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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, 2002

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

Commission File Number 000-21755

iGATE CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (412) 506-1131

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 o

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

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 28, 2002 (based on the closing price of such stock as reported by NASDAQ on such date) was $95,163,485.

The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 17, 2003 (based on the closing price of such stock as reported by NASDAQ on such date) was $60,885,826.

The number of shares of the registrant’s Common Stock, par value $.01 per share, outstanding as of March 17, 2003 was 51,567,360 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. x

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement, prepared for the Annual Meeting of Shareholders scheduled for May 28, 2003, to be filed with the Commission are incorporated by reference into Part III of this report.

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iGATE CORPORATION
2002 FORM 10-K

TABLE OF CONTENTS

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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 such term under the Private Securities Litigation Reform Act of 1995. These forward-looking statements include our financial growth and liquidity projections as well as statements concerning our plans, strategies, intentions and beliefs concerning our business, cash flows, costs and the markets in which we operate. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects” and similar expressions are intended to identify certain forward-looking statements. These forward-looking statements are based on information currently available to us, and we assume no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual events to differ materially from these forward-looking statements. While we cannot predict all of the risks and uncertainties, they include, but are not limited to, our ability to predict our financial performance, the level of market demand for our services, the highly-competitive market for the types of services that we offer, the impact of competitive factors on profit margins, market conditions that could cause our customers to reduce their spending for our services, our ability to create, acquire and build new businesses and to grow our existing businesses, our ability to attract and retain qualified personnel, our ability to reduce costs and conserve cash, currency fluctuations and market conditions in India and elsewhere around the world, political and military tensions in India and South Asia, changes in generally accepted accounting principles and/or their interpretation and other risks that are discussed in the section of Item 1 of this Form 10-K entitled “Risk Factors” and in other sections of this Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)”.

Unless otherwise indicated or the context otherwise requires, all references in this report to “iGate”, the “Company”, “us”, “our”, or “we” are to iGate Corporation a Pennsylvania corporation, and its consolidated subsidiaries. iGate Corporation, formerly named iGate Capital Corporation, through its operating subsidiaries, is a worldwide provider of information technology (“IT”) and Offshore Outsourcing services (“worked performed primarily in India”) to large and medium-sized organizations. These services include client/server design and development, conversion/migration services, offshore outsourcing, enterprise resource planning (“ERP”) package implementation and integration services, software development and applications maintenance outsourcing.

WEB SITE ACCESS TO SEC REPORTS

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

Business Developments

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

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

Going forward, our strategy is to offer offshore-based BPO services to our clients in various industries. Some of these BPO services may be non-IT related and may include services as diverse as call centers, clinical trials management, claims processing, or any other services which may be outsourced and handled from offshore. The nature of our BPO services will be primarily driven by the companies we may acquire, partner with or build on our own. We believe that more services can be or are being performed offshore by talented individuals, at savings as high as 50% over US/European costs.

To enhance our offshore capabilities and to become more visible in the offshore services market, Mascot Systems Ltd. (“Mascot”), our majority owned Indian company, acquired the stock of eJiva, Inc. (“eJiva”), our wholly-owned U.S. subsidiary, and Aqua Regia, an India-based offshore company which has had an exclusive relationship with eJiva. The purchase consideration was $9.5 million and also included iGate’s Toronto Development Center, acquired by eJiva prior to its combination with Mascot. The acquisition of eJiva’s stock was effective January 1, 2003. The acquisition of Aqua Regia will be effective April 1, 2003. Prior to Mascot’s acquisition of eJiva, the staffing portion of eJiva’s business was sold to Mastech Emplifi, Inc.

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We believe that these acquisitions will enable Mascot to become more visible in the BPO industry thereby, becoming more competitive with the larger offshore market leaders. In the offshore industry, revenue size and company size are critical success factors. Further, eJiva will bring certain significant client relationships to enable Mascot to expand its offshore business and to combine its service offerings with eJiva’s service offerings in the upcoming year.

2002 was another difficult year for the IT industry. The IT industry did not rebound from 2001 as we had expected. Our revenues for 2002 decreased from 2001 as demand for our services declined as a result of the general economic slowdown related to uncertainties in the economy both here in the U.S. as well as globally. These factors caused a reduction in capital spending and decreases in the number of new software projects initiated by our customers. During the fourth quarter of 2002, the continued economic slowdown caused us to examine the operations within each of our reportable segments, as well as to re-examine our business strategy for 2003. As a result of our examinations, we decided to increase our focus on our offshore delivery business located in India during the upcoming year and to implement a restructuring plan to cut costs within each of our operating segments. We also decided to regroup our subsidiaries into two new business segments effective January 1, 2003: iGate Solutions and iGate Professional Services.

In the fourth quarter of 2002, we decided to implement a restructuring plan to cut costs within each of our operating segments. In connection with our restructuring plan, we performed an assessment of the carrying values of our intangible assets. We recorded restructuring charges in the amount of $4.2 million and goodwill impairment charges in the amount of $29.7 million. See Note 4 to the Consolidated Financial Statements set forth in on pages 49-52 of this Form 10-K for a description of our restructuring, merger and goodwill impairment charges.

On March 15, 2002, through the combination of a sale of new shares by itiliti, Inc. (“itiliti”) to strategic investors and conversion of its bridge loan financing vehicle to voting equity securities, the Company’s ownership interest in itiliti was reduced from 90% to 49%. Subsequent to the transaction date, the Company accounted for its interest in itiliti under the equity method of accounting due to its lack of a controlling interest in itiliti. In addition, the Company will have no future obligation to fund additional operating or financing requirements of itiliti. During the three months ended March 31, 2002, the Company recorded a gain on deconsolidation of $7.1 million and a pretax loss for the period January 1, 2002 through the date of deconsolidation in the amount of $2.2 million.

