorded impairment charges of $2.4
million to write off the unamortized balance of goodwill recorded in the
acquisition of GRM. The impairment charges are included in the Consolidated
Statement of Operations on the "special items" line. GRM is included in the
Staffing Services segment. The Company believes that the carrying amount of all
other intangible assets will be realizable over their respective amortization
periods. Amortization expense was approximately $5.4 million, $1.3 million, and
$250,000, for the years ended December 31, 2000, 1999, and 1998, respectively.

(h) Equipment and Leasehold Improvements

The Company provides for depreciation using the straight-line method in
amounts that allocate the costs of equipment over their estimated useful lives
of three to seven years, and leasehold improvements over the shorter of the
life of the improvement or of the underlying lease term.

(i) Income Taxes

Deferred income taxes are provided for the temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities. The Company has evaluated its deferred tax asset, and believes
that it will be fully realized. Accordingly, the Company has not recorded a
valuation allowance.

Historically, the government of India has provided incentives, in the form
of tax holidays, to encourage foreign investment. The Company's operation in
India was eligible for a tax holiday for a five-year period beginning in 1997.

(j) Hedging

The Company selectively uses foreign exchange contracts to hedge foreign
exchange exposure on certain intercompany debt. Gains and losses on the foreign
exchange contracts are recognized in Shareholders' Equity as Currency
Translation Adjustments. Such gains and losses are substantially offset in
Currency Translation Adjustment by gains or losses on translation of the
related debt.

(k) Currency Translation Adjustment

The financial statements of foreign subsidiaries are translated using the
exchange rate in effect at year-end for balance sheet accounts and the average
exchange rate in effect during the year for revenue and expense accounts.

34

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company's functional currency for financial reporting purposes is the
U.S. Dollar. The Company generally invoices our clients and pays expenses in
the local currency of the country in which the client is located. Statement of
Operations translation gains and losses arising from differences between the
functional and local currencies are recognized in the Consolidated Statements
of Operations, and have not had a significant impact on the results of
operations. Balance Sheet gains and losses as a result of fluctuations in
foreign currency exchange rates are recognized in the Consolidated Statement of
Shareholders' Equity and Comprehensive Income as a component of accumulated
other comprehensive income. The Company continually evaluates the economic
conditions of each country in which it operates, and bases its foreign currency
accounting policies on those assessments.

(l) Revenue Recognition

The Company recognizes revenue on time-and-materials contracts as the
services are performed. Revenues on fixed-price contracts are recognized using
the proportional performance method. Performance is determined by relating the
actual cost of work performed to date to the estimated total cost for each
contract. If the estimate indicates a loss on a particular fixed-price
contract, a provision is made for the entire estimated loss without reference
to the stage of completion. For certain companies, revenues are recognized upon
implementation and client acceptance of an application and through monthly
service fees in accordance with SOP 97-2, "Software Revenue Recognition".
Changes in job performance, conditions and estimated profitability may result
in revisions to costs and revenues and are recognized in the period in which
the changes are identified.

(m) Gains on Issuance of Stock by Subsidiaries

At the time a subsidiary sells its stock to unrelated parties at a price in
excess of its book value, the Company's investment in that subsidiary's net
assets increases. If at that time, the subsidiary is not a newly-formed, non-
operating entity, nor a research and development, start-up, or development-
stage company, nor is there a question as to the subsidiary's ability to
continue in existence, the Company records the increase as a gain on in its
Consolidated Statement of Operations.

(n) Use of Estimates in the Preparation of Financial Statements

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

(o) Reclassifications and Restatements

Certain reclassifications have been made to the Company's 1999 and 1998
Consolidated Financial Statements to conform to current year presentation. The
Company's 1999 Consolidated Financial Statements have been restated to
consolidate an investment in which the Company had acquired a controlling
interest, which had previously been accounted for under the equity method of
accounting. The Company has also reclassified expenses related to consultants'
non-billable time from cost of revenues to selling, general, and administrative
expenses.

(p) Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), effective January 1, 2001.

35

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
SFAS 133 establishes accounting and reporting standards requiring that all
derivative instruments (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. SFAS 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Accounting for qualifying hedges allows a
derivative's gains and losses to offset related results on the hedged item in
the Consolidated Statement of Operations, and requires that a company must
formally document, designate, and assess the effectiveness of transactions that
receive hedge accounting. The Company will adopt SFAS 133 on January 1, 2001,
which will result in the recording of current assets of $68,000, and a gain
from the cumulative effect from the change in accounting principle of $41,000
net of tax.

2. Investments

In 2000, the Company had short-term investments comprised of commercial
paper and money market funds, held by Mascot in India that totaled $17.7
million. In addition, the Company had restricted investments (as discussed in
Note 7 to the Consolidated Financial Statements) that totaled $25.0 million,
invested in money market funds.

At December 31, 1999, the Company's portfolio of investments consisted of
available-for-sale debt instruments and were accounted for as follows (dollars
in thousands):

Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- -------

Investment grade municipal bonds....... $75,797 $24 $(463) $75,358
======= === ===== =======

3. Investments in Unconsolidated Affiliates

The Company's investments in unconsolidated affiliates, and the percentage
of the affiliate owned by the Company, were as follows on December 31, 2000.
The investments are grouped by the applicable method of accounting. All
ownership positions set forth on the table have been calculated based on the
issued and outstanding common stock of each entity, assuming the issuance of
common stock on the conversion or exercise of preferred stock and convertible
notes, but excluding the effect of unexercised options and warrants.

Percentage
Owned
----------

Available-for-sale equity securities:
Speechworks International, Inc....................................... 2%
Versata, Inc......................................................... *

Equity method of accounting:
Air2Web, Inc......................................................... 22%
Planning Technologies, Inc........................................... 50%
Synerge, LLC (d/b/a iProcess)........................................ 50%
VCampus, Inc......................................................... 14%

Cost method of accounting:
Bluewater Information Convergence, Inc............................... 9%
Brainbench, Inc...................................................... 5%
Escend Technologies, Inc............................................. 15%
Xpede, Inc........................................................... *%

- --------
* Denotes less than 1%

36

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company accounts for its investment in VCampus, Inc. ("VCampus") under
the equity method of accounting because it has obtained significant influence
on VCampus through representation on VCampus' Board of Directors.

The following table summarizes the Company's investments in unconsolidated
affiliates. Ownership interests are classified according to applicable
accounting methods.

December 31, December 31,
2000 1999
---------------- --------------
Carrying Cost Carrying Cost
Value Basis Value Basis
-------- ------- -------- -----
(Dollars in thousands)

Available-for-sale equity securities............ $21,157 $ 3,575 $-- $--
Equity method of accounting..................... 27,915 38,062 -- --
Cost method of accounting....................... 12,048 12,048 290 290
------- ------- ---- ----
$61,120 $53,685 $290 $290
======= ======= ==== ====

At December 31, 2000, the Company's carrying value in its investments
accounted for under the equity method of accounting exceeded its share of the
underlying equity in the net assets of such companies by $26.5 million, which
is being amortized over a five-year period. Amortization expense of $5.4
million was included on the Consolidated Statement of Operations under the
caption "equity in losses of affiliated companies" in the year ended December
31, 2000.

Gross unrealized holding gains on available-for-sale equity securities were
$17.6 million at December 31, 2000. The Company had no unrealized holding
losses on available-for-sale equity securities at December 31, 2000. There were
no sales of available-for-sale equity securities during the year ended December
31, 2000.

4. Restructuring and Merger-Related Expense

In 2000, the Company incurred $4.4 million related to an internal
restructuring that occurred during the fourth quarter of 2000. Costs incurred
related to the restructuring included costs for employee severance, office
closures, professional fees and the write-off of certain business licenses
specific to the restructuring. The costs are expected to be paid by the end of
the fiscal year ended December 31, 2001.

The Company merged with the Amber Group in 1999, and incurred costs totaling
$1.7 million for employee severance, professional fees and office closures
during the year ended December 31, 1999. The Company merged with the Quantum
Group in 1998, and incurred $3.2 million of costs related to employee
severance, professional fees and office closures during the year ended December
31, 1998.