On August 9, 2002, itiliti sold its assets and liabilities to Peopleclick, Inc. (“Peopleclick”) for approximately 3% of Peopleclick’s outstanding Common Stock. We had $0 basis in itiliti at the time of its sale to Peopleclick, and have continued to assign $0 basis in our investment in itiliti, due to lack of marketability of Peopleclick’s stock and liquidation preferences of its preferred shareholders.

In March 2002, we purchased the remaining 10% portion of Symphoni, LLC’s outstanding membership units that we did not own for $0.9 million cash.

In March 2002, we made the decision to close MobileHelix, Inc. (“MobileHelix”) and cease its operations effective immediately.

In February 2002, we changed the names of Emplifi, Inc. to Mastech Emplifi, Inc. and of Quantum Information Resources Ltd. to Mastech Emplifi Ltd. In March 2002, we changed the name of iGate Capital Corporation to iGate Corporation.

Recent Developments

In connection with the January 2003 transfer of eJiva from Mastech Systems Corporation to Mascot, the outstanding shares not owned by iGate were either converted into iGate shares, canceled or purchased in the manner as described below. Each share of common stock of eJiva which was originally issued to the Co-Founders of Innovative Resource Group, Inc. (“IRG”) in the form of restricted stock was converted (based upon the conversion ratio set forth in the merger agreement) into shares of restricted common stock of iGate with the identical terms and vesting schedule as the eJiva restricted stock. The remaining shares of eJiva common stock held by the Co-Founders of IRG were canceled and retired in consideration of iGate assuming all obligations of eJiva related to a put option that was granted to the Co-Founders of IRG in connection with the merger of IRG, with and into eJiva on December 31, 2001, which required eJiva to pay such IRG Co-Founders $9.3 million in the aggregate for such shares. The remaining outstanding capital stock of eJiva held by persons other than iGate and the IRG Co-Founders was converted into and became a right to receive $0.21 per share in cash, which approximated $0.1 million.

On February 26, 2003, iGate Corporation (“iGate”), through a newly formed subsidiary, iGate Clinical Research Management, Inc. (“ICRM”), purchased the assets of Pittsburgh Clinical Research Network (“PCRN”), for $0.4 million. iGate will retain 90% ownership of ICRM, with one minority shareholder owning a 10% minority interest in the entity.

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In February 2003, we changed the name of Mastech Emplifi, Inc. to iGate Mastech, Inc. and the name of Mastech Emplifi Ltd. to iGate Mastech Ltd.

Reportable Financial Segments

In January 2002, we re-examined our financial reporting structure, how we manage our operating businesses and how we categorize our then existing service offerings. As a result of our review, we decided to segment our business according to our service offerings. Our decision was based upon the following factors: (1) to provide the readers of our financial statements, a much simpler view of our business; (2) with the deconsolidation of itiliti and the cessation of operations of MobileHelix, our service offerings became substantially easier to define and segment by service offering; and (3) we believe that our segment reporting approach best represents the way we analyzed and managed our businesses. The composition of segments and measure of segment profitability is consistent with that used by the Company’s management.

In 2001, our reporting segments were Emplifi, Mascot, eJiva, Emerging eServices, Value Services, Staffing Services and iGate.

In 2002, our reporting segments were recast according to service offerings into Offshore Outsourcing, Enterprise Applications, IT Staffing and iGate Corporate.

Prior periods have been reclassified to conform to the current segment reporting.

Offshore Outsourcing

We are able to provide custom and package application development, application maintenance outsourcing, business intelligence services and application reengineering through our Offshore Development Center (“ODC”) model. This model offers clients certain advantages compared to domestic development, which include significant cost savings and more efficient “around the clock” delivery. These services are offered through Mascot, which is publicly held on three Indian stock exchanges.

Currently, we have ODCs in Bangalore and Chennai, India. During the years ended December 31, 2002 and 2001, approximately 30% and 22% of Offshore Outsourcing revenues were generated using this ODC model, respectively. The revenues of our Offshore Outsourcing reporting segment consist entirely of Mascot.

Mascot markets its services primarily to large and medium sized organizations. 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 Company (“GE”). During the years ended December 31, 2002 and 2001, Mascot derived approximately 72% and 66%, respectively, of its revenues from its top five clients. GE accounted for approximately 55% and 49% of Mascot’s revenues during the years ended December 31, 2002 and 2001, respectively.

Mascot is headquartered in Bangalore, India and has offices in the Indian city of Chennai. Mascot’s U.S. headquarters is in Pittsburgh, Pennsylvania. Mascot also has offices in Singapore, Belgium, the Netherlands, United Kingdom, Germany, Japan, Australia and Sweden. Mascot has more than 1,675 employees worldwide.

Enterprise Applications

The Enterprise Application (“EA”) segment consists of services provided by our wholly owned subsidiaries RedBrigade Ltd. (“RedBrigade”) and eJiva. RedBrigade provides web integration services in the European market. eJiva provides enterprise application implementation, customer relationship management applications implementation, supply chain management applications implementation, data integration and business process consulting. eJiva’s capabilities include software design and customization; strategic consulting; domain expertise in a variety of industries; and enterprise application implementation and integration services.

Each of the companies within the EA segment markets its services to information technology directors and chief information officers within prospective client companies. The companies typically enter into an initial client contract with an average duration of approximately nine to ten months for its fixed price projects and its business intelligence software implementation. These fixed price contracts generally provide for payment based upon deliverables and project milestones reached. Some of these 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 time and materials contracts with minimal notice.