5. Hedging Activities

The Company selectively uses foreign exchange contracts to hedge foreign
exchange exposure on certain intercompany debt. At December 31, 2000, the
Company held one foreign exchange contract, which matures on March 30, 2001.
The outstanding contract is for the sale by the Company of 7 million Canadian
dollars at 1.528 (U.S. $4,581,152).

37

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

6. Income Taxes

Income (loss) before income taxes, as shown in the accompanying Consolidated
Financial Statements, consisted of the following for the years ended December
31, 2000, 1999, and 1998:

December 31,
-------------------------
2000 1999 1998
-------- ------- -------
(Dollars in thousands)

Domestic............................................. $(10,634) $45,560 $44,649
Foreign.............................................. (1,639) 10,848 8,366
-------- ------- -------
Income (loss) before income taxes.................. $(12,273) $56,408 $53,015
======== ======= =======

Taxes on income, as shown on the accompanying Consolidated Financial
Statements, consisted of the following for the years ended December 31, 2000,
1999, and 1998:

December 31,
------------------------
2000 1999 1998
------- ------- -------
(Dollars in thousands)

Current provision/(benefit):
Federal............................................. $(5,237) $15,330 $13,806
State............................................... 1,141 2,454 1,869
Foreign............................................. 50 2,225 2,236
------- ------- -------
Total current provision (benefit)................. (4,046) 20,009 17,911
------- ------- -------
Deferred provision/(benefit):
Federal............................................. 2,162 150 2,057
State............................................... (581) 38 491
Foreign............................................. -- -- --
------- ------- -------
Total deferred provision.......................... 1,581 188 2,548
------- ------- -------
Total provision (benefit) for income taxes........ $(2,465) $20,197 $20,459
======= ======= =======

The reconciliation of income taxes computed using the statutory U.S. income
tax rate and the provision for income taxes for the years ended December 31,
2000 and 1999 were as follows:

December 31, December 31,
2000 1999
--------------- -------------
(Dollars in thousands)

Income taxes computed at the federal
statutory rate.............................. $(4,296) (35.0%) $19,734 35.0%
State income taxes, net of federal tax
benefit..................................... 364 3.0 1,437 2.5
Goodwill amortization........................ 2,740 22.3 248 0.4
Other, net................................... (1,273) (10.4) (1,222) (2.1)
-------- ----- ------- ----
Provision (benefit) for income taxes....... $ (2,465) (20.1%) $20,197 35.8%
======== ===== ======= ====

38

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The components of the deferred tax assets and liabilities were as follows:

December 31,
---------------
2000 1999
------- ------
(Dollars in
Thousands)

Deferred tax assets:
Allowance for doubtful accounts and employee advances....... $ (530) $ (295)
Accrued health benefits..................................... (1,077) (431)
Accrued vacation............................................ (1,205) (1,133)
Depreciation................................................ (417) (110)
Reserve for Canadian employment taxes....................... (974) (943)
Other....................................................... -- (64)
------- ------
Total deferred tax assets................................. (4,203) (2,976)
------- ------
Deferred tax liabilities:
Compensation for IMIS employees............................. 3,180 3,260
Section 481(a) adjustments.................................. 142 455
Unrecognized gain on investments............................ 14,541 --
Other....................................................... 355 3,892
------- ------
Total deferred tax liabilities............................ 18,218 7,607
------- ------
Net deferred tax liability.................................... $14,015 $4,631
======= ======
Net deferred tax liability.................................... $14,015 $4,631
Plus: net current deferred tax asset.......................... 6,006 1,676
------- ------
Net long-term deferred tax liability........................ $20,021 $6,307
======= ======

At December 31, 2000, certain reclassifications were made to the current and
deferred income tax liability amounts to reflect the differences between the
actual tax liabilities for the year ended December 31, 1999 as filed and the
estimates of those liabilities at December 31, 1999.

7. Credit Facilities

On August 1, 2000, the Company entered into a $50.0 million secured credit
facility (as amended, the "New PNC Facility") with PNC Bank, N.A. ("PNC"),
replacing an existing $75.0 million revolving credit facility (the "Old
Facility"). The New PNC Facility, which expires on October 1, 2001, provides a
maximum loan amount of $50.0 million, subject to the Company's accounts
receivable balance and other factors. The New PNC Facility contains certain
restrictive covenants related to maintenance of certain net equity and leverage
ratios and prohibition of certain distributions to shareholders. In addition,
covenants in the New PNC Facility require the Company to maintain an aggregate
of $30.0 million in cash and cash equivalents, of which, $25.0 million has been
pledged to PNC. The Company was in compliance with the covenants at
December 31, 2000.

From December 3, 1998 to August 1, 2000, the Company had in place the Old
Facility, which provided a maximum loan amount of $75.0 million. The Old
Facility contained certain restrictive covenants and financial ratio
requirements that limited distributions to shareholders and additional
borrowings.

At December 31, 2000, borrowings of approximately $44.7 million were
outstanding on the New PNC Facility. No borrowings were outstanding under the
Old Facility at December 31, 1999. The weighted average interest rates were
approximately 9.0% and 8.4% at December 31, 2000 and 1999, respectively.

39

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8. Commitments and Contingencies

The Company rents certain office facilities and equipment under
noncancelable operating leases, which provide for the following future minimum
rental payments as of December 31, 2000:

Period ending Amount
December 31, (dollars in thousands)
------------- ----------------------

2001 $8,338
2002 7,122
2003 5,701
2004 4,648
2005 3,579
Thereafter 3,423

Rental expense was approximately $7.3 million, $5.1 million and $3.4 million
for the years ended December 31, 2000, 1999, and 1998, respectively.

The Company has employment agreements with its controlling shareholders and
certain of its executive officers that provide generally for specified minimum
salaries and bonuses based upon the Company's performance.

The terms of certain of the Company's acquisition agreements provide for
additional consideration to be paid if the acquired entity's results of
operations exceed certain benchmark levels. Such additional consideration is to
be paid in cash, and will be recorded as additional goodwill. If all financial
benchmarks are met, total contingent consideration in future periods will be
$17.4 million.

On July 22, 1999, iGate completed a private placement of a $30.0 million
Convertible Promissory Note (as amended, the "Note") with GE Capital Equity
Investments, Inc. ("GE Capital"). The Note can be converted by the holder at
any time from July 22, 2002 through its maturity date of July 22, 2004, into
shares of the Company's Common Stock at an initial conversion price of $14.42
per share; provided, however, that the portion of the Note that may be
converted into the Company's Common Stock may be limited if the revenues that
the Company generates by performing services for GE Capital and certain of its
affiliates fall below certain targets. The Note accrues interest at the rate of
6.3% per annum, payable semi-annually in arrears on the last day of each July
and January. In conjunction with entering into the New PNC Facility, we amended
the Note effective August 1, 2000 to provide GE Capital with a more favorable
conversion price and to provide for revised revenue targets. As part of this
amendment, we paid $10 million on the Note. Interest expense on the Note was
approximately $1.7 million and $851,000 for the years ended December 31, 2000
and 1999, respectively.

In December 1999, the Company settled certain outstanding claims that had
been reserved. As a result of these favorable settlements, the Company
recognized income of approximately $1.8 million or $.02 per diluted share.

9. Issuance of Stock by Subsidiary

In June 2000, the Company's wholly-owned subsidiary, Mascot Systems Ltd.
("Mascot Systems") commenced an initial public offering (the "Offering") of its
Common Stock on several Indian stock exchanges. Mascot Systems issued
approximately 3 million shares at a price of approximately $11 per share,
raising $31.0 million in net proceeds. After the Offering, the Company owned
approximately 88.9% of Mascot Systems' Common Stock. The Company recorded a
pre-tax gain of approximately $26.9 million as a result of the increase in the
value of its percentage ownership in the net assets of Mascot.