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Typically, the service offerings within the segment are designed for large and medium-sized client organizations in a wide variety of industries. During the years ended December 31, 2002 and 2001, the EA segment derived approximately 36% and 29%, respectively, of its revenues from its top five clients. Philip Morris Companies, Inc. accounted for approximately 16% and 8% of EA segment revenues for the years ended December 31, 2002 and 2001, respectively. GE accounted for approximately 10% and 13% of EA segment revenues for the years ended December 31, 2002 and 2001, respectively.

eJiva is headquartered in Pittsburgh, Pennsylvania, and maintains offices in Pleasanton, California; and Worthington, Ohio. RedBrigade is headquartered in Bracknell, England, and has offices in Ireland, Scotland, and South Africa. The EA segment has more than 525 employees.

IT Staffing

The IT Staffing (“Staffing”) segment consists of our wholly owned subsidiaries Mastech Emplifi, Inc., (“MEI”), Chen & McGinley, Inc. (“CMI”), Symphoni, LLC (“Symphoni”), Global Financial Services of Nevada, Inc. (“GFS”), Direct Resources (Scotland) Ltd. (“Direct Resources”), Mastech Application Services, Inc. (“MAS”), Mastech Emplifi Ltd., (“MEL”) and Mastech Asia Pacific Pty. Ltd. (“MAP”). These entities provide a variety of client-managed and supervised IT staffing service offerings including custom application development and design services and package implementation and application support services. Staffing provides these services to large and medium-sized client organizations. The Staffing segment’s capabilities include client directed software design and customization; and enterprise application integration services. In addition, Staffing also offers training as a service to its customers.

Staffing markets its services to application development managers and information technology directors within prospective client companies and also responds to requests for proposals for preferred vendor status to win long-term engagement relationships. Staffing 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. These 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.

The segment serves a wide variety of industries. During the years ended December 31, 2002 and 2001, Staffing’s top five clients accounted for approximately 17% of its revenues. For the years ended December 31, 2002 and 2001, the segment did not have a client that accounted for more than 10% of revenues.

The Staffing segment has U.S. offices in Pittsburgh, Pennsylvania; San Francisco, California; Dallas, Texas; Raleigh, North Carolina; New York, New York; Boston, Massachusetts and Minneapolis, Minnesota. The Staffing segment has international offices located in Edinburgh, Scotland; Mississauga, Canada; and Canberra, Melbourne, Sydney and Brisbane, Australia. The Staffing segment has more than 1,625 employees.

iGate Corporate

We also recast our iGate Corporate (“iGate”) segment. Historically, the iGate segment was a non-revenue producing segment that captured corporate costs, joint ventures and other strategic investment activity and other unallocated charges.

Our recast iGate segment reports operating results of itiliti, MobileHelix and jobcurry Systems Private Ltd. (“jobcurry”). In March 2002, we deconsolidated itiliti and closed operations of MobileHelix. jobcurry continues to provide recruiting and placement services for iGate and outside customers. jobcurry is excluded from the above segments due largely to its dissimilar service offerings and certain economic characteristics. iGate Corporate is headquartered in Pittsburgh, Pennsylvania. jobcurry is located in Pune, India. The iGate segment has more than 85 employees.

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 one-time special charges to segments. In addition, the Company accounts for inter-segment revenues and transfers at current market prices.

Competition

The IT services and Offshore Outsourcing services industries are highly competitive, and are served by numerous global, national, regional and local firms. Primary competitors in the IT industry include participants from a variety of market segments, including the major accounting firms, systems consulting and implementation firms, Internet services and consulting companies, applications software firms, Indian based Offshore Outsourcing companies, 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 Offshore Outsourcing markets include the range of services offered, size and scale of service provider, global reach technical expertise, responsiveness to client needs, speed in delivery of IT solutions, quality of service and perceived value. We believe that we compete favorably with our principal competitors with respect to these factors. 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.

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Our Partner Companies and Affiliates

The following is a listing as of March 31, 2003 of all of our principal operating subsidiaries and affiliates, including the percentage of our ownership in each of these companies:

   (1)    Effective January 1, 2003, eJiva is a wholly-owned subsidiary of Mascot Systems, Ltd.

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, warrants and unvested restricted stock.

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.

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Human Resources

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

We have a focused retention strategy that includes career planning, training, benefits and an incentive plan. Our benefits package includes subsidized health insurance, a 401(k) plan, 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 a 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, 2002, iGate (including its operating subsidiaries) had approximately 3,920 non unionized employees comprised of approximately 3,360 IT professionals (including subcontractors) and approximately 560 individuals working in sales, recruiting, general and administrative roles. As of December 31, 2002, approximately 33% of our U.S. workforce was working under H-1B temporary work permits in the United States. We believe that our relationships with our employees are good.

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RISK FACTORS

Our New Business Strategy is Unproven

We have significantly reorganized our business to reflect our business strategy to increase our focus on our offshore delivery business in India and to expand our offshore business to BPO services, including non-IT related BPO services., and there is no guarantee that this reorganization will be successful. The success of our new business strategy depends in part on the ability of the iGate companies to work collaboratively, share information and leverage their collective resources to optimize strategic opportunities and our ability to effectively identify non-IT related BPO services and deliver cost effective solutions. We cannot be certain that this strategy will improve our performance, and it is possible that the strategy will detract from our performance. The recent difficult economic conditions in many sectors of our business have exacerbated these challenges. In addition, if we cannot convince potential strategic partners 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 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 professionals and project managers, who possess the technical skills and experience necessary to deliver our services. Despite the general economic slowdown, qualified IT professionals are in demand worldwide and are likely to remain a limited resource for the foreseeable future. There can be no assurance that qualified IT 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 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 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 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, 2002, approximately 33% of our U.S. 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” through fiscal year 2003 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 H-1B workers to change employers more easily under certain conditions, which could adversely impact employee retention rates among the Company’s H-1B worker 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 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.