40

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

10. Employee Benefit Plan

The Company has an Employee Retirement Savings Plan (the "Retirement Plan")
under Section 401(k) of the Internal Revenue Code that covers substantially all
U.S.-based salaried employees with at least six months of service. Eligible
employees may contribute up to 15% of eligible compensation, subject to limits
in the Internal Revenue Code.

Effective January 1, 2000, the Company amended the Retirement Plan to
include a matching contribution of up to 4% of each participant's eligible
compensation. The amount of the contribution is dependent upon the employee's
level of participation, and vests immediately. The Company's matching
contribution was $2,963,000 for the year ended December 31, 2000. The Company
did not make a contribution to the Retirement Plan in the years ended December
31, 1999 or 1998.

11. Stock Based Compensation

During 2000, the Company adopted the Second Amended and Restated Stock
Incentive Plan (the "Plan"). The Plan provides that up to 10 million shares of
the Company's Common Stock, plus an automatic annual increase each year from
2001 through 2006 of the lesser of (i) 2 million shares; (ii) 3% of the
outstanding shares on the last day of the preceding year; or (iii) a lesser
number of shares as determined by the Company's Board of Directors, shall be
available for issuance to directors, executive management and key personnel. At
December 31, 2000, there were 5,851,827 shares of Common Stock available for
issuance under the Plan. In addition, the following subsidiaries of the Company
also maintain their own stock option plans: eJIVA, Inc.; itiliti, Inc.;
Innovative Resource Group, Inc.; Mascot Systems Ltd.; MobileHelix, Inc.; and
Symphoni Interactive, LLC. The subsidiaries' stock option plans were approved
by their respective Boards of Directors in 2000. The Company accounts for the
Plan and its subsidiaries' stock option plans under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees". Had compensation
costs for the Plan and the subsidiaries' stock option plans been determined
consistent with Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), net loss and diluted
loss per share for the year ended December 31, 2000 would have been increased
by $5.0 million or $0.09 per share. For the year ended December 31, 1999, net
income and diluted earnings per share would have been reduced by $6.9 million,
or $0.13 per share had compensation costs been calculated under SFAS 123. For
the year ended December 31, 1998, net income and diluted earnings per share
would have been reduced by $3.5 million, or $0.07 per share had compensation
costs been calculated under SFAS 123. The calculation of pro forma net income
under SFAS 123 includes the Company's share of its subsidiaries' SFAS 123 pro
forma expense.

During 2000, 1999 and 1998, options covering a total of 1,326,800 shares,
2,627,840 shares and 1,703,873 shares, respectively, of Common Stock were
granted under the Plan. Options generally expire ten years from the date of
grant, or earlier if an option holder ceases to be employed or associated by
the Company for any reason. A summary of stock options is presented below:

Weighted Average
2000 Options Exercise Price
- ---- --------- ----------------

Options outstanding, beginning of period............. 4,909,552 $15.17
Granted.............................................. 1,326,800 $14.38
Exercised............................................ 568,267 $15.20
Lapsed and forfeited................................. 1,519,912 $19.24
---------
Options outstanding, end of period................... 4,148,173 $13.42
=========
Options exercisable, end of period................... 1,809,795 $13.76
=========
Available for future grant........................... 5,851,827
=========

41

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock options outstanding at December 31, 2000:

Options Outstanding Options Exercisable
- ----------------------------------------------------------- --------------------------
Weighted Average
Remaining
Range of Contractual Weighted Average Weighted Average
Exercise Price Options Life (Years) Exercise Price Options Exercise Price
- -------------- --------- ---------------- ---------------- --------- ----------------

$ 3.032 -
3.969 428,000 9.52 $ 3.82 0 $ .00
4.00 110,000 9.86 4.00 0 .00
4.06 -
7.50 632,717 6.10 7.42 528,217 7.50
8.06 -
11.75 643,239 8.03 10.10 288,669 9.82
11.935 -
13.00 438,705 8.47 12.66 168,004 12.66
13.063 -
15.625 519,906 8.80 14.96 133,261 14.99
15.688 -
18.907 595,913 7.48 17.32 329,262 17.09
19.188 -
23.50 429,149 7.80 21.80 271,174 21.61
23.563 -
33.125 350,044 8.19 26.79 91,208 27.35
45.125 500 9.25 45.13 0 .00
- ------------------------- ---- ------ --------- ------
$ 3.032 -
$45.125 4,148,173 7.99 $13.42 1,809,795 $13.76
========================= ==== ====== ========= ======

Summary of Stock Options

The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option pricing model. The weighted average fair values
of options granted and the assumptions used are as follows:

Year Ended December 31,
2000 iGate eJIVA Itiliti IRG Mascot MobileHelix Symphoni
- ----------------------- ------- ------- ------- ------- ------- ----------- --------

Weighted average fair
value of options
granted during 2000.... $ 9.95 $ 1.10 $ 0.09 $ 0.18 $ 1.23 $ 0.01 $ 0.52
Risk-free interest
rate................... 6.2% 6.2% 6.5% 6.4% 5.6% 6.4% 6.5%
Expected dividend
yield.................. 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Expected life of
options................ 5 years 4 years 4 years 4 years 4 years 4 years 4 years
Expected volatility
rate................... 90.0% 125.0% 152.5% 190.8% 66.5% 119.0% 177.5%

Year Ended December 31,
1999 iGate eJIVA Itiliti IRG Mascot MobileHelix Symphoni
- ----------------------- ------- ------- ------- ------- ------- ----------- --------

Weighted average fair
value of options
granted during 1999.... $ 17.81 -- -- -- -- -- --
Risk-free interest
rate................... 6.5% -- -- -- -- -- --
Expected dividend
yield.................. 0.0% -- -- -- -- -- --
Expected life of
options................ 5 years -- -- -- -- -- --
Expected volatility
rate................... 73.9% -- -- -- -- -- --

Year Ended December 31,
1998 iGate eJIVA itiliti IRG Mascot MobileHelix Symphoni
- ----------------------- ------- ------- ------- ------- ------- ----------- --------

Weighted average fair
value of options
granted during 1998.... $ 9.68 -- -- -- -- -- --
Risk-free interest
rate................... 5.6% -- -- -- -- -- --
Expected dividend
yield.................. 0.0% -- -- -- -- -- --
Expected life of
options................ 5 years -- -- -- -- -- --
Expected volatility
rate................... 50.0% -- -- -- -- -- --

42

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

12. Earnings per Share

The Company reports earnings per share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share", which requires
the disclosure of Basic and Diluted Earnings per Share ("EPS"). Basic EPS is
calculated using net income divided by the weighted average shares outstanding
during the year. Diluted EPS is similar to Basic EPS, except that the weighted
average shares outstanding includes the number of additional shares that would
have been outstanding if the dilutive potential shares, such as options and
convertible shares, had been issued. The Company uses the treasury stock method
for stock options and the if-converted method for the convertible shares
related to the GE Note.

Year Ended December 31,
------------------------
2000 1999 1998
------- ------- -------
(in thousands, except
per share data)

Basic earnings/(loss) per share:
Net income/(loss)................................... $(9,808) $36,211 $32,556
======= ======= =======
Divided by:
Weighted average common shares...................... 50,437 50,280 50,100
======= ======= =======
Basic earnings/(loss) per share....................... $ (0.19) $ 0.72 $ 0.65
======= ======= =======
Diluted earnings/(loss) per share:
Net income/(loss)................................... $(9,808) $36,211 $32,556
Convertible debt expense, net of tax (1)............ -- 542 --
------- ------- -------
Net income.......................................... $(9,808) $36,753 $32,556
======= ======= =======
Divided by the sum of:
Weighted average common shares...................... 50,437 50,280 50,100
Dilutive effect of convertible securities........... -- 619 --
Dilutive effect of common stock equivalents......... -- 611 825
------- ------- -------
Diluted average common shares....................... 50,437 51,510 50,925
======= ======= =======
Diluted earnings/(loss) per share..................... $ (0.19) $ 0.71 $ 0.64
======= ======= =======

- --------
(1) Convertible debt expense relates to GE Convertible Debenture Agreement as
discussed in Note 8.

For the year ended December 31, 2000, options to purchase 619,091 shares, as
well as 1,387,000 shares reserved for issuance upon conversion of a convertible
promissory note, were not included in the diluted calculation of EPS because
their effect would be antidilutive.

13. Business Acquisitions

Ex-tra-net Applications, Inc.: On January 27, 2000, the Company acquired the
net assets of James Hunter Consulting, Inc., a provider of e-Vendor management
services based in Minneapolis, Minnesota. Ex-tra-net Applications, Inc., which
has since changed its name to itiliti ("itiliti"), was formed to effect the
transaction, which was accounted for as a purchase. Accordingly, the results of
operations of itiliti are included in the Company's Consolidated Financial
Statements since the acquisition date. The total purchase price was $2.8
million. Goodwill of $1.8 million was recorded in the transaction, and is being
amortized using the straight-line method over five years. Pro forma disclosures
regarding this purchase have not been provided because they are not material to
the operations of the Company.

43

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Innovative Resource Group, Inc.: On March 3, 2000, the Company acquired 75%
of the outstanding stock of Innovative Resource Group, Inc. ("IRG"), a company
specializing in business intelligence management based in Pittsburgh,
Pennsylvania. The investment in IRG has since been diluted to 70% of the
outstanding stock. The transaction was accounted for as a purchase, and
accordingly, the results of operations of IRG are included in the Company's
Consolidated Financial Statements since the acquisition date. The total
purchase price was $5.8 million. Additional contingent payments of up to $3.6
million will be payable upon attainment of certain performance goals. Such
payments, if required, will be recorded as goodwill. Goodwill of $4.4 million
was recorded in the transaction, and is being amortized using the straight-line
method over five years. Pro forma disclosures regarding this purchase have not
been provided because they are not material to the operations of the Company.

Symphoni Interactive, LLC: On September 13, 1999, the Company contributed
$500,000 to Symphoni Interactive, LLC ("Symphoni"), a provider of information
technology consulting and integrated e-business solutions based in San
Francisco, California. The investment represented a 50% interest in Symphoni.
During the year ended December 31, 2000, the Company contributed approximately
$4.0 million for an additional 40% interest in Symphoni. The transactions were
accounted for as purchases. Upon acquiring a controlling interest in Symphoni,
the Company began to account for its investment in Symphoni as a consolidated
subsidiary. Prior to acquiring a controlling interest, the Company had
accounted for its investment in Symphoni using the equity method of accounting.
Financial statements for the year ended December 31, 1999 were restated to
account for the Company's investment in Symphoni as a consolidated subsidiary
in accordance with step-acquisition accounting. Goodwill of $1.9 million was
recorded pursuant to the transactions, and is being amortized over five years.

Chen & McGinley: On October 16, 1999, the Company acquired Chen & McGinley,
Inc. ("CMI"), a provider of application solutions based in San Francisco,
California. The transaction was accounted for as a purchase, and accordingly,
the results of operations of CMI are included in the Company's Consolidated
Financial Statements since the acquisition date. The total purchase price was
$25.8 million. Additional contingent consideration of up to $5.6 million will
be payable upon attainment of certain performance goals. Such payments, if
required, will be recorded as goodwill. Goodwill of $17.8 million was recorded
in the transaction, and is being amortized using the straight-line method over
30 years. Pro forma disclosures regarding this purchase have not been provided
because they are not material to the operations of the Company.

Global Resource Management: On January 29, 1999, the Company acquired Global
Resource Management ("GRM"), a provider of trade processing services for the
financial services industry based in Jacksonville, Florida. The transaction was
accounted for as a purchase, and accordingly, the results of operations of GRM
are included in the Company's Consolidated Financial Statements since the
acquisition date. The total purchase price was $3.0 million. Goodwill of $2.5
million was recorded in the transaction, and was subsequently written off in
the fourth quarter of 2000 upon determination that the goodwill had become
impaired due to the termination of a business relationship that accounted for
over 95% of GRM's revenue. Pro forma disclosures regarding this purchase have
not been provided because they are not material to the operations of the
Company.

Direct Resources (Scotland) Ltd.: On January 9, 1999, the Company acquired
Direct Resources (Scotland) Ltd. ("Direct Resources"), a provider of staff
augmentation services based in Edinburgh, Scotland. The transaction was
accounted for as a purchase, and accordingly, the results of operations of
Direct Resources are included in the Company's Consolidated Financial
Statements since the acquisition date. The total purchase price was $5.6
million. Goodwill of $5.6 million was recorded in the transaction, and is being
amortized using the straight-line method over 30 years. Pro forma disclosures
regarding this purchase have not been provided because they are not material to
the operations of the Company.

44

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Amber Group: On January 4, 1999 the Company acquired all the issued and
outstanding stock of the Amber Group ("Amber"), a provider of information
technology services, in exchange for 1,095,001 shares of the Company's Common
Stock. The transaction was accounted for as a pooling of interests and,
accordingly, the Company's Consolidated Financial Statements include the
results of Amber for all periods presented. In connection with the merger, the
Company incurred approximately $1.7 million of merger related costs that were
expensed in 1999.

14. Segment Reporting

In accordance with Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information", the
Company has reevaluated the way the Company is to be managed, beginning in the
third quarter of 2000. As a result, the existing operating units of the Company
were recast into seven reportable operating segments, which have been defined
by management based primarily on the scope of services offered by each segment.
The 1999 segment information has been restated accordingly for comparative
purposes.

The Company's seven reporting segments are as follows:

Emplifi

The Emplifi segment consists of Emplifi, Inc., the Company's wholly-owned
subsidiary. Emplifi provides custom application development and design services
and package implementation and application support services to large and
medium-sized client organizations. Emplifi's capabilities include client
directed software design and customization; web-focused strategic consulting;
domain expertise in a variety of industries; and enterprise application
integration services. Most of Emplifi's client engagements involve the
development of customized software solutions.

Emplifi markets its services to application development managers and
information technology directors within prospective client companies. Emplifi
also responds to requests for proposals for preferred vendor status to win
long-term engagement relationships. Emplifi typically enters into an initial
client contract with a relatively short duration. This contract is often
extended, and the average duration of a client project is approximately nine to
ten months. Emplifi's contracts generally provide for payment on a time-and-
materials basis, based on the number of consultant hours worked on the project.
Clients typically have the right to cancel contracts with minimal notice.

Emplifi serves large and medium-sized client organizations in a wide variety
of industries. During the year ended December 31, 2000, Emplifi's top five
clients accounted for approximately 18% of its revenues. Emplifi did not have a
client that accounted for more than 10% of revenues.

Emplifi is headquartered in Pittsburgh, Pennsylvania, and maintains offices
in San Francisco, California; Dallas, Texas; and Raleigh, North Carolina.
Emplifi has over 1,100 employees.

Mascot

The Mascot segment consists of Mascot Systems Ltd. ("Mascot Systems"), the
Company's majority-owned Indian subsidiary. Mascot Systems effected an initial
public offering of its Common Stock on several stock exchanges in India in June
2000. Mascot provides custom and package application development, application
maintenance outsourcing, business intelligence services, and application re-
engineering. Mascot utilizes an Offshore Development Center ("ODC") model,
which offers clients certain advantages compared to domestic development,
including significant cost savings and faster "around the clock" delivery.
Mascot

45

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
provides many of its service offerings through its ODCs in Bangalore, Pune, and
Chennai, India. In 2000, approximately 18% of Mascot's revenues were generated
utilizing this ODC model.

Mascot's service offerings include custom application development utilizing
newer technologies (such as BEA, Versata, ATG, etc.) to convert legacy systems
to an Internet-based platform, application maintenance, business intelligence,
and application reengineering and conversion.