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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 utilizes offshore software development centers based in Bangalore and Chennai, India. Mascot 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 Services 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 conditions.

Risks Associated with Covenants in Certain Financing Instruments

We have entered into a $50.0 million secured credit facility as amended, (“the PNC Facility”) with PNC Bank, N.A (“PNC”). The PNC Facility contains restrictive covenants that require us to meet certain financial criteria on a quarterly basis. We may not be able to continue to satisfy the financial covenants in these documents. If we cannot satisfy such covenants and we are not able to renegotiate the terms and conditions thereof, we may not have access to funds under the PNC Facility. Currently, the most restrictive covenant is the obtainment of specified levels of “Minimum Consolidated Income from Operations”, as defined in the agreement. As of the quarter ended December 31, 2002, we did not obtain the specified required level of “Minimum Consolidated Income from Operations”. We obtained a waiver of the financial covenant violation of noncompliance from PNC. The waiver obtained from PNC covers all activity related to the PNC Facility, through the next measurement date of March 31, 2003. 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. Mascot cannot borrow funds under the provisions of the PNC Facility.

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Intense Competition in the IT and Offshore Outsourcing Services Industries

The IT and Offshore Outsourcing services industries are highly competitive and served by numerous global, national, regional and local firms. Primary competitors include participants from a variety of market segments, including the major accounting firms, systems consulting and implementation firms, India based Offshore Outsourcing services, 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 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 and Offshore Outsourcing services markets.

iGate Companies May Compete with Each Other

iGate Companies may compete with each other for customers, talented employees and strategic relationships and for acquisition opportunities in the IT and Offshore Outsourcing services industries. Such competition may make it more difficult or costly for iGate 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 Corporation and the management of the company which we wish to acquire or invest;

•          competition from other potential acquirors;

•          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.

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.

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Risks Associated with Capital Markets

We currently hold interests in non wholly-owned companies. 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 interests. With respect to such entities with publicly traded stock, we may be unable to sell our interest at then quote 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.

Impairment Analysis May Lead to Recognition of Losses

In 2002, we recorded a goodwill impairment charge of $29.7 million. The carrying amount of the remaining unamortized goodwill on our balance sheet was $4.0 million as of December 31, 2002. We periodically assess the potential impairment of our long-lived assets, such as goodwill, as appropriate. If, as a result of such an assessment, we were to determine that the carrying amount of this goodwill was not recoverable, we would reduce the carrying amount in the period in which the determination was made. Any reduction would result in the recognition of a one-time impairment loss, which would have an adverse effect on our financial results in the period in which the loss was recognized.

In the fourth quarter of 2002, we recorded impairment charges of $0.6 million and $6.8 million, related to our investments of Speechworks International, Inc. (“Speechworks”) and Air2Web, Inc. (“Air2Web”), respectively. The carrying amount of our investments in unconsolidated affiliates was $2.6 million as of December 31, 2002. If we were to determine that the value of such investments had declines judged to be permanent or other than temporary, we would reduce the carrying amount of the investments. Any reduction would result in the recognition of a one-time impairment loss, which would have an adverse effect on our financial results in the period in which the loss was recognized.

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 27%, 23% and 20% of revenues for the years ended December 31, 2002, 2001 and 2000, respectively. In the years ended December 31, 2002 and 2001, General Electric Company accounted for 16% and 14% of our revenues, respectively. No single customer accounted for more than 10% of our revenues in 2000. 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 and Offshore Outsourcing services 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 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.

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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 Corporation and the Co-Chairman and President of iGate 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 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.

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 client’s 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.

NOTICE REGARDING CONSENT OF ARTHUR ANDERSEN LLP

Arthur Andersen LLP was formerly our independent auditor. Representatives of Arthur Andersen LLP are not available to consent to the incorporation by reference of their report contained in this Annual Report into our registration statements on Form S-3 and Form S-8, and we have dispensed with the requirement to file their consent in reliance upon Rule 473a of the Securities Act of 1933. Because Arthur Andersen LLP has not consented to the incorporation by reference of their report into these registration statements, purchasers of stock under these registration statements will not be able to recover against Arthur Andersen LLP under Section 11 of the Securities Act of 1933 for any untrue statements of a material fact contained in the financial statements audited by Arthur Andersen LLP that are incorporated by reference into these registration statements or any omissions of material fact required to be stated therein.

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ITEM 2.          PROPERTIES

Information regarding the principal properties owned and leased by the Company and its subsidiaries as of December 31, 2002 is set forth below.

______________

      *    Lease obligations of subsidiary are guaranteed by iGate.

Mascot leases approximately 140,000 square feet (including 98,000 square feet listed above) of office space in the Indian cities of Chennai, Bangalore and Pune from the principal shareholders of 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.

In 2001, the Company’s majority-owned subsidiary, Mascot, purchased land located in Bangalore and commissioned a 49,000 square foot development center. Mascot also owns land in Chennai and Pune.

ITEM 3.          LEGAL PROCEEDINGS

The Company is a party to a lawsuit for alleged negligence against a former employee by Convergys Information Management Group, Inc. (“Convergys”) and Chubb Custom Insurance Group. Although Convergys’ Complaint does not specify the amount of damages being sought, Convergys has a settlement demand of approximately $3.3 million. The Company has denied liability and plans to vigorously defend its position. Discovery is underway in this matter and a trial date is scheduled for some time in August 2003. The Company believes that coverage of Convergys’ claims is provided under certain of its insurance policies

Other than as set forth above, 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, its business or the financial statements.