Mascot markets its services to chief financial officers and chief
information officers within prospective client companies. Mascot typically
enters into an initial client contract with an average duration of
approximately nine to ten months. Mascot's fixed price contracts generally
provide for payment based upon deliverables and project milestones reached.
Mascot's other contracts provide for payment on a time-and-materials basis,
based on the number of consultant hours worked on the project. Clients
typically have the right to cancel contracts with minimal notice. Contracts
with deliverables or project milestones can provide for certain penalties if
the deliverables or project milestones are not met within a contract timeline.

Mascot serves large and medium-sized client organizations in a wide variety
of industries. Mascot is a Global Preferred Partner of General Electric. During
the year ended December 31, 2000, Mascot derived approximately 57% of its
revenues from its top five clients. One customer accounted for approximately
34% of Mascot's 2000 revenues.

Mascot is headquartered in Bangalore, India and has offices in the Indian
cities of Chennai, Pune, and Mumbai. Mascot's U.S. headquarters is in
Pittsburgh, Pennsylvania. Mascot also has offices in Singapore, the
Netherlands, England, Japan, Sweden and Canada. Mascot has over 1,200 employees
worldwide.

eJIVA

The eJIVA segment consists of eJIVA, Inc., a wholly-owned subsidiary of the
Company. eJIVA provides custom enterprise application implementation, customer
relationship management applications implementation, supply chain management
applications implementation and business process consulting. eJIVA's
capabilities include software design and customization; strategic consulting;
domain expertise in a variety of industries; and enterprise application
integration services. Most of eJIVA's client engagements involve the
development of customized software solutions.

eJIVA markets its services to information technology directors and chief
information officers within prospective client companies. eJIVA typically
enters into an initial client contract with an average duration of
approximately nine to ten months. eJIVA's fixed price contracts generally
provide for payment based upon deliverables and project milestones reached.
Some of eJIVA's contracts provide for payment based on a time-and-materials
basis, based on the number of consultant hours worked on the project. Clients
typically have the right to cancel contracts with minimal notice.

eJIVA serves large and medium-sized client organizations in a wide variety
of industries. During the year ended December 31, 2000, approximately 37% of
eJIVA's revenues were derived from its top five clients, including one client
that accounted for approximately 18% of eJIVA's revenues.

eJIVA is headquartered in Pittsburgh, Pennsylvania, and maintains offices in
Atlanta, Georgia; Cincinnati, Ohio; Columbus, Ohio; Pleasanton, California; and
Washington, D.C. eJIVA has more than 650 employees.

Emerging eServices

The Emerging eServices segment consists of RedBrigade Ltd. and its European
subsidiaries ("RedBrigade"), itiliti, Inc. ("itiliti"), Innovative Resource
Group, Inc. ("IRG"), Symphoni Interactive, LLC

46

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
("Symphoni"), MobileHelix, Inc. ("MobileHelix"), and jobcurry.com, Inc.
("jobcurry.com"). RedBrigade, MobileHelix, and jobcurry.com are wholly-owned
subsidiaries of the Company. itiliti, IRG, and Symphoni are majority-owned
subsidiaries of the Company. The companies within the Emerging eServices
segment are younger, less mature entities which are individually involved in
separate niches in and related to the eServices market. RedBrigade provides web
integration services in the European market. MobileHelix is in the process of
developing wireless applications for the financial services market. itiliti
develops and markets software for the management of outside vendors. IRG is
developing business intelligence software, and also provides services in the
data warehousing/business intelligence space. Symphoni provides application
development services to the financial services industry. jobcurry.com provides
recruiting and placement services for iGate and outside customers.

The Emerging eServices companies market their services to chief financial
officers, and chief technology officers within prospective client companies.
The companies' fixed price contracts generally provide for payment based upon
deliverables and the achievement of project milestones. A portion of the
contracts provide for payment based on a time-and-materials basis, based on the
number of consultant hours worked on the project. Clients typically have the
right to cancel contracts with minimal notice. jobcurry.com's contracts
generally provide for the payment of a fee upon the placement of a candidate.

RedBrigade is headquartered in Bracknell, England, and has offices in
Ireland, Scotland, and South Africa. itiliti is headquartered in Minneapolis,
Minnesota. IRG is headquartered in Pittsburgh, Pennsylvania. Symphoni is
headquartered in San Francisco, California and has offices in Pittsburgh,
Pennsylvania; New York, New York; and Charlotte, North Carolina. MobileHelix is
headquartered in Chantilly, Virginia. jobcurry.com is headquartered in Pune,
India. The companies in the Emerging eServices segment collectively have more
than 400 employees.

Value Services

The Value Services segment consists of Chen & McGinley, Inc. ("CMI"), Global
Financial Services of Nevada, Inc. ("GFS"), and Direct Resources (Scotland)
Ltd. ("Direct Resources"), all wholly-owned subsidiaries of the Company. The
Value Services companies provide IT services that are jointly managed with the
client to large and medium-sized client organizations. The capabilities of the
companies in the Value Services segment include IT consulting services and
application solutions.

Companies in the Value Services segment market their services to project
managers and IT directors within prospective client companies and respond to
requests for proposals for preferred vendor status to win long-term engagement
relationships. The Value Services companies typically enter into an initial
client contract with a relatively short duration. This contract is often
extended, and the average duration of a client project is approximately six
months. All Value Services contracts provide for payment on a time-and
materials basis, based on the number of consultant hours worked on the project.
Clients typically have the right to cancel contracts with minimal notice.
Intelligent Finance accounted for approximately 11% of the 2000 revenue of the
Value Services segment.

CMI is headquartered in San Francisco, California. GFS is headquartered in
San Francisco, California and has offices in New York, New York. Direct
Resources is headquartered in Scotland. The companies in the Value Services
segment collectively have more than 200 employees.

Staffing Services

The Staffing Services segment consists of Mastech Application Services, Inc.
("MAS"), Quantum Information Resources, Ltd. ("Quantum"), and Mastech Asia
Pacific Ltd. ("MAP"), all wholly-owned

47

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
subsidiaries of the Company. MAS provides staff augmentation services to large
integrators in the United States. Quantum provides IT and staff augmentation
services to large and medium-sized companies in Canada. MAP provides IT and
staff augmentation services to large and medium-sized companies in Australia.
All consultants in Staffing Services are supervised and instructed by onsite
client personnel. Capabilities of the companies in the Staffing Services
segment include data processing and IT maintenance and support.

The companies in the Staffing Services segment market their services to
project managers and IT directors within prospective client companies and
respond to requests for proposals for preferred vendor status to win long-term
engagement relationships. Staffing Services companies typically enter into an
initial client contract with a relatively short duration. This contract is
often extended, and the average duration of a client project is approximately
six months. All Staffing Services' contracts provide for payment on a time-and-
materials basis, based on the number of consultant hours worked on the project.
Clients typically have the right to cancel contracts with minimal notice.

The companies in the Staffing Services segment serve large and medium-sized
client organizations in a wide variety of industries.

MAS is headquartered in Pittsburgh, Pennsylvania. Quantum is headquartered
in Mississauga, Canada. MAP is headquartered in Canberra, Australia, and has
offices in Melbourne, Sydney, and Brisbane, Australia. The companies in the
Staffing Services segment collectively have more than 650 employees.

The Staffing Services segment was reported as a discontinued operation from
the first through the third quarters of 2000, when the Company was actively
seeking buyers for the segment. The Company has since decided to retain the
segment due to market conditions.

iGate Corporate

The iGate Corporate segment is a non-revenue-producing segment that captures
corporate costs, joint ventures, other strategic investment activity, and other
unallocated charges.

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, with gross margins being eliminated in the
iGate segment.

48

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following tables present selected financial information for the
Company's reporting segments for the years ended December 31, 2000, 1999, and
1998:

Year Ended December 31, 2000
------------------------------------------------------------------------------
Mascot Emerging Value Staffing iGate
Emplifi Ltd. eJIVA eServices Services Services Corporate(1) Total
-------- ------- ------- --------- -------- -------- ------------ --------
(Dollars in thousands)

Revenues................ $112,977 $71,206 $78,571 $ 60,331 $68,426 $ 85,776 $ -- $477,287
Direct costs............ 73,146 41,800 42,318 35,822 53,245 66,294 -- 312,625
-------- ------- ------- -------- ------- -------- -------- --------
Gross margin............ 39,831 29,406 36,253 24,509 15,181 19,482 -- 164,662
Operating expenses...... 22,960 20,621 43,270 36,390 11,398 19,992 24,745 179,376
-------- ------- ------- -------- ------- -------- -------- --------
Operating margin before
special items.......... 16,871 8,785 (7,017) (11,881) 3,783 (510) (24,745) (14,714)
Special items........... (1,043) -- (565) (536) -- (2,455) (2,241) (6,840)
-------- ------- ------- -------- ------- -------- -------- --------
Operating margin........ $ 15,828 $ 8,785 $(7,582) $(12,417) $ 3,783 $ (2,965) (26,986) (21,554)
======== ======= ======= ======== ======= ========
Other expenses, net.......................................................... (4,727) (4,727)
Equity in losses of unconsolidated affiliates................................ (13,639) (13,639)
Minority interest............................................................ 794 794
Gain on issuance of stock by subsidiary...................................... 26,853 26,853
-------- --------
Income (loss) before income taxes............................................ $(17,705) $(12,273)
======== ========

Year Ended December 31, 1999
------------------------------------------------------------------------------
Mascot Emerging Value Staffing iGate
Emplifi Ltd. eJIVA eServices Services Services Corporate(1) Total
-------- ------- ------- --------- -------- -------- ------------ --------
(Dollars in thousands)

Revenues................ $ 93,462 $63,363 $62,661 $ 43,793 $35,521 $172,939 $ -- $471,739
Direct costs............ 56,100 36,164 31,714 26,459 26,253 122,246 -- 298,936
-------- ------- ------- -------- ------- -------- -------- --------
Gross margin............ 37,362 27,199 30,947 17,334 9,268 50,693 -- 172,803
Operating expenses...... 11,661 18,217 19,756 13,369 6,206 31,728 14,298 115,235
-------- ------- ------- -------- ------- -------- -------- --------
Operating margin before
special items.......... 25,701 8,982 11,191 3,965 3,062 18,965 (14,298) 57,568
Special items........... -- -- -- -- -- (2,316) -- (2,316)
-------- ------- ------- -------- ------- -------- -------- --------
Operating margin........ $ 25,701 $ 8,982 $11,191 $ 3,965 $ 3,062 $ 16,649 (14,298) 55,252
======== ======= ======= ======== ======= ========
Other income, net............................................................ 2,983 2,983
Equity in losses of unconsolidated affiliates................................ (310) (310)
Minority interest............................................................ 210 210
Merger-related expenses...................................................... (1,727) (1,727)
-------- --------
Income (loss) before income taxes............................................ $(13,142) $ 56,408
======== ========

49

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Year Ended December 31, 1998
-------------------------------------------------------------------------
Mascot Emerging Value Staffing iGate
Emplifi Ltd. eJIVA eServices Services Services Corporate(1) Total
------- ------- ------- --------- -------- -------- ------------ --------
(Dollars in thousands)

Revenues................ $71,281 $47,544 $50,292 $27,047 $5,686 $199,521 $ -- $401,371
Direct costs............ 46,133 28,408 27,807 17,472 3,849 135,581 -- 259,250
------- ------- ------- ------- ------ -------- -------- --------
Gross margin............ 25,148 19,136 22,485 9,575 1,837 63,940 -- 142,121
Operating expenses...... 15,666 13,079 9,109 6,794 732 33,235 10,590 89,205
------- ------- ------- ------- ------ -------- -------- --------
Operating margin........ $ 9,482 $ 6,057 $13,376 $ 2,781 $1,105 $ 30,704 (10,590) 52,915
======= ======= ======= ======= ====== ========
Other income, net........................................................... 3,312 3,312
Merger-related expenses..................................................... (3,212) (3,212)
-------- --------
Income (loss) before income taxes........................................... $(10,490) $ 53,015
======== ========

- --------
(1) Corporate activities include general corporate expenses, eliminations of
intersegment transactions, interest income and expense, income or loss
form joint ventures, and other unallocated charges. The Company evaluates
segments based on income from operations. Since certain administrative and
other operating expenses, income or loss from joint ventures, have not
been allocated to the 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 at December 31, 2000 (Dollars in
thousands):

Emplifi................................................................ $ 30,208
Mascot................................................................. 46,864
eJIVA.................................................................. 2,622
Emerging eServices..................................................... 13,839
Value Services......................................................... 10,068
Staffing Services...................................................... 12,819
iGate Corporate........................................................ 247,731
--------
Total assets......................................................... $364,151
========

Revenues and assets by geographic area consisted of the following:

Year Ended December 31,
--------------------------
2000 1999 1998
-------- -------- --------
(Dollars in thousands)

Revenues:
United States........................................ $347,518 $338,439 $294,069
Canada............................................... 25,570 41,456 49,489
Europe and Africa.................................... 40,817 35,607 26,126
Pacific Rim.......................................... 63,382 56,237 31,687
-------- -------- --------
Total revenues..................................... $477,287 $471,739 $401,371
======== ======== ========

50

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Year Ended
December 31,
-----------------
2000 1999
-------- --------
(Dollars in
thousands)

Assets:
United States................................................. $274,671 $209,575
Canada........................................................ 8,345 12,870
Europe and Africa............................................. 26,260 20,050
Pacific Rim .................................................. 4,875 35,693
-------- --------
Total assets................................................ $364,151 $278,188
======== ========

For the year ended December 31, 2000, sales to General Electric Company and
subsidiaries accounted for approximately 18% of the revenues of the eJIVA
segment, and approximately 34% of the revenues of the Mascot segment. Sales to
Electronic Data Systems Corporation accounted for approximately 12% of the
revenues of the Staffing Services segment. Sales to Intelligent Finance
accounted for approximately 11% of the revenues of the Value Services segment.
No single customer accounted for more than 10% of the Company's revenues in the
year ended December 31, 1999. For the year ended December 31, 1998, sales to
Electronic Data Systems Corporation accounted for approximately 11% of the
Company's revenues.

51

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. Quarterly Financial Information (Unaudited)

The following table sets forth certain unaudited financial information for
each of the quarters indicated below and, in the opinion of management,
contains all adjustments, consisting only of normal recurring adjustments, if
necessary, for a fair presentation thereof. The 1999 information was restated
to consolidate an investment in which the Company acquired a controlling
interest that was previously accounted for under the equity method of
accounting. Earnings per share amounts for each quarter are required to be
computed independently, and therefore may not equal the amount computed for the
entire year.

Three Months Ended
--------------------------------------
March 31 June 30 Sept. 30 Dec. 31
-------- -------- -------- --------
(Dollars in thousands, except per
share data)

2000:
Revenues.............................. $110,091 $118,894 $124,333 $123,969
Gross profit.......................... 34,618 40,764 45,258 44,022
Loss from operations.................. (4,737) (4,677) (2,080) (10,060)
Gain on issuance of stock of
subsidiary........................... -- 26,853 -- --
Income before income taxes............ (6,696) 16,927 (8,354) (14,150)
-------- -------- -------- --------
Net income (loss)..................... $ (4,018) $ 10,157 $ (5,012) $(10,935)
======== ======== ======== ========
Net income (loss) per common share,
basic................................ $ (0.08) $ 0.20 $ (0.10) $ (0.21)
======== ======== ======== ========
Net income (loss) per common share,
diluted.............................. $ (0.08) $ 0.20 $ (0.10) $ (0.21)
======== ======== ======== ========

1999:
Revenues.............................. $121,377 $124,514 $117,192 $108,656
Gross profit.......................... 45,965 45,912 43,733 37,193
Special items......................... -- -- 3,528 (1,212)
Income from operations................ 17,194 18,442 11,307 8,339
Merger-related expenses............... 1,727 -- -- --
Income before income taxes............ 16,009 19,236 11,941 9,222
-------- -------- -------- --------
Net income............................ $ 10,104 $ 12,503 $ 7,609 $ 5,995
======== ======== ======== ========
Net income per common share, basic.... $ 0.20 $ 0.25 $ 0.15 $ 0.11
======== ======== ======== ========
Net income per common share, diluted.. $ 0.20 $ 0.25 $ 0.15 $ 0.11
======== ======== ======== ========

16. Related Party Transactions

The Company leases office space in the Indian cities of Bangalore, Chennai,
Pune, and Mumbai from Sunil Wadhwani, the Company's Co-Chairman and Chief
Executive Officer, and Ashok Trivedi, the Company's Co-Chairman and President.
Messrs. Wadhwani and Trivedi own various properties jointly and individually.
The acquisitions of the real estate and the construction of the office
buildings, excluding buildouts of the office space, were financed entirely by
Messrs. Wadhwani and Trivedi from personal funds. The leases cover
approximately 142,000 square feet, and expire at various times from 2003
through 2008. The total annual rental is approximately $597,000. The lease
agreements are subject to annual rent escalation.