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 2002.

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PART II

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

The Common Stock of the Company is traded on the NASDAQ National Market under the ticker symbol “IGTE”. The following table sets forth, for the periods indicated, the range of high and low closing sale prices for iGate Corporation Common Stock as reported on the NASDAQ National Market.

On March 17, 2003, the Company had 212 registered holders of record of the Common Stock.

The Company is prohibited from paying dividends under its credit facility.

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ITEM 6.          SELECTED FINANCIAL DATA

______________

   (1)    In 2002, the Company adopted the provisions of (“EITF”) Issue No. 01-14, Income Statement Characterization of Reimbursement (“EITF 01-14”) and now accounts for billable expenses as a component of both revenue and direct costs. Prior periods have been reclassified for this change.

   (2)    In 2002, we incurred $4.2 million in connection with a restructuring plan. In 2001, we incurred $6.5 million, $0.9 million and $2.4 million in connection with our restructuring, merger of IRG into eJiva and charges associated with an executive employment agreement. In 2000, we incurred $4.4 million in restructuring charges related to our Canadian operations as well as certain U.S. operations. 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.

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   (3)    In 2002, we incurred $29.7 million in total charges related to goodwill impairments on eJiva of $12.1 million, Symphoni of $12.1 million, GFS of $1.7 million and MAP of $3.8 million. In 2001, we incurred $37.3 million in total charges related to goodwill impairments on CMI of $22.3 million, Direct Resources of $4.6 million and Symphoni of $10.4 million. In 2000, we incurred a $2.4 million write-off of impaired goodwill of Global Resource Management (“GRM”) that ceased operations in 2000.

   (4)    For the year ended December 31, 1998, income from operations reflect nonrecurring charges of $0.2 million relating to the amortization of deferred compensation issued to an executive as compensation for services.

   (5)    Includes the impairment charges of Air2Web and various venture investments.

   (6)    We incurred merger-related costs related to the acquisition of the Amber Group during the first quarter of 1999. We also incurred merger-related costs related to the acquisition of Quantum and charged these costs to expense during the second quarter of 1998. These costs fundamentally differ from our IRG merger costs discussed above as the IRG merger was an internal reorganization.

   (7)    In 2002, we recognized a gain of $7.1 million upon the deconsolidation of itiliti.

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

Overview

iGate Corporation, formerly named iGate Capital Corporation, through its operating subsidiaries, is a worldwide provider of IT and Offshore Outsourcing services to large and medium-sized organizations. From inception and through February 2000, we conducted the majority of our business under the name of Mastech Corporation through our wholly-owned subsidiary Mastech Systems Corporation, a Pennsylvania corporation that was formed in July 1986.

In March 2000, we transferred substantially all of the assets of Mastech Systems Corporation to subsidiary operating companies. This reorganization was done to enable us to identify and penetrate emerging IT 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 internet related services market sector.

Our operating subsidiaries provide clients with a source for a broad range of IT applications solutions and Offshore Outsourcing service including: client/server design and development, conversion/migration services, ERP package implementation and integration services, software development and applications maintenance outsourcing.

The companies in the IT Staffing segment earn a substantial portion of their revenues on a time-and-materials basis as services are performed. Companies in the Offshore Outsourcing and Enterprise Applications segments recognize revenues on both a time-and-materials and proportional performance basis.

Critical Accounting Policies

The following explains our most significant accounting policies. See Note 1 to the Consolidated Financial Statements set forth on pages 39-45 of the Form 10-K for a complete description of our significant accounting policies.

Use of Estimates in the Preparation of Financial Statements

The preparation of our financial statements requires us to make certain 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. All of the estimates that we make in preparing our financial statements are in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from our estimates, which could impact our earnings.

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Revenue Recognition

We recognize revenue on time-and-materials contracts as the services are performed. Time and materials contracts typically bill at an agreed upon hourly rate. We also have fixed price arrangements with certain customers. A price for an entire project is agreed upon before the project starts for a predetermined fee. We recognize revenues on fixed-price contracts using the proportional performance method. We prepare a budget for each fixed price project, and based upon the budget that we prepare, we estimate what our costs should be. We determine performance by comparing the actual cost of work performed to date to the estimated total cost for each contract. If our estimates indicate a loss on a particular fixed-price contract, we record a provision for the estimated loss without regard to the stage of completion. 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.

Accounts Receivable

We extend credit to clients based upon management’s assessment of their creditworthiness. Substantially all of our revenues (and the resulting accounts receivable) are from Fortune 500 companies, major systems integrators and governmental agencies.

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.

Allowance for Uncollectible Accounts

We review accounts receivable periodically to determine the probability of loss. The allowance for uncollectible accounts is determined using the combination of the specific identification method for balances deemed uncollectible, as well as judgments made by us based upon historical and expected charge-off experience. If the financial condition of our customers deteriorates or if economic conditions worsen, additional allowances may be necessary, which may impact earnings.

Investments

Investments in money market funds are stated at cost, which approximates fair value. Investments in marketable equity securities are accounted for in accordance with Statements of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities (“SFAS 115”). We have determined that certain of our investments in marketable equity securities are classified as available-for-sale and recorded at fair value, utilizing the investments closing price at each reporting period. These investments are recorded on the balance sheet at market value, with the unrealized gains or losses, net of tax, reported as a component of comprehensive loss in the Consolidated Statement of Shareholders’ Equity and Comprehensive Loss. The unrealized gain or loss is the difference between our original cost for an investment and the investment’s fair value at each reporting period. Realized gains or losses on securities sold are calculated using the specific identification method.