On November 9, 2000, Messrs. Wadhwani and Trivedi each purchased 421,052
newly-issued shares of the Company's Common Stock for approximately $5.94 per
share, the closing price per share as quoted on the Nasdaq National Market. The
proceeds received from the sale will be used for general corporate purposes.

52

iGATE CAPITAL CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Highgate Venture Partners I, L.P. (the "Fund"), has invested in Escend
Technologies, Inc. ("Escend"), a developer of business-to-business customer
relationship management applications. In addition to the Fund's total
investment of $2.7 million the participants in the Fund individually invested
an aggregate of $205,000, and each of Messrs. Wadhwani and Trivedi invested
$300,000 in Escend.

The Company owns approximately 5% of the Common Stock of Brainbench, Inc.
("Brainbench"), a privately-held company that provides web-based professional
certification services. On March 10, 2000, the Company entered into an
agreement (the "Agreement") with Brainbench to purchase web-based skills
testing services through a customized online virtual testing center. Expense
related to the Agreement was approximately $41,000 in the year ended December
31, 2000.

The Company owns approximately 1% of the Common Stock of Versata, Inc.
("Versata"), a publicly-held company that produces e-business application
software. The Company purchases software licenses from Versata for resale to
clients through the Company's operating units. Such purchases of software and
software-related services totaled approximately $268,000 in the year ended
December 31, 2000.

Pursuant to the Company's initial investment in Air2Web, Inc. ("Air2Web"),
the Company was issued warrants to purchase 1,872,660 shares of Air2Web Series
"B" Preferred Stock at $2.67 per share ("Series B Warrants"), which were to
expire on December 31, 2000. In December 2000, the Company made a decision not
to exercise the Series B Warrants in order to preserve cash, and requested an
extension of the time period for exercise of the Series B Warrants. Air2Web
agreed to extend the time period for the exercise of a portion of the Series B
Warrants until June 30, 2001, provided that the Company assigned the remaining
Series B Warrants to Messrs. Wadhwani and Trivedi, and certain executive
officers of Air2Web, and provided that these individuals immediately exercise
the Series B Warrants. As a result of these transactions, the Company now holds
warrants to purchase 1,123,597 shares of Air2Web Series "B" Preferred Stock at
$2.67 per share, exercisable until June 30, 2001.

17. Subsequent Events

On February 28, 2001, the Company announced that it had sold its approximate
50% interest in Planning Technologies, Inc. to Red Hat, Inc. ("Red Hat") in
exchange for approximately 3.2 million shares of Red Hat Common Stock. The
closing price per share of Red Hat's Common Stock on February 28, 2001 was
$6.4375. The Company will be able to sell approximately 2.8 million of these
shares commencing in the third quarter of 2001 upon the expiration of certain
contractual restrictions. The balance of approximately 400,000 shares of Red
Hat's Common Stock is currently held in escrow as an indemnity fund pursuant to
the contract of sale.

53

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

The information required by this item is incorporated by reference to the
information under the captions "Business Experience of Directors," "Executive
Officers," and "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's definitive proxy statement, prepared for the Annual Meeting of
Shareholder scheduled for June 8, 2001, to be filed with the Commission (the
"Proxy Statement").

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the
information under the captions "Director Compensation," "Executive
Compensation," and "Stock Performance Chart" in the Company's Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by reference to the
information under the caption "Stock Ownership of Certain Beneficial Owners and
Management" in the Company's Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference to the
information under the caption "Certain Related Party Transactions" in the
Company's Proxy Statement.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. Financial Statements

The following consolidated financial statements of the registrant and its
subsidiaries are included on pages 29 to 53 and the report of independent
public accountants is included on page 30 in this Form 10-K.

Report of Independent Public Accountants.

Consolidated Balance Sheets--December 31, 2000 and 1999.

Consolidated Statements of Operations--Years ended December 31, 2000, 1999
and 1998.

Consolidated Statements of Shareholders' Equity--Years ended December 31,
2000, 1999 and 1998.

Consolidated Statements of Cash Flows--Years ended December 31, 2000, 1999
and 1998.

Notes to Consolidated Financial Statements

2. Consolidated Financial Statement Schedules

The following consolidated financial statement schedules shown below should
be read in conjunction with the consolidated financial statements on pages [28
to 33] in this Form 10-K. All other schedules are omitted because they are not
applicable or the required information is shown in the Consolidated Financial
Statements or notes thereto.

54

The following items appear immediately following the signature pages:

Report of Independent Public Accountants on Consolidated Financial Statement
Schedules.

Financial Statement Schedules:

Schedule II--Valuation and Qualifying Accounts for the three years ended
December 31, 2000.

Financial Data Schedules

3. Exhibits

Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit
Index, which is incorporated herein by reference.

(b) Reports on Form 8-K:

The Company did not file any reports on Form 8-K during the quarter ended
December 31, 2000.

55

iGATE CAPITAL CORPORATION
Schedule II--Valuation and Qualifying Accounts
For the Years Ended December 31, 2000, 1999 and 1998

Balance at Balance at
beginning Charged end of
of period to expense Deductions period
---------- ---------- ---------- ----------

Allowance for Doubtful Accounts
Year ended December 31, 2000....... $2,069 $3,442 $(3,718) $1,793
Year ended December 31, 1999....... 1,728 432 (91) 2,069
Year ended December 31, 1998....... 1,215 1,413 (900) 1,728

Restructuring Reserve
Year ended December 31, 2000....... $2,360 $4,385 $(1,693) $5,052
Year ended December 31, 1999....... 245 4,727 (2,612) 2,360
Year ended December 31, 1998....... -- 3,212 (2,966) 245

56

Exhibit Index Description of Exhibit
------- ----------------------------

3.1 Second Amended and Restated Articles of Incorporation of the Company
are incorporated by reference to Exhibit 3.1 to the Quarterly Report
on Form 10-Q, File No. 000-21755, filed on August 14, 2000.

3.2 Amended and Restated Bylaws of the Company are incorporated by
reference to Exhibit 3.2 to the Quarterly Report on Form 10-Q, File
No. 000-21755, filed on August 14, 2000.

4.1 Form of certificate representing the Common Stock of the Company is
incorporated by reference From Exhibit 4.1 to iGate Capital
Corporation's Registration Statement on Form S-1, Commission File No.
333-14169, filed on November 19, 1996.

4.2 Note Purchase Agreement dated as of July 22, 1999 between iGate
Capital Corporation and GE Capital Equity Investments, Inc. is
incorporated by reference from Exhibit 4.1 to the Quarterly Report on
Form 10-Q, File No. 000-21755 filed on November 15, 1999.

4.2(a) First Amendment to Note Purchase Agreement and Waiver dated August 1,
2000 by and between iGate Capital Corporation and GE Capital Equity
Investments, Inc. is incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q, Commission File No. 000-21755, filed on
November 14, 2000

4.3 Registration Rights Agreement dated as of July 22, 1999 between iGate
Capital Corporation and GE Capital Equity Investments, Inc. is
incorporated by reference from Exhibit 4.2 to the Quarterly Report on
Form 10-Q No. 000-21755 filed on November 15, 1999.