If management determines that an investment in available for sale securities has sustained an other-than-temporary decline in its value, the investment is written down to its fair value, by a charge to earnings. Such evaluation is dependent on the specific facts and circumstances. Factors that are considered by us in determining whether an other-than-temporary decline in value has occurred include: the market value of the security in relation to its cost basis; the financial condition of the investee; and the intent and ability to retain the investment for a sufficient period of time to allow for recovery in the market value of the investment.

In evaluating these factors, management presumes a decline in value to be other-than-temporary if the market price of the security is 20% or more below the investment’s cost basis for a period of six months or more (the “20% criteria”). However, the presumption of an other-than-temporary decline in these instances may be overcome if there is persuasive evidence indicating that the decline is temporary in nature (e.g., strong operating performance of investee, historical volatility of investee, etc.). Additionally, there may be instances where impairment losses are recognized even if the 20% criteria is not satisfied (e.g., plan to sell the security in the near term and the fair value is below our cost basis). During 2002, we incurred impairment losses deemed to be other-than-temporary. These impairments are discussed in Note 3 to the Consolidated Financial Statements.

We account for investments in businesses in which we own between 20% and 50% of equity or otherwise acquire 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 we acquire less than a 20% interest, or in which we do not acquire management influence are accounted for using the cost method of accounting or, if publicly traded, as available-for-sale

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securities. For investments accounted for using the cost or equity method of accounting, management evaluates information (e.g., budgets, business plans, financial statements, etc.) in addition to quoted market price, if any, in determining whether an other-than-temporary decline in value exists. Factors indicative of an other-than-temporary decline include recurring operating losses, credit defaults and subsequent rounds of financings at an amount below the cost basis of an investment. This list is not all-inclusive and management weighs all quantitative factors in determining if an other-than-temporary decline in value of an investment has occurred.

Goodwill and Intangible Assets

Goodwill is the excess of purchase price over the value of the net assets acquired. In January 2002, we adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS 142”). Under SFAS 142, goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. Estimated fair values of reporting units underlying the segments were estimated using either a discounted cash flow methodology, recent comparable transactions or a combination thereof. For further discussions, see Note 4 to the Consolidated Financial Statements.

Stock Based Compensation

At December 31, 2002, we had seven stock-based employee compensation plans, which are described more fully in Note 10 to the Consolidated Financial Statements. SFAS No. 123, Accounting for Stock-Based Compensation, (“SFAS 123”) gives companies the option to adopt the fair value method for expense recognition of employee stock options or to continue to account for employee stock options using the intrinsic value method, as outlined under Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees. We have elected to continue to apply the intrinsic value method to account for employee stock options and discloses the pro forma effect as if the fair value method had been applied in Note 10 to the Consolidated Financial Statements. The following table illustrates the effect on net loss per share if we had applied the fair value recognition provisions of SFAS 123 to stock-based employee compensation:

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2002 Compared to 2001

The following tables present selected financial information for the Company’s reporting segments for the years ended December 31, 2002 and 2001:

The following comparisons include billable expenses as part of external revenues in accordance with EITF Issue No. 01-14, Income Statement Characterization of Reimbursements (“EITF 01-14”). We were required to reclassify all prior periods in order for them to be comparable to 2002 revenues. For further discussion refer to Note 1 to the Consolidated Financial Statements on page 39. All charges related to our restructuring are classified as special items in the information presented.

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

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The following discussion compares our results of operations for the years ended December 31, 2002 and 2001. As discussed, we implemented restructuring plans and recognized impairment charges during the 2002 and 2001. See Note 4 to the Consolidated Financial Statements set forth on pages 39-45 of this Form 10-K for a description of restructuring, merger and impairment charges.

Offshore Outsourcing

Revenues for our Offshore Outsourcing segment were $75.4 million for year ended December 31, 2002 representing a decline of $13.9 million, or 15.6%, as compared to $89.3 million for the comparable year ended December 31, 2001. Billable expenses for this segment approximated 0.1% as a percentage of revenue for both years ended December 31, 2002 and 2001. During 2002, we were not able to grow our non-GE revenues as rapidly as we initially anticipated. Our Offshore Outsourcing segment is in the process of developing brand recognition, a proven track record and reputation in the industry. Mascot’s increased size through its impending acquisitions of eJiva and Aqua Regia is expected to increase its competitiveness against other offshore firms. Factors contributing to the revenue decline include decreases in IT spending, consultant utilization and overall billable headcount. We have also experienced delays from clients in closing new projects due to their uncertainty in the economy. We continue to experience pricing pressures from our customers.

The gross margin for our Offshore Outsourcing segment, including billable expenses, was 37.4% for the year ended December 31, 2002, as compared to 39.2% for the comparable year ended December 31, 2001. The decrease in gross margin in this segment was attributable to a combination of pricing pressures, increases in employee related costs and benefits, and by three significant blended rate contracts, which contributed approximately 30% of our Offshore Outsourcing segment revenues. Blended rates are rates that are fixed regardless of where the work is performed, onsite (“worked performed at customer sites”), or offshore (“work performed primarily in India”). These contracts have had a negative impact on margins due to startup costs being performed onsite.

Selling, general and administrative (“S,G&A”) expenses include all costs that are not directly associated with our Offshore Outsourcing segment’s revenue generating consultants. S,G&A expenses include non-consultant salaries and employees benefits, costs of consultants that are not being utilized on projects (i.e. “bench costs”), recruiting and training costs, rent, depreciation and amortization, as well as communications, facilities costs, and any additional expenses incurred in conjunction with our restructuring. Offshore Outsourcing S,G&A costs for the year ended December 31, 2002 were $24.0 million, or 31.8% of revenues as compared to $25.4 million, or 28.5% of revenues for the comparable year. Our S,G&A costs in 2002 excluded restructuring costs of $1.1 million. While S,G&A costs as a percentage of revenues rose for comparable years, our absolute dollar costs decreased $1.4 million or 5.6%.

Income from operations for the Offshore Outsourcing segment for the year ended December 31, 2002 was $3.0 million or 4.0% of revenues as compared to $9.6 million or 10.8% of revenues for the comparable year ended December 31, 2001. The decreases were attributed to a decline in overall revenue volume, an unfavorable mix of salaried consultants to subcontractor labor which directly affects our gross margin, an increase in S,G&A costs as a percentage of revenue and costs incurred in conjunction with our restructuring.

Enterprise Applications

Revenues for our Enterprise Applications segment were $63.2 million for the year ended December 31, 2002, a decrease of $30.4 million, or 32.5% as compared to $93.7 million for the comparable year ended December 31, 2001. Billable expenses for this segment approximated 5.3% and 5.4% as a percentage of revenue for the years ended December 31, 2002 and 2001, respectively. The decline in revenues for the segment was mainly attributable to continued weakness in IT spending, decreases in consultant utilization and overall billable consultant headcount. We have also experienced project delays from clients over the past few months due to their uncertainty in the economy. We continue to experience pricing pressures from our customers.

The gross margin for our Enterprise Applications segment, including billable expenses, was 38.6% for the year ended December 31, 2002, as compared to 44.3% for the comparable year ended December 31, 2001. The decrease in gross margin in this segment was attributable to a combination of pricing pressures and increases in employees’ related costs and benefits.

Enterprise Applications S,G&A costs for the year ended December 31, 2002 were $24.4 million, or 38.5% of revenues, as compared to $42.1 million or 45.0% of revenues for the comparable year ended December 31, 2001. The overall decrease in S,G&A costs was mainly attributable to better management of bench costs, employee headcount and other operating costs.

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Restructuring costs incurred were $1.8 million in 2002 and $2.5 million in 2001. We also incurred goodwill impairment charges of $12.1 million in 2002 related to eJiva.

Loss from operations for the Enterprise Applications segment for the year ended December 31, 2002 was $13.8 million, or 21.9% of revenues, as compared to an operating loss of $3.1 million, or 3.3% of revenues for the comparable year ended December 31, 2001. The loss incurred in 2002 was mainly due to restructuring costs and goodwill impairment charges. The loss incurred in 2001 was due to restructuring costs as well as increases in S,G&A costs as a percentage of revenues.

IT Staffing

Revenues for our IT Staffing segment were $153.5 million for the year ended December 31, 2002, a decline of $83.4 million, or 35.2%, as compared to $236.9 million for the comparable year ended December 31, 2001. Billable expenses for this segment approximated 1.4% and 1.6% as a percentage of revenues for the years ended December 31, 2002 and 2001, respectively. In December 2001, we closed the operations of Chen & McGinley, Inc. (“CMI”). CMI’s revenues in 2001 were $19.0 million. Other factors contributing to the decline in revenues for the segment were mainly attributable to continued weaknesses in IT spending, decreases in consultant utilization and overall billable consultant headcount. Because of competitive pricing pressures, billing rates for consultants for comparable years have had a negative impact on revenues.

The gross margin for our IT Staffing segment, including billable expenses, was 26.6% for the year ended December 31, 2002, as compared to 29.5% for the comparable year ended December 31, 2001. The decrease in gross margin in this segment was attributable to a combination of pricing pressures, increases in employee related costs and benefits, as well as increased usage of subcontractor labor. CMI’s closure did not negatively impact gross margins on a comparative basis.

IT Staffing S,G&A costs for the year ended December 31, 2002 were $28.7 million, or 18.7% of revenues, as compared to $51.1 million, or 21.6% of revenues for the year ended December 31, 2001. CMI’s operating expenses in 2001 were $27.5 million, which contributed to the overall decline in S,G&A costs in 2002. Other factors contributing to the decline in S,G&A costs were attributable to better management of bench costs, employee headcount and other operating costs.

Restructuring costs incurred were $0.5 million in 2002 and $7.4 million in 2001. We also incurred goodwill impairment charges of $17.6 million in 2002 related to Symphoni, GFS and MAP, and goodwill impairment charges of $37.3 million in 2001 related to CMI, Symphoni and Direct Resources.

 Loss from operations for the IT Staffing segment for the year ended December 31, 2002 was $6.0 million, or 3.9% of revenues, as compared to an operating loss of $25.9 million, or 10.9% of revenues for the comparable year ended December 31, 2001. The losses incurred in 2002 and 2001, respectively, were due to restructuring costs and goodwill impairment charges incurred. In 2002, we also experienced declines in revenue volume and an unfavorable mix of salaried consultants to subcontractor labor which directly affect gross margin. Loss from operations as a percentage of revenue improved due to decreases in S,G&A spending, which offset declines in volume and unfavorable labor mixes.

iGate Corporate

iGate Corporate’s segment reports operating results of itiliti, MobileHelix and jobcurry. In March 2002, we deconsolidated itiliti, and closed the operations of MobileHelix. jobcurry continues to provide recruiting and placement services for iGate Corporate and outside customers. Revenues for the segment for the year ended December 31, 2002 were $0.6 million, a decrease of $1.0 million, or 63.4% from revenues of $1.6 million for the comparable year ended December 31, 2001, due to declines in revenues of itiliti, MobileHelix and jobcurry.