10.1 Form of Employment Agreement by and between the Company and Sunil
Wadhwani and Ashok Trivedi is incorporated by reference from Exhibit
10.1 to iGate Capital Corporation's Registration Statement on Form S-
1, Commission File No. 333-14169, filed on November 19, 1996.*

10.1(a) Form of Amendment to Employment Agreement by and between the Company
and Sunil Wadhwani and Ashok Trivedi is filed herewith.*

10.2 Executive Employment Agreement dated November 22, 2000 between Steven
Shangold and Emplifi, Inc. is filed herewith.*

10.3 Amended and Restated Agreement dated October 18, 2000 between iGate
Capital Corporation and Bruce Haney is filed herewith.*

10.4 1996 Stock Incentive Plan is incorporated by reference to Exhibit 10.2
to iGate Capital Corporation's Registration Statement on Form S-1,
Commission File No. 333-14169, filed on November 19, 1996.*

10.5 Amended and Restated 1996 Stock Incentive Plan is incorporated by
reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q, File
No. 000-21755 filed on November 16, 1998.*

10.6 Second Amended and Restated 1996 Stock Incentive Plan is incorporated
by reference to Exhibit 99.1 to iGate Capital Corporation's Definitive
Proxy Statement, File No. 000-21755 filed on December 30, 1998.*

10.7 Second Amended and Restated Stock Incentive Plan is incorporated by
reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q, File
No. 000-21755, filed on August 14, 2000.*

10.8 Credit Agreement dated August 1, 2000 by and among iGate Capital
Corporation, as borrower, and the financial institutions party
thereto, as lenders, and PNC Bank, N.A., as agent and as Swing Loan
Lender and Issuing Bank is incorporated by reference to Exhibit 10.2
to the Quarterly Report on Form 10-Q, Commission File No. 000-21755,
filed on November 14, 2000

10.8(a) First Amendment to Credit Agreement dated November 28, 2000 by and
among iGate Capital Corporation, PNC Bank, N.A. and National City Bank
of Pennsylvania is filed herewith.

10.9 Lease Agreement dated January 15, 1995 by and between Mascot Systems
Private Limited and Messrs. Wadhwani and Trivedi for real estate in
Bangalore, India is incorporated by reference to Exhibit 10.10 to
iGate Capital Corporation's Registration Statement on Form S-1,
Commission File No. 333-14169, filed on November 19, 1996.

57

Exhibit Index Description of Exhibit
------- ----------------------------

10.10 Lease Agreement dated November 6, 1996 by and between Mascot Systems
Private Limited and Messrs. Wadhwani and Trivedi for real estate in
Bangalore, India is incorporated by reference to Exhibit 10.11 to
iGate Capital Corporation's Registration Statement on Form S-1,
Commission File No. 333-14169, filed on November 19, 1996.

10.11 Lease Agreement dated January 15, 1998 by and between Mascot Systems
Private Limited and Messrs. Wadhwani and Trivedi for real estate in
Bangalore, India incorporated by reference to Exhibit 10.12 to Annual
Report on Form 10-K for the year ended December 31, 1998.

10.12 Lease Agreement dated March 26, 1997 by and between Mascot Systems
Private Limited and Messrs. Wadhwani and Trivedi for real estate in
Bangalore, India incorporated by reference to Exhibit 10.13 to Annual
Report on Form 10-K for the year ended December 31, 1998.

10.13 Lease Agreement dated January 13, 1998 by and between Mascot Systems
Private Limited and Messrs. Wadhwani and Trivedi for real estate in
Chennai, India incorporated by reference to Exhibit 10.14 to Annual
Report on Form 10-K for the year ended December 31, 1998.

10.14 Lease Agreement dated April 1, 1996 by and between Scott Systems
Private Limited and Messrs. Wadhwani and Trivedi for real estate in
Bombay, India is incorporated by reference from Exhibit 10.12 to iGate
Capital Corporation's Registration Statement on Form S-1, Commission
File No. 333-4169, filed on November 19, 1996.

10.15 Lease Agreement dated April 1, 1996 by and between Scott Systems
Private Limited and Sunil Wadhwani for real estate in Bombay, India is
incorporated by reference to Exhibit 10.13 to iGate Capital
Corporation's Registration Statement on Form S-1, Commission File No.
333-14169, filed on November 19, 1996.

10.16 Lease Agreement dated April 1, 1996 by and between Scott Systems
Private Limited and Ashok Trivedi for real estate in Bombay, India is
incorporated by reference to Exhibit 10.14 to Mastech Corporation's
Registration Statement on Form S-1, Commission File No. 333-14169,
filed on November 19, 1996.

10.17 Lease Agreement dated April 18, 1998 by and between Scott Systems
Private Limited and Messrs. Wadhwani and Trivedi for real estate in
Mumbai, India incorporated by reference to Exhibit 10.18 to Annual
Report on Form 10-K for the year ended December 31, 1998.

10.18 Lease Agreement dated April 18, 1998 by and between Scott Systems
Private Limited and Messrs. Wadhwani and Trivedi for real estate in
Mumbai, India incorporated by reference to Exhibit 10.19 to Annual
Report on Form 10-K for the year ended December 31, 1998.

10.19 Sublease Agreement dated February 10, 1995 by and between Westinghouse
Electric Corporation and the Company for the Company's Oakdale, PA
headquarters, as amended by amendment dated March 20, 1996 is
incorporated by reference to Exhibit 10.19 to iGate Capital
Corporation's Registration Statement on Form S-1, Commission File No.
333-14169, filed on November 19, 1996.

10.20 Lease Agreement dated October 14, 1998 by and between Park Ridge One
Associates and the Company for office space located in Park Ridge
Office Center near Pittsburgh, Pennsylvania incorporated by reference
to Exhibit 10.25 to Annual Report on Form 10-K for the year ended
December 31, 1998.

10.21 Lease Agreement dated June 8, 2000 by and between the Company and
Foster Plaza Holding Corporation for office space in Foster Plaza
located near Pittsburgh, Pennsylvania is filed herewith.

10.22 Stock Purchase Agreement by and between the Company and Messrs.
Wadhwani and Trivedi for their shares of Mascot Systems Private
Limited (incorporated by reference to Exhibit 10.20 on Form S-1 of
iGate Capital Corporation, Commission File No. 333-14169, filed on
November 19, 1996).

10.23 Shareholders Agreement by and among the Company, Sunil Wadhwani and
Ashok Trivedi and the Joinder Agreement by Grantor Retained Annuity
Trusts established by Messrs. Wadhwani and Trivedi are incorporated by
reference to Exhibit 10.5 to iGate Capital Corporation's Registration
Statement on Form S-1, Commission File No. 333-14169, filed on
December 16, 1996.

58

Exhibit Index Description of Exhibit
------- ----------------------------

10.24 Agreement and Plan of Merger by and between the Company and SWAT
Systems is incorporated by reference to Exhibit 10.15 to iGate Capital
Corporation's Registration Statement on Form S-1, Commission File No.
333-14169, filed on November 19, 1996.

10.25 Form of S-corporation Revocation, Tax Allocation and Indemnification
Agreement is incorporated by reference to Exhibit 10.17 to iGate
Capital Corporation's Registration Statement on Form S-1, Commission
File No. 333-14169, filed on November 19, 1996.

10.67 Form of Capital Contribution Agreement by and among the Company, Sunil
Wadhwani, Ashok Trivedi and their respective family trusts is
incorporated by reference to Exhibit 10.21 to iGate Capital
Corporation's Registration Statement on Form S-1, Commission File No.
333-14169, filed on December 16, 1996.

21.0 Subsidiaries of the registrant

23.0 Report of Independent Public Accountants on Financial Data Schedule

99.0 Preliminary Notice and Proxy Statement

- --------
*Management compensatory plan or arrangement

59