Gross margins were of 5.3% for the year ended December 31, 2002 and a loss of 32.5% for the year ended December 31, 2001, as costs exceeded revenue amounts for MobileHelix and itiliti.

iGate Corporate’s segment SG&A expenses for the year ended December 31, 2002 were $10.7 million, a decline of $18.9 million, or 63.9% from $29.5 million for the comparative year ended December 31, 2001. This decline in S,G&A costs on a comparative basis was attributable to the closure and deconsolidations of MobileHelix and itiliti, respectively, as well as declines in headcount and other S,G&A costs in 2002. Restructuring costs incurred were $0.8 million in 2002.

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Other Income (Expense) Components

Other income (expense), net

Other income (expense), net for the year ended December 31, 2002 totaled $1.5 million and consisted of interest income on cash and cash equivalents of $3.0 million, foreign currency translation gains of $1.3 million offset by interest expense of $1.6 million, interest accretion of $1.0 million and miscellaneous expense of $0.2 million. Other income (expense), net for the year ended December 31, 2001 consisted of interest income on cash and cash equivalents of $3.1 million, foreign currency translation losses of $2.0 million, expense associated with the write-down of Speechworks warrants of $1.4 million, interest expense of $3.5 million and miscellaneous income of $0.2 million.

Minority interest

Minority interest reflects the share of the net income or loss of our majority-owned operating subsidiaries attributable to the minority owners. Minority interest amounted to expense of $0.4 million for the year ended December 31, 2002, compared to expense of $1.3 million for the year ended December 31, 2001. The minority interest expense in 2002 was the minority share of the net income of Mascot. The minority interest expense in 2001 consisted of the minority share of the net income of Mascot and IRG, net of the minority share of the net loss of Symphoni and itiliti.

Gain on deconsolidation of subsidiary

We recorded a gain on deconsolidation of itiliti of $7.1 million for the year ended December 31, 2002, that is more fully discussed in Note 3 to the Consolidated Financial Statements.

Equity in losses of affiliated companies

We had no joint venture or equity investment activity in 2002. In 2001, equity in losses of affiliated companies consisted of our share of the net losses of our joint ventures, Synerge, LLC (d/b/a iProcess) and PTI, and of our equity investments in Air2Web and VCampus Corporation (“VCampus”). We sold our share in PTI on February 23, 2001, and, accordingly, recognized our share of PTI’s losses through February 22, 2001. We sold our share of iProcess on June 20, 2001 and recognized a gain of $1.8 million related to the sale. Equity in losses of affiliated companies for the year ended December 31, 2001 totaled $8.0 million.

Loss on venture investments and affiliated companies

In 2002, we recognized impairment losses of $7.4 million related to our investments in Speechworks and Air2Web. We also sold our shares in Versata, Inc. (“Versata”) stock at a loss $ 0.2 million. These losses are included as a component of Loss on Venture Investments and Affiliated Companies in the Consolidated Statement of Operations. We recognized a loss on venture investments and affiliated companies of $9.0 million for the year ended December 31, 2001. We recognized a $3.5 million loss on our investment in Bluewater Information Convergence. Inc. (“Bluewater”), a $2.0 million loss on our investment in Xpede, Inc. (“Xpede”), as well as losses in Ordercare, Inc. (“Ordercare”), Escend Technologies, Inc. (“Escend”) and Brainbench, Inc. (“Brainbench”) of $0.7 million, $2.7 million and $1.3 million, respectively. We also recognized an impairment loss of $5.0 million on our Air2Web investment due to the fact that the pre-money valuation in an additional financing round was significantly less than our proportionate carrying value. In April 2001, we sold 300,000 shares of Speechworks stock for a realized gain of $6.4 million. Further, we sold our remaining investment in VCampus resulting in a $0.2 million loss.

Gain on sale of stock of unconsolidated affiliates

In February 2001, we sold our approximate 50% interest in PTI to Red Hat in exchange for approximately 3.2 million shares of Red Hat common stock. The gain on sale of stock of unconsolidated affiliate for the year ended December 31, 2001 consisted of

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a $16.7 million gain on the sale of PTI less a realized loss of $5.8 million on the sale of Red Hat common stock that we received. We have sold all of our shares in Red Hat that are not subject to an escrow agreement.

During the year ended December 31, 2001, we had a gain on the cumulative effect of a change in accounting principle of $0.9 million, net of tax. The net gain resulted from our implementation of SFAS No. 133 Accounting for Derivative Investments and Hedging Activities, on January 1, 2001 and was related to our recording the net value of our derivative investments in Speechworks common stock warrants. These warrants were subsequently written down to $0 during the same year. We no longer hold any Speechworks warrants.

Our income tax benefit was $0.1 million at an effective rate of 0.5% for the year ended December 31, 2002. Our income tax benefit for the comparable year in 2001 was $4.1 million at an effective rate of 6.7%. The significant items comprising our effective rate included the write-off of impaired goodwill that is not recognized for tax purposes, non-deductible goodwill amortization and equity losses which are offset by a tax holiday in India related to our Mascot subsidiary.

2001 Compared to 2000

The following tables present selected financial information for the Company’s reporting segments for the years ended December 31, 2001 and 2000:

The following comparisons include billable expenses as part of external revenues in accordance with EITF Issue No. 01-14, Income Statement Characterization of Reimbursements (“EITF 01-14”). We were required to reclassify all prior periods in order for them to be comparable to 2002 revenues. For further discussion, refer to Note 1 to the Consolidated Financial Statements on page 39. All charges related to our restructuring are classified as special items in the information presented.